Singapore and Malaysian ports battle for transshipment traffic-
Southeast Asia has grown to become one of the busiest regions for container shipping. The container ports in this region accounted for around 30 per cent of the world’s transhipment traffic in 2004; this figure is expected to increase to 33 per cent in 2015. Among the countries, Singapore enjoys a dominant position as the leading transhipment hub, while Malaysia is emerging as a major competitor. Inaugurated officially in 2000, Malaysia’s Port of Tanjung Pelepas (PTP) has become the second largest transhipment centre within a short span of time. Both PTP and Singapore port have excellent locations along the Strait of Malacca; thus, transhipment presents a good opportunity for these ports to expand beyond the demands of their respective economies and tap into international cargo flows. As a result, the transhipment business has emerged as a growth driver for these ports. Going ahead, Singapore port is expected to remain the premier transhipment port of Southeast Asia, in view of its long existence and service quality. However, with the growing competition from other regional hubs, its dominance will continue to decline, albeit slowly.
Transhipments drive container traffic growth
Singapore handled the highest amount of container traffic – 32 million twentyfoot equivalent units (TEUs) – in Southeast Asia in 2012. Over the years, however, its position in the market has been slowly, but unmistakably, falling. A major reason for this development has been the growing competition from the emerging hub ports in the neighbourhood, primarily Port Klang and PTP in Malaysia.
During the 2007–12 period, container traffic at Singapore port increased at a compound annual growth rate (CAGR) of 2.53 per cent, compared to the respective rates of 7.1 per cent and 6.96 per cent for Port Klang and PTP. However, Singapore still commands a sizeable share of the traffic volume: in 2012, its container volume was more than 200 per cent that of Port Klang and 300 per cent that of PTP. Based on current volumes, coupled with Singapore’s huge capacity augmentation plans for its port, Singapore’s dominance is expected to continue.
A major growth driver for each of these three aforementioned ports has been transhipment traffic. For instance, at present, around 94 per cent of the total container traffic at PTP is transhipped traffic. The share of transhipment traffic at Port Klang increased to 64 per cent in 2012, compared to 53 per cent in 2005. In Singapore, the share of transhipment traffic is currently expected to be around 85 per cent.
Strategic capture of transhipment market
Attracting transhipped traffic is not just a function of a favourable location, but also of customer-focused strategies adopted by ports. Singapore, for instance, is located on the route of ships from Europe or the US West Coast to Southeast Asia, thus making it a natural entry for products shipped to and from neighbouring countries. Building upon its locational advantage of a large and protected harbour, the port offers excellent infrastructure for handling modern carriers and its services offer significant operational and cost efficiencies in terms of faster turnaround times, less pre-berthing delays, and lower charges. Singapore has focused on continuous improvements through the use of technology and highly skilled employees.
Other ports located in the East–West sea lanes including PTP have begun to compete directly with Singapore port. In order to attract major shipping lines, PTP sought to differentiate itself through the use of competitive pricing, flexibility to shippers, faster turnaround times, etc. The Malaysian government gave companies a say in managing the port, along with the flexibility to develop dedicated berths and set up their own wharves (compared to Singapore’s timeshare contracts, which are stringent as generally they can only be broken if the contract allows for cancellation). Handling charges at PTP were around 40–50 per cent lower than those at Singapore port. Its strategies yielded a positive outcome: in 2002, Maersk Sealand and Evergreen Marine moved from Singapore to PTP.
In response, PSA Singapore Terminals lowered its handling charges for empty containers by 50 per cent and gave operators the option of a stake in PSA’s operations to promote greater customer focus and flexibility. In addition, overseas acquisitions and ventures of PSA benefited international shipping lines. By 2003, PSA had recovered the loss of the roughly 3 million TEUs that was incurred by the departure of Maersk and Evergreen the year before. The success of these strategies is supported by the fact that no major shipping lines have left the port after 2005.
Preparing for the future: Boosting capacity
The growing transhipment trade in the region presents both opportunities and challenges to port operators. Continuous investment in infrastructure is a must for ports to maintain their competitiveness and attractiveness for transhipment traffic. The introduction of larger container ships in recent years has imposed a new demand on ports to invest in infrastructure to handle these bigger ships. Further, with the emergence of Asia as the new global hub of economic growth, traffic to and from these ports, including transhipments, is expected to continue to grow. Recognising this development, both Singapore and Malaysian ports have ambitious plans for capacity augmentation.
In the long term, Singapore aims to consolidate all its container shipping terminals in Tuas, while almost doubling its annual port capacity to around 65 million TEUs (from the current 35 million TEUs). The expansion plans in Tuas will comprise 15 new berths with a quay length of around 6,000 metres and a draught of 18 metres. The first berth at Tuas is likely to be operationalised in 10–15 years, when the leases of terminals at Tanjong Pagar, Keppel, and Brani expire in 2027.
PSA is also developing automated guided vehicle prototypes, which will operate 24×7 for its upcoming container terminals to transport containers between the quay and the container yard efficiently and reliably. This is a part of PSA’s strategic investment in automation technologies to maintain its dominant position as a transhipment hub.
At the same time, PTP has also formulated container capacity augmentation plans. In July 2012, it announced an expansion plan amounting to around RM 1.43 billion [RM 1 = $0.31], which will be implemented over the next three years. Based on the plan, two new berths will be built and new cranes will be deployed to cater to large-sized container vessels. Construction work on the new berths, measuring 720 metres, has already started; it is likely to be completed by May 2014. The expansion will increase PTP’s annual handling capacity by 25 per cent to 10.5 million TEUs and the number of berths to 14 with a total quay length of 5 km. The new berths and equipment will be able to handle 18,000 TEU ships. The port authorities are also planning Phase III that will involve the construction of three new berths of 1.5 km, which should be completed by 2018.
Chipping away at Singapore’s dominance
Driven by the rapid economic growth and increased globalisation of this region, transhipment traffic is rising not just for Singapore and Malaysian ports, but also for other Southeast Asian ports. The coming years will be marked by intensified competition between PSA, Port Klang, and PTP. Although Singapore has thus far enjoyed a dominant position as the premier transhipment hub in the region in terms of market share by total throughput, its market share is slowly decreasing.
Maintaining its leadership position will depend on its ability to offer more value to the shipping lines. As for the Malaysian ports that have thus far been successful in attracting shipping lines to their ports, their capabilities in sustaining the feeder network to support transhipments, as well as attract more shipping lines will enable them to remain competitive. In order to chip away at Singapore’s share of the market, these ports would have to double up their efforts, as common and dedicated feeder operators still have a preference for Singapore port. For now, the space for competitive strategies is wide open and global trade will be the ultimate beneficiary.
