Kaohsiung port takes a hit

I was reading this fascinating article today on wooden molds for making parts for the old Taiwan steam railway trains, when my friend Thomas flipped me a link to the latest blow to Kaohsiung port....it seems that the Danish shipping firm Maersk is pulling out of Kaohsiung:

A Danish giant's decision to pull out of Kaohsiung is seen as a huge blow to the port's future as China gains ground.

The world's largest boxship player has denied it is abandoning its operations in Taiwan in order to concentrate on the growing Chinese market.

Maersk Line told TradeWinds that the decision to pull out of Kaohsiung Port was made as part of a global strategy, which considers each port as a "unique situation".

Tensions have been running high at Kaohsiung since APM Terminals handed over control of piers 76 and 77 to South Korea's Hanjin Pacific at the end of January.

The existing Maersk contract expires in May, and workers at the docks actually struck this month in an attempt to get better severance pay. Maersk is strenuously denying that the decision has anything to do with its investments in China. But as this report observes:

The DPA report in the Liberty Times said Maersk last year stopped the lease on two of its four container terminals at Kaohsiung Port and would not renew the lease for the two remaining terminals when it expires. The reason being is the carrier aims to increase its investment in mainland's Port of Xiamen.

Ranked the world's third busiest container port in the 1980s, Taiwan's largest port has seen its container throughput decline from 10.3 million TEU in 2007 to 8.5 million TEU in 2009. Kaohsiung's demise in recent years has been blamed on the expansion of neighbouring ports, particularly those across the Taiwan Strait on the mainland.

The fall in the global ranking of Kaohsiung port is keenly felt in Taiwan, where international rankings on any scale are an object of much local anxiety. Another report adds (the graph below is from that report):

Indeed, there is evidence that Kaohsiung's share of the East Asian container shipping market has gradually been eroded by the emergence of rival ports in the region over the past few years. The growth of China's port sector has surpassed that of Taiwan as manufacturers have shifted their focus to the Chinese market. The development of Chinese facilities has been aided, in large part, by government tax incentives and low labour costs, which have left their Taiwanese counterparts struggling to compete. As the island's largest port, Kaohsiung has suffered the brunt of the changes and, having been the world's third-largest container port in the 1980s, saw its ranking slip to 22nd in 2008.

World rank of Kaohsiung port in TEUs handled

Kaohsiung has been in a long-term fall-off as Taiwan's factories have moved to China. Another problem for Kaohsiung in maintaining its ranking is that other ports are coming online, including the new port of Taipei in Bali, and the port in Anping in Tainan, a satellite of Kaohsiung. Taiwan currently has seven international ports: Kaohsiung, Anping, Suao, Keelung, Taipei, Hualien, and Taichung. The ROC Yearbook for 2009 says that in 2008, around 74,000 ships visited Taiwan's ports, handling a total of 12.98 million TEUs. The Port of Kaohsiung handled 9.68 million TEUs of cargo, followed by Keelung with 2.06 million TEUs. Since Keelung is being phased out in favor of the new Port of Taipei, which is five times the size of Keelung, it is obvious that Kaohsiung's share of the island's container traffic (which has increased slightly even though Kaohsiung's traffic has decreased) will continue to decline.
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Even More Daily Links

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ECFA storms in local ports

Jon Adam's excellent piece on Taiwan's Whale Sharks reminded me of our marine situation, ports and shippers....

First, what's going on? Well, according to Lloyd's, the China business has saved Taiwan.

The island’s three main gateways — Kaohsiung, Keelung and Taichung — have seen a dramatic drop in container volumes this year as a result of the slump in trade caused by the global economic downturn. Kaohsiung, Taiwan’s top performing port, saw box volumes slide 23.2% to 1.9m teu in the first quarter this year compared with a year earlier.

But since direct connections were re- established on December 15 after a break of 49 years, Kaohsiung has seen an increase in the number of containers direct from Chinese ports with 165,000 teu between January and March.

.......

Latest figures from Kaohsiung Harbour Bureau show the port handled slightly more than 4m teu in the first six months of this year compared with nearly 9.7m teu for the whole of last year. Monthly volumes have averaged more than 700,000 teu since March.

