Customer reshuffle thwarts projections

Several operators face over-capacity as customers move between major players, but one port at least has done well out of the process, writes Rainbow Nelson

As lines seek to cut costs to cope with the most difficult trading conditions in the history of containerisation, the Caribbean transhipment market has seen an important rotation of customers moving between the major players.

The Caribbean customer roundabout has turned some operators’ volume projections upside down, threatening important investment plans. The biggest losers in the latest re-shuffling of the Caribbean pack have been left smarting, facing the problem of considerable over-capacity in a period of stagnant growth.

Ironically, the biggest winner in the Caribbean transhipment market in the past two years has been a port on the Pacific coast of Panama – Balboa.

The decision by Maersk Line, Cosco, CMA CGM, MOL and APL to drop higher quantities of Caribbean-bound cargoes coming from Asia in Balboa, and forward them to their destination via the Panama Canal Railway Company and local feeders, has had a heavy impact on volumes at terminals such as Kingston Container Terminal (KCT).

Maersk’s consolidation of its transhipment business in Panama once again has also affected other ports such as Cartagena, once a centre for transhipment volumes moving to and from Brazil.

The reshuffle has bolstered volumes at Hutchison Port Holdings’ Balboa operation by 18%, taking them to more than 2.1m teu for the first time. Maersk is also calling at Manzanillo International Terminal (MIT) again, a move that helped swell its volumes by 25% to 1.6m teu in 2008.

KCT, by contrast has seen its throughput shrink to 1.5m teu, down 16% in 2008 at a time when it is completing its US$231m fifth-phase expansion programme, taking capacity to 3.2m teu (also see box story).

Sociedad Portuaria Regional de Cartagena (SPRC) has not been as badly affected, owing mainly to the decision by Hamburg Sud to further consolidate its transhipment business in the port after acquiring Costa Container Line in 2008.

Mediterranean Shipping Company has also switched some of its transhipment business to Cartagena, encouraging the terminal operator to forge ahead with the first phase of the development of its new Contecar terminal.

SPRC reported a 22.3% increase in its total traffic representing 1,002,200teu in 2008. It is optimistic that it will post similar growth in 2009, despite the global economic downturn.

Much of the new growth will be channelled to the Contecar terminal, where the company plans to invest $450m, and has already allocated $150m for the extension of berths and the acquisition of three Noell ship-to-shore gantry cranes and 10 Kalmar RTGs.

"Our estimation is to grow 20-25% this year," says Giovanni Benedetti, SPRC commercial director. "I am optimistic. In the first two months of the year, volumes in Manga were up 16% with more than an 85% expansion in figures in Contecar. The two volumes combined give us growth of 26-27%."

Volatility in the market, coupled with the difficulty in borrowing money, has cast a shadow over many costly investments planned for the region. But Benedetti believes that the impact will not be all bad news, and that it will leave scope for both winners and losers.

"At Contecar we are going forward with our expansion plan. We are convinced that this [crisis] is not a statistical equation that hits everyone the same," he says. "Some will not have an opportunity to grow, and others will grow a lot more. We have to continue, and our position is to be ready eventually for the big ships of 12,000teu, which today do not exist in the Caribbean."

Other operators are opting to wait and see, concentrating on improving operations while the storm passes. David Sanborn, DP World’s senior VP and MD for the Americas region, says the company has no major expansion plans for its facility in the Dominican Republic.

"We are continuing with our expansion plans. We have ordered some equipment, mobile harbour cranes and RTGs, and we are getting ready to order a gantry crane," he says. "We aren’t talking about any full-scale expansion. This move is going to expand our capacity, but it is more to enhance our efficiency."

Likewise, MIT general manager, Carlos Urriolla, finished the expansion of the largest container terminal on the Atlantic coast of Panama in 2007 and is now working to ensure the terminal can maintain its levels of efficiency.

"We still have capacity. We don’t have any major investments in infrastructure this year except for probably some equipment, to improve things more on an operational level," he says. With capacity of more than 2.2m teu a year at MIT secured, it has turned its attention to improving other facilities in the region, to help consolidate MIT’s position as the largest transhipment facility in the Caribbean.

The company has tied up two important consulting contracts in Port of Spain, Trinidad, and Santa Marta, Colombia, with both ports looking to expand their container businesses.

Urriolla believes that, even in one of the most competitive markets in the world, there is still plenty of scope for collaboration.

"We are a fully transhipment terminal, and other areas have a lot of local cargo that needs transhipment. If other ports are efficient, it will help the whole system to work much better," he says. "It’s not enough to have a good hub, because then the whole system will not work perfectly. If we can collaborate with some terminals so they will also be efficient, then everybody wins."

Unfortunately for others, the idea of a win-win situation has not been the case.

Volumes at neighbouring Colon Container Terminal (CCT) were down 21% year-on-year to 616,502teu, while Hutchison’s Cristobal operation posted its best year yet following the acquisition of 10 RTGs and four new ship-to-shore gantry cranes that will bring efficiency closer into line with its rivals on the Atlantic coast. Panama Ports Company’s (PPC) Cristobal operation managed to secure the defection of Cosco in the middle of last year, thereby affecting volumes at Evergreen’s CCT.

PPC, a Hutchison subsidiary, recorded a 49% increase in its volumes in Cristobal, with volumes reaching 249,244teu. It is still small in comparison with MIT, which remains the largest container terminal on the Caribbean coast of Panama with 1.6m teu a year crossing its quays.

In an attempt to regain its market share, CCT is forging ahead with a $200m expansion plan that will add 11ha to the 37ha of existing paved area, taking total capacity to 1.5m teu.

It already operates with 982 metres of quayline equipped with five panamax and five post-panamax gantry cranes. The facility’s existing stacking area operates with 30 RTG cranes and nine yard cranes.