Manila South Harbor operator Asian Terminals Inc. is keeping its eyes peeled for opportunities to manage other terminals.
“We will certainly take a serious look at the Davao (port) terms of reference when they come out,” executive vice president Andrew Hoad told PortCalls in a recent interview.
ATI is keen on bidding for Davao port because of its prospects for trade and further containerization. Hoad said, “Davao is essentially about bananas. If you look at the profile of ships that serve the banana trade at the moment, over the next couple of years a lot of those ships’ charters will end and the ships will be phased out of the industry.
“Banana producers like containers because the wastage rate is much less than (when transported in) the big open-hulled ships with pallets. Banana producers want to go to containers. A lot of the traditional refrigerated open-hulled ships will be leaving the market so there is going to be a significant move towards containerization over the next two to three years.
“So we can see growth. And when we can see growth, we will certainly look at opportunity there.”
In addition, ATI is “watching what may appear internationally,” something it has not traditionally done.
Hoad is particularly bullish about Batangas, where it operates both the domestic passenger terminal and the container terminal. He is quick to describe Batangas port as the country’s biggest passenger port and the number one car carrier port in the Philippines.
“I like Batangas a lot,” he remarked. “If you look at the hinterlands up to 60 kilometers north of Batangas, there’s about 300,000 to 400,000 TEUs over there. So there’s no reason why there shouldn’t be more cargo being shipped through the port,” now handling 12,000 TEUs a year, he said.
“We absolutely should encourage the 300,000-400,000 (TEUs) – which is a significant throughput for a container terminal — to go through Batangas because it’s better for the businesses, better for the consumer, better for the environment, less truck distances, less Co2 (emissions).”
The ATI boss ticked off the area’s positives: There’s no road congestion or truck ban in the Southern Tagalog region; the port has a 13-meter draft; and there’s a thriving trucking community that can support the region’s cargo volume growth.
Cost not a clinching argument
“It’s not about costs. It’s a good thing to offer competitive tariffs both as the terminal operator and as the port authority. The port authority has reduced its prices. It’s not a clinching argument, however.”
He pointed out that port cost accounts for only 10-15% of a ship on a round voyage. “If you’ve got a ship that goes into Batangas, (that ship) will call at least four or five ports. Those four or five ports together will constitute about 15% of the round voyage cost, most of that in fuel.
“Even if you charge nothing… there’s no charge for stevedoring, there’s no charge for port charges, you’re saying that one-fifth (or one port on the network) of 15% of the round voyage cost will go down to zero, that’s 3%. That doesn’t mean much one way or the other to a shipping line.
“At the end of the day, it’s not about price, it’s about building a diverse network of service offerings by carriers in response to identified routing demand by locators. Price can play a role in reducing some of the risk for carriers as they first put in a service, but the locator service demand, vocalization if you like, will be the driver.”
For now only MCC Transport, the intra-Asia liner subsidiary of Maersk Line, services Batangas. Hoad said the carrier’s volumes have seen steady growth this year. “For the first two months of the year, it was shipping 150 TEU per ship a week, but now it’s doing 300. Relatively small numbers but steady growth.”
Shipping line-shippers’ forum
In order to drum up support for the port, ATI recently put together an event linking CMA CGM and subsidiary CNC Line, which are keenly interested in servicing Batangas, with shippers of Calabarzon (Cavite, Laguna, Batangas, Rizal and Quezon).
At the gathering, Hoad said CMA CGM and CNC Line laid down their detailed service proposition to shippers. “They (CMA) asked: ‘What have you (shippers) got? What can you give us?’ And at that event the contacts started happening and there’s a lot of discussion going on at the moment now. And as soon as one comes in, the others will get interested. We’ve seen that. There’s a lot of inquiries coming in about what’s going on.”
Hoad added, “What we haven’t seen until now, is a shipping line saying this is the proposition: ‘We will come, you support us, we will tell you what it will be – (we have) these services, this day of the week, this transit time, these spaces.’ That was a very positive step forward.
“In a sense it’s not rocket science. It’s just putting together people with ship space with people with cargo in a forum. There’s been a lot of maritime activity in the four weeks since that event. So will it (entry of CMA CGM / CNC Line) happen? I think there’s a good chance it will.”
The ATI boss said: “In a perfect world, the government will go to shipping lines and say we will provide (cargo) for developmental reasons…”
The government, he said, for instance could propose to a shipping line the “underwriting of 200-TEU slots a week. If you (shipping line) get 100 or 150 slots, we’ll (government) pay the balance on the 50. Put the capacity in there. Yes, it’s going to cost the Philippine government some money in the first year – but we’re not talking a huge amount of money, we’re talking maybe 100 slots a week for 25 weeks – but in the grand scheme of things, when there’s wider discussion on other measures that will be taken, it’s something that could be looked at.
“I would even ask if there is a Japanese shipping line that can do this.” (Japanese official development assistance helped build Batangas port.)
“In wider terms, you could even make the argument that part of that Japanese assistance could help the Philippine government with a take-or-pay scheme. Why just focus on the hard kit of the asset rather than the softer sell but which is critical for getting the shipping lines in there?
“So in a perfect world, some type of thinking on a take-or-pay scheme would be very good.”
No overnight fix
While Hoad is sanguine about Batangas’ prospects, he acknowledges growth will not happen overnight.
“These things take time because (Batangas is) essentially a complementary market. It was never designed to serve Manila. That’s why it’s the size it is. And that’s why it’s where it is. When it was initially built, if you look at the documentation that came out at that time, it was designed for Calabarzon. It’s 100 kilometers away from Manila. Manila has got its quantities, Batangas has its own. They’re complementary. One’s not a substitute for the other. It takes time when you’re building a new cargo base.”
He said the same situation occurred at Busan Newport, built by DP World, ATI’s strategic foreign partner. “It took a lot of years to get the cargo because even though there really was port congestion in downtown Busan there were still a lot of vested interests there – that’s where the customs brokers are, it’s where the port community is, it just takes time for cargo to switch, but it will eventually happen and it will happen for Batangas.
“But it will happen for Batangas principally for businesses it was designed for, setting up in the business parks. And that number is growing. People like Canon are already coming.”