Ports & Shipping Networks: Challenges & Opportunities

Arvind Kumar (IES Retd)Government of India

Former Senior Adviser (Transport Research)Ministry of Road Transport & Highways

Former Member ,TAMPMinistry of Shipping

Maritime Transport : Shipping

“Whosoever commands the sea commands trade; whosoever commands the trade of the world commands the riches of the world and consequently the world itself”

Sir Walter Raleigh, 17th Century

“The most advanced nations are also those who navigate the most”

Emerson (1870)

Maritime Transport : Shipping

Most nations consume more shipping services than they produce

Absence of “maritime nations” in classical sense Instead nations participate in a certain segment

National trade is not being carried on nationally owned or operated or flagged ships No longer say that “trade follows the flag”

Feasible to be a major operator in world trade with modest merchant fleet

Easier to substitute one flag for another but difficult to shuffle resources across sectors.

Shipping marked by inelastic supply & elastic demand.

Shipping booms are short but slumps long.

Maritime Sector is Highly Globalised

• Example Ship Owner : GreekFlag : PanamaFreight agent : NetherlandsSeafarers : PhillipinosCrewing agent : CyprusCargo : from Shanghai (PRC) to IndiaFuel : Singapore Insurance : EnglandShipyard : Korea

MARITIME INDUSTRY IS MOVING TOWARDS SPECIALISATION

• Past : Each maritime nation had its own ship building, flag registration, nautical schools, seafarers, operators, owners etc.

• Today nations are specialising : Phillipines : Seafarers (2.3 lakh)South Asia : Ship BreakingsHongkong : Container Port OperatorsKorea : Ship Building

Nr Maritime SectorShare of

top 4percentage

Share of top 10

percentage

HHI fortop 4

Market share of developing countries in

top 10percentage

Number of developing countriesin top 10

Average GDP per capita,

$

Multpilkator world

average per capita GDP

1 Ship building (DWT) 95.4% 98.2% 3144 76.4% 6 19 369 2.3

2 Ship scrapping (DWT) 94.3% 99.0% 4940 99.0% 5 2 094 0.2

3 Insurance services - P&I (DWT) 91.2% 74.6% 2937 2.4% 2 48 628 5.7

4 Ship classification (DWT) 65.0% 95.4% 1110 10.6% 2 36 629 4.3

5 Ship owning (DWT) 49.7% 69.1% 668 26.1% 4 31 150 3.6

6 Ship registration (DWT) 45.9% 72.0% 712 53.2% 6 9 220 1.1

7 Container terminal operators (TEU) 43.9% 61.7% 526 67.4% 5 35 640 4.1

8 Ship financing (DWT) 40.1% 70.2% 437 0.0% 0 n.a. n.a.

9 Container ship operation (TEU) 36.9% 73.2% 357 41.5% 5 35 847 4.2

10 Ratings (Headcount) 35.1% 50.0% 338 89.5% 8 10 604 1.2

11 Officers (Headcount) 30.8% 52.0% 243 75.4% 6 15 315 1.8

The participation of developing countries in each sector can be assessed through a GDP per capita analysis.

Source: UNCTAD, Review of Maritime Transport, 2011

Globalization of trade

What is meant by “Globalization” of trade?• Global production, with increased trade in

components and unfinished products

Globalization of trade

What are the causes of Globalization?• Trade liberalization• Telematics • Standardization• Transport and Logistics

Globalized production

• About 1/3 of global trade is intra-company trade

• Around 30% of trade is trade in components and unfinished goods

International seaborne trade for selected yearsindex of major commodities

Source: UNCTAD Review of Maritime Transport, 2011

Primarily International

Pacific Asia Europe

APM Terminals

Dubai Ports World

Hutchison Port Holdings

Port of Singapore AuthorityEurogate

Stevedoring Services of America

Dedicated Maritime Container TerminalsMajort Port Holdings, 2007

Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University

New Panamax

Six Generations of Containerships

First (1956-1970) Converted Tanker

Second(1970-1980) Cellular Containership

Third(1980-1988)

Panamax Class

Fourth(1988-2000)

Post Panamax PlusFifth

(2000-2005)

