Can Colombo port emerge as mega hub of South Asia

Strategically located at the center of the Indian ocean just close to the main sea route from far east and Australia to Europe and America, Colombo is a major port of call for more than 30 main lines including almost all the top container carriers and more than15 feeder carriers. Most of the larger container carriers do not call the Indian, Pakistan and Bangladesh ports because they do not have sufficient depth and adequate port facilities to handle such vessels and also they are handicapped in other ancillary marine services vital for shipping trade.

However a few ports in India have developed container terminals enabling to service 3rd generation container vessels and a few other ports are planning to strengthen their container handling capacity with foreign investments.The Tuticorin Port Trust & PSA joint venture has developed two container berths with 370m length and 11.9m depth.Throughput in 2000 at Tuticorin was 156,978 TEUs*. Although Tuticorin is also at a good location similar to Colombo it has a limited depth of only 11.9m. and therefore it will not be a serious threat for Colombo which has a 15 m. depth. Jawaharlal Nheru Port Container Terminal (JNPT) also has been improved its capacity and container handling productivity with the investments by P & O. JNPT has 3 berths with 680m. length and 12m.depth and her throughput in 2001 was 607,000 TEUs*. Although JNPT had been able to attract some transhipment containers through direct services, due to draft limitations, it will not be able, with the current position to serve large main line operators. Port of Chennai which operates 3 container terminals with 600m. length and 13m. depth has handled 352,307 TEUs* in 2000. Although the container handling facilities at Chennai port are being planned to be further developed by P&O on BOT terms,due to draft limitation and Tuticorine’s more attractiveness to local cargo operations the chance of Chennai being developed to be a transhipment hub is not seen to be positive. Ports of Pipaw and Cochin in India , Karachi & Port Quasim in Pakistan and Chittagong in Bangladesh also have been identified as probable ports which could attract direct main line callers. Due to draft, hinterland and other restrictions the possibility of developing these ports to the hub level is doubtful. In view of above scenario any of the Indian sub-continental ports (ISC) cannot be compared with Colombo at this stage because the depth of all those ports against Colombo is lesser 3 to 4 meters and calling large vessels into such ports would be a very risky operation .In addition to above the ships’ requirements do not confine only for cargo handling facilities but for other ancillary services such as bunkering, ship repairs etc. as well. In this context Colombo is far ahead than the Indian sub-continental ports. Top of all that the deviation cost from the Main shipping route to these ports will be very much higher than that for Colombo. As such, some of these ports could be looked in as possible mini-hubs to take Indian cargo by feeder vessels to Colombo or any other major hub. Mega hubTherefore, the remaining major competitors for a regional mega hub port status in the south Asia region with Colombo will be Singapore, Port Kelang, Salala , Dubai and Aden. Let us examine the degree of competitive advantages / disadvantages of Colombo against Singapore ,Port Kelang , Salala and Aden.Except JNPT, Tuticorin and Chennai, all the other ISC ports largely depend on outside hub ports for the transhipment of their cargo. In the event of the introduction of giant container ships (8,000 TEUs to 18,000 TEUs) in the next few years to come (Lloyds List – 7th July 2000) and the concept of “Mega hub” with 17m to 21m depth becomes a reality all ISC ports will have to remain as feeder ports.In this context the Port of Colombo which is the closest hub to all ISC ports except for Kandla and Karachi appears to be having greater chances to be the Mega hub port in the ISC region.

