Strategies and Conditions for a Regional Hub Port in Asia

1. Strategies and Conditions for a Regional Hub Port in Asia

2. “Globalization has been made possible by the progressive dismantling of barriers to trade and capital mobility, fundamental technologies advances, steadily declining cost of transport, communication and computing. Its integrative logic seen inexorable, its momentum irresistible.”- Kofi Annan,2000

3. Introduction • We have seen hub ports emerge, successful ones and also many countries trying to be a hub. • During this presentation, I will try and explain how this trend surfaced and what are the factors that drive the need for a hub, and how does a port emerge as a hub. • The presentation will briefly include • World Container Trade • Lines response • Hub & spoke • Co-operation, mergers and acquisitions • Vessel sizes • Impact to ports • Ports – responding to the demand • Developing a transshipment hub – The PTP story

4. Container Trade Outlook Container Trade • Over the last couple of decades, organic growth has been influenced by globalisation. Globalisation drives trade growth and therefore the container trade. • Recent examples of globalisation include :- • Regional FTAs – Creating economic blocs which enable limited free flow of trade; thereby increasing the ‘spokes’ in the wheel • Bilateral FTAs • Vietnam’s entry into WTO – Creation of a new market giant ? • These points result in creation of new shipping routes; thus influencing hubs and spokes Source: Drewry Shipping Consultants, Container Market Quarterly Supply Outlook Source: BRS Alphaliner, including options and plans, July 2005

5. How do the lines respond ? • Hub & spoke concept • Emergence of main hubs and secondary hubs • Lines participation and investment in terminals to ensure capacity • Capacity expansion to cater for demand through • Merger & Acquisition – Maersk & PONL, Hapag Lloyd/CP ships • Alliance and Service Cooperation i.e New World Alliance, Grand Alliance & CKYH (Cosco, K-Line, Yang Ming & Hanjin) • Building larger vessels • Integration - Lines getting involved in supply chain and value added logistics services – i.e distribution and warehousing, logistics i.e NYK – Tasco, Maersk – Maersk Logistics etc

6. Capacity Expansion by the Lines Carrier Mergers

8. What do lines face when responding to the increasing but unpredictable demand ? • Cyclical freight rates as a result of supply and demand • Rising bunker cost • Increase in terminal cost due to rising CPI • Increase in charter rates due to cyclical demand • Imbalance of trade – cost of repositioning impacts the lines “bottom line” • Increase in operational cost due to security measures investment http://octane.nmt.edu/gotech/Marketplace/Prices.aspx

9. Myanmar PSA Corp Cambodia Ho Chi Minh Port Johor Port Tanjung Priok Philippines Thai Ports New Zealand Port Klang AUSTRALIA 3.17 million TEUS 0.21 million TEUS 2.3 million TEUS 5.18 million TEUS 6 million TEUs 165,702TEUs BKK : 1.32mnLCB : 3.62mnTotal: 4.94mn 3.18 million TEUs 877,000 TEUs 1.70 million TEUs 23 million TEUs PTP 4.77 million TEUs Indonesia SUB : 1.7mn SRG : 0.24mn MES : 0.28mn TOTAL: 2.22mn S.E. Asia Region – Major ports • Most of these ports are vying for hub status. • How many can there be in S.E. Asia ? • I cannot answer this question, but will share my views on some of the pre-requisites

10. Ports’ response to demand • Building of mega ports – larger capacity, deeper draft and larger ports equipment. Ports with super post panamax cranes and minimum of 15 metres draft became the norm • Improve terminal performance and productivity – increase the benchmark to 31-32 moves per crane per hour • Strategic cost management • Development of Free Trade Zone/Economic Zone within the terminal to cater for logistics and distribution requirements • Links to global operators became more commonplace – APMT, HPH, DP World, PSA Corp.

11. Global Port Operators Terminals – PSA, DP World, HPH, APMT

12. Building a regional hub – prerequisites • Hubs need the following as a minimum : - • Strategic Location i.e. with minimum deviation from the main trade lanes, and enabling feedering from the ‘spokes’ • Large capacity – These ports must be supply driven, and hence government support or a entrepreneurial drive is must • Operational excellence – high productivity and fast turn around time • Equipment to cater the next generation of vessels • Free trade zone/Economic zone development • Operational flexibility – This cannot be undermined. The changing nature of trade results in lines needing flexibility. Ports that cannot or refuse to adapt will face consequences in the future

13. Developing a Transshipment hub- the PTP story • Timeline - The journey • Location • Strategic Location • Largest Start up Container Terminal • Equipment & Infrastructure

14. PTP enjoyed a strategic location • Ultimate Location • Intersection of International trade lanes & minimum deviation • Natural Factors • Sheltered bay & no tide restriction • Terminal Draft of 15-19 meters • Hinterland Accessibility • A greenfield, but access to Johor market (900,000 teu) and Singapore market was possible via excellent highways. • Rail connection to Southern Thailand, northern Malaysia

15. Largest Start-up Container Terminal • Facilities • 3,600m linear quay (10 berths x 360m) • 154,000 TEU capacity container yard • 3,300 Reefer points • 8 million TEU capacity • Equipment • 27 super-post panamax cranes • 14 with 18 rows outreach • 13 with 22 rows outreach & twin pick • 72 Rubber Tyred Gantry cranes • Integrated IT system • Ancillary Facilities • Container repair & maintenance • On-dock depot • Bunkering & other marine services • Inspection Bays • Operations Support Center

16. Conclusion • As an example, PTP was told by ‘experts’ that we had a fatal flaw, and would be a white elephant. I was told in year 1999. • Today despite the early cynicsm, we are a hub port • My conclusion is simple – There is no one that can accurately predict the changing nature of the trade. As long as you have the fundamentals, isn’t the rest just about branding and marketing ?