Location of New Port Expansion Projects: Analysis

By George Backwell
Monday, July 28, 2014
Container terminal: Image courtesy of APM

When it comes to port development, many governments now favour letting the market decide where expansion should take place, whereas most other transport infrastructure, such as roads and rail, remains centrally managed. The problem is that old habits die hard in shipping, meaning that the free market approach is sometimes a painful process, as discussed here in an excerpt from recent  Drewry Maritime Research.

While some observers might argue that the Middle East has a reputation for vanity port projects – with governments building shiny new ports just because they can – the reality is that utilisation levels in many of the region’s gateways are high and new capacity is needed. However, this alone does not necessarily guarantee that the new ports will be used. The existing, old ports often have better proximity to their hinterlands, plus extensive vested interests who want to see the status quo maintained.

The solution adopted by many Middle Eastern governments is to order the closure of the old ports and the transfer of their volumes to the new ones. Whilst this would not be an option for footloose transhipment traffic, gateway traffic has no option but to toe the line.

The Middle East though, is the exception rather than the rule. In most other locations, governments and port authorities now seek to let the market decide which ports to use, banking on the fact that newer terminals offer better facilities, deeper water and higher service levels. However, whilst the market will happily decide, it may not choose the option that investors, port authorities and governments want.

In some locations, the authorities have promised to ensure that old facilities will be closed down – but this has proved to be easier said than done. In Vietnam for example, a number of international terminal operators have invested in new deep water facilities in the Cai Mep area, downriver from the older Ho Chi Minh City facilities which are draught restricted and suffer congestion (in August carriers will be imposing a congestion surcharge for the Cat Lai terminal for example).

The development of terminals at Cai Mep was motivated partly by Vietnam’s booming trade growth (which was subsequently hit by the global financial crisis – and ironically Cai Mep port opened fully in 2009), but also on the understanding that some of the Ho Chi Minh City terminals would close down.  This has not happened (and indeed the river approach to Ho Chi Minh City has recently been dredged to allow larger vessel access). The reasons for this are many, but vested interests are high on the list – both from the local municipalities in each location and from the Vietnamese Navy which gains revenue from the upriver terminals.

In addition, while carriers initially started deploying large mainline vessels of over 8,000 teu to Cai Mep, the slowing of volume growth, the fragmented nature of the carrier market serving Vietnam, and the need to barge containers between Ho Chi Minh City and Cai Mep at carriers’ expense, has led to a reversion to feeder vessels calling at the upriver terminals. The Cai Mep facilities are severely under-utilised, so much so that in 2013 the Vietnamese Ministry of Transport had to set a mandatory two-year minimum handling price to try and protect terminal operators. Small consolation to those with no cargo though.

A similar story prevailed in Busan port, South Korea. Whilst Busan New Port was being developed, the understanding was that some of the existing terminals in the old port area would be closed down. However, vested interests resisted the change and the early days of Busan New Port after it opened in 2006 saw very low utilisation levels. However, over time, things have improved markedly, partly due to the closure of some of the old port facilities but mainly because of the rapid growth in ship sizes calling at the port.

The terminals in the old port have not been able to offer the kind of infrastructure and equipment the big ships need, and so in effect, the market has – belatedly – decided. Today, more than half of Busan’s volume is handled at the New Port, and the share is growing, and another one of the terminals (UAT) in the old port has just closed down.

Industry observers might be forgiven for thinking that governments and port authorities being unable or unwilling to close old ports and terminals is as extreme as it gets. However, it can get worse.

For example, in Djibouti, DP World won a long term deal to handle containers on an exclusive basis, developing and opening in 2009 the new Dolareh Container Terminal with its majority partner, the Djibouti port authority (PDSA). The old existing terminal, run by PDSA, was closed down. In 2011 though, DPW’s exclusivity was terminated and the old terminal was brought back into operation by PDSA, phoenix style.

