Westport trying to fight back fierce competition from Singapore

Port Klang terminal operator Westports is expecting to break the 10m teu mark for the first time this year, as Malaysia continues its fightback against fierce competition from Singapore.

Managing director Ruben Emir Gnanalingam told local media Westports was expecting double-digit growth in 2019, continuing a strong first-half performance when throughput jumped 17%, to 5.27m teu.

The terminal operator said this was partially down to strong intra-Asia traffic, although it admitted the strong growth rate had been “partly helped by a lower base in the previous year”.

Westports’ volumes took a hit following the reshuffle of carrier alliances in 2017 and subsequent migration of transhipment traffic to Singapore. In particular ,the relocation of a significant portion of CMA CGM volumes in the wake of its takeover of APL.

According to industry analyst Andy Lane, Singapore now handles some 72% of the French carrier’s regional transhipment traffic.

Westports handles 80% of Port Klang’s containers and at the time the port’s volumes fell 9%, before recovering just 0.4% in 2018. By comparison, Singapore’s volumes grew 8.7% last year, according to Alphaliner.

New Tactics Necessary

Durairaj Govindasamy, managing director of local consultant PortsWorld, said Westports could win back some container traffic from Singapore if it adopted some of the tactics employed by its competitor there, PSA.

For example, joint-venture terminals helped PSA attract the Ocean Alliance and THE Alliance to make Singapore their regional hub, thus tying up the South-east Asian transhipment market. PSA now has combined operations with ONE, CMA CGM, Cosco, MSC and PIL.

“If Westports adopted some unconventional approaches, including joint-venture terminals, berth appropriation and incentivized solutions, the port could win some traffic from Singapore, or even develop new traffic sources,” Mr Govindasamy told The Loadstar.

“This may not be core transhipment traffic, which is well-entrenched in Singapore, but more of the marginal trade, especially where the average costs would be lower.

Changing Trading Trends

“Besides, shipping patterns are still fluid and may witness further changes in light of changing trading trends influencing the fortunes of ports in the region.

“Carrier alliances are not cast in stone, and in a market awash with such large port capacity, it will not be surprising if shipping lines shop around.”

However, PSA’s successful tactics have prompted some Malaysian stakeholders to question their country’s apparent lack of a coherent national port strategy. For example, while Singapore forges ahead with constructing the 65m teu Tuas mega-port, authorities in Malaysia are still debating the go-ahead for a new port complex on Carey Island, outside Port Klang.

Not for the first time, a feasibility study into the project is under way. But with approval already granted for Westports’ own expansion to 30m teu capacity, is the new development necessary?

“Any opportunity to compete with Singapore or Tuas, one of the most modern facilities of its kind in the world, may have been lost,” said Mr Govindasamy.  “Although Malaysia had repeatedly stated its intention to compete with Singapore, a comprehensive, unambiguous and articulated policy on how to take it on has always been lacking.”

He said expansion at both Westports and the proposed Carey Island facility would likely lead to overcapacity.

“Much of the focus of those ports is on transhipment, so it will be a real challenge for them in view of the port development in Vietnam and Indonesia, for example.  And with Tanjung Pelepas – just a stone’s throw from Singapore – also considering expansion, it does not need a port planning expert to say that there will be an overhang in capacity at Malaysian ports,” Mr Govindasamy added.