Lack of intra-Asia port congestion tied to declining volumes

Lack of intra-Asia port congestion tied to declining volumes

After bottlenecks and delays in 2014, it was tempting to greet the lack of congestion in ports across Asia in 2015 with relief, but the open berthing windows and “come right in” signs were, in fact, an indicator of falling demand.

“The volumes haven’t been there, which is why there has not been much congestion,” said Tim Wickmann, chief executive of MCC Transport, the intra-Asia specialist of Maersk Group.

The problem is that many terminals in the region are mostly operating at or near capacity, and the concern among carriers is that if intra-Asia volumes increase as expected, even by a small percentage, it will result in choked ports.

“If you think of how many moves are being added to the trade every year and include all the international trade, that is an enormous amount of additional capacity that the ports will have to handle,” Wichmann said. “If the intra-Asia trade is around 32 million 20-foot-equivalent units and grows, say, 4 percent each year, then you are already adding 1.3 million more TEUs a year.”

Intra-Asia is the world’s busiest trade lane, with most estimates placing annual volumes between 30 million and 40 million TEUs without the cabotage and feeder movements. But quality trade data is difficult to find because there are thousands of port-to-port combinations that are overlaid or simultaneously conducted with feeder services into the major east-west trades.

One trend to emerge in 2015 was the participation of huge ships in the regional trade. The only place to deploy vessels of 18,000 TEUs and larger is on the Asia-North Europe and Mediterranean routes, but the benefits of the economies of scale can be unlocked only if the vessels are full.

With so many slots, the mega-ships now are bringing containers from North Asia and dropping them off in Singapore, or at Tanjung Pelepas or Port Kelang in Malaysia. On the eastbound leg, mega-vessels are now picking up containers in Singapore and dropping them off in Busan, South Korea. Accurate data on these volumes, which are combined with Asia-Europe and intra-Asia trade statistics, aren’t available, however.

Finding reliable data isn’t the biggest problem facing intra-Asia operators in the year ahead. Competition is making profitability difficult to achieve, according to Robert Sallons, managing director of CMA CGM’s intra-Asia specialist Cheng Lie Navigation Line. Carriers launched 33 weekly loops in the first half of 2015, he noted, and 14 of those were to North China alone.

“And the market hasn’t grown that much,” Sallons said. “Intra-Asia consists of hundreds of corridors where one or two carriers may have a big market share on some trades, and on other corridors many lines may only have a small market share. Pricing and profitability differ greatly as it is a very fragmented market. There are more than 70 carriers serving more than 4,000 port pairs in this market.”

Contact Greg Knowler at greg.knowler@ihs.com and follow him on Twitter: @greg_knowler.

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