The Hindu Business Line : Dubai Port Intl's acquisition of CSX World Terminals

DUBAI Ports International's (DPI) recent acquisition of the global port assets of the US-based CSX Corp., the third largest railroad operator in America, will benefit Kochi Port where DPI has won a contract to develop and operate a greenfield International Container Transshipment Terminal (ICTT).

DPI's $1.15-billion acquisition of the CSX World Terminals' assets, including the highly profitable Container Terminal No. 3 at Hong Kong's Kwai Chung Container Port, will help DPI gain a foothold in Hong Kong and access to booming China, making it the sixth largest global port operator.

"The acquisition of CSX World Terminals will be a strong strategic fit for DPI, bridging our terminal network between East and West," says the DPI Managing Director, Mr Mohammed Sharaf.

Kochi Port is upbeat about this development, reckoning that DPI may be able to attract direct mainline calls to Kochi by offering discounts to shipping lines calling at its terminals in Honk Kong, China, Australia and Latin America where it will now have a big presence. "By offering discounts, DPI will be able to entice shipping lines to make direct calls to Kochi and thereby cut India's dependence on neighbouring transshipment ports to a large extent," a Port Trust official told Business Line.

The deal includes nine terminals with 24 shipping berths having a combined future capacity of 14.56 million twenty-foot equivalent units (TEUs) operated by CSX World Terminals in Hong Kong, Yantai and Tianjin in China; Adelaide in Australia; Venezuela and the Dominican Republic.

The most profitable among the assets is Container Terminal No. 3 at Hong Kong's Kwai Chung Container Port, the busiest container port in the world.

The deal also includes CSX's stake in Asia Container Terminals, which owns and operates two other berths at Container Terminal No. 8 in Kwai Chung. Hong Kong accounts for around 60 per cent of all cargo originating from the Pearl River Delta region — Southern China's industrial hub.

Dubai Port will also get a 25 per cent stake in South Korea's Pusan Newport, with a capacity of 5.5 million TEUs that is expected to start operations in 2006. Besides, it will take over CSX World's interest in logistics businesses in Hong Kong and China.

Dubai Ports International, the investment arm of the state-owned Dubai Ports Authority, currently operates terminals in West Asia, Romania (Eastern Europe) and India (Visakhapatnam), and the International Gateway Terminal, Kochi, Kerala.

In March 2004, DPI was selected as the preferred bidder to operate the existing Rajiv Gandhi Container Terminal (RGCT) at the Kochi Port and as developer and operator of the proposed new deep-water container terminal at Vallarpadam. This facility will be developed by DPI as the premier gateway to South India besides offering a mainland alternative to nearby Colombo Port for containers being transshipped for India, as Kochi is strategically located on the main east-west shipping lanes, having a draft of 16 metres.

The first phase of this terminal will have a capacity of one million TEUs and cost approximately $100 million. Over the 38-year duration of the contract, this will be expanded to three million TEUs at a total project cost of $500 million.

With the announcement on December 9 of the agreement to purchase CSX World Terminals, DPI has taken its next major step onto the world stage, out-manoeuvring many larger, but less flexible operators in the process.

"The knock-on benefits of this acquisition to DPI's existing concessions are significant, especially for the Vallarpadam ICTT," a DPI official said.

Explaining, he said that the Vallarpadam terminal is being built not just for the growing South India import-export market, but also to attract shipping lines to undertake transhipment and possibly deep-sea relay from one mainline service to another.

"To do this, lines need the confidence that their vessels will be handled quickly and efficiently. Dubai Ports already does this at the homeports of Jebel Ali and Port Rashid and will now have the opportunity to bring the same high standards of service to the world's largest transshipment container port in Hong Kong," he noted.

Perceived throughout the global shipping circles as a "more neutral port operator" primarily focussed on meeting customer needs, DPI will bring to Kochi an important element in the decision-making process for many of its existing customer base.

This exposure will be not only at the highest decision-making level within the shipping lines themselves, but also to the international trading community and overseas Governmental authorities. "Vallarpadam is destined to become a significant part of this global network of ports," the DPI official emphasised.

Trade sources reckon that lines operating in the Far East will now be able to experience DPI's high levels of customer service as it will provide more options to existing customers, enhancing already strong relationships with them.

"With a portfolio of terminals that have a truly global spread under its wings, providing special emphasis on the rapidly expanding markets in the Far East, DPI now has a platform that consolidates its global reach enabling it to build trade links and grant a heightened level of exposure of all their facilities on the international stage", the DPI official said.