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South Korea's Busan port gunning for higher transhipment volumes

Asian ports pursue transhipment growth

Singapore is well-recognised as the world’s leading container transhipment port, and a handful of the regional Asian ports are also major transhipment centres of the world. A look at the development of some of the East Asian ports reveals that expanding their transhipment activity is now an important growth strategy.

East Asian ports, particularly South Korea’s Busan, Taiwan’s Kaohsiung and China’s Shanghai, are emphasising the development of their transhipment business, forming the basis for port expansion and infrastructure upgrades.

Busan port, for instance, has been trying to attract new transhipment cargoes from the north-south trunk route around Oceania, Africa and South America, where strong growth potential of logistics has been observed. Busan Port Authority (BPA) has also affirmed that it is trying to bring in more transhipment cargoes from northern China and the western coast of Japan.

As part of Busan’s efforts to expand the transhipment business, BPA is offering cash incentives to shipping companies with decent transhipment throughput or those with high transhipment cargo growth rate. Vessels with 15-30% of transhipment cargo ratio will enjoy a 50% exemption in port dues, while vessels with more than 30% will be 100% exempted.

And the Korean port has seen its transhipment increased, as the volumes accounted for 50.5% of the total throughput of 18.65m teu in 2014, the first time that it crossed the halfway mark.

At Taiwan’s Kaohsiung port, transhipment volumes grew by 5.6% year-on-year in 2014 on the back of higher Southeast Asia and North America volumes. The Taiwanese port has attracted investments to its 90-hectare International Logistics Parks to boost the volume of transhipment cargoes.

In fact, the declining transhipment activities at Kaohsiung in the past several years have posed formidable challenges to the growth of the port. The port continues to be challenged by the strained Cross-Strait relations, where foreign carriers are forbidden to carry transhipment cargoes from China, allowing only national carriers from both sides to benefit.

According to China-based Shanghai International Shipping Institute (SISI), the formation and development of container transhipment ports are typically confined by geographic conditions, hinterland connections, cost efficiency and trade environment.

“As ships become larger, waterway depth and shoreline are crucial for the development of hub ports,” SISI said in its latest quarterly ports report.

“The economic scale and transhipment demand of hinterland determine the expansion potential of transhipment services to a large extent. Low cost, high efficiency as well as the soft environment for port production and operation are important for transhipment services,” SISI added.

The port of Shanghai, currently the world’s busiest container port, has launched a pilot program to carry out tax refunds on the port-of-departure, approved Chinese flag of convenience ships so as to better engage the coastal shipping market, as well as to promote container transhipment at Yangshan Deepwater Port in Shanghai’s free trade zone.

“Container transhipment will bring huge throughput to ports, but it cannot generate direct economic benefits. Most transhipment ports adopt price competition approach, offering favourable rates to international transhipment containers,” SISI said.

Discounting political factors, such as the one Kaohsiung faces, ports wanting a big transhipment market would need to explore indirect cargo source in hinterland, establish and connect to ocean-going and short-distance feeder routes, while at the same time build appropriate infrastructure to accommodate larger ships.

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