Asia trade growth threatened by poor port infrastructure
Insufficient port capacity and productivity are looming large as restraints on trade growth, with Asia likely to suffer the most if delays in upgrading infrastructure threaten the sustainability of thriving intra-regional trade.
For many working in the logistics industry, last year will be remembered as one of gridlock on the docks, with a number of ports around the world, including Hong Kong, Shanghai, Qingdao, Manila, Rotterdam and those on the US west coast, suffering from congestion.
Tim Wickmann, the chief executive of MCC Transport, the intra-Asia container shipping arm of AP Moller-Maersk Group, was among those who dealt with delayed shipments on a daily basis. “In my 25 years’ experience in shipping, 2014 was the worst I’ve seen in terminal congestion in Asia,” he said. “Congestion in Manila and Hong Kong was a huge problem for us.”
Wickmann estimated trade growth would create three million extra handling moves for Asian terminals.
“However, we have a situation where many ports in Asia are close to their maximum capacity and are not developing fast enough to cater for this growth,” he said. “Inadequate port capacity and related infrastructure is the single biggest challenge to intra-Asia trade growth.”
Ports have historically been forced to play catch-up with shipping lines, which are racing to introduce newer and larger vessels to achieve economies of scale. Standard container lifts at global ports saw compound annual growth of 9.8 per cent between 1975 and last year, according to Clarksons, the world’s largest shipping data provider.
Still, experts remain divided on who should be held accountable for the logjams.
Andy Lane, a partner at Container Transport International Consultancy, said ports should learn from their customers, shipping lines, which had been “woefully wasteful” until the 2008 financial crisis served as a wake-up call prompting cost-saving.
“Many terminals have enjoyed captive markets and high returns on investments for many years,” Lane said. “As such, they have not felt compelled to focus on creating competitive advantages, which is likely the primary reason why productivity has lagged. The environment is changing. We now see different ports competing for the same hinterlands, and multiple terminals within ports.
“The financial crisis created a massive shock wave for which shipping lines’ business models were not prepared. The terminals can learn from this and ensure better overall health and fitness before the inevitable shock wave hits them also. It is an accident waiting to happen.”
Others say it is carriers’ unbridled obsession with bigger ships that is exerting pressure on quaysides with nothing to gain from further capital investment.
“The short-term impacts of large ships on terminal productivity and supply chains have often been adverse,” said Jonathan Beard, a vice-president at US consultancy ICF International. “Our analysis of container exchanges per port call for large ships does not indicate a significant increase over the past two years, yet the larger vessels demand greater investment in terminal infrastructure and equipment. Until the economies of scale start coming through, the potential benefits of these larger vessels will not be fully realised – the terminals will suffer the additional investment cost without the upside.”
Roads to the quayside are crucial too. “In Manila, it doesn’t matter how efficient the ports are unless the infrastructure connecting the terminals to a wider network is improved,” Wickmann said.
Source: South China Morning Post