Post Panamax

Converted Cargo Vessel

TEULength135 m

200 m

500

800

215 m 1,000 –2,500

250 m 3,000

290 m 4,000

275 –305 m

4,000 –5,000

335 m 5,000 –8,000

Draft< 9 m< 30 ft

10 m33 ft

11-12 m36-40 ft

11-13 m36-43 ft

13-14 m43-46 ft

Sixth(2006-) 397 m

15.5 m50 ft

11,000 –14,500

14Fritz Pinnock - Caribbean Maritime Institute

SEALEVEL

Pre-19701,700 TEU

<10 Containers

Wide

1970-19802,305 TEU

10-11 Containers Wide

19853,220 TEU

11-13 Containers Wide

1986-20004,848 TEU

13-17 Containers Wide

2000-20058,600+ TEU

17-22 Containers Wide

Ever Larger ContainershipsDriving Need for Ever Deeper Channels

> 14m12.8-14m11.6-12.8m10m<9m

Differences in freight costs depend on…• Distances• Type & value of goods• Imbalances

CompetitionEconomies of scalePort and infrastructure characteristics

Distance

• Distance matters much more over land than at sea

• Distance matters more with higher oil prices

Economies of Scale• moving 10 000

tons instead of 100 (in one transaction)reduces unit costs by 40 to 50%

Merchandize type and value

• Increase the value by 1% implies an increase of transport and insurance costs by around 0.3 – 0.4%

Imbalances

CI-Online 10 May 2010

CRS, 25 April 2010

“Maritime connectivity”

UNCTAD’s “Liner Shipping Connectivity Index” (LSCI): An indicator for the supply of liner shipping services

Components:• Ships • Container carrying capacity• Shipping companies• Services• Maximum ship sizes

Liner Shipping Connectivity IndexCountry 2004 2009 2013

Singapore 81.87 99.47 106.91Malaysia 62.83 81.21 98.18

India 34.14 40.97 44.35Vietnam 12.86 26.39 43.26Thailand 31.01 36.78 38.32Indonesia 25.88 25.68 27.41Philippines 15.45 15.90 18.11Myanmar 3.12 3.79 6.00Cambodia 3.89 4.67 5.34

Brunei 3.91 3.94 4.61China 100.0 132.47 157.51

China,Hong Kong 94.42 104.47 116.63Source:Review of Maritime Transport,2013,UNCTAD

Container Throughput (Million TEUs): ASEAN & India

Country 2010 2011 2012

Singapore 29.18 30.72 32.42Malaysia 18.27 20.14 20.87

India 9.75 9.98 9.83Indonesia 8.48 9.00 9.32Thailand 6.65 7.17 7.37Vietnam 5.98 6.34 6.59

Philippines 4.95 5.26 5.72Cambodia 0.22 0.24 0.25Myanmar 0.19 0.20 0.21

Brunei 0.10 0.11 0.11China 130.29 143.90 155.02

China, Hong Kong 23.70 24.38 23.10Source: Review of Maritime Transport,2013,UNCTAD

Types of Merchant Fleet (Th GRT)ASEAN & IndiaCountry Total Tanker Bulk Gnrl Cargo Container OtherSingapore 89,697 36,893 30,164 1,455 13,408 7,779

India 15,876 8,569 4,908 799 345 1,254Indonesia 14,267 3,894 2,303 3,362 1,629 3,080

Malaysia 10,508 4,588 243 433 585 4,660Vietnam 7,284 1,532 1,631 3,092 193 835

Philippines 6,417 441 3,927 1,057 352 641Thailand 4,811 1,590 1,435 584 287 914

Cambodia 2,319 82 324 1,780 36 98Brunei 449 7 8 434

Myanmar 182 5 163 15China 68,642 14,104 39,654 4,490 6,274 4,120

HongKong 129,806 26,115 81,416 2,662 16,473 3,140

Share of Indian Tonnage across Cargo Categories (Million Tonnes) Year General

CargoDry Bulk Liquid Indian

LinesTotal*

2000-01 3.54 (8.3) 11.10 (12.2) 40.02 (36.2)

54.66 (22.4)

244.33

2004-05 7.56 (8.0) 7.82 (5.0) 39.50 (26.6)

54.89 (13.7)

400.58

2008-09 4.02 (2.7) 11.34 (4.8) 33.96 (15.3)

49.31(8.1)

611.04

2011-12 9.64 (4.7) 24.41 (9.0) 48.04 (17.3)

82.08 (10.9)

754.87

* Total cargo carried on Indian & foreign lines; figures within parenthesis indicate percentage share of respective cargo category carried by Indian registered ships.

PORTS IN INDIAPORTS IN INDIA

Major Ports

Governed by the Central Government

12 Major Ports : 6 each on West and East coast

Account for about 75 per cent of total cargo traffic

Tariff regulated by TAMP.

