Westports Malaysia on an expansion spree –
Port operator Westports Malaysia is an important player in Malaysia’s maritime sector and specifically in the development of Port Klang. Westports-operated terminals account for more than three-fourths of container traffic at Port Klang alone. This signifies the level of importance attached to the development of Westports. The listing of the company on the Kuala Lumpur Stock Exchange (KLSE) in 2013 as the second highest grosser in that year reinforces its importance. The port operator has planned for further expansion and is likely to record greater traffic with the commissioning of the same.
Infrastructure
Westports Malaysia has developed infrastructure to cater to the needs of port users relating to different kinds of cargo. The infrastructure, which includes a total of 29 berths, is equipped to handle container as well as conventional cargo.
The port operator has developed seven container handling terminals with a combined capacity of 11 million twenty-foot equivalent units (TEUs). Of these, container terminal 7 (CT 7) was fully commissioned by the company in December 2014. The terminal provided the port with an additional capacity of 1.5 million TEUs and has the newest ship-to-shore quay cranes with a height of 52 metres. The terminals have a total of 16 berths with draught levels ranging from 15 metres to 17.5 metres. These cover a total area of 163.6 hectares.
Operational performance indices indicate a high level of efficiency with 35 moves per hour per crane. This has been due to the company’s focus on maintaining high quality equipment at the terminals. These include 52 quay cranes, 157 rubber-tyred gantry cranes (RTGCs), 397 prime movers, 27 stackers, 2,428 reefer points and 35,905 ground slots.
In terms of conventional cargo, facilities have been developed to cater to liquid bulk, break bulk and dry bulk. There are 13 berths for conventional cargo. Apart from these, it houses other facilities like a vehicle terminal centre, bunkering services and marine services (pilotage and tug boats).
Performance: Operational and financial
Container traffic at Westports-owned terminals has increased steadily and recorded a compound annual growth rate (CAGR) of 10.67 per cent over the period 2010 to 2014. In absolute terms, traffic increased from 5.6 million TEUs in 2010 to 8.4 million TEUs in 2014. During the same period, container ship calls registered a CAGR of 1.1 per cent, increasing from 6,700 to 7,000. “Our overall capacity utilisation at Westports in 2014 was 76 per cent for container operations,” says Ruben Emir Gnanalingam, chief executive officer, Westports Malaysia.
In December 2014, one of the company-operated terminals catered to the demand of the world’s largest container vessel, MV CSCL Globe, with a capacity of 19,100 TEUs, pointing to the relative superiority of the port’s infrastructure and its ability to berth large vessels.
Westports Malaysia has recorded momentous traffic volumes with respect to conventional cargo too. The traffic relates to different kinds of cargo including break bulk, dry bulk and liquid bulk. The CAGR in traffic volumes of conventional cargo was 3.72 per cent, with traffic increasing from 8.9 million tonnes (mt) in 2010 to 10.3 mt in 2014.
Westports Malaysia has listed itself on the KLSE to raise money for its plans. The company completed the process in October 2013 and raised $644 million through its initial public offering.
After the listing, the company registered decent financial results for two consecutive years, 2013 and 2014. The operational revenue increased from RM 1.3 billion to RM 1.5 billion, registering a growth of over 15 per cent. In terms of net profit, the figure stood at RM 512.2 million at the end of 2014 as against RM 435.3 million in 2013, a growth of about 18 per cent.
Expansion plans
The development of a new container terminal, that is., CT 8, at an estimated cost of $300 million is central to Westports Malaysia’s expansion plan. The plan calls for phase-wise development of the terminal with a total capacity addition of 2.8 million TEUs.
The plan includes the construction of a 600 metre wharf and supporting yard, back-of-the-terminal facilities comprising a second container gate, marshalling centre and container freight station facilities, 14 ship-to-shore quay cranes, and RTGCs, terminal tractors and trailers. Phase I of the project, which involves the construction of 300 metres of the wharf and supporting port equipment and facilities, is due for completion in early-2016. The remaining work is part of Phase II of the project and is scheduled to be completed by mid-2017.
Westports Malaysia awarded a contract worth $39 million (RM 135 million) for Phase I construction work to Malaysia-based Muhibbah Engineering (M) Berhad in December 2014. The company has been provided with an option to sign an agreement for work on Phase II within six months of the date of site possession for Phase I. The entire contract value for both the phases is estimated at RM 256 million.
Gnanalingam cites, “Beyond CT 8, Westports still has a contiguous land area which can be used for the development of CT 9. However, the development of CT 9 will depend on our terminal utilisation and volume throughput after CT 8 is fully operational.”
Key issues and challenges
The key issue is the potential of corporate restructurings or merger and acquisition among/between marine line operators. This could affect their services and eventual ports of call. However, this particular risk is mitigated with lower cost pressure due to lower bunker prices and possibly healthier growth prospects in North America.
Also, a significant portion of the trade lanes are now already being consolidated under shipping companies operating within the four key alliances – 2M Alliance; CKHYE (comprising of Cosco, K-Line, Yang Ming, Hanjin and Evergreen); G6 Alliance (comprising of Hapag-Lloyd, NYK Lines, Orient Overseas Container Line, Hyundai Merchant Marine, APL, and Mitsui O.S.K. Lines); and O3 Alliance. There could be changes within the alliances instead of between the alliances. Westports is already benefiting from O3 Alliance and hence, this key issue raised is mitigated.
Outlook
According to a market study, Port Klang is projected to cross the 202 mt mark in 2015. Port Klang alone accounts for about 50 per cent of Malaysia’s seaborne container trade and majority share in the container traffic at Port Klang bodes well for the future growth of the operator. In terms of container traffic, the port is likely to touch a figure of 9 million TEUs in 2015.
The formation of the Ocean Three (O3) Alliance between three shipping companies, namely CMA CGM, China Shipping Container Lines (CSCL), and United Arab Shipping Company (UASC), is also likely to add to the projected volumes as the companies use the Westports-owned terminals as their hub. Gnanalingam adds, “CMA CGM, CSCL and UASC are our top three clients and they already use Westports as their hub even before the O3 Alliance. With the O3 Alliance, we expect positive volume growth which will reinforce Westports Malaysia’s standing as one of the key transshipment hub in Southeast Asia.”
Westports Malaysia also has plans to develop a new exit gate of 14 lanes at CT 7. The gate has been scheduled for commissioning by the end of 2015 and is likely to give a boost to traffic volumes with improved efficiency in operations.
Other initiatives undertaken by the Port Klang Authority further brighten the prospects of the port operator. These relate to commencement of barge services between Westports and Northport to cater to transhipment containers and to reduce congestion in existing rail and road modes of moving container traffic. Further, dredging works to increase the draught levels to 18.5 metres are in process and likely to be completed by May 2015. Following this, the port will become a non-tidal port and will offer round-the-clock accessibility to its terminals.
The Malaysian government has also planned to implement the goods and services tax of 6 per cent beginning April 2015, which will be lowest in the Association of Southeast Asian Nations. This is likely to increase the competitiveness of Malaysia’s exports and as a result lead to an increase in traffic at Malaysia’s ports, benefiting Westports as well.
