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Monday, Aug 19, 2002

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As competition intensifies... : It is battle stations at PSA Corpn

Raja Simhan T E

Trade sources in Singapore say PTP can be up to 30 per cent cheaper compared to Singapore port — a major reason for Maersk-Sealand and more recently Evergreen to leave Singapore for PTP.

Ships exiting Singapore port

recently in Singapore

IT IS joy uncontained for the Singapore's container terminal operator, PSA Corporation, after a rough 2001. Volumes are picking up slowly after the severe jolt last year with the Danish shipping major, Maersk-Sealand sailing off to Malaysia's Port of Tanjung Pelepas (PTP) in Johor.

The latest figures shows that PSA Corporation's four container terminals handled 1.48 million TEUs in July 2002, the highest throughput in 23 months, and 9.9 per cent up over July 2001. The growth from January to July 2002 was 9.2 per cent. The performance was due to the jump in transhipment volumes across all major markets, especially China and South Asia, as well as local exports growth.

PSA's overseas container terminals for July 2002 registered a 129 per cent growth over July 2001 to 0.78 million TEUs. January to July 2002, the increase was 115 per cent.

This growth in overseas throughput included the volumes handled at Hesse-Noord Natie (HNN), Belgium. Volume increases can be seen in all of PSA's overseas ports, especially the ports in China. Aden Container Terminal, Yemen, also reported good business with the addition of several new services, say PSA officials.

Overall, the PSA Group grew 34 per cent in July 2002 with container throughput for January to July 2002 going up 27 per cent.

Despite the rebound in the first half of the year, it may not be smooth siling for PSA. The 30-year grip on the region is loosening with serious competition from neighbours, especially Malaysia's Port of Tanjung Pelepas (PTP) in Johor and Port Klang.

Trade sources in Singapore say PTP can be up to 30 per cent cheaper compared to Singapore port — a major reason for Maersk-Sealand and more recently Evergreen to leave Singapore for PTP. Besides this, the global recession in 2001 had an impact on the Singapore port. The port handled 15.5 million TEUs in 2001 compared to 17.4 million in 2000.

But PSA is not going to give up without a fight. To counter the "cheap" competition, as trade sources pointed out, a few days it announced its first ever "appreciation package" of massive discounts. "The message was loud and clear: PSA will do whatever it takes to stay competitive and keep its customers happy," said an official.

PSA's customers will enjoy for one year, starting July 1, a 50 per cent discount on handling charges for all empty containers handled in Singapore. They will also get, during this period, a further 10 per cent discount on all bills at PSA's cargo terminals in Singapore. These are over and above all discounts and rebates that customers wangle in their individual agreements with PSA. The across-the-board discounts signal a new approach to business by PSA.

"We will stay very customer-focussed. We will be innovative, flexible and dynamic, to adapt to the rapidly changing circumstances of the industry. Most of all, we want to see our customers succeed," the official said. PSA is also exploring the possibility of joint venture and dedicated terminals.

For PSA the simple strategy to counter competition is — GROW. This is a three-pronged approach — to grow in Singapore, to grow overseas, and to grow in areas that create synergies to complement PSA's port operations, says a PSA official.

According to the official, for PSA the overseas volumes are growing at about 30 per cent plus a year. The company is actively pursuing a few more investment in China (focussing on the Shanghai and Guangzhou regions) and "was highly interested" in future privatisation of India's waterfront as its two key areas of international expansion.

While China offers enormous potential, competition is severe. A lot of port-related projects are going on China, and the company may consider three or four, he added.

In India, the official said, Tuticorin, which handled 203,000 TEUs in 2001 — PSA in association with the Chennai-based South India Corporation (Agencies) Limited runs the Tuticorin Container Terminal under a privatisation programme — was growing at over 10 per cent per annum.

However, the company's association in Pipavav, Gujarat, has "not grown" due to the recent troubles in the State. However, the company expects volumes to go up with Maersk's new involvement in the port.

"In our international business, India along with China will be a key destination. We continue to be interested in various privatisation projects that are coming up in India. Except for one in Chennai (granted to P&O Ports, Australia) so far none has yet been awarded. When the projects come in, we will be actively participating," the official said.

The new hub

MALAYSIA'S Port of Tanjung Pelepas (PTP) in Johor, now the regional hub for two of the world's largest carriers, Maersk Sealand and Evergreen, is to build its box handling capacity to 10 million TEU in three years, four times the existing throughput, according to sources.

If this happens , it will rival Singapore's PSA terminals in total capacity, and turn PTP into Malaysia's largest port. Recently the Malaysian Prime Minister, Dr Mahathir Mohamad, said PTP would put in place the infrastructure to double the present 4.5 million TEU capacity. In comparison, the combined throughput at the three main Malaysian ports — PTP, Port Klang, and Johor Port — is about 8 million TEUs.

Previously Malaysia's ports handled less than a million containers. But now the Johor port alone handles 700,000 TEU. Eight years ago, it stood at 300,000 TEU, say sources.

How PSA stacks up

PSA Corporation operates four container terminals in Singapore — Brani, Pasir Panjan, Tangong Pagar and Keppel Terminals, with a total of 37 berths, operated as one integrated facility. It also operates two multi-purpose terminals. Pasir Panjan Terminal, PSA's most advanced, has 15-metre-deep berths with quay cranes able to reach across 18 rows of containers for the world's largest container vessels.

In 2001, PSA managed 19.13 million TEUs of container at all its ports around the world including 15.52 million TEUs in Singapore.

Daily sailings from PSA in Singapore include seven to the US, five to Europe, five to Japan, ten to China, Hong Kong and Taiwan, seven to South Asia and 72 to South-East Asia. PSA has 13 port ventures in eight countries including China, India, Indonesia and Yemen. Eleven that are operational are expected to handle 7.5 million TEUs this year.

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