PORT CONGESTION

Lines double surcharge at Chennai terminals Delay in finding berths at privately-operated container terminals importing materials in containers through Chennai port's private container terminals has become costlier with shipping lines doubling the surcharge to US$130 per TEU, reported The Hindu. This is because of the delay in container vessels getting berths due to severe congestion. For exports too the surcharge has been increased to $65 per TEU from $35, according to industry sources. The shipping lines said that situation at the two terminals operated by DP World and PSA Singapore has not improved in the last few days leading to delays in arrival and departure of their vessels. As of Friday morning, six container vessels were waiting outside the port's anchorage waiting for berth. A large shipping line even diverted two of its vessels to Colombo from where boxes were shipped to Chennai in feeder vessels. The opening of gate 2A at the Chennai port has not improved the situation at the two terminals. While the inventory at DP World Chennai is around 11,000 TEUs, it is nearly half at the Chennai International Terminal, sources said. An official of one terminal said infrastructure outside the port has not improved for speedier evacuation of containers. The average evacuation at DP World Chennai used to be around 1,800 boxes a day but dropped to around 1,200 due to bottlenecks outside the port. It is a similar situation at the other terminal. Walter D'Souza, regional chairman, FIEO Southern Region, said as Christmas season is approaching, exporters fear there could be a huge backlog during the festival season. Last Christmas, the Chennai port temporarily suspended export cargo clearance for over a week to ease the congestion. As there is no improvement in infrastructure, a similar crisis during the current season is inevitable unless necessary steps are taken by the stakeholders, he said. There are frequent strikes by trailer operators and other supporting services, resulting in traffic congestion in and around the port and exporters do not know when the cargo will reach the port and whether he can ship his consignment in the scheduled vessel. Exporters are forced to pay additional charges to the trailers due to detention at port, and the charges imposed by the shipping lines will make export unviable, he said. D'Souza requested the Commerce Ministry to intervene in this matter urgently, call for a meeting of all stakeholders immediately and outline a road map for a short term and medium term solution to the Chennai port problems.

MALAYSIAN PORTS PERFORMANCE

Malaysia’s ports hold a steady course Malaysia's two busiest ports, Port Klangand Port of Tanjung Pelepas, have been left largely unscathed by the slowdown in commerce, reported Business Times. Both ports handled about 84 per cent of total container volumes that went through Malaysian ports in 2010. Commerce on the Asia-to-Europe route, the world's second-busiest container route, rose 4.2 per cent in the second quarter. The growth was the weakest since the end of 2009, according to England-based Container Trade Statistics. According to Port Klang Authority (PKA), which oversees both Westports and Northport, overall container trade grew by eight per cent to 6.3 million TEUs for the first eight months of the year. While there was a slight drop in exports in July and in imports in August 2011 compared to the previous year, the drop was deemed negligible or insignificant. About two-thirds of containers that go through Port Klang are bound for Asean, Far East and South Asia. About 10 per cent are Europe-bound while two percent are US-bound. Port Klang is projected to handle 9.4 million TEUs in 2011. Last year, it handled 8.9 million TEUs. "Total container volume handled at Port Klang reflects that Port Klang could meet its projection," the port regulator said. MMC Corp, however, while not expecting PTP and Johor Port to be adversely affected by the global economic slowdown, is anticipating slower transhipment growth for the year. The conglomerate owns both PTP and Johor Port. MMC Corp group managing director Datuk Hasni Harun told Business Times recently that it expected slower transhipment growth of between three and four percent this year compared with between six and seven percent in 2010. PTP saw container throughput rise by 16 per cent year-on-year in the first half of 2011 to 3.6 million TEUs. Transhipment contributed more than 90 per cent of total containers handled in PTP for the first half of this year. The port has set a target of 7.5 million TEUs this year. PTP handled 6.3 million TEUs in 2010.

A NEW BENCHMARK FOR THE SHIPPING INDUSTRY

Maersk offers compensation if cargo late One of Singapore's rival ports, Tanjung Pelepas in Johor, has received a boost after Danish container shipping giant Maersk Line offered a money-back guarantee to customers whose cargo does not arrive on time, reported Straits Times. Maersk is also running daily services between Asia and Europe as part of its aim to improve the reliability of its cargo shipments. This enhanced service is also offered at three other Asian ports: China's Shanghai, Yantian and Ningbo ports. Tanjung Pelepas emerged as a potential threat to Singapore's ports about a decade ago but its container traffic is still substantially lower. Thomas Knudsen, Maersk chief executive for the Asia-Pacific region, told The Straits Times the move will help improve supply chains. Maersk's ships that used to sail two to five times a week and arrive at various times will now sail every day at a fixed time, and arrive at a fixed time. This means customers will be able to reduce warehousing costs as cargo can be shipped right after production, Knudsen said. “For any company doing business in Asia to Europe, this has a relevance... Hopefully our customers can see that beyond just the price, there is value in this.’’ A pilot programme started three months ago achieved a 95 per cent success rate. In the industry, more than half of all container ships arrive late, and 11 per cent more than two days late, Maersk said. In Europe, the service will be offered at the three ports of Felixstowe in Britain, Rotterdam in the Netherlands, and Bremerhaven in Germany. Asia-Europe is Maersk's largest shipping route. The new service will cover about five per cent of its total volume shipped globally, said Knudsen. Singapore traders and shippers can still benefit by trucking or shipping their goods to nearby Tanjung Pelepas, or to other stops en route. Maersk will compensate customers US$100 to $300 per container, depending on whether it arrives a day late or more at its destination. Divay Goel, general manager of Siva Shipping, an Indian tanker and offshore firm, said this is a major step for the shipping industry. “Because shipping lines did not adhere to the schedule, shippers did not have reliable delivery. It is a good initiative, but not many have the power that Maersk has to put so many ships in the line.’’

