Do Mega-Alliances Provide Opportunities for Mega-Transhipment Hubs?
Some of the half-year port statistics will make uncomfortable reading for officials at a number of the world’s largest transshipment hubs. Throughput at Singapore after the first six months of 2016 was down by five percent, while further north Hong Kong fared even worse with a half-year decline of ten percent.
The latest results compound miserable figures for the full-year 2015 when Singapore’s volumes fell by nearly nine percent, equivalent to 2.9 million TEU, and Hong Kong’s slipped by 10 percent, or 2.2 million TEU.
Some of Singapore’s and Hong Kong’s woes can be explained slower global trade growth. Drewry estimated that world port throughput only increased by one percent in 2015 and expects 2016 to see growth only marginally higher at 1.8 percent.
But there are some other factors at play, according to a recent Drewry report. Transshipment volumes account for around 85 percent of Singapore’s container handling and a sizeable proportion of Hong Kong’s as well. Some of the contraction is the consequence of market share shifts to other nearby hubs.
Annual growth at Singapore and Hong Kong since 2010 has lagged well below the world average, while other hubs such as Tanjung Pelepas and Port Kelang have grown above trend as more carriers and alliances have moved some transshipment activity there.
Ocean carriers are under severe financial pressure to reduce their operational costs and some of their actions have accelerated the shift towards more direct calls at the expense of transshipment. More previously feedered ports are being added to mainline services to save on feeder costs. The addition of more ports onto weekly loops has extended the voyages of services, requiring additional ships to maintain the frequency and helping absorb surplus vessel capacity.
Increased demand and new terminal infrastructure in emerging markets such as Indonesia, Vietnam, and Malaysia, the bread and butter of Singapore’s transshipment activity, has also helped to attract more direct services.
Having fewer but larger alliances poses another risk to all transshipment-heavy ports as it will reduce the client pool for terminal operators and will see business won and lost in much bigger chunks. The trend towards fewer services using bigger ships with multiple carriers pooling cargo will create winners and losers with successful terminal operators most likely having strong connections to the dominant carriers in the alliances.
The rise of the mega-alliances could be beneficial to larger transshipment ports, according to Drewry, where there is ample capacity to cater to increasing volumes. Alliances will be lured by their greater connectivity and lower risk of congestion during peaks. The transshipment ports that appear most at risk are those that are smaller or more fragmented. In the world of the mega-alliance, the mega-hubs are best able to compete, Drewry concluded.