Whether central government control of port capacity is preferable to letting the market decide is a matter of opinion, but either way, when governments and port authorities make promises to close capacity, they have to live up to them. Otherwise the private sector will think twice about investing. They also need to recognise that it is one thing to move a port or terminal to a more preferable site, it is another to expect forwarders to abandon their warehouses at the same time.

Drewry's View
In the absence of overt central control, the market will decide which ports and terminals to use. However, experience shows though that habits (and old ports) die hard in shipping, so external encouragement for change is often required.

Source: Drewry Maritime Research

Maritime Reporter November 2013 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

People & Company News

U.S. Drillers Cut Rigs to Lowest since August

Energy companies have reduced the number of rigs drilling for oil in the United States to the lowest since August, shifting more rigs in favor of natural gas as crude prices dive,

Equinox Class Scrubber Systems Receive Certification

Algoma Central Corporation (“Algoma”), the largest Canadian shipowner and operator of domestic Great Lakes vessels announces that it has received all requisite

MARAD Tests Alternative Power for Ships

The Maritime Administration (MARAD) is testing state-of-the-art, environmentally efficient technology onboard the Training Ship (TS) Kennedy.   The National Defense


Southern California Port Congestion

Hapag-Lloyd informs about the congestion at the ports of Los Angeles and Long Beach that has reached a critical point. I. Several container ships are anchoring

GAC Starts Hull Cleaning Op'ns in Oman

GAC EnvironHull hull cleaning operations using the brush-and-diver-free HullWiper system starting at the port of Sohar, just outside the Gulf of Hormuz. This

Bulker Arrives to US on Her Maiden Voyage

The Port of Vancouver USA welcomed the Kypros Unity, commanded by Capt. Wilfredo F. Itable of Cyprus, on her maiden voyage Oct. 28. Capt. Itable and his 20-member

Container Ships

Asia-Euro Box Rates Jump 88 pct

Shipping freight rates for transporting containers from ports in Asia to Northern Europe jumped 88.2 percent to $1,312 per 20-foot container (TEU) in the week ended on Friday,

Seaspan Receives 5th 10K TEU Boxship

Seaspan Corporation announced yesterday that it accepted delivery of a 10000 TEU containership, the MOL Brightness.   The new containership, which was constructed

CMA CGM to Retrofit 10 More Bulbous Bows

The CMA CGM Group said it will retrofit 10 of its vessels’ bulbous bows to achieve improved energy efficiency for slow steaming. The modifications are in addition


U.S. Drillers Cut Rigs to Lowest since August

Energy companies have reduced the number of rigs drilling for oil in the United States to the lowest since August, shifting more rigs in favor of natural gas as crude prices dive,

Italy Ending Med Sea Rescues

Rights groups warn of risk of more deaths; EU mission Triton will have more limited scope. Italy said on Friday it would close a sea rescue mission that has saved the lives of more than 100,

St. Lawrence Seaway Workers Extend Strike Deadline

The union that represents workers on the St. Lawrence Seaway, the waterway that links the Great Lakes and the Atlantic Ocean, has extended a strike deadline to Monday at 5 p.


SMC to Provide Marine Coordination for Siemens

Specialist Marine Consultants Ltd (SMC) have been working with Siemens, providing offshore marine coordination for a fifth Siemens Wind Power construction project.

Good Performance by Dun & Bradstreet in 3Q 2014

Dun & Bradstreet, the world's leading source of commercial information and insight on businesses, today reported results for the third quarter ended September 30, 2014.

Schlumberger Introduces New Well Integrity Service

Schlumberger announced today the release of Invizion Evaluation* well integrity service, which helps operators evaluate zonal isolation by using integrated drilling, cementing and well logging data.

Maritime Careers / Shipboard Positions Navigation Offshore Oil Pod Propulsion Port Authority Salvage Ship Repair Shipbuilding / Vessel Construction Sonar Winch
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.2513 sec (4 req/sec)