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Terminal Operators Aim For A Share Of Caribbean
December 5, 2003
Terminal operators aim for a share of Caribbean growth. The battle for transhipment volumes in the Caribbean is stronger than ever and, with a new state-of-the-art facility to open in the Dominican Republic at the end of the year, competition will intensify.
While volumes of containers moving through the Caribbean continue to rise N although at a relatively low rate of 2.8% N intra-regional traffic has been reduced in absolute terms by 4.4% and has shrunk by 3% in relation to total traffic.
Along with the growing challenges associated with transhipment of containers, especially to the US under the new security guidelines being driven by the worldOs largest economy, it is an interesting time for those seeking to expand their share in a very fierce market for container terminals.
The next entrant to the market will be CSX World Terminals, which has plans to finish Phase 1 of its Caucedo port project in the Dominican Republic by the end of this year.
The $280m investment includes five post-panamax gantry cranes N two of which were sent to the port by Chinese crane manufacturer ZPMC in August N and 10 rubber tyre gantries.
With 600 m of berth and a 15 m draught, the 50-hectare site is forecast to have capacity to handle 600,000 teu a year.
Curtis Foltz, vice-president of operations and general manager for Latin America for CSXWT, says there is more than enough room for one more operator.
"Today within the Caribbean there exists well in excess of 3m teu of transhipment activity and growth rates over the past five years have been very robust with high double-digit growth annually," he says.
The success of container operations in the heart of the Caribbean on islands such as Jamaica and the Bahamas has also helped in putting together the project.
With an additional 600,000 teu of capacity soon to be available, larger shipping lines will be keen to use their economies of scale in an attempt to play the ports off against each other and reduce their port costs.
CSXWT is already closing in on potential customers as the rest of the terminals seek to secure their most important clients.
"We have been engaged in commercial discussions with carriers for the past two months and are in every phase of contract discussions with different clients," says Mr Foltz.
"Due to the confidential nature of these discussions we are not at liberty to share their status. However, we do have specific carriers slotted for operations in Caucedo this December."
Shipping lines suffering from imbalances, in particular in the southbound trades to the west and east coast of South America from Europe, Asia and the US, are likely to use additional capacity to secure more favourable rates. But that is something for which all the terminals are prepared.
"Competition is healthy in any market and ensures that consumers are receiving goods and services at reasonable levels," says Mr Foltz.
"The introduction of Caucedo will actually introduce a transhipment alternative within the central Caribbean region which today is very limited. We are intent on offering a value driven rate which is commensurate with the services provided."
While new state-of-the-art facilities turn up the heat on existing operations such as Panama, Jamaica and the Bahamas, they are responding with measures to maintain their advantage.
Jamaica is a good example of a facility that continues to strengthen its position with healthy box volumes in Kingston Container Terminal. KCT, with two terminals, north and south, has 1.2m teu of capacity but is seeking to add to that figure.
The management contract of both terminals was awarded to APM Terminals last year and since then results have continued to be impressive with growth rates of more than 10% in the first six months of this year, mainly due to three new customers.
Last year the company handled 957,859 teu and this year the figure is likely to be more than 1m teu with the extension of Zim Container Lines hub service contract for another five years, the addition of Costa Container Line volumes of 42,300 teu a year and an additional 12,000 teu from MSC.
Almost 85% of KCTs volumes are accounted for by transhipment moves. The reason for the growth in transhipment is twofold, says Karen Clarke-Rigg, KCTs client services officer are US cabotage laws and the proximity to the canal and Panama City.
Increasing volumes of containers moving from Asia to the US are employing the all-water route through Panama to the US east coast, avoiding calling at ports on the west coast of the US due to last years costly dockworkers strike.
According to United Nations figures Panamanian ports remain the largest in Latin America with Stevedoring Services of Manzanillo International Terminal in the US still setting the benchmark for its rivals in Panama Col-n Container Terminal and Panama Port Cos Balboa facility with 955,000 teu last year and average gross productivity rates of more than 40 moves an hour per crane.
This year the company is forecasting that volumes will be up by more than 10% with volumes set to breach 1m teu.
