The Hindu Business Line : India must think big on ports

It is just over a half a century since the first container ship, the IDEAL X, sailed from Newark to Houston in the US on April 26, 1956. The ship carried 58 containers and 15,000 tonnes of bulk petroleum.

Since that small beginning, a lot has changed in the global containerisation of cargo. From the US, where the action started, it has shifted towards Asia, especially China, in the last decade. China has emerged as a major container market. Rapid progress has been made in infrastructure, and volumes to and from China have grown enormously over the decade.

For instance, in 1989, the volume of containers handled by the Chinese mainland ports was less than 1 million TEUs. By 1995, it had increased to 4 million, and in 2002 it was 12 million, and increasing annually by over 25 per cent, according to an Economic and Social Commission for Asia and the Pacific (ESCAP) study on Regional Shipping and Port Development Strategies.

Today, the size of container ships matters a lot, and global shipping lines are going for larger ships (more than 5,000 TEUs). But Indian ports are nowhere near being able to handle such large ships.

On the other hand, China's growth has been mainly due to its capability to handle large (mother) vessels that connect its major ports with international ports, says an industry source.

The Yangshan deep-water port will accommodate super-sized tankers and could help Shanghai overtake Hong Kong and Singapore as the world's biggest container port. By 2020 the estimated volume through the port would be 20 million TEUs, which is a tripling of traffic through Shanghai.

Missing Infrastructure

Today, the world's largest sailing container ship, Emma Maersk, has a declared capacity of 11,000 twenty-foot equivalent units (TEUs) of containers. Built by A.P. Moller-Maersk's Odense Steel Shipyard in Denmark, the 397-metre long and 56-metre wide container ship operates on Maersk Line's Europe-Far East shipping service. It calls at the ports of Suez Canal, Gothenburg, Aarhus, Bremerhaven, Rotterdam, Algeciras, Singapore, Kobe, Nagoya, Yokohama, Yantian, Hong Kong, Tanjung Pelepas and Felixstowe.

All these international ports have built infrastructure long ago to handle large ships. In India, except for Jawaharlal Nehru Port (JNP) none of the other terminals can handle ships of around 5,000 TEUs in the next couple of years. "We will continue to depend a lot on feeder vessels, and freight will remain uncompetitive when compared to Chinese," said an industry source.

Even in JNP the declared draft is 12.5m. On completion of a proposed project to deepen and widen the port's channel, the JNP will be able to handle vessels up to 14m draft (container vessels with capacity of 6,000 TEUs). The first phase will begin by January 2007 and is expected to be completed by April 2009. Till then, vessels with 12.5m draft will be handled at JN Port.

Increased Pressure

"There will be increased pressure on Indian ports, especially Chennai, Tuticorin and Kochi, to provide infrastructure to handle large container ships. With increasing export-import trade, major shipping lines are expanding in the country, and they would like to bring in large ships in future," the source said.

The world over there is a growing trend of increased container vessel sizes to cater to increased trade volumes on international routes. These vessels do save on operational costs and time — two crucial factors affecting economies of scale in ship operations.

For instance, in 2003-04 the average dead weight tonne (DWT) of a container vessel was 79,758 and the carrying capacity was 6,425 TEUs. This will increase to 99,000 DWT and 8,100 TEUs in 2007-08, says the Shipping Ministry's National Maritime Development Programme (NMDP) report, quoting a study.

Why large vessels?

According to a BRS-Alphaliner report, global shipping lines have ordered around 150 very large container ships (of over 7,500 TEU capacity). This is in addition to the 40 such vessels already in service. By 2010, there will be many container vessels with 12,000 TEU (Suezmax) capacity, and by 2015 the size could be as high as 18,154 TEUs (Malacca-Max), says a study by American Shipper, a consultancy.

According to ESCAP, some analysts argue that the search for economies of scale is inexorable and will drive vessel sizes up through 12,000 TEU and beyond within the next decade. Shipping lines have pursued more fuel economy and economies of scale in vessel size to reduce cost, increase market share and take leading positions in the sector.

Large ships typically have a lower cost per TEU-mile hour than smaller units with the same load factor.

Samsung demonstrated that a vessel of 12,000 TEU on the Europe-Far East route would generate a 11 per cent cost saving per container compared to a 8,000 TEU vessel and even 23 per cent less than a 4,000 TEU ship.

Drewry Shipping Consultants also made similar calculations to point to potential cost differences of around 50 per cent between a Panamax ship of 4,000 TEU and a mega post-Panamax unit of 10,000 TEU.

Strain on Indian ports

There is already a strain on the country's major ports. In 2004-05 the ports handled 54.76 million TEUs while the capacity was only 48.30 million TEUs. The NMDP report says by 2013-14, Indian ports will have to handle 181.20 million TEUs. For which they will need a capacity of 235.56 million TEUs. This means, an additional capacity of 186.01 million TEUs needs to be created in the next seven years, the report says.