The opening of a new container terminal at Colombo in Sri Lanka, designed to attract transshipment traffic, is unlikely to have a serious impact on the dynamics of liner shipping in the Indian Ocean, analysts say.
The $500 million Colombo International Container Terminal started operations Monday. With its deep draft and high-capacity cranes, CICT is being lauded by Sri Lanka Ports Authority as the means by which the port will compete with major global transshipment hubs in the Middle East and Southeast Asia for liner services.
Priyath Bandu Wickrama, chairman of the SLPA, a 15 percent stakeholder in the new terminal, also believes CICT will enable Colombo to attract mega-ships with lower slot costs such as Maersk's Triple Es, giving Indian shippers an alternative to transshipping in Southeast Asia to access such services.
However, Nikhil Chitkara, a senior research analyst based at Drewry's India office, does not expect the new terminal to be a major shaper of Colombo's fortunes, not least because lines are now offering more direct services to India instead of transshipping.
"Colombo's share of the transshipment market has been stagnant for the last couple of years, and we do not expect a reversal," he said. "In fact, more direct services to the Indian coast — especially for rapidly expanding trade with Far East Asia — would reduce the need for transshipment."
Shippers and container lines are also unlikely to see any major direct or significant cost savings from the opening of the new terminal. "I say this as there is no shortage of capacity currently at existing terminals at Colombo," Chitkara said. "We do think that the new capacity will intensify competition between existing terminals at Colombo port, but do not expect a significant — if any — reduction in costs to shipping lines that could be passed to shippers."
Lars Mikael Jensen, head of Asia-Europe trade at Maersk Line, told The Journal of Commerce that Maersk has no plans to add Colombo or any other South Asian ports to the line's AE10 service from Asia to Europe on which the Triple E vessels are deployed.
Ports in India are also upgrading facilities to accept larger vessels and to handle transshipment traffic in competition with Colombo.
For example, at Cochin port on India's lower southwest coast, DP World opened its International Container Transshipment Terminal at Vallarpadam in 2011. This is being marketed as the country's first dedicated transshipment hub, although Chitkara concedes it may take DP World "several years to gain traction and compete with Colombo's established position" in the Indian Ocean.
CICT was built and is operated by China Merchant Holdings International, which has an 85 percent stake in the business. As geopolitical analysts have noted, because CMHI is a Hong Kong-based subsidiary of Chinese state-owned China Merchant Group, the new Colombo terminal does further expand the influence in Sri Lanka of the Chinese state, which has already helped to build a huge new port at Hambantota, a second international airport and the country's widest expressway.
CICT also extends China Merchant Holding's global reach. The company is currently the largest public port operator in China, but its overseas investments apart from Colombo consist of just one terminal in Nigeria. "For a global terminal operator like CMHI, a global presence should be an added advantage in attracting liner clients," Chitkara said.
Contact Mike King at email@example.com.