Towards greater efficiency: Port expansion projects will boost capacity

Malaysia’s ports will benefit from continued expansion in 2014. This has been built not only on the back of the country’s overall economic growth but also flows from long-standing plans for development. New terminals and improved efficiency are now in the pipeline.

Fundamentals

Growth in ports has a direct correlation with economic growth in general. Thus, Malaysia’s GDP expansion over the past few years – 7.4% in 2010, 5.1% in 2011, 5.6% in 2012 and 4.7% in 2013, according to the World Bank – has meant sustained growth in the sector. Malaysia’s exports and imports show substantial growth in recent years. In 2011, according to Department of Statistics Malaysia figures, exports were 9.2% higher than in 2010, imports 8.5% higher; in 2012, exports grew 0.7%, imports, 5.8%; in 2013, exports rose 2.4%, imports 7.2%. Much of this trade came and went by sea, with most going through a handful of key ports.

Principal among these is Port Klang, on the west coast of Peninsular Malaysia on the Straits of Malacca – one of the world’s busiest shipping lanes. Located close to Kuala Lumpur, the port also serves the industrial Klang Valley. It is thus the busiest port in the country – indeed, in terms of container traffic, it is second only to Singapore in South-east Asia, according to tainer Traffic magazine’s most recent regional rankings in 2012. Statistics from the port authority show container traffic accelerating from 5.54m twenty-foot equivalent units (TEUs) in 2005 to 10.0m TEUs in 2012. Over the same period, the cargo volume went from 109.7m freight weight tonnes (fwt) to 197.9m fwt, while the number of ships calling went from 15,050 to 17,721.

Since privatisation, two main competitors at the port have emerged. These are NCB Holdings – which owns Northport Malaysia – and Westport Malaysia. At Northport, where the government renewed the company’s lease for another 30 years in December 2013, there has been a drive to boost efficiency in recent years, with a RM350m ($109.2m) investment in Container Terminal 4 recently begun, allowing greater productivity. Northport has also recently deepened the berthing capacity of its Wharf 8A to 17 metres to allow bigger ships and boost efficiency. Partly, this drive towards greater efficiency has been the result of capacity constraints for Northport, as the available land for expansion is limited. Yet plans for a new, third terminal are also with the government for approval. If granted, the new terminal will be able to handle 30m TEUs a year.

Westport, meanwhile, has fewer constraints when it comes to available land. In 2012 the company says it had a 69% share of all container traffic at the port. Westport has 4 km of quays, with six container terminals and the capacity to build three more. It also boasts high productivity – aiming to exceed the industry standard of 25 standard container moves per hour to 35.

By year-end 2014, the firm forecasts, it will have boosted its capacity to 11m TEUs from a total of 9.5m TEUs at the end of 2013. According to the company, in 2013, the port actually handled around 7.4m TEUs. The boosted capacity will come from the new Container Terminal 7 (CT7), the fruit of a two-year, RM800m ($249.7m) investment. The addition of CT7 would bring Westport’s berth length to 4.6 km, with a berth depth of 17.5 metres and new cranes that can handle 18,000 TEU class ships. The company said it had seen around 8% growth in container traffic in 2013, and expected 10% in 2014.

Tanjung Pelepas

Elsewhere in Peninsular Malaysia, the Port of Tanjung Pelepas (PTP), in south-western Johor, is also a major maritime hub. zine ranked the port third in South-east Asia for container traffic in 2012, which constitutes an impressive growth record, given that it only received its first ship as recently as 1999. In 2012 PTP handled 7.7m TEUs, up from 7.5m in 2011. Full figures for 2013 were unavailable, but the port authorities had predicted 8.3m TEUs in July that year. Singapore is PTP’s big rival, with PTP majority owned by MMC Corporation, with a 70% stake, while Maersk holds the remaining 30%. Market rumours indicated in early 2014 that MMC may seek to list PTP in the future, ahead of the potential privatisation of MMC itself. New berths and cranes are being added to enable the port to handle Maersk’s triple-E class vessels, of 18,000 TEUs, via a RM1.4bn ($436.9m) investment. When finished, this new expansion will raise PTP’s capacity to 10.5m TEUs a year, an increase of some 24%.

Lumut Port In Perak

Another interesting expansion in Peninsular Malaysia is Lumut Port in Perak, also on the west coast. Unlike many other Malaysian ports, which are administered by a port authority, Lumut Port is a concession, with the state owning 50% plus one of the shares. The port is jointly owned, operated and maintained by Integrax, a public-private partnership, and has two terminals. The port has taken on an important role in the development of the state as a whole, with its adjacent Lumut Port Industrial Park.

“According to the state government, an economic multiplier effect to the tune of RM25bn ($7.8bn) has been generated through the establishment of Lumut Port and its industrial park since 1995,” Azman Shah, executive director of Integrax, told OBG.

The port also has a deal with national power generator TENAGA, which maintains coal-fired power stations on a reclaimed island at Lumut. The coal is shipped in through the port, with TENAGA supplying 12-13% of Malaysia’s electricity via its generating units there.

Leveraging this dependable revenue scheme, the port is expanding, taking advantage of the fact that it has an anchorage of 20 metres in parts, making it capable of handling the world’s largest bulk carriers with no need for dredging. Integrax has been pursuing a tie up with Brazil’s Vale, the mining giant, which has been investing in iron ore pelletising at Teluk Rubiah, Lumut. The port aims to become a regional trans-shipment hub for coal, fertiliser, biomass and other commodities.

East & West

Other western Malaysian ports include Penang, Malacca and Johor. Regarding the first of these, uncertainties over its privatisation and delays in a RM353m ($110.2m) deep-sea dredging project to increase the port’s draught have led to an erosion of competitiveness. According to the state chief minister, the port currently handles around 1m TEUs a year.

Administered by the Port Klang Authority, the most recent statistics available for Malacca show roughly similar cargo tonnage handled in 2005 (418,135) to 2012 (419,789). Johor Port, meanwhile, is situated close to PTP, and has container facilities and break bulk and dry bulk terminals. It is owned by MMC, and has been moving into liquid bulk cargoes, particularly palm oil.

In eastern Malaysia, Bintulu port in Sarawak has an important role in LNG shipments, while Kuching (and the nearby new deep water Senari Port), Miri and Sibu also have significant facilities. In Sabah, Suria Capital is the major player, with Sabah Ports its subsidiary. A major new project there is Jesselton Quay, which is scheduled to open a cruise ship terminal in 2017.

Volumes are generally low in both Sarawak and Sabah, with a cabotage policy in place that means only Malaysian flagged ships can transport locally made goods from the peninsula to Sarawak and Sabah.