Vizhinjam strategy, can it beat the Port of Colombo?

Vizhinjam strategy, can it beat the Port of Colombo?

In a bid to complete its own version of the ‘Sagalarmala’ Project, a $ 10.5 billion Indian government initiative to modernise India’s ports, Adani Ports has set a target to establish a presence in the Indian states of Maharashtra, Andhra Pradesh and Karnataka as well as setting up transhipment terminals in Southeast Asia and East Africa, according to the Business Standard. 

Karan Adani, Executive Director of the Adani Ports and Special Economic Zone said, “Our focus will be having presence in these three states of Maharashtra, Karnataka and Andhra Pradesh, so that our nine ports are better served and our own ‘Sagarmala’ plan is fulfilled. We are also keen to have transhipment terminals in Southeast Asia, especially in Myanmar and Bangladesh and also in East Africa, so that these facilities can serve the upcoming Vizhinjam facility, which can compete on cost with the Colombo and Singapore ports, which handle more than 80% of the country’s international trade”. 

Adani said, “Our Vizhinjam strategy will be cost-led and we are confident that we can beat Colombo and other nearby ports on costs.” Adani Ports previously signed an agreement with the Kerala government to build Vizhinjam Port, increasing its portfolio of new port projects to nine, with Vizhinjam anticipated to be completed by 2018. Adani has also recently signed an agreement to acquire Kattaupalli Port in Tamil Nadu from L & T Shipbuilding.

Jobless container fleet soars to 5 year high

The fleet of idle container ships above 500 twenty foot equivalent units has surged to a five year high of 1.2 million TEUs and more vessels will join the jobless queue in the coming weeks, Alphaliner said. There were 306 ships with a total capacity of 1.24 million TEUs without work as of Nov. 16, representing 6.3% of the global fleet, up from 278 vessels with a total capacity of 1.04 million TEUs, according to the Industry Analyst. The jobless fleet is just 280,000 TEUs short of the record high of 1.52 million TEUs recorded in December 2009. 

The average size of idled ships has reached a new peak of 4,050 TEUs as an increasing number of vessels above 7,500 TEUs are without work. A total of 40 ships between 7,900 TEUs and 18,300 TEUs with a combined capacity of 434,000 TEUs are unemployed. Of these, just 06 are charter-free while 34 are either owned by or on charter to ocean carriers. Most of these ships have been idled as a result of void sailing programs and service withdrawals implemented by carrier alliances on the Aisa-Europe route since September and are expected to be out of action for between two to five months. 

With Asia-Europe demand expected remain weak, while the trans-Pacific routes enter their traditional slack period, the number of idle ships is expected to increase in the coming weeks. New idle fleet peaks will likely be registered as vessel unemployment affects ships across all size sectors. The gloomy environment will also lead to more long term unemployment, with two Panamax vessels heading for lay-up in the Philippines to join 05 other 5,300 – 5,900 TEU ships at anchor in the region. The container charter market outlook remains bleak with fundamentals getting worse by the day, Alphaliner said.

 

Carrier pain, face 3 more years

The container shipping industry is facing three more years of overcapacity and financial pain because of slowing global trade and a bloated order book of large vessels, forcing Drewry to slash its growth forecast for 2015 and revise down estimates for future years. The London based analyst said in its latest Container Forecaster report that the recent trade slowdown meant container shipping would grow by just 2.2% this year, half its previous estimate. 

The container shipping industry is in the midst of an overcapacity crisis that will worsen next year, said Neil Dekker, Drewry’s Director of Container Shipping Research. An additional 1.6 million 20 foot equivalent units of new capacity is being added to the fleet this year equating to a growth rate of 7.7%. This has pushed Drewry’s Global Supply/Demand Index a measure of the relative balance of vessel capacity and cargo demand in the market where 100 equals equilibrium down to a reading of 91 in 2015, its lowest level since the recession ravaged year of 2009. 

As a result of the capacity glut, spot freight rates across most key trades have fallen to historical lows, particularly on Asia-Europe, Asia-east coast South America and Asia-Middle East. Carrier reliance on the monthly general rate increase mechanism and void sailings to adjust capacity has not worked. Were it not for the recent fall in bunker prices, shipping lines would be losing money, said Dekker. 

