Port Klang augmenting capacity-

Since the 1990s, Malaysia’s port sector has grown by leaps and bounds, with container traffic volumes increasing from about 2 million twenty-foot equivalent units (TEUs) per annum, to over 20 million TEUs.  It is now the seventh largest container handling country in the world after China, Hong Kong, Singapore, the US, Korea, and Taiwan. The growth is attributed to the country’s industrialisation, coupled with a substantial increase in capacity and traffic at two of the country’s main ports, Port Klang and Port of Tanjung Pelepas.

Port Klang is currently among the top 15 container handling ports in the world. It is situated in the state of Selangor, on the west coast of peninsular Malaysia. Its strategic location in the Klang Valley, the most developed region in the country, and its proximity to the federal capital, Kuala Lumpur (it is located only 40 km away from the capital), has ensured its consistent growth. Its location makes it the first port of call for ships on the eastbound leg and the last port of call on the westbound leg of the Far East–Europe trade.

Established in 1963, the Port Klang Authority (PKA) is the regulatory authority for port operations. Established in 1963 as a statutory body, PKA now acts as a landlord and regulatory authority. It is actively involved in port promotion and infrastructure development to turn the port into a major regional transhipment hub.

Port Klang has two main gateways – Northport and Westports – which have put Port Klang on the world map among the top 15 busiest ports globally in 2013. NCB Holdings Berhad and Westports Malaysia Sendirian Berhad manage Northport and Westports respectively. Northport comprises port facilities at two locations, namely, in Southpoint, which has conventional cargo handling facilities, and in Northport, which has both container and conventional cargo handling facilities. NCB also operates logistics business operations whereby services like container haulage, warehousing, and freight forwarding are provided under Kontena Nasional, a 100 per cent-owned subsidiary of NCB. Westports Malaysia Sendirian Berhad handles container and conventional cargo, and provides a wide range of port services, including marine services, rental services, and other ancillary services.

Over the years, these two operators have continuously upgraded and improved their infrastructure facilities in Port Klang to meet the needs of users.

Performance

In the five years 2009–13, cargo traffic at the port increased at a compound annual growth rate (CAGR) of about 10 per cent, from 138 million freight weight tonnes (FWT) in 2009 to 200 million FWT in 2013. In terms of composition, containers account for the largest share of total traffic at 85.1 per cent, followed by general cargo at 5.62 per cent, dry bulk at 5.26 per cent, and liquid bulk at 4.03 per cent.

With a volume of 10.3 million TEUs in 2012, Port Klang was ranked the 12th busiest container port in the world. In 2013, total container traffic at the port stood at 10.53 million FWT, of which Northport and Westports accounted for 72 per cent and 28 per cent share, respectively. Over the years, the share of Westports has increased on account of better port infrastructure and higher efficiency standards. In 2013, Westports accounted for 72 per cent of the total container traffic at Port Klang, compared to 62 per cent in 2009. Its total revenue and net profits increased by 14.8 per cent and 20.6 per cent (at RM 1,713 million and RM 435 million) respectively in 2013 over 2012.

For financial year ended December 31, 2013, NCB recorded lower revenue of RM 919.4 million, a decline of 6.1 per cent from the RM 978.8 million recorded in 2012. Consequently, its pre-tax profit also dropped to RM 93.2 million, from 2012’s RM 154.2 million. The lower revenue was attributed to a drop of 6.9 per cent in container throughput to 2.8 million FWT from 3.1 million FWT in the previous year.

Focus on technology

To enhance Port Klang’s efficiency and productivity, PKA introduced Port Klang Net in 2012. This system aims at integrating various current IT systems being used by port users. The pilot project, which was launched in December 2012, was implemented in 2013 in stages. The modules being implemented under Port Klang Net include port users’ registration, vessel ID, ship call number, and eIMPORT and eEXPORT. As of August 12, 2014, 1,053 companies are  registered under the system.

Expansion plans

Port Klang is aiming to be among the top 10 busiest ports in the world by 2016. This will be driven primarily by expanding the capacity of both its terminal operators. For 2014, Westports has earmarked a capital expenditure (capex) plan of RM 380 million for the construction of container terminal (CT)-7, the purchase of quay cranes and other terminal operating equipment, land reclamation, and maintenance works. The capex is to be funded through internal generation of funds as well as drawdown under the sukuk programme.

Westports’ CT-7 wharf expansion is expected to be completed by the end of 2014 and will increase the firm’s handling capacity by an additional 1.5 million TEUs to 11 million TEUs per annum. Four of the seven high-specification ship-to-shore cranes have commenced operation. The delivery of the remaining three cranes is expected by September 2014. In addition, the company has expansion plans for CT-8 and CT-9. Land reclamation and incidental works for these projects is almost complete. However, the construction of more container terminals would depend on future market conditions.

The recent extension of its concession from September 1, 2024 to August 31, 2054, will allow Westports to complete land reclamation works for new container terminals, CT-6 to CT-9, and provides assurance of continuity for lines calling at the port.

Northport is also working to upgrade facilities at its dry bulk, break bulk, and liquid bulk facilities. It aims to increase its installed capacity to 6.2 million TEUs by 2016 at a total capex of over RM 1 billion. The expenditure has been spread over a period of five years until 2016; a total of RM 600 million has already been spent from 2012 to 2013, mainly for the construction and purchase of state-of-the-art equipment for Wharf 8A. The rest has been allocated for ongoing upgrading work on Wharf 16 and the planned upgrading of Wharf 8. The group’s expansion plans are being financed by internal funds as well as borrowings. The company has already completed Wharf 8A, which has given it an additional capacity of 0.6 million TEUs, bringing Northport’s capacity to 5.6 million TEUs. To support the new terminal, Northport acquired four new quay cranes in 2013, bringing the total crane fleet for quay-side operations to 32 units. The government recently granted Northport a new lease, extending its present tenure as a port operator for another 30 years, until 2043.

Challenges and the way forward

Malaysia’s Port Klang growth trajectory has been well supported by its infrastructure so far.  However, sustaining growth will mean augmenting capacity and improving operational efficiency. Tariffs are currently fixed and regulated by the government. Port operators fear that the global slowdown, and rising costs of labour, electricity, and fuel will erode the margin enjoyed by operators over the long term unless there is a tariff revision. Westports Malaysia Sendirian Berhad has already submitted a proposal for revisions in container tariff to PKA. Going ahead, the government’s role will be instrumental in Malaysia’s continued infrastructure development. The government should take steps to facilitate seamless and speedy cargo movement. In this regard, it could consider a long-standing proposal to introduce a single-window system for customs clearance.