A favourable geographic location spurs Trinidad and Tobago's maritime segment ambitions

As efforts to diversify T&T’s energy-reliant economy intensify, the government is looking to accelerate growth in maritime industries. To this end, T&T is looking to develop its infrastructure and capitalise on its strategic advantages, including its sheltered location in the southern Caribbean. However, it will be doing so in an increasingly competitive environment, with several regional ports seeking global port status and the shipping industry weathering one of the worst downturns in recent decades.

Natural Harbour

At the southern base of the Caribbean, T&T is well positioned relative to shipping lanes in the eastern Caribbean and North, Central and South America. The country is also fortunate in its location below the hurricane belt, while Trinidad’s western coast is sheltered by the Gulf of Paria, a natural harbour on the Atlantic coast of the Americas, where winds do not exceed a monthly average of seven knots and waves do not exceed one metre in height. “T&T is in a prime position to develop a ship building and ship repair industry to serve commercial ships, as well as the yachting industry,” Rhett Chee Ping, president of the Shipping Association of T&T (SATT), told OBG. “This would give the country an important opportunity to diversify the economy.”

Recognising the country’s strategic advantage, in 2005 the Maritime Industry Development Committee was charged with developing and implementing a strategic plan for the sector. As of mid-2016, however, a long-awaited new shipping bill had been given mid-term priority within the government’s legislative agenda. According to SATT, the absence of a defined maritime policy to guide development in related industries has led to limited sector progress. “The industry is changing and we are not adapting quickly enough. This has made it more difficult to attract new shipping lines to T&T’s shores and to develop the shipbuilding and ship repair industries, despite our competitive advantages,” Chee Ping told OBG.

Renewed Focus

Since coming to power in 2015, the government has demonstrated an interest in unlocking new opportunities. Colm Imbert, minister of finance, said during the mid-year budget review of April 2016 that the country will begin by establishing a maritime and shipbuilding complex, which will, in an initial phase, meet maintenance requirements for the existing fleet of government-owned naval and maritime assets. “Such a maintenance facility will catalyse the development of a ship-repair and ship-building industry beginning in the north-west peninsula,” Imbert said. “The maintenance support will emerge as a hub for major ship-repair and ship-building within the CARICOM [Caribbean Community] region, thereby creating a new maritime economy.”

At present, one facility, CL Marine – also known as Caribbean Dockyard, a subsidiary of CL Financial – offers commercial ship repair services at Port of Chaguaramas. CL Marine has a dry dock with a lifting capacity of 23,000 metric tonnes and can accommodate large vessels exceeding 200 tonnes. According to a 2014 study by Nathan Associates, commissioned by the Ministry of Planning and Sustainable Development, with the exception of Cuba, the main ship repair locations in the Caribbean accommodate vessels between 20,000 and 23,000 deadweight tonnes (DWT). A second maintenance facility at Chaguaramas heliport has the capacity to dry dock vessels below 200 tonnes. “The availability of these two facilities, together with the existing large inventory of naval and maritime assets, represents an important opportunity with the critical infrastructure to develop a ship-repair industry,” Imbert said. According to the minister, the country will resort to public-private partnerships to facilitate the necessary investments.

Sub-Regional Hub

T&T is already a sub-regional trans-shipment hub, engaging in land-based and offshore, bulk and containerised trans-shipment activities, and serving smaller ports in the Caribbean, including Grenada, St Lucia and St Vincent. The country has six ports of entry, one coastal bauxite trans-shipment port and one offshore iron ore trans-shipment facility. Major international shipping lines, including CMA CGM, MSC, Maersk, Hapag-Lloyd and Crowley, regularly call at T&T ports. Despite its limited port infrastructure and steep competition in the trans-shipment sector, the country processes around 200,000 twenty-foot equivalent units (TEUs) of trans-shipment volume annually, reflecting T&T’s large domestic cargo base and advantageous location relative to shipping lanes.

