CASA stresses urgency to develop East Container Terminal

• Expresses the urgency of ECT to remain competitive and retain its strong position in the region
• Says transshipment volumes at risk if ECT is not expedited

The need for deep water terminals was discussed in many platforms last year due to the urgency of increasing port capacity in Colombo to cater to the surge of volume. In 2017, the Colombo Port reached a historic juncture with over 6.2 million container traffic transactions and the Sri Lanka Ports Authority expects to maintain a double digit growth for the year 2018. 1st quarter of 2018 records a 16% growth of container throughput when compared with the 1st Quarter of 2017. These results show that adding capacity at a brisk pace is the most important factor for Sri Lanka to retain its position as the best connectivity port in South Asia

The only deep water terminal in Sri Lanka is CICT with a depth of 18m and the existing facilities are reaching saturation for 6th generation container mega careers. Ports and Shipping Minister in many occasions have clarified the Government’s interest in expediting the equipping and operating the East Container Terminal as 440 metres of quay and the yard facility is already constructed. In the master plan of Colombo Port Expansion Project, the East Container Terminal has a 1200m long Quay wall, alongside water depth of 18m and a yard capacity of 2.4 million TEUs.

CASA, the voice of the shipping industry view these developments positively and appeals that these initiatives are implemented immediately before we lose the competitive advantage of being the strongest transshipment hub in the region

Larger ships require bigger facilities

Container ships became bigger in size and volume due to favourable industry speculation leading to an increase of supply. To benefit from economies of scale, increase fuel efficiency and reduce carbon foot print, shipping lines invested in modern ships with larger capacities. 

Panama Canal expansion has also resulted in bigger ships. Several ship manufacturing companies across the world are already following the new parameters for container ships to match the dimensions of New Panamax. They are also getting large orders for the New Panamax vessels from shipping companies. These vessels require sufficient berth depth to call at a terminal.

Opportunities as a regional transshipment hub

Increasing regional transshipment volume is also demanding for more capacity. India and Bangladesh are port of Colombo’s primary transshipment markets. The key drivers are the size of the import/export volumes at these ports and proximity to the port of Colombo. The import/export volume of India stands at 12.31 million TEUs and is expected to grow at a compound annual growth rate (CAGR) of 7.9% (2015 to 2041). 23% of India’s transshipment volume is handled via port of Colombo. Similarly 33% of Bangladesh’s transshipment volume is handled via port of Colombo and the import/export volume is expected to grow at a CAGR of 9.5%. Therefore it is of utmost importance that the port of Colombo is able to handle the surge of transshipment cargo in the coming years.

Challenges

India is rapidly investing in their port sector and particularly a Deep Water Terminal in Vizhinjam which will affect transshipment volumes from India. However, high efficiency, less bureaucracy and red tape would attract more shipping lines to Colombo as long as the infrastructure is available. Based on the current environment, it would be viable for Indian ports to be served by transshipping via port of Colombo than direct calls or transshipment via a port in India. Even though the Import and Export volumes of these regional ports have increased, the transshipment share which Colombo port enjoyed has declined. Therefore capacity improvements such as the East Container Terminal and West Container Terminal would strengthen our position in the global maritime sector. 

To attract services which are currently not calling Colombo and to retain the share in a growing regional transshipment market, we must have more capacity. If not, shipping lines and exporters would look for alternative ports to direct their transshipment volumes. Staying ahead of the demand curve is of paramount importance not just for growth but for survival of the port of Colombo as a transshipment port.

Conclusion

Currently the Colombo International Container Terminal with an 18m berth depth caters to modern ships and has reported a throughput of 2.3 million TEUs for the 12 months ending 31st December 2017, achieving impressive YOY growth of 19.3% in volume. CICT is jointly developed by CMHI (China Merchants Holdings International) and SLPA (Sri Lanka Ports Authority) as part of the Colombo Port Expansion Project (CPEP). The terminal started operations in 2013 and is the biggest container facility currently in the Port of Colombo in terms of draft and crane size.

However CICT is currently operating at 80% capacity and will soon exceed capacity which creates an urgent need for another deep water terminal. East Container Terminal therefore plays an important role in Sri Lanka’s journey of becoming the maritime hub in Asia. 

SLPA going ahead to speed up the operationalisation of ECT is indeed heartening news to the maritime industry stakeholders in Sri Lanka. It would be prudent for SLPA to plan not only to operate the present 440m of the ECT by expediting the installation of cranes and other container handling equipment, but at the same time commence the rest of the construction of the ECT. With shipping lines operating larger ships (lengths exceeding 350 metres) on the main East-West trade lane, at present only two vessels which are over 360M long can be accommodated in the Port of Colombo at any given point of time. This should at least grow to four if we are to attract multiple east-west services to the port of Colombo. If we are unable to attract these services then we may run the risk of losing the competitive advantage of being a vibrant transshipment hub.