Sweeter achievement in a challenging environment


  • Business
  • Saturday, 11 Jan 2003

By JOSE BARROCK

LOCATED on the outskirts of Port Klang, in Pulau Indah, Westport is Malaysia's third largest terminal in terms of container throughput. The port has, to date, shown tremendous growth patterns, since initiating operations in 1997. Judging by the huge expansion plans the volumes should surge even further.  

Operated by Kelang Multi Terminal Sdn Bhd, and under the chairmanship of Tan Sri G. Gnanalingam, the port has grown from strength to strength, breaking the two million-container box mark this year, after starting container handling facilities in 1997 with a mere 120,000 twenty foot equivalent units (TEU) throughput. 

The achievement is indeed impressive considering the port has literally doubled its throughput figures over the last two years, handling 1.03 million container boxes in 2000, 1.45 million boxes in 2001 and adding more than 600,000 TEUs to close 2002 at more than two million TEUs.  

The achievement according to Gnanalingam is even sweeter considering the competitive and challenging environment in which the improvements in throughput were made. 

“The environment was not altogether conducive for such growth. With the currency crisis of 1997 still looming, the worldwide economic crisis which happened shortly after that, our neighbours Northport increasing capacity and improving performance levels, the emergence of the Port of Tanjung Pelepas which absorbed some 300,000 transhipment boxes from us, and of course PSA (Port of Singapore Authority) offering heavy subsidies, all made it more difficult but nevertheless sweeter,” he tells BizWeek.  

As for the year ahead, Gnanalingam is optimistic; “We have a target of at least 2.5 million containers, from our current capacity of three million boxes. We have two kilometres of berth and twenty cranes, which for now gives us a three million TUE capacity quite comfortably,” he says.  

Westport, Gnanalingam adds, will commence berth construction in April this year, adding on some 2.4 kilometres of quay length, to enable the port to handle around eight million containers. 

“First, there has to be land reclamation from the sea to build a linear berth. Second the berth has to be strong enough to carry the weight of the new variety of cranes that are considerably larger than the present ones. We are planning the berths to accommodate the latest 25 box out reach cranes,” he says. 

The largest cranes in South-East Asia are currently found in the Port of Tanjung Pelepas, they were built with an outreach of 22 boxes to facilitate the handling of the largest 7,500 TEU carrying vessels.  

Gnanalingam says: “The total cost of our (Westport's) expansion will be in the region of RM1.5 billion – RM800 million for the additional 2.4 kilometres of berth and RM700 million for the additional equipment.” Westport, he adds, will have no difficulty obtaining the funds. 

“There are two things certain about the port business, if you don’t build, the customers will not come. If you want to build the capacity, you have to build 18 months in advance, 18 months before it is required, both equipment and berth construction. Both easily take 18 months to be completed,” Gnanalingam says. 

He predicts that the current surge in containerisation, at 230 million boxes, will increase to some 300 million by 2005 and further escalate to 700 million in 2020. 

Port capacity, Gnanalingam he says, will be wanting by 2005, with only in the region of 230 million container capacity in the ports in contrast to 300 million boxes in volume. 

“All you have to do is to see how the picture was 20 years ago, to predict how the situation will be in the future, draw an analogy,” Gnanalingam says, referring to the 20 million or so containers plying international waters in 1980 surging to current volumes. The increase, he indicates, will be good for the container terminals.  

The throughput increases in Westport over the years, he says, have come from the growth in shipping lines calling at Westport.  

“When we (Westport) started operations, CMA CGM (Compagnie Maritime D' Affrement Compagnie Generale Maritime) had only 10,000 boxes, today they handle around 500,000 (TEUs), China Shipping started with 12,000, today their volume stands at 300,000 (TEUs), Goldstar started with less than 10,000 boxes which have now gone up to more than 250,000 boxes, Hanjin started with 17,000 containers but handles 300,000 boxes today.  

“Growth is dependant on three factors, capacity, the ability to get sufficient equipment, and quality of staff. We (Westport) have always been able to provide all three factors. We have a well-trained, well-oiled unit of 1,800 staff, adequate capacity and sufficient equipment to provide efficient service,” he says. 

However, Gnanalingam is quick to concede that not all is fine and dandy in the local port industry. “The last five years we looked at increasing volume. The next five years is about port sustainability. 

“For every one million increase in capacity it takes about RM800 million to build the capacity. To be able to invest in fresh capacity, it takes a lot, and sometimes can take a toll on a port operator,” he says. 

Port equipment, like quay cranes, rubber tired gantry cranes, and straddle carriers, which are a common sight in any container port, are costly pieces of machinery. A cheaper brand of quay cranes from China can cost in the region of RM20 million.  

Gnanalingam says: “To be supply-driven, you need massive cash flows. When you consider the currency exchange, the difference is larger still. When Westport first started, the US Dollar was at RM2.50. Today it stands at RM3.80. The port charges and rates, however, have not increased.”  

Malaysian port charges have not been changed since 1966, a situation that has made our ports attractive during the challenging economic conditions to bleeding shipping lines.  

“When we, the port operators, increase our rates, we increase by US$10 but shipping lines on the other hand increase by around US$200. Our (port) cost is only four per cent of the logistics cost. 

“Freight rates out of Malaysia are definitely one of the lowest due to the excess capacity in the market, caused by the increased number of calls and increase in ship sizes at a time when the Asian economy was in crisis. However, the situation has improved lately in terms of improved demand,” says Gnanalingam. 

“We are working with the authorities and our customers in terms of tariff increases which will gradually be conducted over the next two years, to ensure port viability and sustainability,” he adds. 

“We at Westport have had to ensure that we are profitable each and every year. Only once in (19) 98 did we fall short but that was due to a hike in interest rates, and not by any fault of ours,” he says. 

“In fact the key challenge for the port industry here in Malaysia for the next five years will be port profitability, sustaining development and continuity in providing supply-driven facilities,” says Gnanalingam in conclusion. 

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