A 2014 study by Nathan Associates estimated that the country’s total annual trans-shipment demand could rise to 810,000 TEUs by 2025 (in a base-line scenario), with domestic cargo accounting for 470,000 TEUs of that total and other trans-shipment accounting for the remaining 340,000 TEUs. In a high-growth scenario, the figure could reach 1.12m TEUs (460,000 TEUs of domestic cargo and 660,000 TEUs of trans-shipment) by 2025, while a low-growth scenario would see demand peak at a much lower 620,000 TEUs (400,000 TEUs of domestic cargo and 220,000 TEUs of trans-shipment). Following the study, however, T&T’s largest port, the Port of Port of Spain (PPOS), saw its trans-shipment volume decline after the French shipping line CMA CGM – PPOS’s largest client – took part of its trans-shipment activities to Jamaica. In April 2015 CMA CGM signed a concession agreement under which it pledged an investment of $600m to upgrade the Kingston Container Terminal and operate it for a period of 30 years under the banner of the newly formed Kingston Freeport Terminal.

Changing Dynamics

The deal came in the midst of one of the worst downturns in recent decades in the shipping industry, which was hit by overcapacity, low freights and a slowdown in global demand for commodities. International carriers reported an estimated $5bn in losses in 2015, with sector giant AP Moeller-Maersk declaring annual profits had fallen by 84%. Merger activity has also been increasing. In February 2016 a merger between Costco and China Ocean Shipping was announced and an acquisition of APL parent NOL by CMA CGM is expected to take place in the second half of 2016. Global capacity also continued to rise in 2015, by 8.5% according to industry press reports, increasing pressure on the industry to decouple capacity from freight rates.

Panama Canal

The opening of the $5.25bn Panama Canal expansion in June 2016 is expected to set in motion a gradual shift toward newer generation vessels. A new set of locks will enable the transit of New Panamax vessels – measuring up to 366 metres in length, 49 metres in width and 15.24 metres of draft – and will have the capacity to accommodate container vessels of up to 13,200 TEUs or 170,000 DWT. The transition to the new vessels is expected to take place in two stages. Ships of between 8000 and 9000 TEUs will be deployed in an initial phase, followed by 13,000 TEU vessels at a later stage. In T&T a similar domino effect is expected, as current main liners become feeders and new vessels become main liners. A restructuring of the liner shipping industry is expected, alongside increased market concentration.

New Opportunities

With most of the US East and Gulf Coast ports able to accommodate up to 9200 TEU vessels at present, the deployment of 13,000 TEU vessels is expected to create substantial trans-shipment opportunities for Caribbean hub ports, including Kingston, Nassau in the Bahamas and Caucedo in the Dominican Republic. The Caribbean intercepts key east-west and north-south trade routes, making nearby ports ideal for cargo trans-shipment, with the edges of the Caribbean trans-shipment triangle encompassing Panama, the Bahamas and T&T.

T&T’s infrastructure and location in the southernmost area of the Caribbean makes the country less attractive as a trans-shipment hub for US-Caribbean trade or East-West trade through the canal. Using a T&T port as the primary trans-shipment port for Panama Canal shipments would entail a deviation of some 1500 nautical miles, Nathan Associates noted in its 2014 study. However, according to the study, the country’s comparatively developed port infrastructure could induce shipping lines to use it as a hub to serve adjacent ports with shallow natural drafts, including Suriname, Guyana and possibly Venezuela.

Location, Location

More importantly, T&T is in a prime position to benefit from the increasing volumes being traded between the east coast of South America and the US. The canal expansion will enable the transit of larger volumes of energy and mineral commodities, including coal from Colombia, bauxite from Guyana, and iron ore from Venezuela and northern Brazil, where it is loaded into medium-sized ships. Indeed, since July 2012 Oldendorff Carriers T&T has operated two floating cranes at the country’s iron ore offshore trans-shipment platform, with the company reporting that more than 2m tonnes of iron ore were trans-shipped in the first four months of operations.