Note that the article ignores the whole flag issue that turns Taiwan's routes into domestic routes of China. The article further observes that....

China has been taking the lead in opening up all its major ports to shipping lines keen to establish direct cross-strait services. Chinese operators, notably China Ocean Shipping (Group) and China Merchants, have also expressed interest in investing in Taiwan ports.

The KMT strategy is to let China put tentacles into Taiwan's economy so deeply that they can never be withdrawn. Think they will let China invest in Taiwan's ports? I can see the progression of headlines now:

CHINA FIRMS LOOK TO INVEST IN TAIWAN PORTS
GOVERNMENT MULLING CHINA INVESTMENT IN LOCAL PORTS
OPPOSITION PARTIES PROTEST PORT INVESTMENTS ON SECURITY, POLICY GROUNDS
GOVERNMENT REJECTS BIDS FROM CHINESE FIRMS TO INVEST IN LOCAL PORTS

(six months later)
CHINA FIRMS INVEST IN LOCAL PORTS THROUGH FRONT CORPORATIONS DESPITE GOVERNMENT BAN

The remainder of the article discusses the Kaohsiung Harbor Bureau's involvement in upgrading smaller ports in the Penghu and elsewhere to take advantage of the cross-strait shipping agreements. Kaohsiung is also expected to face stiff competition from the new Taipei Port in Danshui, well-positioned for the China trade, and to serve as a port for any invading Chinese forces.

A couple of small errors in this article: the "split" between Taiwan and China is 59, not 49 years old, and the reporter writes: But Kaohsiung is also expected to come under pressure from home-grown rival Taipei Port Container Terminal to develop a new seven-berth box port at Keelung in the north of the island. But the port is in Danshui, not Keelung. Keelung is being reconstructed as a tourist port (pics here).

I love the title of the next article:

Nation hopeful as Chinese free trade agreement nears

Actually, as we saw in the post below this one, the nation is more like confused and wary, though shippers might be hopeful. Hey, at least he identified Taiwan as a nation.

The opening article is pure stenography, merely repeating the government line without caveat or contradiction:

The key to current optimism is an economic co-operation framework agreement, which would be similar to a free trade pact, that is expected to be signed between Taiwan and China next year. The deal would end all tariffs on Taiwan products entering China, making Taiwan more competitive than South Korea and Japan.

In a report outlining the impact of the agreement on Taiwan, the island’s economics ministry said the pact would boost Taiwan’s growth rate by up to 1.72% and create 270,000 jobs.

Taiwan and China are expected to hold talks on the agreement in October, although Taiwanese president Ma Ying-jeou said the island cannot afford to wait....

Again, as I noted earlier this month, ECFA is about preserving the current political economy -- our electronics firms are going to take a hit. Simulations I have heard about have the vital IT sector falling anywhere from 7-9%. Since that sector drives productivity rises and keeps living standards up, it is pretty clear what is going to happen once ECFA is signed and our economy is hollowed out for the sake of China. Interestingly, the shipping trends reflect that. From the same article:

But while container lines have been mauled by the slump in the box trades, Taiwan’s bulker owners have fared much better.

Wisdom Marine Lines has an ambitious plan to expand its dry bulk fleet from 44 to 50 ships by the end of this year, rising to around 70 vessels by 2013. The shipping firm, one of Taiwan’s largest bulker operators, will also diversify its fleet from handysize and handysize vessels into larger ships including supramax, panamax and capesize.

Taipower, the island’s leading electricity provider, has moved into the bulk sector with an $182m order placed in July at CSBC Corp for four post-panamax 93,000 dwt bulkers. Similarly, Chinese Maritime Transport has two capesize bulkers on order with the 177,000 dwt China Pride due for delivery this year and the 176,000 dwt China Pioneer set to joint the fleet in 2011.

Container traffic -- read exports of electronics and other goodies -- are down, but bulk goods are not doing so badly. The dry bulk expansion is global, and the industry is expected to undergo a 40% expansion this year. The financial crisis slammed shippers -- with the collapse of Lehman, financing dried up, and many formerly private banks are now at least partly state-owned. Much of the growth in dry bulking is being driven by Asian demand for iron ore and for coal for new power plants -- the latter reason no doubt driving Taipower's acquisition of bulk carriers, to ship coal for, among other things, its new, incredibly stupid, coal-fired plants in central Taiwan. As the Nation noted in 2007, "China already uses more coal than the United States, the European Union and Japan combined..."

