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Cascade Effects in Container Shipping
    Implication for Regional and Feeder Ports

                                            Portek International Limited
                                                    Larry Lam, Chairman




The contents of this document are copyrighted and proprietary, and may not be reproduced without the permission of Portek International Limited
What we do

 Portek is both a
 provider of equipment, services
  and solutions to ports worldwide,
  & an
 operator of medium sized ports.
What we do
• As provider to ports:
  – Modernize Port Equipment – upgrading
    equipment from PX to PPX, turnkey
  – Quick deployment of cranes to meet
    surge in traffic; sale or lease
  – Crane accidents recovery & repairs
  – Port IT & Automation modules
  – Traffic studies, marketing program to
    attract traffic, simulations
What we do
• As port operator:
  – T009 & T300 (Jakarta, Indonesia)
  – Bejaia Mediterranean Terminal
    (Algeria)
  – Valetta Gateway Terminal (Malta)
  – Port of Libreville & Port Gentil ( Gabon)
PORTEK
Creating Global Footprints
Background
The Trend




                                 12,500
                        7,200
            4,500
  3,000




 1980      1990       2000      2006
          Maximum Vessel Size
The Trend

• By end of 2007, there were 188
  Vessels of greater than 10 000
  TEUs on order

• By 2011, Post Panamax Vessels
  will contribute 50% of all
  container slots
Definitions

• Mid Panamax MPX ~ 2000 – 3500 TEUs
• Large Panamax LPX ~ 3500+ – 4500 TEUs
• Post Panamax PPX ~ 4500+ – 6000 TEUs
• Large Post Panamax LPPX
                     ~ 6000+ – 8000 TEUs
• Super Post Panamax SPPX (Mega Ships)
                     ~ 8000+ – 12500 TEUs
Cascade Effect
Cascade Effects


• Cascade effect: big ships
  displacing small ships across
  all ship sizes
World Container Fleet
Supply

• Order book of 6.9 million TEU with
  an average ship size of 4,500 TEU.

• Existing world fleet is only 11.8 TEU,
  with an average ship size of less
  than 3,000 TEU.
LPPX/ SPPX
                 7,000 – 12,500TEUs

Displacing

              LPX/ SPX
              4,000 – 6,000TEUs
Displacing
             Small Vessels
             2,000 – 4,000TEUs
Displacing
             Smaller Vessels
             1,000 – 2,000TEUs
Cascade Patterns (1)




        Deployment of Megaships
Cascade Patterns (2)




          Routes for LPX/PPX
Cascade Patterns (2)




    New (Shuttle) Services for LPX/PPX
Cascade Patterns (3)




    Routes for MPX
Shipping Economics
And Implications for regional and feeder shipping
Shipping Economics


• Shipping Economics :
  driven by need to fill the
  vessel to achieve low unit
  slot cost
What are the implications?
• More consolidation, M&A in the regional
  and feeder trades?
• Slot sharing, gradual exit of smaller
  ships?
• Increase in fuel cost will further
  accentuate the cost difference
• Ship call frequency decrease due to
  larger ships and bigger loads
• Reduced port calls, as port with low load
  factor will be dropped out
Impact on Ports
Implications for regional and feeder ports
Regional Ports & Feeder
Ports
• Regional ports are ports serving
  Intra-continent of Intra-regional
  trades such as Intra-Asia trades, SE
  Asia Trades
• Feeder ports are mainly those that
  feed or receive cargo to and from a
  regional port or a major hub port
Challenges for Regional and
Feeder Ports
• Questions confronting regional and
  feeder ports:
  – Are the (displaced) big ships coming to
    your port?
  – Are you pushed further into the feeder
    trades?
  – Which ports can be winners and which
    may be bypassed?
The Future of Regional Ports



2,500 TEU ships       5,000 TEU ships


Some regional ports may emerge as
the regional hubs, and attract more
transshipment traffic
The Future of Feeder Ports



600 – 1,200 TEU ships        2,500 TEU ships


  Feeder ports who cannot service larger
  ships will be marginalized, they may
  dropped as a port of call, will see reduced
  frequency, and connectivity
Advantage = US$ 8 / TEU / day savings in slot cost
          = US$ 48 for a voyage of 6 days
Winners and Losers

