On par with Singapore not easy
By Dang Duong
|The Cai Mep-Thi Vai is currently a gateway port with the ratio of transshipments of less than 10% per year, mainly transshipments from Cambodia – PHOTO: ANH QUAN|
In a meeting with leaders of Ba Ria-Vung Tau Province after an inspection tour of the Cai Mep-Thi Vai deepwater port on May 20, the then Prime Minister Nguyen Xuan Phuc, now State President, mentioned the goal of developing the port complex on par with those in the region and able to compete with Singapore by 2030 and to a world-class seaport hub by 2045. This is an ambitious but tough target.
Singapore is the largest container transshipment port in the world with 80% of the cargo volume through the port being transshipments. Malaysia, with part of its coastline along the Malacca Strait, is the strongest rival with Singapore in the construction of international transshipment ports. Since the final years of the 20th century, Malaysia’s largest seaports, the Port Klang and the Tanjung Pelepas, have actively embarked on upgrade and expansion and have called on international shippers to move transshipment there with the handling fee lower than in Singapore.
As a result, Maersk, CMA-CGM and Evergreen, which are among the world’s largest shipping lines, have moved their operations to Malaysia’s ports. Maersk and Evergreen have relocated their transshipment centers to Tanjung Pelepas, raising the ratio of transshipments handled at the port to 94%. CMA-CGM has also moved its service routes to Port Klang, increasing the transshipment volume there to 60-70% per year. Over the past years, Port Klang and Tanjung Pelepas, with their respective annual transshipment volumes of 11-13 million TEUs and 8-9 million TEUs, have been the second and the third largest container ports in Southeast Asia after only Singapore with the container handling volume of over 30 million TEUs per year, and above Laem
Chabang Port (Thailand) with around 8 million TEUs per year and HCMC Port with some 7 million TEUs per year.
Nevertheless, the growth of Malaysia’s seaports stalled in 2017.
With the merger and acquisition activities of shipping firms, which were especially buoyant in 2016, big shipping companies like CMA-CGM (which acquired APL) and UASC (merged with Hapag-Lloyd) have re-directed their service routes to Singapore. Therefore, while the container throughput at Tanjung Pelepas still inched up slightly by 2.9% in 2017, the throughput at Port Klang plunged by as much as 10%, sending the total throughput at the two ports down. Meanwhile, the throughput at Singapore increased by 9%. A disadvantage of Port Klang is it does not have investments by shipping firms. This has caused an immediate fall in its throughput when the shipping firms change their alliances, as the firms tend to bring vessels to transport cargo at the ports where their alliances hold shares or have stable operations.
Apart from the change in alliances, the slowness in expanding infrastructure at Malaysia’s ports led to congestion at some points of time in the latter half of the last decade, and shipping firms intending to develop new routes did not choose the ports to avoid waiting. Meanwhile, Singapore Port has continuously increased its handling capacity over the years and expanded cooperation for port exploitation with shipping firms, thus attracting more service routes.
In 2020, the throughput at Port Klang decreased by 2.5% while Tanjung Pelepas could maintain its throughput growth at 8.5%. Singapore Port recorded a 0.9% fall in throughput, the lowest fall compared with transshipment ports which suffered a throughput decline due to Covid-19.
The competitiveness of Cai Mep-Thi Vai Port
The Cai Mep-Thi Vai is currently a gateway port with the ratio of transshipments of less than 10% per year, mainly transshipments from Cambodia. As the gateway of the Southern Key Economic Region and the Mekong Delta for long-haul services for imports and exports to and from European and North American destinations, Cai Mep-Thi Vai handles quite a large volume of import-export cargo; so the direction to become a pure transshipment port like Singapore and Tanjung Pelepas is unnecessary.
However, attracting more transshipments from countries in the region and developing Cai Mep-Thi Vai to an international transshipment port with the transshipment throughput of over 25% is a feasible target as indicated by Mr. Phuc.
At present, there are three shipping alliances providing long-haul services, namely 2M (Maersk and MSC), Ocean Alliance (CMA-CGM, COSCO and Evergreen) and THE Alliance (ONE, Hapag-Lloyd, Yang Ming and HMM). These three alliances hold an absolute advantage for long-haul services, with 100% of the market share in Asia-Europe routes and 92% of the market share in Asia-North America routes. Their operations determine the competition of transshipment ports worldwide, including those in Southeast Asia.
In a report on assessment of the competitiveness of deepwater ports in the region conducted by Port Klang in April 2018, the consultant was cautious about Cai Mep-Thi Vai. It argued that shipping alliances choose ports for cargo transport in Southeast Asia under the model 2+1 (2 transshipment ports + 1 gateway port). 2M has selected Tanjung Pelepas, Singapore + Cai Mep-Thi Vai and Ocean Alliance has picked Singapore, Port Klang + Cai Mep-Thi Vai. THE Alliance has yet to invest in any port in Singapore and Malaysia while it has investments in Cai Mep-Thi Vai and Laem Chabang; so, the consultant believed that this alliance will choose Singapore, Cai Mep-Thi Vai + Laem Chabang, meaning that Cai Mep-Thi Vai will become a transshipment port for THE Alliance.
Still on the horizon
In December 2018, the shipping firm ONE announced the establishment of a joint venture with PSA Singapore to exploit four container terminals with a combined capacity of 4 million TEUs per year in Singapore Port. In September 2020, HMM inked a joint venture deal with PSA for port exploitation in Singapore. Both ONE and HMM are members of THE Alliance.
Consequently, the likelihood of THE Alliance to choose Cai Mep-Thi Vai as a transshipment port is unclear, as half of the members of this alliance have invested in Singapore Port while its investment in Cai Mep-Thi Vai lies in the Tan Cang International Terminal, which is operating above its designed capacity and it’s not easy for it to receive multiple feeder ships to gather cargo for mother vessels at Cai Mep-Thi Vai.
The possibility of developing Cai Mep-Thi Vai to an international transshipment port so that it is able to compete with those in the region is currently limited, because despite investments by some shipping firms, the piers at the port have small sizes, generally 600 meters, and some have surpassed or nearly reached their designed capacity.
Gemalink, which has a 25% stake in CMA-CGM, is expected to attract transshipments from Ocean Alliance, but its total capacity is 2.4 million TEUs, equivalent to only 17% of the capacity of Westports(2) which is the alliance’s transshipment port besides Singapore Port. Westports is under expansion. Construction of its four new piers with a length of 2,400 meters started early this year. With its lower capacity than those of other transshipment ports, it’s not easy for Gemalink to attract more transshipments.
Cai Mep-Thi Vai still has room for expanding its capacity, with the two projects of Cai Mep Ha general cargo and container terminal and the downstream Cai Mep Ha port of the Cai Mep Ha Logistics Center. These two projects have attracted great interest from investors. Therefore, apart from efforts to increase connectivity with Cai Mep-Thi Vai and dredge the navigation channel, the Government should pay attention to the selection of investors who are to develop the remaining container terminals, with priority given to shipping firms in joint ventures for port exploitation to ensure large throughput and attract international transshipments. In addition, port projects which can potentially reduce the throughput of Cai Mep-Thi Vai, such as the Tran De, should be reviewed for its investment roadmap though it is put in the planning.
(1) MOL and NYK had invested in ports in Laem Chabang and Cai Mep-Thi Vai before merging its container transport business with K Line to form the ONE shipping firm.
(2) Westports is the largest port in Port Klang, the remaining port is Northport which has lower handling capacity.