Ennore port is India’s only Corporate Port.

Responsibility of the Ministry of Shipping, Road Transport and Highways

Non-Major Ports

Under the jurisdiction of the respective State Govts.

Total about 187 minor & intermediate ports

(Gujarat : 40, Maharashtra : 53, Tamil Nadu : 15, Andhra Pradesh : 12, Goa : 5, Karnataka : 10, Orissa : 2, Kerala : 13, West Bengal : 1, Daman & Diu : 1, Pondicherry : 1, Andaman & Nicobar : 23, Lakshadweep : 10)

Account for about 25 per cent of total cargo traffic

Determine their own tariffs

Responsibility of the respective State Maritime Boards or Port Departments.

Major & Minor Ports: Share in Cargo Traffic

(In Million Tonnes)

PORTS 1990-91 2000-01 2005-06 2012-13(P)

Major 151.67(92.2)

281.13(76.3)

423.57(73.2)

545.79(58.4)

Non- Major 12.78(7.8)

87.37(23.7)

155.42(26.8)

388.22(41.6)

All Ports164.45(100.0)

368.50(100.0)

578.99(100.0)

934.02(100.0)

Figures in Brackets indicate percentage to total

World Top 10 Cargo PortsPort 2011(Million Tonnes) 2012 (Million Tonnes)

1.Zhoushan/Ningbo (PRC) 691.0 744.0

1.Shanghai (PRC) 727.6 736.0

3.Singapore 531.2 538.0

4.Tianjin (PRC) 451.0 476.0

5.Rotterdam (Netherlands) 434.6 441.5

6.Guangzhou (PRC) 429.0 434.0

7.Qingdao (PRC) 375.0 402.0

8.Dalian(PRC) 338.0 373.0

9..Tangshan(PRC) 308.0 364.6

10.Yingkou(PRC) 261.0 301.1

India (total) 913.93 (2011-12) 934.02 (2012-13)

Major Ports 560.19 (2011-12) 545.79 (2012-13)

Kandla 82.50 (2011-12) 93.62 (2012-13)

Source:For S.No.s 1-10, Port of Rotterdam ,Statistics,2013

Scale of Port Operations: India versus China

Port Operations Scale of Port OperationsSize Class (Million Tonnes) China India

>500 2 nil400-500 3 nil300-400 2 nil200-300 3 nil100-200 2 1(Sikka)50-100 2 6+2(Mundra & Papava)

Less than 50 1 6

World Top 10 Container PortsPort 2011 (Million TEUs) 2012 (Million TEUs)

1. Shanghai 31.74 32.53

2.Singapore 29.94 31.65

3.Hong Kong (PRC) 24.22 23.12

4.Shenzen (PRC) 22.57 22.94

5.Busan (S.Korea) 16.19 17.04

6. Zhoushan / Ningbo (PRC) 14.69 16.83

7.Guangzhou(PRC) 14.40 14.74

8. Qingdao (PRC) 13.02 14.50

9.Dubai Port(UAE) 13.00 13.28

10.Tianjin (PRC) 11.50 12.30

India

Major Ports 7.65 (2011-12) 7.71(2012-13)

JNPT 4.32(2011-12) 4.26(2012-13)

Source:For S.No.s 1-10, Port of Rotterdam Authority, May 2013.

Major Ports : Turn Around Time

2.1 2.2 2.4 2.53.1

3.5 3.64.2 4.4 4.5 4.7 4.7

5.5

0

1

2

3

4

5

6

Day

s

Average Total Turn Round Time (Days) 2010-11

Vessel turn around time (Hrs) of select foreign ports: Port Kelang (11), Busan (14), Shanghai (19), New-York (22),Hamburg (28), Long Beach (24),Rotterdam (40), Laem Chabang (12)Global Median (26)

India’s Major Ports:APBT (2010-11)

0 0.7 1 2.3 2.54.6 5.8

7.79.4

13.7 14.2

27.6

36.2

05

10152025303540

Hou

rs

Ports

Average Pre- Berthing Time (APBT) in Hours

Draft and Average Parcel Size

Port PPT KOPT HDL TPT MBPT JNPT COPT PT KPT CHPT NMPT

MOPT ENNORE

Draft (Mtr)

12.8 5.3-8.4 6.7 10.4 10.9 11.0 12.8 10.7-20.0

4.6-23.5 12.0-17.4 (OH)