In the first six months of the year the terminal handled 511,293 teu compared with 466,059 in the same period last year.
With growing competition, MIT is also looking at its long-term expansion prospects. But the company has become bogged down in discussions with the Panamanian government to secure the land it requires to expand its facilities.
In particular, says Carlos Urriola, MITs general manager, the terminal needs to add to the number of berths it has available.
The company is in discussions with the government to acquire 374,000 sq m of adjacent land which is reported to have been valued at $22.3m.
Since the terminal started operations in 1997 it has been trying to secure additional land, says Mr Urriola. But long-running discussions with the government continue to suffer from delays.
With elections due next year it is not clear when a decision can be made about future expansion, although Bertilda Garc'a, administrator of the Panama Maritime Authority, says the issue will be resolved by the end of this year.
A dispute over the land ownership has been resolved and now it is only a matter of finalising the terms of an agreement, she adds.
The reason for the success of Latin America terminal operators such as KCT and Hutchison Port Holdings 950,000 moves a year at its facility in the Bahamas is the tendency of shipping lines to feeder large volumes of goods to the US by way of the Caribbean.
"The US cabotage has boosted transhipment in this region with large vessels arriving in the Caribbean with cargoes destined for various American ports," explains Ms Clarke-Rigg.
"These cargoes are then moved to feeder vessels for shipment to their final destination to avoid the use of expensive US-flagged vessels."
This trend is a problem that will have to be overcome by another potential newcomer to the field, Port of the Americas, a $1bn proposed container transhipment hub being backed by the Puerto Rican government.
In Phase 1 of this mega-port proposal, to be located in the port of Ponce, it is set to grow to 1.2m teu, says Edgardo Torres, assistant secretary in charge of strategic projects at the Puerto Rican governments department of economic development.
In the second phase the project is planned to reach 2.2m teu. The local government, says Mr Torres, is prepared to finance the design, build, operate and transfer project but it is inviting international port operators to submit their bids for the right to partner the government in the project.
As part of the process it has already pre-qualified the Port of Rotterdam, ICTSI and PSA Corporation from the first interested parties. A further request for proposals was expected in October.
"Although Puerto Rico may be getting in late, we definitely think we have the ability to offer more in terms of hi-tech assembly businesses, for much of Puerto Rico is already very capable of handling that type of electronics-pharmaceuticals business," says Mr Torres.
One of the disadvantages of being the 52nd state of the US in terms of shipping is that, due to the Jones Act, any ship that calls in Puerto Rico is prevented from calling at another US port unless it is flagged in the country.
For the largest shipping lines using the Caribbean as a drop-off point for South and North America, this may present a serious hurdle to the attractiveness of Ponce.
However, Mr Torres says the projections have already taken this factor into account.
"All our forecasts have been based on the status quo and that is that Puerto Rico is covered by the Jones Act," he says.
"The port is viable with the Jones Act and the forecast we have used makes that part of our business. If we dont have the Jones Act our opportunities are even bigger."
Each year there are suggestions that the US will drop the Jones Act as part of an international concession on free trade, but lobbying has failed to make any real ground.
Mr Torres, however, is not relying on a change in US cabotage laws as he points to the fact that in the north-south trades there are plenty of vessels that call at Caribbean ports as they drop off cargo for South America or North America that then do not call in the US.
He says the port is expected to obtain its environmental permits from the local and federal government in February and April next year, which will enable dredging and construction to start as early as May. He also says the financial structure is in place, leaving only the selection of the terminal operator to be decided after the RFPs have been considered at the end of this year.
If Ponce manages to find its feet alongside Caucedo, Kingston, MIT and the Bahamas Freeport, it can only be good news for the shipping lines.
But at what price for those already scrapping away in a very crowded arena? Shipping lines will be keen to use their economies of scale in an attempt to play ports in the region off against each other, writes Rainbow Nelson CSX World Terminals state-of-the-art Caucedo project in the Dominican Republic under construction. It is scheduled to open by the end of the year. Kingston Container Terminal in Jamaica, where results continue to be impressive. A terminal in Panama operated by MIT. The countrys ports are the largest in Latin America.