[291015.EN.SEA] Colombo Emerges As South Asia's Next Major Transshipment Port

SRI Lanka's port of Colombo has emerged as a growing transshipment hub capable of handling the increasing number of mega-ships that have become the workhorses of the Asia-Europe trade.

Colombo International Container Terminals (CICT) became a major player in September when CMA CGM Marco Polo - until 2013 the world's largest container ship with a capacity of 16,020 TEU - arrived at the facility, shaking off years of miniscule container growth.

The 2.4-million-TEU deep-sea terminal is a joint venture between China Merchants Holdings International and the Sri Lanka Ports Authority, and the rise of major shipping alliances, or more integrated and expansive vessel-sharing agreements, has boosted traffic at Colombo and other Asia transshipment hubs.

Those hubs are benefiting from the inability of other nations on the Indian subcontinent to handle vessels with capacities of 10,000 TEU and up - and the massive volumes they discharge into the hinterland, the IHS Media reported.

Colombo, particularly, has reaped the benefits of being at the nexus of the South Asia trade, a position that forces it to balance relations with India, its much larger neighbour, while still benefiting from terminal investment and trade fuelled by China, Asia's other heavy hitter.

CICT's increase in volume has been staggering. In 2014, its first full year of operation, the terminal handled slightly more than 686,600 TEU and expects to double that this year to about 1.3 million TEU. Colombo, consisting of three container terminals, is expected to boost volume 5 to 10 per cent this year over 2014, Upul Jayatissa, chief manager of marketing and business development, said.

Total box volume in Colombo container volume grew 14 per cent year over year in 2014 to 4.9 million TEU, elevating Colombo three spots, to 30th, on The Journal of Commerce's ranking of global container ports.

In the prior four years, Colombo had a compound annual growth rate of 1 per cent. Transshipment cargo to and from India, east Africa and Bangladesh accounts for approximately 70 per cent of the port's volume, according to the Asian Development Bank. The remaining 30 per cent is local traffic, driven by garment, tea and rubber exports, and consumer products, and industrial and agricultural equipment imports.

The port has an annual capacity of 7.4 million TEU, but the addition of two new planned terminals, each with annual capacities of 2.4 million TEU, in the South Harbour, where CITC is located, would bring its capacity to 12.2 million TEU. Another 1 million TEU of capacity or so could be squeezed out by maximizing the terminals, estimates Rohan Masakorala, CEO of Shippers' Academy Colombo, a school of business for global commerce and logistics. Another 800,000 TEU of capacity will be added in 2016, when the US$500 million East Terminal comes online.

The terminal's 59-foot draft and cranes with a 230-foot outreach allow it to handle the largest container vessels in service, giving the port a chance to stay competitive in a transshipment market plied by increasingly larger vessels. Fourteen services using mega-ships call CICT weekly, providing about 65 per cent of the volume, with feeder traffic providing the rest.

The terminal receives more than 100 ship calls a month, with the 2M Alliance of Maersk Line and MSC, the two largest global carriers, driving the most volume. Singapore-based Pacific International Lines is the second-largest user of the terminal, followed by the CKYHE and G6 alliances.

The Asian Development Bank, which gave a $300 million loan to Colombo for harbour improvements, is optimistic about the port's potential, noting most ports in South Asia face congestion.

Demand for Colombo transshipment appears to be growing in India. The volume of transshipped goods moving through Colombo for India's major public ports nearly doubled from 652,000 TEU in the fiscal year ending March 31, 2014, to nearly 1.2 million during fiscal 2014-15, according to statistics obtained from India's Ministry of Shipping. Total foreign transshipped volume through India's major ports soared 34 per cent to 2.5 million TEU in the same period.

Colombo commanded the largest share of India's foreign transshipment volume in the latest fiscal year, accounting for 48 per cent of all traffic, according to ministry statistics. Singapore was the second-largest gateway for foreign transshipped cargo to India, with a 22 per cent share, and Port Klang, Malaysia, was third, with a 10 per cent share.

CICT also handled 220,000 TEU moving to and from Bangladesh this year, up 40 per cent from 2014. Of the 1.6 million oceangoing TEU moving through Bangladesh annually, CICT aims to add 800,000 over the next two years.

Source : HKSG.