CONTAINER TERMINAL OPERATION & CHANGING REALITY

CAPT. ANWAR SHAH
(feedback@pgeconomist.com)

Oct 3 - 9, 2011

Karachi port has two container terminals viz. KICT (HPH) at West Wharf and PICT at East Wharf, whereas Port Qasim has DP world terminal QICT.

The Keamari Groyne deepwater terminal also being awarded to HPH of Hong Kong has virtually made it a key player as KICT is also owned by it and with completion of third phase KICT may be in position to handle 750/1 mill TEUS.

Both Pakistani ports have handled 1.8 mill TEUS all captive cargo due to sustainable economic growth 7 per cent for five years. However, no efforts were made to secure CAS cargoes, which are largely routed through Bander Abbas (Iran) due to good logistics facility and marketing by Bander Abbas Port.

Pakistani container terminal industry is largely controlled by HPH and DP world, whereas PICT, single local player, is working hard to enter 0.5 mill TEU Club.

It is not only in Pakistan, but half of the world's terminal capacity, and almost 60 per cent of throughput is managed by small group of companies, that can be defined as global terminal operators, a new name to stevedores of past Era. These companies having presence in more than one geographical region handled around 300 mill TEU.

The buoyant world economy in particular strong containerized export growth in China and India helped global operators to grow organically. Most of the market leaders saw additional new capacity coming on stream in 2004. It is expected that global terminal operators will increase their share from 57 per cent in 2004 to 59 per cent in 2010.

Three out of four leading global operators HPH, PSA and DP are stevedore based together with Hydrid APM terminals. They handled about 150 mill TEU. The top four thus accounted for over half of the global terminal operator, throughput and over 1/3rd of total world container terminal volumes.

HPH is the leading global terminal operator handling 47.8 mill TEU. The company has strengthened its position in China, Thailand and Pakistan and Eastern Europe.

PSA, the second biggest operator, has also experienced double-digit growth. PSA is handling 40 mill TEU and planning to add 25 mill TEU by investing four bill USA in Singapore, Antwerp, Hong Kong and Gwadar.

APM terminals have grown by 49 per cent and are likely to handle 61.6 mill TEU in 2010, by investing in India, China, USA, Brazil etc.

CASCO, the 5th biggest, is striving for 4th position. Dubai port with acquisition is also trying hard to gain 4th position.

HPH and PSA derive 70 per cent of container business from S. Asia and Far East. By contrast APM, DPA/DPI have more balanced portfolio. The emerging new trends amongst global operators is to cooperate, as APH, CASCO and PSA are working together in Dalian Ports.

By leveraging on various factors, including their generally greater financial resources, ability to spread risk, greater purchasing power, and ability to offer shipping lines a multi regional network, the global operators have a competitive edge over other private operators.

There is also some data to suggest that they are more efficient. However, analysis of productivity data in terms of TEU per hectare and TEU per ship to shore gantry crane, reflects a slight decline in global terminal operator average performance in several regions.

Most global operators showed a significant improvement in financial performance, thus HPH's/ PSA profit margins were 30 per cent plus and PSA and DPI achieved a 15.5 per cent return.

The recent example is PICT could not qualify for Keamari Groyne deepwater port. It may be food of thought for small private players who may have to succumb to pressure of four leading operators, leading to acquisition of small players.

The hybrid terminal operators like APM, Hanjin and MSC may be dictating in next 20 years and may cause problem to four leading global players too.

There is a limited scope for new entrants to break into the global operators "CLUB" but china merchants and China Shipping container lines are the most likely future new comers.

HPH with KICT and Keamari Groyne deep ports will have the initial capacity of handling over two mill TEU and QICT of DP world may handle one mill TEU by 2010. PICT may find tough to face these two giants, so will be PSA at Gwadar that will be at disadvantage with monopoly of HPH at Karachi and DP at QICT. Gwadar has no hinterland connectivity other than Makran coastal highway to Karachi.

The only solution is sustained economic growth of 7 per cent plus to feed these captive cargo players. Pakistani ports will have to look for transshipment business to meet the need of increased capacity or else our economy may remain steady to support the development in Port and avoid surplus buildup capacity.

Some idealist without looking at patterns and data make claims of turning our ports as MEGA HUBS. It is hard to turn to regional hub even, as India having 6 mill TEU against ours of 1.8 mill TEU has not been able to turn its Pipavav port as regional hub, what to talk about mega hubs, a fantasy/fiction.

The ground reality and the pattern of shipping trade data and geographical position can only give the correct picture, thus we must wake up to realities and not blazon on dreams. Let us learn from the experience of Colombo, Singapore and Jebel Ali etc. which are professionally managed ports handling 70 to 75 per cent transshipment cargo.

Twelve major Indian ports are also thriving on captive cargo due to expected increase to one billion ton mark of volume due to sustained economic growth of nine per cent plus.

The Indians beaten by congestion and not allowing HPH to build Bombay gateway Port with J.V. of Larson Turbo on mere suspicion of China connection are now out to invest 15 billion USD in ports and 12 billion USD in developing rail tracks/roads to make quadruple triangle connecting all major cities of India.

Colombo port has tendered South Port project of 2.4 mill TEU additional capacity, but HPH and PSA are vying hard and contesting. As per latest report in world cargo news, Sri Lanka Port authority has awarded 400 million USD project to HPH of Hong Kong creating a controversy that SPLA Chairman has misled the SPLA Board against joint venture of PSA and a local group. Bombay off shore deep water Port has also been awarded to Derivados of Spain and local partner Gammon India.

Bandar Abbas thriving on CAS cargo has completed 2nd container Terminal at Shahid Rajai Port adding 1.5 mil TEU and boosting total capacity to 3.5 million tons. Port of Jubail is set to improve its capacity to 14 mil tons by June, 2008 from 11 mil tons.

With above changing scenario, KPT has to be alerted with its deepwater port project as now HPH may opt to concentrate on Colombo. It appears that Keamari Groyne project may suffer setback, unless pursued.

KPT must go full speed ahead resolving issues, ensuring no cost escalation, as new developments do shift interest of terminal operators. Gwadar Port must also keep an eye on regional developments, thus GPA and PSAI have to offer incentives to induce ship-owners to Gwadar. One can only guess that ministry of ports & shipping has taken due cognizance of changing scenario.