Colombo is the cheapest regional hub in terms of Feeder cost and also offers the shortest transportation time. In the shipping world it is said that “time is money”. Minimizing the lay time and dispatching the vessel in time is of paramount importance because “once demurrage always on demurrage ”.ADB appointed study team which consisted of high caliber consultants from Germany, USA, Australia and Sri Lanka in their preliminary report on Colombo south port development states (pg3-23) that “ Colombo is the least cost hub for all ISC Ports except Kandla and Karachi both of which are more competitively served from Aden. This assumes that productivity at Colombo is at least the same, if not better than that of other hub ports.”However , the higher productivity and faster turnaround time might supercede the above advantageous. Interesting to note that Port of Colombo has adopted various measures to Improve its productivity and the turnaround time and encourage the shipping lines. Many incentive measures such as rebate schemes (T/S volume rebate, East Coast rebate, Handling Discount) and Free storage of 21 days for T/S containers etc. have been offered by the Port of Colombo to reduce the per unit handling costs. In order to encourage the customers the SLPA is in the process of entering into Port (Terminal) Services Agreements with Main Line Operators. As the first step the SLPA recently entered into a Terminal Service Agreement with Hanjin Shipping which is a major line serving Colombo port. In the near future the SLPA will enter into more such Service Agreements where volume handling will definitely put the shipping lines at a very advantageous position.ReformsAt Jaya Container Terminal (JCT), the recently introduced reforms, such as the Target Bonus System which is based on a constantly functioning Productivity Monitoring System. motivation of the workforce for working on public holidays such as the May day, Sinhala /Tamil New year day Christmas day, welfare measures including better transport system, skill development etc. had geared for considerable productivity and efficiency improvement. Recently in many occasions JCT had been able to achieve a Gantry Productivity of over 25 moves p/h and vessel productivity of over 75 moves p/h. South Asia Gateway Terminal (SAGT) also achieved similar productivity and efficiency. Both terminals together increased their daily handling volume tremendously during the recent past. On the 15-07-2002 both terminals handled 8,231 TEUs registering the highest ever per day volume in the port history. During the recent past Colombo has been achieving outstanding improvement in container vessel turnaround time as well. Container handling trade which suffered seriously with the imposition of the war risk surcharge after the terrorist attack on Katunayake Air port has now raised her cargo handling to a better position.. Transhipment box handling is also on the increase at a considerable rate.In the mean time The Sri Lanka Ports Authority recently converted its premier Container Terminal (JCT) from a government authoritative institute to a more liberalized and marketing oriented organization. The Queen Elizabeth Container Terminal is being developed and managed (on BOT basis for 30 yrs.) by the P&O led consortium; South Asia Gateway Terminals ltd.(SAGT). It is now in the process of extending ,re-equipping, and re-structuring the terminal. Three berths with 940m length and 15m. draft to handle 1 million TEUs will be completed towards the end of 2003. By now SAGT has completed 650m length with 15m draft and hopes to handle 600,000 TEU by the end of 2002. Unity Container Terminal -UCT (formerly known as the North Pier) also has been developed with two container berths with 340m length and 9 to 11m depth mainly for handling feeder vessels. The UCT would be fully operational with 3 quay cranes,8 transfer cranes and 45 prime movers & trailers with a handling capacity of 230,000 TEUs per annum. Developments More importantly, having realized the present developments of the global shipping industry the port of Colombo has taken several steps to expand the container handling capacity. The shipping industries searching for economic of scale to bring down the unit cost are now in the process of introducing Mega ships of 7000 TEUs and 12,500 TEUs to 18,000 TEUs with a length of 325 to 381m., a breath of 46m to 57m. and a draft of 14.5m. According to the orders that are being placed for new ships at present , significant number of vessels of 7,000 to 8,000 TEUs capacity with 325m. length, 46-50 m. breath and 14.5m. draft will come into operation before 2008.In view of above the Port of Colombo has taken initial steps to construct a newest container terminal (Colombo Port South Harbour ) with the intention of attracting mega container vessels. The proposed terminal will be fully completed with 12 berths in six phases of two years each over a span of 20 years and it will have a total capacity of 10 million TEUs. At the first phase, two berths with 720m to 800m length and 17m depth are expected to be completed by 2007. Thereafter at every phase , two berths of the same capacity will be completed. At later stages, remaining berths will be developed with greater length and 21m depth to meet the demand by mega vessel operators. These berths will be fully equipped with latest container handling equipment , modern automation systems and state of the art of technology. The South harbour of Colombo port once developed would be able to meet the growing demand for container handling in the South Asia region With above super infrastructure developments, supported by the skilled and reliable workforce and high quality ancillary services such as bunkering, ship repairs ,ship chandelling ,duty free shopping etc. the port of Colombo would be powerful enough to play the role of a mega port, offering comparatively a profitable service to the shipping lines operating ISC cargo than any other competitor in the region.