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Malaysian ports left out as container shipping lines consolidate

      01/24/2018

The recent round of container shipping line consolidation and alliance reshuffling leaves Malaysian ports out of the race for transhipment volumes, as bigger groups opt to maintain or move their services to Singapore rather than to Port Klang or Port of Tanjung Pelepas (PTP).

The consolidation has claimed its first casualty among Malaysian ports, with Westports Holdings Bhd’s transhipment throughput dropping by as much as 16% last year. That dragged Westports’ total container throughput down by more than 9% last year. This is despite gateway container volume — containers carrying import and export goods — at the port increasing by 10% to 2.8 million 20-foot equivalent units (TEUs) last year.

Meanwhile, the acquisition of Hamburg Sud by Maersk Line recently does not seem to benefit PTP as much as it does Singapore, with the Danish company’s chief commercial officer saying transhipment volume from the group passing through the Lion City will increase as a result of it.

Note that APM Terminals, the port operating arm of the AP Moller-Maersk group, has a 29.99% stake in Pelabuhan Tanjung Pelepas Sdn Bhd, the operator of PTP. Maersk Line has a dedicated berth in PTP.

This raises the question as to why mega lines are choosing Singapore over Malaysian ports as their transhipment hubs, despite the latter offering much lower tariffs.

“It’s the classic question of Malaysia versus Singapore all over again. Our ports are just as strategically located as Singapore, with on-par facilities, but we keep losing customers to them despite throwing rates and offering rebates and discounts,” says an official of a port operator.

“I would attribute it to the pro-activeness of the Singaporean government in securing these major customers by offering them special access to the port, something ours have not yet been able to do,” he adds.

The official says that CMA CGM, a major customer of Westports which accounts for almost 20% of its container throughput, once requested a dedicated berth at the terminal to bring in more services and volume. Any port expansion plan has to be approved by the Economic Planning Unit. Westports’ request to build the berth was declined, he adds. A dedicated berth would require the container liner to own a stake in the berth.

In Malaysia, only PTP has a dedicated berth for its major customer, Maersk Line, because APM Terminals is a substantial shareholder of the port operator. APM Terminals and Maersk Line are both members of the AP Moller-Maersk group.

Having APM Terminals as a major shareholder has benefited PTP tremendously. The port grew from a greenfield site into one of Asia’s major transhipment hubs within just a decade, and continues to pose a challenge to the Port of Singapore. It also insulated PTP from suffering the same fate as Westports in terms of transhipment volume last year.

Transhipment throughput in PTP for 2017 up to November stood at 6.97 million TEUs. Annualised, the port handled 7.6 million TEUs in 2017, on par with 2016.

However, Westports benefited from the increase in gateway containers due to its position in the central region of Peninsular Malaysia, which is home to the country’s largest economic region — an advantage PTP does not have.

To be fair, not all the transhipment services of CMA CGM at Westports were lost to Singapore. Westports still serves 12 weekly services on six trade lanes for CMA CGM and its Ocean Alliance partners.

“We would like to clarify that CMA CGM shifted only a handful of services to Singapore in December 2016. Other services of CMA CGM and also Ocean Alliance continue to use Westports as a transhipment hub,” Westports says in a written response to The Edge.

Joint-venture terminals have been a feature of the Port of Singapore for many years. Port operator PSA Singapore has joint ventures with mega lines such as China COSCO Shipping, Mediterranean Shipping Company and CMA CGM.

In fact, one of the reasons why CMA CGM moved some of its services from Westports to Singapore was because of its JV with PSA Singapore to operate four mega berths at the Pasir Panjang Terminal.

Looking at the benefits of having dedicated terminals for major container shipping lines, should Malaysian ports, especially those without any as yet, consider such a move?

“Allocating dedicated terminals to specific major container shipping customers is practised at some terminals abroad. With the extensive planned container capacity and also the opportunity for new working arrangements being created by CT10-CT19, dedicated terminals can be evaluated,” says Westports.

As for PTP, the acquisition of Hamburg Sud by Maersk Line does not bring any apparent benefit for the port as Maersk Line will continue using Singapore as a transhipment hub rather than moving some of its volume across the Johor strait.

Maersk Line uses PTP primarily as the transhipment hub for its Asia-North Europe services, and Singapore for its Asia-Mediterranean services. It’s the same case for Hamburg Sud, as per the slot purchase agreement on East-West trades entered into by the companies in February 2017.

In an interview with The Straits Times last December, Maersk Line’s chief commercial officer Vincent Clerc says all of Hamburg Sud’s transshipment containers will remain in Singapore despite the group having a dedicated berth in PTP. PTP is 70% owned by MMC Corp Bhd.

Westports recently completed its latest berth, Container Terminal 9, expanding its container handling capacity to 14 million TEUs per year. This is the last berth under the current concession before Westports embarks on its second concession, under Westports2.

Given that Westports handled nine million TEUs last year and the management is targeting 2% to 3% growth this year, there is ample capacity at the terminal for more containers and services. However, it remains to be seen whether it can attract more services from mega lines and shipping alliances.