Love thy neighbour

East Asian ports look set to continue their dizzying growth trajectory but in the shadow of substantive amounts of change as they digest recent financial turmoil and deal with the new environment it helped create.

The top line of this is the increased importance of intra-Asian trade, especially with China. Not that the long haul routes are a thing of the past – far from it – but in the rebalanced world, trade with each other as well as with the Middle Kingdom is a driver.

“South East Asian ports have seen significant change in their trading patterns during the last 12 months,” says Richard A Butcher, group marketing and sales director of IMS UK. “Greater import cargo has been witnessed whereas they tended to have handled export trades – the change into this cycle and the introduction of new services and larger vessels being deployed has put a real burden on the terminal operations.”

Significant opportunity lies, therefore, for those who can help ease those problems. At this stage in the game the issue is not so much building new hardware, although that will come, but ‘software’. Among the needs of the latter flagged by Mr Butcher are proper terminal planning, training and technology. “Ports need to invest heavily in training and maintaining a reliable and quality work force that can deliver a first class service.”

China, while it remains the leading light within the East Asia region, is very much a symbol of the change within in it. Shanghai is the global pace-setter in terms of cargo throughput, although Ningbo and Tianjin on the East coast offer excellent facilities as well, and the Hong Kong-Guangdong port cluster of Hong Kong, Shenzhen and Guangdong accounts for 12% of global container movements and looks set to continue to grow.

That’s not up for dispute. What is, and in a sense encapsulates the debate about change, is what is happening within that cluster.

Traditionally, the export flows from Southern China went via Hong Kong. Now costs and the growth of new as-good facilities have seen things move via ports such as Yantian and Dha-Chan Bay, according to Mr Butcher.

Paradoxically, further east along the coast, Tianjin, he says, has started to pull in trade from the Korean port of Kwangyang.

Another East Asian country of rising interest is Vietnam. Increasingly an offshore destination for manufacturing weary of China’s increasing costs, Vietnam’s port sector is changing by being better connected with long and short haul destinations as well as its own economic hinterland – itself an important benchmark of how things are changing.

Kickstarting this process will be four new terminals opening in the Cai Mep area 50 km Southeast of Ho Chi Minh City, the business capital of Vietnam. Leading them is Cai Mep International Terminal, CMIT, a joint venture between APM Terminals, Vinalines and Saigon Port, due to open in March.

This facility has a 600 metre quay, a 48 hectare footprint including six post-panamax (22 out-reach) ship-to-shore cranes and 840 reefer plugs. This is a port designed to service the long haul destinations as much as anything. While it represents the old model of East Asia – exports going far away – that it is being built demostrates the changes ongoing within the region.

More tellingly, it has avoided the problem that has dogged the expansion of ports in this area before: draught. Not only does the access channel have 14 meter draught but quayside it is between 14 and 20 meters.

“That’s the most important part of the value we are offering,” says Malcolm Gregory, CMIT chief communications officer. “Of course we have to have the infrastructure for big ships once they are here.”

This will give CMIT an annual throughput capacity of 1.1m teu and the ability to cope with the new generations of large ships. “To date there are 11 direct long-haul container services calling in Cai Mep each week with at least six more expected to start within Q1 of 2011. We estimate 25-30 direct mainliner calls per week by end 2011,” says Mr Gregory.

It is worth bearing in mind this is more than a quarter of the current throughput for the five Ho Chi Minh City terminals which was 3.6m teu in 2009 and 2.6m teu for January to August of this year.

Also, this is not the only facility that will come on line at the same time and around the same place.

CMIT is due to open in March, roughly the same time as SNP-TCIT, but ahead of SSIT, due to open in the third quarter of next year, ODA-Cai Mep, fourth quarter of 2012, and GemaLink, fourth quarter of 2013. Cai Mep Ha remains postponed.

East Asia might be getting, at Cai Mep, another shipping cluster of the same ilk as Hong Kong-South China and Korea’s Busan, but it is not getting a new hub. “We just try to meet market demand, cargo volumes are increasing quite quickly,” says Ho Kim Lan, secretary general of the Vietnam Ports Association. “Maybe eventually these ports can do some transhipments.”

Work on Cai Lan International Container Terminal, a joint venture between Vinalines subsidiary Cai Lan Port Investment Joint Stock Company and SSA Marine’s parent company Carrix Inc, was able to start quickly, after putting together a multi-faceted lending consortium to build its new deep water container terminal in Quang Ninh which will serve Hanoi and the North Vietnam markets.

“We are very pleased to work with our lending partners to conclude CICT’s financing. It has been a very efficient process. North Vietnam’s container volume is growing at over 20% per year and by 2011 container volume will outgrow terminal capacity. CICT is needed as quickly as we can build it just to keep pace,” said Le Trieu Thanh, CICT’s Chairman in a press statement.

Fast funding might have worked there, but the challenge of financing remains and is not confined to Vietnam; it is an East Asian problem and a particular challenge it needs to overcome. For the broader Asia region, infrastructure needs are put at approximately $2.5tr over the next decade.

“Improving rail and road connections to ports is particularly important for inland areas and landlocked countries as they tend to encounter high trade costs. Given current investment levels are way below the amount needed, the region must find innovative ways to mobilise the resources that are needed,” says Jin Cyn, principal regional cooperation specialist with the Asian Development Bank’s Office of regional Economic Cooperation.

It may well be that the real development of East Asia’s ports is still to come. However, it might also be that postponing dealing with funding issues means that opportunity is lost.