PSA goes for $ 2.8 b expansion as S’pore bets on more trade

Monday, 15 October 2012 00:00 - - {{hitsCtrl.values.hits}}

SINGAPORE: Singapore is planning an ambitious expansion of its container port capacity, betting that global trade will pick up in coming years and that the country can weather a continued challenge from ports in Malaysia.

PSA Singapore Terminals, a unit of government-owned port operator PSA International, last week said it would spend 3.5 billion Singapore dollars (US$2.85 billion) expanding its Pasir Panjang Terminal in the city-state’s southwest, where land has been reclaimed from the sea to create space for a large terminal.

The investment comes despite headwinds for Singapore’s ports and reflects optimism that global trade will improve and that costs can be reduced by consolidating operations, removing some need for containers to be moved between ports by road.

“Shipping will continue to be the lifeblood of Singapore’s economy far into the future,” Singaporean Transport Minister Lui Tuck Tew said in a recent speech.

The tiny nation is the world’s biggest ship-refueling stop, based on the number of ships that refuel and the volume of shipping fuel sold, and a center for ship repair, brokering and finance, occupying a key spot along traditional shipping routes.

But Singapore’s total trade grew just 2.1% last year, slowing from a 19% expansion in 2010, when the economy recovered from a recession. Total trade through Singapore, including transshipments, was S$974.4 billion last year. Exports of locally produced goods fell 11% in August from a year earlier, a decline that was steeper than analysts had predicted.

Global trade has slowed amid a downturn in demand led by Europe and the U.S. But Singapore is banking on a longer-term recovery as regional demand grows and the developed Western economies regain traction.

The Asian Development Bank last week cut its forecasts for growth in emerging Asia, highlighting a slowdown in regional powerhouses such as China and India and warning of the potential for sudden flows in capital out of the region.

Singapore also needs to protect its business. Malaysia’s ports have worked hard to attract ships, mostly by offering lower fees and priority berthing. The Port of Tanjung Pelepas, at the southern tip of the Malaysian peninsula and just across a narrow channel on Singapore’s western coast, handled 7.5 million 20-foot equivalent units of containers last year, a rise of 15% from 2010.

PSA Singapore Terminals handled 29.37 million TEUs—the standard unit for containers—last year, up 6.1% from 2010. It handled 20.88 million TEUs between January and August this year, according to its website.

Scheduled for completion by 2020, the Singapore development will lift its total container-handling capacity to 50 million TEUs a year and offer up to 18 meters berthing depth in order to accommodate bigger container vessels. The country’s current annual capacity is 35 million TEUs and the depth capacity is 16 meters. (WSJ)