Another trend is cross-strait shipping pacts...

While the carrier has tried to push through rate restoration measures in common with other lines, Evergreen Marine has also reached out to its liner rivals across the Taiwan Strait. Since the beginning of this year the carrier has formed agreements to operate at least three joint services with Cosco Container Lines and China Shipping Container Lines.

Articles out that same day note that Taiwan shipper Wan Hai, which has been steadily reducing its non-Asian shipping, looks pretty well set for the next couple of years, since it has focused on the Asian market where economies are looking a bit better than in the US, where Goldman Sachs is more important than the entire US economy, and Europe.

Yang Ming Marine, another key local shipper, has more business outside Asia and is taking a loss this year, resulting from the collapse of the box trade that saw profits plummet 90% last year. The repercussions stretch into shipbuilding, where it has delayed delivery on 14 ships now in the yards at China Shipbuilding. Despite this, it will eventually take delivery of 24 new ships in the next five years, doubling its capacity by 2013.

Finally, cruise lines are looking at Taiwan's tourism, high incomes, and excellent ports....

The latest entrant with plans to launch Taiwan cruises is Costa Crociere, the Italian cruise giant, which intends to inaugurate services early next year using the 1991-built, 52,926 gt cruise liner Costa Classica .

Costa Crociere is planning 15 cross-strait cruises next year specifically for tour groups from mainland China who want to visit Taiwan. The firm said it will be the “first international cruise company operating in China to introduce regular Taiwan itineraries”.

The Costa Classica will operate from Hong Kong and call at Taipei, Keelung and Taichung starting from January 31, 2010.

The piece also notes a local firm is getting in on the action, operating from my hometown of Taichung:

Taiwanese shipping company Excalibur International Marine Corp has also taken advantage of the thaw in cross-strait relations after launching charter passenger cruises between Taichung and Xiamen using the 2004-built 2,292 gt Ocean Lala at the end of June. The firm’s general manager Han Chih-yang said the eventual aim is to operate “a regular cruise service going not only to Xiamen, but also to other Chinese ports like Fuzhou and Shanghai”.

"Ocean Lala." LOLz. The cruise business here should take off once the renovations at Keelung port are completed -- though the local government still hasn't figured out how to take advantage of that port city's incredible potential for a beautiful port and ocean experience.

REFS: CS Monitor piece on Kaohsiung port from April, previous extensive post on port issues.
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Daily Links

• N Korea releases US journalists.
• Taiwan Amnesty Int'l Meeting tonight, presentation from David Reid.
• The gutlessness of the local EPA on dolphin issues.
• Changhua hosting aboriginal festival this weekend.
• FT says China's growth figures don't add up. Who could have imagined that Beijing would lie about its growth figures, which it hasn't done since, oh, 2008.

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[Taiwan] Don't miss the comments below! And check out my blog and its sidebars for events, links to previous posts and picture posts, and scores of links to other Taiwan blogs and forums!

Cargo Links, Cargo Cults, and Taiwan's Ports

For years shippers have argued that direct cargo links to China would enable Taiwan's ports to regain their high rankings and return to competitiveness. Since links with China have long been treated, cargo-cultlike, as a panacea for all that ails Taiwan economically, it is only appropriate that the China Cargo Cult arrive, well, at cargo. A couple of articles from Lloydslist forwarded to me by a Loyal Reader comment on the possibility of direct cargo links. First, the Dream of Chinese link takes flight....

IT IS a year of expectations for the shipping community in Taiwan. Since Ma Ying-jeou of the Kuomintang party became president in May, a dream shared by many Taiwanese merchants has become possible.

The physical connection between mainland China and Taiwan — air and sea transport suspended since 1949 — is likely to be restored soon.

Direct cargo between Taiwan and China has to stop at a third party port, usually Japan's Ishigaki, sometimes Busan or Hong Kong, before sailing to the other side of the Taiwan Strait.

