The world’s largest transhipment hubs are exposed to numerous risks, from poor underlying demand to increasing use of direct services, however, strong links to new mega-alliances that can guarantee capacity and smooth operations could provide opportunities as well as risks, according to shipping consultancy Drewry.
Throughput at Singapore after the first six months of 2016 was down by 5%, while further north Hong Kong fared even worse with a half-year decline of 10%.
Transhipment volumes account for around 85% of all Singapore’s container handling and a sizeable proportion of Hong Kong’s and some of their contraction is the consequence of market share shifts to other nearby hubs. Annual growth at Singapore and Hong Kong has lagged well below the world average since 2010, while other hubs such as Tanjung Pelepas and Port Kelang have grown above trend as more carriers and alliances have moved some transhipment activity there.
The ports’ customers, ocean carriers, are under financial pressure to reduce their operational costs and some of their actions have accelerated the shift towards more direct calls at the expense of transhipment. More previously feedered ports are being added to mainline services to save on feeder costs. The addition of more ports on to weekly loops has extended the round voyages of services, requiring additional ships to maintain the frequency, helping absorb surplus vessel capacity.
Increased demand and new terminal infrastructure in emerging markets such as Indonesia, Vietnam and Malaysia, has also helped to attract more direct services.
Having fewer but larger alliances poses another risk to all transhipment-heavy ports as it will reduce the client pool for terminal operators and will see business won and lost in much bigger “chunks”, according to Drewry.
However, Drewry added that the rise of the mega-alliances could actually be beneficial to larger transhipment ports where there is ample capacity to cater to increasing alliance-level volumes.