The Hindu Business Line : Lines scramble to double as terminal operators

Shipping Corporation of India's foray into container terminal operation denotes a marked shift from its traditional activity and reflects the changing global scene in which the running of terminals is fast ceasing to be the exclusive preserve of a club of independent operators.

THE state-owned Shipping Corporation of India is to venture into terminal operation and is, therefore, considering bidding for Jawaharlal Nehru port's proposed fourth container terminal in partnership with others. Whether the shipping line will succeed in landing the contract is too early to debate as the project itself is still on the drawing board.

The JN port authorities are yet to firm up the project size and other details. The bids will perhaps be invited from across the globe once the project proposal takes concrete shape; only then will SCI be in a position to respond to it after identifying the partner and teaming up with it.

SCI's move is significant on two counts. First, the country's largest shipping line is planning something that is different from its traditional line of activity and, second, the container terminal operating industry globally is slowly ceasing to be an exclusive club of a few independent terminal operators — all non-shipping companies such as Hutchison Port Holdings, Stevedoring Services of America, PSA Corporation, Eurogate GmbH, Dubai Port International and CSX World Terminals (now acquired by Dubai Port International).

Over the years, some of the world's major shipping lines, such as P&O (through P&O Ports), Maersk (through APM Terminals), NYK Line, Yang Ming Line, Sea-Land Services Inc and Hoegh Line (through Leif Hoegh) have emerged as important terminal operators in various ports of the world.

Interestingly, some of these foreign companies, both shipping and non-shipping, are already present on the Indian coasts and these include P&O Ports (JNPT, Chennai), Maersk (Pipavav and JNPT) and PSA Corporation (Tuticoirn). Dubai Port International, already a partner in the joint venture that runs the container terminal at Visakhapatnam port, has also secured the contract for the construction and operation of a hub at Kochi.

SSA had teamed up with L&T and Thailand's Precious Shipping and formed a consortium, ISPL, to run Kakinada port. ISPL floated an SPV to build and operate one of the berths at Haldia. SSA is believed to have withdrawn from the consortium.

There are several reasons why more and more shipping companies are exploring opportunities in terminal operation. First, the growing trend among major container operators to order more and more mega container ships of the capacity of more than 8,000 TEUs. True, giant container ships are expected to revolutionise the global container operation. But it is also felt that investing in super post-Panamax containerships without at the same time controlling terminals will be a high-risk strategy.

The demand for very large container ships is on the rise but according to some experts the demand for terminal assets in coming days will be even greater. Which lines are going to be brave enough to order more such ships? Not those lines which do not have their berths in control in key locations.

The lines with aspirations now have to be operators of their own terminals in, or close to, their key cargo constituencies to be sure of making their big ship investments pay. In fact, it is felt that the terminal ownership may determine the future ship-ordering pattern.

Second, the lack of infrastructure, which is going to affect the world trade in years ahead. According to one estimate, one new berth will be required for every two new 8,000 TEU services. However, that is not going to happen soon. Which means the demand for berths will outpace supply as the world order-book for new-buildings continues to expand, with some experts currently estimating it at 3.6 m TEUs, or equivalent of 51 per cent of present fleet.

In other words, the problem of port congestion is going to be serious in the coming days. In such a situation, the lines without the control over terminal operation will suffer.

A section of the independent terminal operators are of the view that terminals owned and operated by shipping lines are vulnerable to leverage applied by the unions to their costly vessel assets. Therefore, line-owned terminals tend to have more restrictive work rules, higher overheads and overall higher operating costs.

Such apprehensions may not be entirely unfounded. Nearer home, Chennai container terminal run by P&O has been a victim of persistent industrial relations problems.

However, according to some other experts, a partnership between an independent operator and a liner company can be an ideal model as the shipping line will guarantee a base of cargo while the terminal operator will bring in the professional operating skill.

Such partnerships work fine in many ports. It, therefore, remains to be seen who becomes SCI's partner in terminal operation — another international shipping line active in terminal operation or an independent terminal operator.

One thing is certain. A successful terminal operator is one who is not tied to any single business model but adept at changing his business plan to suit the requirement of diverse market place.

China may be the hottest market but it is also difficult to penetrate while privatisation of ports and opportunities for growth hold out big promises for India.

For some operators, transshipment cargo may be the major attraction and for others it is the solid indigenous hinterland cargo. However in all such different cases, one trait is critical for achieving success: flexibility.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

Stories in this Section
Budget puts airlines on a high

AI Express to devise a low-cost biz model

`Basic infrastructure vital to woo FDI'

Lines scramble to double as terminal operators

Rail budget: Whizzing past real issues

Logistics, safe and express

RVNL to raise Rs 1,000 cr for infrastructure projects

Kochuveli terminal by month-end

Chief Controller of Chartering quits