PORT PRIVATISATION - PORT OF BOTANY

Showdown looms over Botany privatisation

Sydney’s Port Botany will be privatised, setting the stage for a row with the maritime union and putting pressure on the Victorian and West Australian governments to consider selling their general cargo ports. NSW Treasurer Mike Baird unveiled the plan to put the Port Botany facility out for a 99-year lease as necessary to unlock funds to pour into the government's infrastructure fund, Restart NSW, reported The Australian. Investment bankers have been anticipating such a move for months given the change of government in NSW, and because ports assets are less politically sensitive than national icons such as the Snowy Hydro scheme, where a privatisation was abandoned in 2006 because of strong public opposition. Baird said that proceeds from the transaction, which could be finished in the first half of 2013, would be used to fund upgrades to the Pacific and Princes highways. The NSW plan is modelled on the Port of Brisbane privatisation, which reaped US$2.23 billion by putting the port out to a 99-year lease. Maritime Union of Australia national secretary Paddy Crumlin lashed out at the plan, saying Premier Barry O'Farrell was trying to sell the port to the highest bidder rather than attempting to ensure sustainable investment for public infrastructure. ``O'Farrell is stripping public assets for short-term political gain rather than putting in place long-term plans for increased capital productivity in the port, which services Australia's largest city,'' Crumlin said. ``Furthermore, O'Farrell is selling public assets into a capital market which is currently experiencing severe decline.'' Ports Australia boss David Anderson said that the possibilities of privatising ports was ``increasingly coming to the minds of governments''. Infrastructure Partnerships Australia head Brendan Lyon said other states across the country should be looking at their seaports and other assets to unlock funds. ``Asset sales will need to be a consistent theme for governments, because it allows them to shrink their balance sheets and recycle capital to fund new projects,'' Lyon said. The Port of Melbourne is the country's busiest container port and has just had a channel deepening to allow larger ships to trade through its facilities; it could be worth about $2.55 billion, compared with about $2.23 billion for Port Botany. Business Council of Australia chief executive Jennifer Westacott said NSW had taken an important step in ``building the capacity of the state economy over the long term'' by setting up its infrastructure fund. The NSW government is also putting its controversial desalination plant out to lease. Baird said the $66.51 billion in infrastructure spending over four years outlined in the budget was a record. Of this, $6.69 billion has been allocated to transport and roads.

UPTREND MARKET FOR LOGISTICS IN VIETNAM

Japan mid-size logistics firms target Vietnam Mid-size logistics companies are expanding their distribution networks in Vietnam, a growing market where big players have still not solidified their positions, according to Nikkei Report. Japan Logistic Systems Corp will open warehouses in Hanoi, Da Nang and Ho Chi Minh City on October 1. A roughly 20,000 sq m facility in Ho Chi Minh City will receive automobiles and motorcycles from factories in the north and supply them to the domestic market. A similarly sized warehouse in the capital will act as a logistics base for mainly home appliances, with the facility to be expanded by 10,000 sq m in December to accommodate transactions with an air-conditioner manufacturer. The overall investment is estimated at US$5.19 million, and Japan Logistic Systems aims to boost annual Vietnamese revenue from $51.74 million today to $90.55 million in three years. Mitsubishi Logistics Corp, having set up a joint venture with a local firm, has begun transporting products from appliance factories to the parts of Vietnam where they will be sold. The Japanese firm hopes to eventually handle imports and exports of electronic parts, coffee and other products. Nissin Corp has joined hands with Vietnam's national railroad to operate a freight train exclusively for Japanese companies in response to growing demand to transport cars and motorcycles. The train makes two trips a week between Hanoi, where factories are concentrated, and Ho Chi Minh City, where the vehicles are sold. Appliances are shipped on the return trip going north. The products used to be transported on trucks, but deliveries were often delayed and products were sometimes damaged en route. Yusen Logistics Co has begun considering regular truck deliveries between Hanoi and Ho Chi Minh City. Since the firm already operates Bangkok-Hanoi and Hong Kong-Hanoi routes, the new route would connect the former Saigon with Thailand and China by land. Japanese companies have been setting up factories in Vietnam, in part to take advantage of low labour costs and its proximity to the Chinese market. The Vietnamese government has indicated a plan to create a special economic zone for Japanese businesses, another positive factor for mid-size logistics firms.