15.4 14.4 16.0

28687227

14986 16510 17420 19582 19833

27259 28555 3001333883

3710139494

05000

1000015000200002500030000350004000045000

Tonn

es

Average Parcel Size (Tonnes) 2009-10

Average Parcel Size (in Tonnes)Major Ports 1990-91 2000-01 2004-05 2011-12

Kolkata 4885 8379 11264 7916Haldia 18460 16188 17188 15334Paradip 23258 22356 28565 41043Vizag 24900 27134 27769 27719Ennore 58651 38848Chennai 17800 23354 26247 27267Tuticorin 8120 10197 10824 19480Cochin 11603 13564 16946 23975New Mangalore

16911 24335 31913 28859

Mormugao 34497 35561 32179 36368Mumbai 14036 1447 17181 19752JNPT 10227 14646 22699Kandla 20969 22724 21143 30369

Major Ports: Non Working Time at Berth

12.817 19 21.5 23.4 23.8 25.8 27.6 28 29.4

32.336.7

49.5

0

10

20

30

40

50

60

Perc

enta

ge

Ports

Percent of idle time to total time at Berth

Port Call Charges (US$) (24Hrs stay of 50000 GRT vessel 2009-10 )

23876958 9552 9733

1894626330

31727

50634

0

10000

20000

30000

40000

50000

60000

Port

Cal

l Cos

ts U

S$

Ports

Source: Task Force on Transaction Cost in Exports, 2011, Ministry of Commerce and Industry

TEU per meter of Berth

Global Median=945

1187 12861142

2553 2462

536

2122 2061

2661

2109

1418

0

500

1000

1500

2000

2500

3000

Productivity of Gantries (Moves/Hr), 2009-10

15 1620

24 25 27 28 30 3035 35 35 36

40

0

5

10

15

20

25

30

35

40

45

Port

Global median mover per hour 30

Percentage Share of Rail Borne & Coastal TrafficMajor Ports 2000-01 2004-05 2011-12

RB CT RB CT RB CTKolkata 21.4 11.0 33.9 7.4Haldia 25.4 19.4 69.6 21.0Paradip 50.7 38.3 56.4 23.9Vizag 45.0 27.2 51.5 33.6Ennore 93.2 7.3 55.2Chennai 39.9 17.3 13.8 8.2Tuticorin 50.7 38.7 5.4 24.0Cochin 44.1 26.6 0.9 33.2New Mangalore

24.1 24.8 27.0 18.0

Mormugao 6.4 3.7 20.5 2.9Mumbai 32.0 33.2 5.0 25.4JNPT 9.7 8.5 20.4 7.6Kandla 15.3 11.0 12.1 12.0Total 31.2 23.0 25.8 18.8RB: % share of rail borne traffic CT: % share of coastal traffic in total traffic

Port productivity metrics

• Throughput Density (TEUs per hectare)• Berth utilization (Berth/feet)• Throughput (TEUs per annum)• Dwell time• Terminal time• Crane productivity

• Crane cycle time• Lifts per hour• Moves per hour

Strategic Issues (1) :Ports & Shipping

• Why are vessel related charges higher at Indian Ports.• What makes high turnaround time and pre berthing detention at Indian Ports

- lower levels of technology & lack of coordination amongst stakeholders• How to make Indian Port sector vibrant?

- Change in institutional structure(Trusts versus Corporatized entity)- Does ownership matter ?

All Ports in Europe (except in the UK),Dubai, Singapore etc owned by the State- Synergy with trade and industrial policy (SEZs and FTZs).

• Are port related charges villain of the piece?- No, port related charges account for around 10-15% of total

logistics cost.- High inland transit costs, connectivity constraints influence cargo

flows/costs.• India does not have an international port operators of its own (Dominated by

DP World, PSA SICAL )• Why we are not taking the lead yet• How can India get into the lucrative business of container port

operations?

Strategic Issues (2) : Ports & Shipping

• Captive versus common carrier terminals• Inter port and intra port competition

• Inter port competition constrained by hinterland economic activity, connectivity & inland transit costs

• Intra port competition can serve to mitigate the pricing power • Intra port competition may be ineffective in situations where ownership is concentrated

• Financing of port infrastructure• Land acquisition and environmental clearance

- long gestation period for green field port projects (15 years)• Scale of operations at Indian Ports

- Fragmented and small compared to China- Combined throughput at Major Indian Ports barely matches that of Shanghai alone.

• Draft limitation restricts access of large vessels to Indian Ports resulting in: - More number of ship calls leading to congestion- Higher demand for berthing

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