Drewry Maritime Research, a
shipping consultancy of international acclaim, in its Annual Review 2016 of
Global Container Terminal Operators has forecast a lackluster average global growth
of 2.7% per annum for the next five years for global container ports as the
industry moves from being a growth sector to emerging as a value sector. It
turns out that the only global region wherein Drewry is confident of double
digit growth happened to be the South Asia region of which Pakistan is a
constituent. Indeed, the annual containerized growth rate for Pakistan for the
last two years has remained double digit with the 2015 growth being over 14%
and 2016 over 16%. Industry pundits foresee 2017 to clock an attractive 15%,
thus far above the global forecast of 2.7% as prophesized by Drewry.
As the Advisor on Shipping to the
Karachi Chamber of Commerce and Industry (KCCI), the Shipping Committee of the
KCCI has during a recent meeting supported me in taking up the matter of
imposition of congestion charge by shipping lines at the highest level with the
government. The business logic behind this action by shipping lines eludes comprehension
given that this region shall remain a cash cow for these shipping lines coupled
with the fact that the capacity in Pakistanout paces current volumes.Pakistan’s capacity at the beginning of 2016 was approximately 2.5 million TEUs while the three container terminals, namely Karachi International Container Terminal (KICT), Qasim International Container Terminal (QICT) and Pakistan International Container Terminal (PICT), were handling a combined annual throughput of over 2.8 million TEUs. To elaborate this point, KICT for example handled 1.1 million TEUs in 2015 as against a designed capacity of about 0.75 million TEUs. The other two terminals too remained full past the brim to coupe with volumes above and beyond their designed capacities. Despite the difficulties faced by the container terminals in Pakistan, the profits of shipping lines calling at Pakistan remained bright green without any mention of a congestion levy.
The capacity situation by the end
of 2016 changed for the better for all industry stakeholders including large
importers and Customs when South Asia Pakistan Terminals (SAPT) commenced its
operation by adding 0.55 million TEUs to the overall capacity upon completion
of the first of four phases of the US$600 million project. With another 0.55
million TEUsin capacity expected by June this year upon completion of the
second phase, the project is expected to yield a combined capacity of 3.1
million TEUs when all four phases are complete by the year 2020. With these
numbers, the container terminals in Pakistan are nowhere near a state of
congestion and are not foreseen to be in such a state for at least the next 8
to 10 years.
A related article published by business recorder on 26 March 2017 states that
shipping lines have initiated collecting from the consignee at destination
before delivery US$150 and US$300 on 20ft and 40ft containers respectively.
Shipping lines, it has emerged, claim that the dwell time for containers lying
at the terminals is far beyond what it should be and thus have tried to justify
this charge. The lines further contend that the loading and unloading of boxes
to and from vessels has remained slow resulting in extending in port stays for
the vessels. The said claims by shipping lines warrants a thread bare analysis
as follows.
The overcapacity handling witnessed
by terminals during 2015 and the better part of 2016 was as a result of growth
in import volumes overwhelming the handling capacities available at the ports. The
market shares of KICT, QICT and PICT as a percentage of total volumes remained
pretty much unaltered on a year on year basis thus suggesting that there was no
disruptive wheeling and dealing by the terminals resulting in kicking the
market off balance by the terminals. Shipping lines continued to enjoy a growth
in volumes during this period and there were no complaints by them of earning
revenues above their forecasts despite terminals being overwhelmed. This was
the period when a congestion charge could have been justified but not without
argument. However, this was also the time when shipping lines were losing money
globally and were focused on ways and means for containing the hemorrhaging to
their bottom lines.
With SAPT adding not only land side
capacity but also berth side capacity for shipping lines in Pakistan, the claim
relating to congestion resulting in delays to the vessels seeking a berthing
window remains hard to digest. As witnessed since December 2016, the capacity
spillover of the terminals has been absorbed by SAPT and vessels are no longer
confined to wait at the outer anchorage for up to two days at times for want of
berthing space. Given rationalization of throughput post SAPT commencement of
operations, the other terminals are no longer stretched beyond their limits thus
naturally resulting in improved handing efficiencies both at the berth and in
the yard. Thus a potentially win-win situation for all stakeholders.
It may be argued that shipping
lines have been allowed to get away with imposing a congestion charge because there
exists a void in the form of a unified forum empowered to take-up the matter directly
with the shipping lines. The shipping lines must also remain mindful that as
volumes grow in the coming years, both as a natural result of organic growth
and the booster shots expected in the form of CPEC, the bargaining power of
large Pakistani importers shall also grow which could potentially further
depress that already rock bottom haulage rates being witnessed by these very
lines. A congestion charge today may leave a nasty after taste in the years to
come. This coupled with the possibility of a representative body such as the
KCCI taking up the matter with the government seeking policy intervention could
leave shipping lines being penny wise and pound foolish.
It remains to be seen if shipping
lines will focus on developing trade within the region, especially in Pakistan
or will prefer a short term quick gain in the form of a congestion charge and
restricting maneuvering space in the future. Drewry in its report for 2016 also
predicts a change in demographics within respective regions with this change
being a natural outcome of markets within the regions maturing earlier than
expected. These changes and their possible implications on the profitability
for shipping lines in the long term as argued by Drewry could imply that
shipping lines would be best advised to take a long term view of high grown
markets as against a short term view.