The Kaohsiung Offshore Shipping Centre is the only terminal in Taiwan that is licensed to receive transhipment cargoes directly from the two designated Chinese ports, Xiamen and Fuzhou.

According to the pledge that Mr Ma made during his election campaign, direct transport links between mainland China and Taiwan would be launched within a year of him taking office if he could reach agreement with Chinese authorities.
.....

The next item on the action list is widely expected to be the restoration of a direct sea link for cargo across the Taiwan Strait, as hinted at by Chiang Pin-kung, chairman of Straits Exchange Foundation, a semi-official organisation set up by the Taiwanese authorities to handle technical and business matters with mainland China.

But alas, even when the gods deliver cargo, there may not be enough....

Meanwhile, container ports on the island have major concerns. Taipei Port Container Terminal, the joint venture between Evergreen Marine, Yang Ming Marine Transport and Wan Hai Lines, will open in January next year.

The new port is expected to compete directly with Kaohsiung and Keelung for cargo from north Taiwan.

Before dealing with the threat from Taipei port, Kaohsiung port in southwest Taiwan may want to first fend off competition from Xiamena and Fuzhou as its throughput growth slowed in the first half.

Kaohsiung port is also busy adding more capacity to its terminal as the utilisation rate of its berths exceeded 100% last year.

In the north, Keelung port has prepared an alternative plan to switch its business focus from cargo vessels to cruiseships in case volumes go down.

A ship under construction at the Taiwan Shipbuilding yard in Hsiaokang outside of Kaohsiung.

What has happened is that the government has been engaged in port expansion, meaning that the new ports are not so much developing new business as cannibalizing business from existing ports. Keelung, mentioned above, has long been bracing for this news. The second article below discusses some of the problems....(emphasis mine)

WHILE some believe the restoration of direct links for cargo across the strait seems to be a solve-it-all remedy for the marine transport and logistics industry, Robert Ho, president and chief operating officer of Yang Ming Marine Transport, says it is not the opening-up that matters, but the degree to which things open up.

The relaxation of non-transhipment cargo transport, which is the most likely deal to be struck by the end of this year, will offer little help.

The second largest container shipping carrier in Taiwan does not even plan to deploy a vessel on the trade should non-transhipment cargo be allowed to be shipped directly across the strait instead of via a third port.

Yang Ming currently charters slots from other lines on the trade.

"The route is not profitable," says Mr Ho. The more aggressive mainland Chinese shipping lines, which outnumber Taiwanese firms on the trade, have made the relatively small market very competitive.

The same thing has been noted on the direct flights. Once higher fuel costs and direct competition from Chinese airlines are are factored in, the fat profits vanish. People seem to have forgotten that once direct links are open cut-rate Chinese carriers will be able to ship cargoes. Can Taiwan firms compete?

However, Mr Ho admits that such direct links would be lower and transit time shorter as vessels do not need to visit Japan's Ishigaki to obtain a stamp before berthing on either side of the strait. The cost reduction would reflect on freight rates in the long run.

Good news for carriers, according to Mr Ho, would be the opening-up of the direct sea trade that allowed both transhipment and direct cargo to be carried by the same ship between any Chinese and Taiwanese ports.

Currently, ships that carry direct cargo to and from China and Taiwan cannot at the same time transport transhipment cargo. Also, just two ports in China's Fujian province are allowed to load transshipment cargo destined for Kaohsiung.

Note again the China issue....

Meanwhile, the volume of transhipment cargo coming from China is shrinking at Kaohsiung port as ports on the other side of the sea grow rapidly in scale and in the number of services they offer, according to Mr Ho. Yang Ming also ended a service between Xiamen and Kaohsiung last year.

However, it seems impossible for mainland China to let go a policy that helps nurture its own ports at a time where transhipment cargo has become the most coveted business for ports in the region.

Recall that those hordes of Chinese tourists can only fly to Taiwan on Chinese carriers. What makes anyone think the cargo business is going to be run on different principles? Especially since Ma has nothing to negotiate with, and yet must get a deal. That spells S-E-L-L-O-U-T.

Keelung Port seen from the ridges overlooking the city.