 

Singapore renews liner block exemption

Singapore will extend its block exemption order for liner shipping agreements for another 05 years until December 2020, the Ministry of Trade and Industry has announced. The decision was widely expected and comes after a public consultation by the Competition Commission of Singapore and its recommendation to renew the existing exemption from anti-trust regulations. The block exemption order, which was first issued in July 2006, exempts a category of liner shipping agreements from the prohibition against anti-competitive agreements under section 34 of the Competition Act. 

Those include non-mandatory adherence to tariffs and allowing liner operators to enter into individual confidential contracts and offer their own service arrangements. Esben Poulsson, President of the Singapore Shipping Association said, “Any help that could be given to an industry as important to free trade and globalisation as container shipping should be welcomed. It is self-evident that the dismal state of the global container market and the extremely low box rates being paid clearly prove that whatever held the industry can be given at this point will be most welcome,” he said.

 These historically low rates illustrate just how competitive the market is and highlight how any talk of this measure being anti-competitive, is just plain wrong. In making its recommendation, the Competition Commission of Singapore received five submissions in response to the public consultation. Four of the respondents were supportive of the proposed extension of the block exemption, while one respondent was not in favour. The commission considered the changes in the international regulatory environment in its review and noted that anti-trust exemptions for liner shipping agreements generally remained the regulatory norm worldwide.

 

Driving logistics innovation

The multi-million dollar facility is DHL’s first innovation centre located outside of the company’s global headquarters in Germany and will be used to develop innovative solutions to meet evolving supply chain needs. APIC is located within the S$ 160 million (€ 104 million) DHL Supply Chain Advanced Regional Centre (ARC) building at Singapore’s Tampines Logis Park. The centre showcases DHL’s work exploring new technologies such as driverless shuttles, augmented reality ‘smart glasses’ for warehouse assembly-lines and product picking, drones for delivery of time-critical goods like medicines and Maintenance of Demand (MoDe) vehicles that use machine-to-machine (M2M) sensors to boost vehicle uptime by 30%. 

APIC will also invest in capabilities in analytics, e-commerce and last mile solutions designed for Asia Pacific markets. Besides showcasing the latest in logistics trends and innovative solutions, APIC serves as a regional plat form for collaborative innovation between DHL, customers, industry partners and independent experts, said a company statement. The centre will drive DHL’s Trend Research initiatives focusing on emerging trends in Asian logistics and economic activity, the company underlined.

 

End of oldest container terminal – many to follow

The oldest container terminal in Rotterdam, ECT City Terminal, has closed after nearly 50 years, because it can’t handle the ever-larger vessels calling at Europe’s top container port. The CMA CGM Sambhar was the last vessel to call at ECT City, once the world’s largest terminal, before it was officially closed to shipping recently. The 65 hectare (161 acres) facility, more commonly known as the Home Terminal, handled its first container vessel, Atlantic Container Line’s Atlantic Span, on 31 August 1967, at the dawn of the container age. 

The closure of the ECT City Terminal is the end of an era, said ECT Chief Executive Officer Leo Ruijs. As a pioneer, ECT has written history here. The terminal reportedly handled 334,000 container moves in 2014 and made a loss. ECT City, which can accommodate ships up to 8,000 twenty-foot equivalent units, has an annual capacity of over one million TEUs but is estimated to have handled only around 200,000 TEUs this year. 

The terminal, located in the old inner port close to the city, started to lose clients after ECT, a unit of Hong Kong based Hutchison Port Holdings, opened the Delta Terminal on the Maasvlakte, a large tract of land reclaimed form the North Sea, in 1985. However, the terminal continued to serve several large carriers, including Evergreen Line and Hamburg-Sud, for several years.

(The writer a Maritime Economist is a Chartered Fellow (Logistics Transport), Chartered Shipbroker (UK), Chartered Marketer (UK) and a University of Oxford Business Alumni. He is also a Fellow of NORAD/JICA and Harvard Business School (EEP).)