• For South East Asia:
  – Tg Priok (Jakarta)?
  – Manila, Laem Chabang?
  – Port Klang?
  – Cai Mep Port? With throughput in
    Vietnam growing at 25% a year,
    will Cai Mep be a winner?
River Ports VS. Sea Ports

• Cascade effect will tilt the
  balance in favour of sea ports:
  – Ho Chi Minh VS. Cai Mep
  – Bangkok VS. Laem Chabang
  – Ports along Yangtze VS. coastal
    ports (Yangshan, Ningbo, etc.)
Winners and Losers

• For Indian subcontinent/ Arabian
  Sea:
  – Will Nhava Sheva emerge as a
    major port of calls for Post
    Panamax vessels?
  – Karachi, Bandar Abbas
Challenges
What can regional and feeder ports do?
Challenges
• Insufficient cargo volume for new size
  of ships
• Physical infrastructural constraints
• Equipment constraints
• IT & communication system constraints
• Administrative issues – bureaucratic
  red tape, labour management issues,
  custom inspection, adopt best
  practices
Cargo Volume Constraints
• There must be sufficient cargo or
  load factor for the ship to justify
  making a call.
• Regional Ports must:
  – Expand its hinterland; seize initiatives
    to be a gateway port for the country,
    and neighboring countries.
  – Attracting transshipment traffic
  – Stimulate a more balanced trade
Round TRIP
Simulation
System
Physical Infrastructural
Constraints
• Draft:
  – Regional ports : 13 – 15 m
  – Feeder ports : 10 – 12 m
• Sufficient turning radius
• Berth Length:
  – Regional ports: 300 – 330 m
  – Feeder ports : 200 – 250 m
Physical Infrastructural
Constraints

• Yard space:
  – The more usual constraint
  – A lot of yard space needed for
    an exchange of 2,000 to 3,000
    boxes
Equipment Constraints

• Panamax Quay Crane
  – Lift Height (26 m  30 – 32 m)
  – Outreach (12 – 13 rows    14 – 15
    rows)
  – Crane speeds – possible to increase
    incrementally
Equipment Constraints
• Panamax Quay Crane
  – Drive change – improve reliability,
    parts absolescence
  – General refurbishment – better cabin
    ergonomics, greater safety as in
    braking systems, etc.
  – Twin lift 2 X 20’ can be incorporated
    without major change in operating
    procedures
Quay crane
modification & drive
change in Penang,
Malaysia
Boom extension
in Tuticorin,
India
QC Drive change in PSA,
             Singapore
RTG speed increase in
    Penang, Malaysia
Equipment Constraints
• Yard Equipment
  – RTG height of 1 over 4 (or 1 over 3) to
    1over 5 or 1over 6
  – Yard space is at a premium
  – Straddle carriers of 1 over 2
    configuration are being phased out in
    favour of 1 over 3
Portek T300 Terminal
IT & Communication
Systems

• The port IT system must be able
  to cope with an exchange of
  3,000 to 4,000 moves per ship
  within a 24 hour period
Upgrading of CTMS
Review of Operational
          procedures
Radio Data
    Terminals for
accurate real time
      information
GPS Satellites



                                              Fixed GPS
                                              (reference)




                 Send Error Correction Data




 Mobile GPS




                                   Position Determination
                                                 Systems
Optical Character
                   Recognition
                       Systems

CYLU4236936
Administrative Issues
• Streamlining customs procedure and
  documentation flow – many ports in
  developing countries have time
  consuming custom inspection, and
  complicated documentation,
  resulting in a dwell time of
  containers
Administrative Issues
• Dealing with Bureaucracy - state owned
  ports slow to respond to customer needs,
  cumbersome procurement process, not
  able to gear up quickly to handle
  increased traffic
• Labour issues - Some unionized labour
  force continuing with outdated work
  practices, resist changes and new
  technology
Conclusions
Conclusion: Mega Hub and
Regional Port
• Big ships reinforce the hub and
  spoke pattern of shipping, favoring
  mega hub ports

