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Container industry adapting to change

Challenges have been aplenty from bigger vessels, shifting dynamics of alliances and consolidation to new routes.
Tuesday, April 25, 2017 - 05:50

THE container shipping industry has gone through tremendous changes especially in the past few years and the ports that serve them have also had to adapt to meet their increasing commercial and operational requirements.

Some of these developments include much bigger container vessels and the shifting dynamics of shipping alliances. Also, due to changing global trade dynamics, the shipping routes and trade lanes are also evolving from traditional patterns.

For example, developing economies continue to raise their share of global container throughput, leading to an increase in South-South trade. In response, emerging economies in South-east Asia in particular have ramped up their port development to accommodate these growing volumes.

Meanwhile, the industry also faces growing economic, environmental and social challenges as ports develop. These include issues such as growing and more lumpy volumes due to the introduction of the ultra large container ships (ULCS) as well as the cost of new equipment, infrastructure and yard space to meet these needs.

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"With the changes in the business environment such as the growing size of container vessels and the evolution of shipping alliances, we have also looked at drawing down our operations at older terminals such as Tanjong Pagar Terminal, and instead bringing more ships to berth at our expanded facilities at Pasir Panjang Terminals. This will allow us to better handle the increasing complexity of container transhipment," said PSA International's South-east Asia regional CEO, Ong Kim Pong.

"At these new facilities, we currently deploy automated yard cranes on a scale unseen anywhere else in the world, with over 144 automated yard cranes at our Pasir Panjang Terminal Phases 3 and 4. These cranes are completely unmanned. Complementing this, we are also developing automated guided vehicles (AGVs) for our future terminals. We will have 30 of such units by the end of this year on live trials at the PSA Living Lab," he added.

Finally, the pace of change in the alliances has been unprecedented in the past couple of years due to mergers and acquisitions as well as the demise of certain players and resultant consolidation of the industry.

The long talked about consolidation of the liner industry finally took place last year, with the hand of some operators being forced, such as Korea's Hanjin Shipping, which filed for bankruptcy in August.

What was a relatively stable grouping of 16 major carriers in four major alliances has become 12 lines in three alliances, with another two major independent lines. The merger of the two major Chinese lines has reduced two behemoths in North Asia to one and this will be further whittled down as the three major Japanese lines, MOL, K Line and NYK Line, alo merge by next year.

"Consolidation has been a key driver in the industry and terminal operators have been needed to adapt and respond. Our expanded facilities in Pasir Panjang Terminals offer 15 mega berths with among the best-in-class operational productivity to handle the world's largest container ships," said Mr Ong.

"As the Asian hub for shipping alliances in the Southeast Asia region, we are working closely with our customers and partners in established joint venture terminals, including Cosco-PSA Terminal (CPT), CMA-CGM PSA Lion Terminal (CPLT), and MSC-PSA Asia Terminal (MPAT)," he added.

"Looking ahead, PSA Singapore is already planning to develop a 65m-TEU mega-terminal in Tuas, where all container port activities in Singapore will be consolidated. The first set of berths will be operational in 2021 and the facility will boast full terminal automation, including automated cranes and vehicles and we are planning to introduce effective ecosystems interfacing with the supply chain locally and internationally," Mr Ong noted.

Other container terminal operators within the region meanwhile have also risen to the challenge. Malaysian commodities conglomerate MMC Corp has been methodically consolidating its operations in Malaysia, now owning three container terminal operators all along the west coast of Peninsula Malaysia.

NEW REGIONAL ALIGNMENTS

MMC's Port of Tanjung Pelepas (PTP) in Johor, Northport in Port Klang and Penang Port, grouped under its Ports and Logistics Division cumulatively handled 12.3m TEU in 2016.

Previously smaller feeder ports have also been expanding and these could alter the regional market's dynamics going forward. Plantations and infrastructure player Sime Darby has reportedly had discussions with China Merchants Group to develop the massive Carey Island project near Port Klang, which could have a capacity of 30m TEU.

Commenting on the possible effects of these realignments, Arcadis head of transportation and logistics Jonathan Beard said: "In terms of the container transhipment market, the key market for this port, not especially - shipping lines and their relevant alliances are the key consideration."

Indonesia's Tanjung Priok Port is undergoing expansion works that are slated to bring capacity up to 19.5m TEU a year by 2024. In addition, the Indonesian government is also moving quickly to secure Japanese funding to begin construction of a new port at Patimban in West Java which will have a capacity of 7.5m TEU per annum by 2027 when it is fully completed and help alleviate some of the pressure on Tanjung Priok which is currently operating at full capacity.

Listing key contributing factors of any effects Mr Beard said: "Where do those alliances currently have their South-east Asia transhipment hubs? What are the contract terms? Do they have equity stakes in their current hubs? Do their current hubs offer adequate capacity for expansion; high port productivity and service quality; low charges, etc?"

He noted, however, that "if there is widespread expansion, it may lead to some re-shuffling of transhipment hubs and possibly depressed terminal revenues".

Another factor that could affect the future for terminal operators in Asia in is China's Belt and Road initiative.

"I think the One Belt One Road initiative brings a lot of opportunities for PSA. Singapore is geographically well-positioned along the Maritime Silk Route, and there is space for PSA to facilitate potential trade growth as economic activities increase in this region," said Mr Ong.

"We are also working closely with China Cosco Shipping, the world's fourth largest container shipping line, and have expanded our already existing partnership in our joint venture terminal Cosco-PSA Terminal to include three new mega berths at our Pasir Panjang Terminals. In line with this commitment, China Cosco Shipping has also chosen us as their main transhipment hub port in South-east Asia," he concluded.

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