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Friday, August 18, 2017

Economist: With advances in shipping, ECRL is no ‘game changer’

More shipping companies are opting for mammoth container vessels which usually dock at main ports in a region, and Singapore’s Tuas port will serve their needs more efficiently in Asean, says Hoo Ke Ping.
Hoo-Ke-PingPETALING JAYA: The East Coast Rail Link (ECRL) may not be the game changer it is touted to be as the growing use of mammoth container ships for maritime trade is changing how shipping companies operate, says a veteran economist.
Speaking to FMT, Hoo Ke Ping said more shipping companies, particularly the five biggest container lines which controlled over 60% of the global market, were shifting towards using larger container ships.
“The big container lines are moving towards using massive ships with capacities of 18,000 TEU which are much bigger than ships with capacities of 10,000 TEU.”
TEU, which is short for twenty-foot equivalent unit, is the most common international standard for describing a ship’s cargo-carrying capacity.
In a recent Bloomberg report, Seoul-based Shinyoung Securities analyst Um Kyung-a said the shipping industry was becoming more dominated by top players with big ships.
She said the use of such large ships allowed companies to deploy fewer vessels and move more cargo in a single journey.
She estimated that there were 58 carriers worldwide which could carry more than 18,000 containers, and that this number would likely double in just a few years.
Mammoth ships will choose Singapore
Hoo said mammoth vessels like those with a 18,000 TEU capacity would only dock at main ports on their journey due to their size, and wouldn’t stop at different ports like smaller ships would.
“It’s more economically viable for the mammoth ships plying the Malacca Straits to dock at one port rather than a few.
“In this case, that port is likely to be Singapore’s Tuas port,” he said, referring to the mega port which is currently being developed.
The Tuas mega port will eventually be able to handle 65 million TEU per year.
“So a ship which has a 18,000 TEU capacity is likely to end up in Tuas and unlikely to stop at Port Klang.
“What they will do is dock at Tuas, and from there, feeder ships will take the cargo to various ports in the region, effectively serving over 600 million people in the region.”
This, Hoo said, was because of the size and infrastructure at Tuas port, and the fact that Singapore was known for its efficiency.
He added, this meant container ships could dock, unload cargo and move the cargo out of the port faster.
“Even though Port Klang is one of the largest ports in the world, it and other ports in Thailand and Indonesia will be far behind the Tuas port.”
Hoo added that the estimated impact of the RM55 billion ECRL on the Tuas Port would be limited.
The ECRL will create a land bridge between the Kuantan port on Malaysia’s east coast and Port Klang, which is located along the Malacca Straits.
Some had previously labelled it as a “game changer” which could threaten Singapore, as it would see ships from China bypassing the city-state to access the Malacca Straits.
But Hoo said Chinese shipping companies, which included Cosco Shipping Holdings, Asia’s biggest container line and the smaller Orient Overseas International of Hong Kong, only had a global market share of 11.7%.
“Compared with the other players, 11.7% is peanuts. Maersk controls 16.7%, Mediterranean Shipping controls 14.5%, while CMA CGM controls 11.6%, and the various other players make up 38.3% of the market share.
“So to begin with, the Chinese shipping companies don’t really represent big business for Singapore.
“And with the trend of the use of mammoth ships, Tuas will remain as the main port in the region because the other shipping companies will naturally go to Tuas as it would make more economic sense.”
China persisting with ECRL
Hoo said it was highly unlikely that China was not aware of the change in shipping trends and that this would likely mean the ECRL wouldn’t be the “game changer” many think it would be.
“But I don’t believe China will fund the construction of something which doesn’t serve its interests.
“So, in the ECRL, I don’t believe China is motivated by economic purposes, but rather geopolitical interests.”
Recently, PKR’s Wong Chen raised concerns over China’s motives in pushing through with the ECRL, questioning the commercial feasibility of the project in the wake of China’s capital controls.
He said if a project undertaken by a Chinese state-owned enterprise wasn’t commercially feasible, like the ECRL, then China must have other reasons to move forward with the project.
The Kelana Jaya MP said such reasons could include regional security interests. - FMT

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