• Some regional ports will be winners
  and emerge as regional hubs. Many
  will be bypassed
Conclusion: Feeder Ports
and Feeder Shipping
• Feeder ports face pressure as feeder
  vessels scale up. Failure to cope means:
  high freight costs, low connectivity and
  becoming less relevant
• Further shake-out in regional and feeder
  shipping through mergers and
  acquisitions. Smaller ships of less than
  1000 TEU size will retreat to marginal or
  niche routes or to domestic, inter-island
  routes
Thank You



Questions?
enquiry@portek.com

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Cascade Effects in Container Shipping: Implication for Regional and Feeder Ports

  • 1. Cascade Effects in Container Shipping Implication for Regional and Feeder Ports Portek International Limited Larry Lam, Chairman The contents of this document are copyrighted and proprietary, and may not be reproduced without the permission of Portek International Limited
  • 2.
  • 3. What we do Portek is both a provider of equipment, services and solutions to ports worldwide, & an operator of medium sized ports.
  • 4. What we do • As provider to ports: – Modernize Port Equipment – upgrading equipment from PX to PPX, turnkey – Quick deployment of cranes to meet surge in traffic; sale or lease – Crane accidents recovery & repairs – Port IT & Automation modules – Traffic studies, marketing program to attract traffic, simulations
  • 5.
  • 6. What we do • As port operator: – T009 & T300 (Jakarta, Indonesia) – Bejaia Mediterranean Terminal (Algeria) – Valetta Gateway Terminal (Malta) – Port of Libreville & Port Gentil ( Gabon)
  • 7.
  • 10. The Trend 12,500 7,200 4,500 3,000 1980 1990 2000 2006 Maximum Vessel Size
  • 11. The Trend • By end of 2007, there were 188 Vessels of greater than 10 000 TEUs on order • By 2011, Post Panamax Vessels will contribute 50% of all container slots
  • 12. Definitions • Mid Panamax MPX ~ 2000 – 3500 TEUs • Large Panamax LPX ~ 3500+ – 4500 TEUs • Post Panamax PPX ~ 4500+ – 6000 TEUs • Large Post Panamax LPPX ~ 6000+ – 8000 TEUs • Super Post Panamax SPPX (Mega Ships) ~ 8000+ – 12500 TEUs
  • 14. Cascade Effects • Cascade effect: big ships displacing small ships across all ship sizes
  • 15. World Container Fleet Supply • Order book of 6.9 million TEU with an average ship size of 4,500 TEU. • Existing world fleet is only 11.8 TEU, with an average ship size of less than 3,000 TEU.
  • 16. LPPX/ SPPX 7,000 – 12,500TEUs Displacing LPX/ SPX 4,000 – 6,000TEUs Displacing Small Vessels 2,000 – 4,000TEUs Displacing Smaller Vessels 1,000 – 2,000TEUs
  • 17. Cascade Patterns (1) Deployment of Megaships
  • 18. Cascade Patterns (2) Routes for LPX/PPX
  • 19. Cascade Patterns (2) New (Shuttle) Services for LPX/PPX
  • 20. Cascade Patterns (3) Routes for MPX
  • 21. Shipping Economics And Implications for regional and feeder shipping
  • 22. Shipping Economics • Shipping Economics : driven by need to fill the vessel to achieve low unit slot cost
  • 23. What are the implications? • More consolidation, M&A in the regional and feeder trades? • Slot sharing, gradual exit of smaller ships? • Increase in fuel cost will further accentuate the cost difference • Ship call frequency decrease due to larger ships and bigger loads • Reduced port calls, as port with low load factor will be dropped out
  • 24. Impact on Ports Implications for regional and feeder ports
  • 25. Regional Ports & Feeder Ports • Regional ports are ports serving Intra-continent of Intra-regional trades such as Intra-Asia trades, SE Asia Trades • Feeder ports are mainly those that feed or receive cargo to and from a regional port or a major hub port
  • 26. Challenges for Regional and Feeder Ports • Questions confronting regional and feeder ports: – Are the (displaced) big ships coming to your port? – Are you pushed further into the feeder trades? – Which ports can be winners and which may be bypassed?
  • 27. The Future of Regional Ports 2,500 TEU ships 5,000 TEU ships Some regional ports may emerge as the regional hubs, and attract more transshipment traffic
  • 28. The Future of Feeder Ports 600 – 1,200 TEU ships 2,500 TEU ships Feeder ports who cannot service larger ships will be marginalized, they may dropped as a port of call, will see reduced frequency, and connectivity
