Biggest transshipment ports record volume decline in H1

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Port_of_hong_kongPort statistics show that throughput at the world’s largest transshipment hubs has been on a decline, pulled down by a number of factors, according to a new analysis by Drewry Maritime Research.

Half-year port data show volumes at the Port of Singapore were down by 5%, while the Port of Hong Kong fared even worse with a half-year decline of 10%.

This comes on the heels of worrisome full-year 2015 results, said Drewry, as Singapore’s volumes last year fell by nearly 9%, equivalent to 2.9 million TEUs, and Hong Kong’s slipped by 10%, or 2.2 million TEUs.

The maritime shipping consultancy attributed some of the “malaise” in Singapore and Hong Kong to the fact that the industry at large is having to contend with much slower underlying growth than it used to. Drewry estimates that world port throughput only increased by 1% in 2015 and expects 2016 to see growth only marginally higher at 1.8%.

But some other factors are also at play, it said.

Some of the contraction in Singapore, where transshipment volumes account for around 85% of all containers handled, and Hong Kong, where transshipments comprise a large part of traffic as well, can be traced to market share shifts to other nearby hubs, Drewry said.

“Annual growth at Singapore and Hong Kong since 2010 has lagged well below the world average, while other hubs such as Tanjung Pelepas and Port Kelang have grown above trend as more carriers and alliances have moved some transshipment activity there,” it said.

Aside from competition from other transshipment hubs, another reason is the replacement of transshipments by direct calls.

The ports’ customers—ocean carriers—are under severe financial pressure to reduce operational costs and some of their actions have accelerated the shift towards more direct calls at the expense of transshipment. More previously feedered ports are being added to mainline services to save on feeder costs. The addition of more ports to weekly loops has extended the round voyages of services, requiring additional ships to maintain the frequency and helping absorb surplus vessel capacity.

Increased demand and new terminal infrastructure in emerging markets such as Indonesia, Vietnam, and Malaysia, the bread and butter of Singapore’s transshipment activity, has also helped to attract more direct services, observed Drewry.

Having fewer but larger alliances poses another risk to all transshipment-heavy ports as it will reduce the client pool for terminal operators and will see business won and lost in much bigger “chunks.”

The trend towards fewer services using bigger ships with multiple carriers pooling cargo will create winners and losers, with successful terminal operators most likely having strong connections to the dominant carriers in the alliances, said Drewry.

With the rise of mega-alliances, potential winners may be the  larger transshipment ports where there is ample capacity in both the near and medium term to cater to increasing alliance-level volumes. “Alliances will also be lured by their greater connectivity and lower risk of congestion during peaks,” it further stated.

Likely to lose are the transshipment ports that are smaller or more fragmented. “In the world of the mega-alliance, the mega-hubs are best able to compete,” the report said.

“Transshipment hubs are exposed to numerous risks, from poor underlying demand to increasing use of direct services. Tomorrow’s winners are likely to be the biggest hubs with strong links to carriers that can guarantee capacity and smooth operations,” said Drewry.

Photo: Andrew Smith