Subic’s revival

06 Nov 2017
Grain growth: a new flour mill is boosting volumes at Subic

Grain growth: a new flour mill is boosting volumes at Subic

Growing port builds on its reputation as a viable alternative to congested Manila. Michael King reports

Ports boasting deep harbours and located within easy reach of vast population centres are not often short of cargo. But Subic Bay in the Philippines has never been normal.

Until 1992, Subic was home to the US military’s largest overseas military camp, a 262 square miles base which encircled the Bay, which is located a two to three hour drive north of Manila. Once the Americans packed up, it was converted to commercial use. Yet despite its vast potential, ship calls during full year 2016 totalled only 3,069, while Subic’s piers handled just 7.1m tonnes of non-containerised tonnage.

Now branded Subic Bay Freeport Zone (SBFZ), port managers admit that progress over the last 25 years has been slow. But the Philippines’ rapid economic growth and the ambitious infrastructure and economic development plans of President Duterte point to a bright future.

Certainly, the Philippines economy is one of Asia’s star performers. For most of this decade, gross domestic product growth has been over 6% per annum and economic expansion of 6.8% in 2016 is forecast to be followed by growth of at least 6.5% this year.

President Duterte has announced an array of road and rail projects designed to further boost economic growth north of Manila. Economic zones which the administration hopes will attract more manufacturers and boost employment have also been established within easy reach of Subic.

“The past two or three years has seen an influx of companies engaged in manufacturing into the region north of Manila and that will continue in the future,” said Ronnie R Yambao, marketing manager at Subic Bay Metropolitan Authority which manages SBFZ. “The port of Manila suffers from serious road congestion. Subic offers shippers and carriers an alternative.”

As well as easy access to growing cities in central and northern Luzon, Subic’s Freeport status is another pull factor. For example, companies located inside SBFZ are exempt from all local and national taxes and can also claim duty free exemptions on imports of raw materials and capital equipment. “We are very hopeful these benefits will help us attract more manufacturers and other businesses to locate within the port,” said Mr Yambao.

Feeding growth

Subic’s prime location, along with the expanding Philippines economy and the population’s evolving culinary tastes, was a critical driver behind the opening this year of a new flour mill on a 5.8-hectare site within SBFZ. When fully operational in 2018, the $30m Mabuhay Interflour Mill will import around 100,000 tons of grain via Subic’s two bulk terminals. In the future Interflour, one of South East Asia’s leading millers, plans to triple production, a move that would further drive grain volumes.

“We buy grain as a group and Subic has the capability to unload panamax vessels so this is a strategic advantage for us,” says Tina Piguing, chief executive of the company’s Philippines operation. “Port access also means we can send out finished products in barges to Manila, or to Cebu in Visayas and the port of Davao in Mindanao.

Managers at SBFZ are also now targeting more container traffic. Subic is home to two modern container terminals offering a combined 600 metres of berths with ample room for expansion. NCT1 and NCT2 are operated by ICTSI subsidiary Subic Bay International Terminal Corp and boast a combined annual capacity of 600,000 teu. Although currently utilisation levels are low, volumes are rising – up from 77,648 teu in FY 2014 to 124,707 teu in FY 2016.

ICTSI has now opened a new Container Freight Station at the port to improve value-added options and distribution capacity to industrial centres north of Manila including Clark, Bataan, and Tarlac.

“We expect to set a new record this year,” says Mr Yambao. “We are gradually attracting more container line services as shippers and carriers realise the benefits Subic offers in terms of reaching north and central Luzon and we’re also a good option for Manila.

“Three years ago we only had two shipping lines. Now we have nine lines and we expect two more services from Chinese carriers to start operations this year.”

The port could also benefit from a new 300MW coal-fired power plant which is scheduled to be constructed next year and would import coal from Indonesia. “We’re now looking at expanding our bulk cargo port facility,” says Mr Yambao. “We are doing the feasibility work at the moment, but we’re examining a $120m public-private partnership.

“Our existing bulk terminals are also ordering new unloading equipment to improve capacity. The government wants Subic to handle a lot more cargo in the years ahead and we intend to deliver.”