  • 29. Advantage = US$ 8 / TEU / day savings in slot cost = US$ 48 for a voyage of 6 days
  • 30. Winners and Losers • For South East Asia: – Tg Priok (Jakarta)? – Manila, Laem Chabang? – Port Klang? – Cai Mep Port? With throughput in Vietnam growing at 25% a year, will Cai Mep be a winner?
  • 31. River Ports VS. Sea Ports • Cascade effect will tilt the balance in favour of sea ports: – Ho Chi Minh VS. Cai Mep – Bangkok VS. Laem Chabang – Ports along Yangtze VS. coastal ports (Yangshan, Ningbo, etc.)
  • 32. Winners and Losers • For Indian subcontinent/ Arabian Sea: – Will Nhava Sheva emerge as a major port of calls for Post Panamax vessels? – Karachi, Bandar Abbas
  • 33. Challenges What can regional and feeder ports do?
  • 34. Challenges • Insufficient cargo volume for new size of ships • Physical infrastructural constraints • Equipment constraints • IT & communication system constraints • Administrative issues – bureaucratic red tape, labour management issues, custom inspection, adopt best practices
  • 35. Cargo Volume Constraints • There must be sufficient cargo or load factor for the ship to justify making a call. • Regional Ports must: – Expand its hinterland; seize initiatives to be a gateway port for the country, and neighboring countries. – Attracting transshipment traffic – Stimulate a more balanced trade
  • 37. Physical Infrastructural Constraints • Draft: – Regional ports : 13 – 15 m – Feeder ports : 10 – 12 m • Sufficient turning radius • Berth Length: – Regional ports: 300 – 330 m – Feeder ports : 200 – 250 m
  • 38. Physical Infrastructural Constraints • Yard space: – The more usual constraint – A lot of yard space needed for an exchange of 2,000 to 3,000 boxes
  • 39. Equipment Constraints • Panamax Quay Crane – Lift Height (26 m 30 – 32 m) – Outreach (12 – 13 rows 14 – 15 rows) – Crane speeds – possible to increase incrementally
  • 40. Equipment Constraints • Panamax Quay Crane – Drive change – improve reliability, parts absolescence – General refurbishment – better cabin ergonomics, greater safety as in braking systems, etc. – Twin lift 2 X 20’ can be incorporated without major change in operating procedures
  • 41. Quay crane modification & drive change in Penang, Malaysia
  • 43. QC Drive change in PSA, Singapore
  • 44. RTG speed increase in Penang, Malaysia
  • 45. Equipment Constraints • Yard Equipment – RTG height of 1 over 4 (or 1 over 3) to 1over 5 or 1over 6 – Yard space is at a premium – Straddle carriers of 1 over 2 configuration are being phased out in favour of 1 over 3
  • 47. IT & Communication Systems • The port IT system must be able to cope with an exchange of 3,000 to 4,000 moves per ship within a 24 hour period
  • 49. Review of Operational procedures
  • 50. Radio Data Terminals for accurate real time information
  • 51. GPS Satellites Fixed GPS (reference) Send Error Correction Data Mobile GPS Position Determination Systems
  • 52. Optical Character Recognition Systems CYLU4236936
  • 53. Administrative Issues • Streamlining customs procedure and documentation flow – many ports in developing countries have time consuming custom inspection, and complicated documentation, resulting in a dwell time of containers
  • 54. Administrative Issues • Dealing with Bureaucracy - state owned ports slow to respond to customer needs, cumbersome procurement process, not able to gear up quickly to handle increased traffic • Labour issues - Some unionized labour force continuing with outdated work practices, resist changes and new technology
  • 56. Conclusion: Mega Hub and Regional Port • Big ships reinforce the hub and spoke pattern of shipping, favoring mega hub ports • Some regional ports will be winners and emerge as regional hubs. Many will be bypassed
  • 57. Conclusion: Feeder Ports and Feeder Shipping • Feeder ports face pressure as feeder vessels scale up. Failure to cope means: high freight costs, low connectivity and becoming less relevant • Further shake-out in regional and feeder shipping through mergers and acquisitions. Smaller ships of less than 1000 TEU size will retreat to marginal or niche routes or to domestic, inter-island routes