Southern Asian Hub Ports Invest in a Bigger Future

Southern Asian Hub Ports Invest in a Bigger Future

Transshipment hubs in South and Southeast Asia are pouring investment into expanding facilities and adding new equipment to handle the increasing size of container vessels, the new alliance groupings and steadily improving trade.

Malaysia’s Port of Tanjung Pelepas is investing $430 million as it prepares for the arrival of the P3 Network of Maersk Line, CMA CGM and Mediterranean Shipping Co. Sri Lanka’s Colombo International Container Terminal (CICT) has injected $500 million into its new four-berth terminal as it develops a strategic South Asia hub position, and Singapore has embarked on a giant $8 billion new port project that will double its capacity by 2020.

Last year, Tanjung Pelepas’ throughput fell a marginal 1 percent to 7.63 million 20-foot containers. Singapore, by contrast, handled a record 32.6 million TEUs, up 2.9 percent, while a turnaround in the transshipment business last year saw the port of Colombo’s throughput rise almost 3 percent to 4.31 million 20-foot containers.

Unit costs are driving the container lines to order larger vessels, with more than 53 percent of the 3.8 million-TEU order book for ships with capacities greater than 10,000 TEUs. This is placing mounting pressure on ports to lift productivity and vessel turn around times, especially at the major transhipment hubs that handle the bigger ships.

Tanjung Pelepas is expanding its berths and equipment to cope with the 18,000-TEU ships in the P3 Network. It is on a productivity drive and has targeted a throughput of 9 million 20-foot containers this year, an ambitious 15 percent increase on 2013. The expansion will raise the port’s annual handling capacity by 25 percent to 10.5 million TEUs and increase the number of berths to 14, with total quay length of more than three miles.

The Malaysian port is one of the few in the world that can accommodate a fully laden 18,000-TEU vessel, and PTP CEO Glen Hilton told the JOC that as Maersk Line’s main Southeast Asia hub, and CMA CGM’s secondary hub, it was “an obvious” port of call for the P3.

However, in order to handle the 18,000-TEU vessels being operated by the alliance members, Hilton said high port productivity and reliability are essential to enable the carriers to operate within their schedules. Productivity increased at the port last year, rising from an average of 63 gross moves per hour for each call recorded in 2012 to an average of 81 gross moves per hour in 2013, according to JOC Group’s port productivity data.

“The improvement in productivity and efficiency is important and will ensure that PTP will be able to continuously meet the service level targets,” he said, adding that the ship turnaround times were of primary importance to the carriers.

The P3 Network will operate a capacity of 2.6 million TEU (initially 252 vessels on 28 loops) on three trade lanes: Asia-Europe, Trans-Pacific and Trans-Atlantic, with the aim to improve and optimize operations and service offerings.

Since the ships operated by the P3 will be larger on average than ones operated by the other major alliances, the G6 and CKYHE, it will give the carriers a cost advantage over most of the rest of the industry. Regulators in the U.S. and Europe have approved the alliance but it is still being reviewed by China’s Transportation and Commerce Ministries.

In Singapore, the Maritime and Port Authority last year announced an $8 billion investment to build a new port, west of the current site, that when completed in 2022 would double its capacity to 65 million 20-foot containers. PSA International operates five terminals in Singapore and is investing $2.7 billion in 15 new berths that will be ready by 2020.

But the newest kid on the hub port block is Colombo International Container Terminal (CICT), a joint venture between China Merchants Holdings (International) and the Sri Lanka Ports Authority (SLPA), with CMHI holding an 85 percent share.

The port of Colombo has embarked on an infrastructure development program that will add 7.2 million TEUs of capacity in three separate phases. The Colombo South Harbour Development, which comprises three independent dedicated container terminals, will create this additional capacity in three different phases of 2.4 million TEUs in each phase.

CICT was awarded the tender to construct and operate the Colombo South Container Terminal for 35 years, after which the terminal will be handed over to the Sri Lanka Ports Authority. Its four berths opened in April and have a total capacity of 2.4 million 20-foot containers. At a cost of $500 million, it is the largest foreign direct investment in Sri Lanka.

Tissa Wickramasinghe, general manager of CICT, told the JOC that the terminal would handle 500,000 20-foot containers this year.

“That includes both domestic and transshipment cargo, with transshipment dominating the numbers due to the port of Colombo being essentially a transshipment hub,” he said. Around 80 percent of the container volume is transit cargo.

With larger vessels calling and the formation of the mega alliances, terminal performance would be impacted by the greater container volume, and Wickramasinghe said improving productivity in handling ships in port would be the key focus of both shipping lines and terminal operators.

Asked whether the development of India’s ports could threaten Colombo’s transshipment hub position, he said any improvement in the efficiencies of of its larger neighbor would have a positive impact on the performance of Colombo.

“Given the strategic geographic location of Colombo, the deviation factor for the ultra large container vessels to divert from the main east-west shipping route will be a critical factor. Colombo will always play a complementary role to India to facilitate their inbound and outbound trade,” he said.

Contact Greg Knowler at gknowler@joc.com and follow him on Twitter: @greg_knowler.