SEAPORTS - FDI

Concern over PSA Indian partner in major port project

The biggest single foreign direct investment (FDI) in an Indian port project, by Singapore's PSA International, has come under threat after members on the board of the Union government-controlled Jawaharlal Nehru (JN) port raised concerns about PSA's local partner ABG Ports, reported The Mint.

The two firms are associated in a plan that will see PSA investing “over US$442 million to build a fourth terminal and expand capacity at the congested JN port, the country's busiest container facility. The board members are concerned about the below par performance of the Indian company at a container terminal it has been operating since 2007 at Kandla port in Gujarat.

A JN port spokesman said the board of trustees has set up a six member panel headed by the port's deputy chairman N Kumar to find out the reasons for ABG's performance. PSA has a 49 percent stake in Kandla Container Terminal Pvt. Ltd with ABG holding the rest.

The shipping ministry is not pleased with the developments.
"The ministry has taken a very dim view of the board of trustees decision to set up a panel to examine the performance of ABG at Kandla," said Rakesh Srivastava, a joint secretary looking after ports in the shipping ministry.

"If they wanted to disqualify the PSA-ABG team, they should have done so at the qualification stage itself. Now, after qualifying them and after they have become the highest bidder, you can't do this. It is simply ducking the issue and delaying it for some extraneous reasons," he said.

The financial bid submitted by the PSA-ABG team is valid till 30 September.

Srivastava said shipping secretary K. Mohandas has asked the port chairman to send a detailed report on the developments, which is awaited, ahead of taking a decision.

A spokesman for PSA declined to comment.

A spokesman for ABG Ports said that there was a problem of draft (depth) at Kandla. "The port management is totally responsible for that; they had promised to give us a depth of 12.5m at the channel, which has not been done so far. As a result, we are not able to bring mainline ships," the spokesman said.

A Kandla port spokesman was not immediately available for comment.

"JN port is choking," said Samir Kanabar, director, ports and shipping at Ernst and Young. "The government cannot afford to delay building the fourth terminal any further; it is already delayed by several years," he said, adding that the board of trustees should go by the stature of PSA, the majority JV partner in the new project.

According to qualification documents filed by the PSA-ABG team, PSA is the lead member of the consortium and will have management control of the new terminal with a 74 percent stake.

The delay in clearing the project comes at a time when the port, which loads more than 50 percent of India's container cargo, is battling congestion due to lack of capacity, forcing shipping lines to levy a congestion surcharge ranging from $60 to $155, depending on the size of the container, from exporters and importers since July. The port has said it's losing “half a million of revenue for each day of delay in implementing the new project,’’ according to a June affidavit filed by it in the Bombay high court in a case that involved one of the shortlisted bidders.

On 10 August, the board of trustees discussed the highest financial bid submitted by the PSA-ABG consortium to develop the new container terminal, the fourth, at JN port as it looks to expand capacity. The PSA-ABG team had offered to share 50.82 percent of its annual revenue with the government-run port, making it the highest revenue share bid quoted by a private firm since India started container port privatization programme in 1997.

Under this policy, the bidder willing to share the most from annual revenue with the government-owned port gets the contract, typically stretching 30 years.

The approval of the board of trustees for the project that will allow the port to load an additional four million containers a year to the 4.27 million TEUs it already handles, was considered a formality.

The tendering process lasted almost three years as it was marred by court cases filed by bidders over the government's policy on ports.

JN port chairman L. Radhakrishnan confirmed that the trustees had decided to set up a panel to examine ABG's Kandla performance, without elaborating further.

One of the trustees not attached or belonging to the port, who attended the 10 August meeting, said a section of them had urged caution.

"If ABG is not able to perform at a smaller terminal in Kandla, then how would it perform at a bigger terminal at JN port," he asked, requesting anonymity.

ROAD TRANSPORT - FORWARDING

DHL launches Southeast Asia road service suite

DHL Global Forwarding has consolidated its network of secure road freight services connecting Singapore, Malaysia and Thailand.

Its new and improved suite of three road freight services – Asiaconnect, Asialine and Asianet – will provide customers with a complete range of flexible and fast overland freighting options. Asiaconnect is DHL's less-than-truck-load (LTL) scheduled service that is now available to complement DHL's full-load service now called Asialine and its bespoke service, Asianet.

Amadou Diallo, CEO, Africa and South Asia Pacific, DHL Global Forwarding, said: "DHL Global Forwarding has been offering customers road freight services in Asia for years as it has many advantages - it is faster than sea, cheaper than air and can offer customers more pick-up flexibility and shorter lead times.

"Now consolidated into a single suite, and especially with the introduction of DHL Asiaconnect, our customers can choose the product best suited to their immediate needs. This is perfect for SMEs whose volumes vary and are not always very large, and for companies seeking better inventory management. With this suite of services DHL is providing the fastest, most flexible and secure road option whether customers require a tailor-made road freight solution or simply want to send small shipments securely at an all-in rate price system."