The next piece discusses Keelung and the costs of shipping....

ALMOST certain to miss its volume targets in 2008, Keelung port is expecting another rough year ahead.

The port forecasts a throughput of 1.96m teu for 2009, 13% lower than this year's target of 2.26m teu, already regarded as unattainable when the port released its first-half figures.

A dampened transpacific trade inthe past two months has crushed hopesof the second largest boxport on the island breaking its throughput record twicein a row, Keelung Harbor Bureau director-general Hsiao Ding-Hsun told Lloyd'sList.

The port handled 1.07m teu in the first six months of this year, 6,400 teu fewer than in the same period last year.

Meanwhile, Keelung's business is moving elsewhere:

Just 38 nautical miles away with a deeper draught of 16 m, Taipei Port Container Terminal, a joint venture between Evergreen, Wan Hai Lines and Yang Ming Marine, is due to open in January 2009. In a study last year, the Taiwan Ministry of Transportation and Communications estimated that the new facility will take 452,000 teu away from Keelung port.

As yet another article today notes, Taipei port is also impacting Kaohsiung:

THE list of container terminals in north Asia that are targeting transhipment cargo includes Shanghai, Busan, Ningbo, Qingdao and Xiamen. If the sector is not crowded enough, mind you, Taipei port will join soon.

This implies that Kaohsiung port, with 51% of its throughput being transhipment goods, faces a scenario in which half its volume is coveted by its eager neighbours.

The utilisation rate of the eighth busiest boxport in the world and Taiwan's top port reached 100% last year. With a designed capacity of 10m teu a year, the port handled 10.26m teu in 2007.

Kaohsiung's priority should be adding new capacity before its clients conveniently go to its neighbours for empty berths. The port apparently has got the point, but new facilities are about two years from being ready.

Yang Ming Marine Transport, the second largest carrier in Taiwan, has won a 50-year concession to develop four berths on 75 ha of land in the sixth container centre of Kaohsiung port. The additional 1.5 km of quay will add 2m teu of handling capacity to the port.

Construction of the first two berths, which started last December, is scheduled to be completed by 2010, while the remaining two will be available in 2013.

The new Taipei Port under construction.

Finally, the changes in the island's logistics markets caused by Taipei Port are discussed in some depth. The port, at the entrance to the Tamshui River northwest of Taipei, is affecting the entire island:

THE opening of Taipei Port Container Terminal, backed by Evergreen Marine, Wan Hai Lines and Yang Ming Marine Transport, on January 1 next year will change the logistics landscape in Taiwan.

The new port will help shippers save more than NT$10bn ($327m) of inland transport costs a year. Around 40% of imported and exported cargoes in Taiwan come from, or are destined to, the northern and central parts of the island. But not all of them can be shipped or unloaded at Keelung Port, whose relatively shallow draught of 12 m-14.5 m cannot accommodate containerships over 5,500 teu.

More than 1m teu of containerised cargoes are thus being trucked between Kaohsiung and northern and central Taiwan, said president of TPCT Chen Hau-Gi. He added that it costs NT$7,000-NT$8,000 per teu to carry those boxes between northern Taiwan and Kaohsiung.

Moreover, the new facilities will have little difficulty in attracting carriers and cargoes with the backing of the three lines.

Largest shareholder Evergreen Marine, with a 50% stake in the port, has no dedicated terminal at nearby Keelung port and plans to have 12 services calling at the Taipei terminal in its start-up stage, according to Mr Chen. Asia-Europe and transpacific services will make up the majority of the services with the rest being intra-Asia.

Wan Hai Lines and Yang Ming Marine Transport have dedicated terminals in Keelung port. Wan Hai holds 40% of the shares in the joint venture, with the remaining 10% belonging to Yang Ming. Wan Hai is planning to have two near-ocean services calling Taipei at the beginning, said Mr Chen.

Taiwanese officials often complain that Kaohsiung's place in the world port rankings is falling. It is hard to imagine how it could be otherwise, with new growth in Shanghai, Busan, and elsewhere. Now the port in Taipei, well-placed to serve Taiwan's rapidly growing northern region, is another regional competitor. Expect Kaohsiung's place to continue to fall.

[Taiwan]