The ports and shipping sector provides critical infrastructure for the social, regional and economic development of a country. The sector is no longer limited to cargo handling; now, the provision of logistics services in an international context has become a core part of the business. The demand for containers and transhipment has been increasing continuously. Going forward, technological advancements in the logistics as well as port sectors are going to be the key drivers.
Increasing containerisation
Given their geographical location, the Southeast Asian (SEA) countries are considered to be an important gateway for maritime containerised trade. A notable trend in these countries has been the 36 per cent increase in the average container prices from the month of August 2022 and a 21 per cent increase in the one-way leasing rates for containers, reflecting the rising demand for containers. The governments of Singapore and Indonesia have announced plans to build an international container port at the Kendal industrial park in Central Java, Indonesia.
Feasibility studies for potential sites have already been completed and a proposal has been submitted to the Government of Indonesia. Discussions are currently under way to decide upon the appointment of a Singapore-based local partner to develop the port.The port project has been classified as a strategic national project in Indonesia and works are expected to be completed by 2024. Once operational, it will be capable of handling 0.4 million twenty-foot equivalent units (TEUs) of containers initially, with capacity increasing up to 1.5 million TEUs in the coming years. The Ministry of Public Works and Transport, Cambodia, recently held the ground-breaking ceremony to mark the start of construction at the new international multipurpose logistics and port centre in the south-western province of Kampot. The estimated cost of the project is $1.5 billion. It will be built on a total area of 600 hectares, with a depth of 15 metres to accommodate vessels weighing up to 100,000 tonnes. The project is expected to improve the efficiency of export of agricultural, industrial, and fishing products in the local and global markets and boost Cambodia’s economic growth in the process.
Rising transhipment volumes
The ports in SEA also cater to the demand and supply requirements of other countries in Asia like India and China by operating as transhipment hubs. At present, about 75 per cent of India’s transhipment cargo is handled at ports outside India. On a surprising note, more than 85 per cent of this cargo is being handled by the ports of Colombo, Singapore and Klang (Malaysia). A port,which is being developed in Mindanao, Philippines, will stimulate the logistics industry and position the southern island as a viable hub for imports to be transhipped from the south to the north as an alternative to importing through Manila. Two seaports in Mindanao – Sasa port in Davao City and General Santos City port – have pending unsolicited proposals under a public-private partnership scheme. Singapore plans to invest$14 billion to build the largest automated port in the world by 2024. This will double the existing space and feature drones and driverless vehicles. Two new berths became operational in 2021, and construction work is currently continuing in the next phase.
As per reports, after purchasing a new logistics centre in Indonesia as part of its New Southern Policy to boost trade, the Busan Port Authority will set up and run a bonded warehouse. The Mediterranean Shipping Company (MSC), together with the Vietnam Maritime Corporation, proposes to construct a massive new transhipment container terminal near Ho Chi Minh City. The terminal will have more than 23,000 feet of wharf and the capability to handle ships up to 250,000 tonnes and with a capacity of 24,000 TEUs. MSC, in association with Saigon Port, carried out studies for the new terminal and has recently submitted these to the government for approval. The new MSC terminal willfocus on transhipment with as much as 80 per cent of its volume being international cargo and just 20 per cent domestic cargo. Under the proposal, construction will begin on the new terminal in 2024 and it will be opened in 2027.
Greater emphasis on technology
Nowadays, port authorities including transhippers, warehouses, and merchants are increasingly exploring digital transformation to stay ahead of the regional and global logistics competition while keeping costs low. Additionally, the explosive growth of ecommerce because of the Covid-19 pandemic and increasing preference for digital medium is encouraging logistics companies to digitalise their operations to form seamless e-fulfilment hubs to efficiently serve global supply chain activities across countries. Further, the use of digital tools for stock fulfilment is on the rise and many are being improved to help businesses better track their inventories.
Countries across the SEA region are planning to deploy the latest technologies to further smoothen logistics and supply chain processes. Singapore will operate automated guided vehicles to move more containers between the yards and berths where ships wait. A human driving a truck will use sensors and wireless communications to lead a convoy of driver-less vehicles in and out of the port. Drones will be used for shore-toship deliveries, and aid security guards with checks. The upgraded technology will save on manpower. Additionally, Singapore port wants to take a further step by integrating information systems, enabling it to track cargo and communicate surges in demand to all supply chain players. Grab Haulier plans to invest in expanding the logistics supply chains in Penang and Johor in Malaysia to build a smart logistics suite of services. Pipeline plans include integrating other related ecosystems such as ports, depots, warehouses, and other associated areas into one system.
Challenges
Maritime logistics and connectivity have been a huge challenge for SEA countries. The shortcomings in maritime logistics and infrastructure have resulted in high turnaround time at ports, undermining their trade and competitiveness. Interregional disparities in terms of port infrastructure are another major cause for concern. Further, the problems of port congestion, high transportation cost, and surcharge imposed by shipping lines to remove large quantities of empty containers continue to loom in the background. Enterprises face the risk of late order delivery, fine payment for contract breach, or having to switch from sea to air transport, even though it costs more to avoid breaching contracts. Besides, the long shipping journey poses the risk of damage to goods, especially in the case of food items.
The way ahead
Going forward, there is a need to upgrade infrastructure and equipment to handle mega-ships. Logistics enterprises need to work with industry associations and shipping lines to implement new logistics networks to connect existing seaport clusters to reduce pressure on the transport system and optimise the transport chain. In the long term, logistics businesses need to quickly apply automation to reduce their dependence on labour as well as implement new technologies to manage movement of goods efficiently and optimise the supply chain.
