Depot operators wary over reports Manila terminals operating as ECDs

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ID-100180769The Container Depot Alliance of the Philippines (CDAP) raised “serious concern” over reports Manila terminal operators are offering some carriers free storage for their empty containers in competition with CDAP services.

In a recent letter signed by CDAP president Carl Fontanilla and addressed to Cabinet Secretary Jose Rene Almendras, the association said terminal operators deciding to reopen their empty container depots (ECDs) to shipping lines now that port congestion had eased would threaten survival of the container depot industry.

“There would not be any problem at all if the empty containers entering the terminals are to be shipped or loaded out on vessels. But… these containers are later on issued to exporters, meaning that the terminals are also performing the same function of an empty container depot and are now directly or indirectly competing with our industry,” CDAP explained.

But in an email to PortCalls, Christian Gonzalez, head for Asia, Pacific and the Subcontinent of International Container Terminal Services, Inc, which operates the Manila International Container Terminal (MICT), said, “At this time we do not offer any free storage or free handling on any kind of empties.”

He added: “We do not intend to open any on-dock ECD. Nevertheless, if we wanted to, we are well within our rights to operate an ECD, as we have done so in the past and we can charge whatever we want given it is a competitive fee.”

Asian Terminals Inc, which operates the Manila South Harbor (MSH), also explained in an email to PortCalls its facility “accepts empties as part of regular services to shipping lines calling the port. Acceptance is based on shipping lines’ empty pool allocation which corresponds to the load out requirement of vessels. Empties are loaded onto vessels to facilitate immediate container recirculation to regional markets and prevent port congestion. MSH applies rates based on PPA (Philippine Ports Authority)-regulated tariff.”

Role of off-dock empty container depots

CDAP is now seeking a meeting with Almendras—who headed the Cabinet Cluster on Port Congestion during the Manila port congestion and is currently head of Task Force Pantalan—“to look into this plan of the terminal operators and persuade them that the operation of empty container depots should be left to outside facilities.”

It said lessons learned from the port congestion in 2014 “are quite clear. Container terminals are built to allow the unhampered movement of imports and exports containers, as well as the trucks’ turnaround time inside the ports. Terminals are not built for ECDs.”

“More importantly, we should not also lose sight of the fact that off-dock empty container depots are part of the infrastructure the country needs to develop as the volume of trade grows, being one of the most active economies in Asia.”

Off-dock container depot operators “have a critical support role to play as road and other physical infrastructure outside the ports are yet to be in place, while the Manila terminals can only absorb so much,” CDAP said.

It noted that the “small empty container depot industry, which we are trying to revitalize at present because of its role as an important support facility, might again lose out to big business.”

Expansion of ECDs

At the height of the Manila port congestion, CDAP recalled its members felt “strong pressure” from shipping lines, truckers and the business community to “establish and operate new off-dock container yard facilities to augment existing ones which were bursting at the seams…” Then, yard utilization at the MICT and South Harbor was over 105%, it said.

“And without the slightest hesitation, our members responded to the call, infusing significant capital made through bank loans.”

From the original eight ECDs with a total yard capacity of 117 hectares pre-port congestion, the number grew to 15 during the congestion period, bringing in additional capacity of 217 hectares, the association noted. More people skilled in container yard operations were also hired and additional yard equipment brought in.

Now that Manila ports are operating at normal levels again, the “potential problem” has come up of free storage being offered to certain carriers for their empties which are then later issued to exporters, it said.

CDAP recalled that Manila port operators used to operate “ECDs in their terminals free of storage charge as a marketing tool to attract shipping lines to call their port. This marketing strategy effectively lured many shipping lines to the point of practically driving away competition from the off-dock facilities.

“Given the one-sided situation, our members lost any interest to expand and were just content in making the most of what they had,” with some operators shutting down operations.

When port congestion started to affect yard efficiency, CDAP noted terminal operators closed their ECDs.

“Shipping lines were left with no choice but to utilize the underdeveloped off-dock facilities the bulk of which are situated in the overcrowded cities of Manila, Caloocan, Navotas, and Malabon areas. The lack of enough off-dock facilities aggravated the situation and there was total confusion and helplessness on where to return the empty containers. The outcry for more depots at this point served as the motivation for members to establish new facilities,” CDAP said.

Now that reports have surfaced terminal operators would be making available their ECDs again, “we can already foresee the extent of damage it could bring to our members, exactly the same experience that happened in the past,” the group said.

“But the consequences will be far more serious this time as possible dislocation of many workers looms and millions of pesos in investment (could go) down the drain. Our industry belongs to the small or medium scale enterprises category, a particular area of business endeavor where inclusive growth should be very much felt,” CDAP said. – Roumina Pablo

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