The future growth of container trade at principal containers ports in Malaysia is expected to strongly fuelled by the continued expansion in transhipment traffic. Given the current pace of growth in transshipment traffic it is expected that the share of transhipment traffic, which last year made 37 per cent of the total container trade, the share could rise to about 50 per cent this year (or about 4.3 million TEUs). 

What will be significant to note is that while the growth in the transshipment in the last four years was mainly contributed to the aggressive efforts mounted by Port Klang Authority to win back Malaysian traffic lost to Singapore, the growth in the immediate years ahead is expected to stem from the expansion of transshipment at the new Port of Tanjung Pelepas (PTP).

It will also be important to note that the growth generated at PTP will largely consist of non-Malaysian traffic (essentially luring away traffic that could go the Singapore way).

The growth of transshipment at PTP has no doubt been dramatic - in the first year of operation last year it handled about 400,000 TEUs.

This year, PTP expects about a seven-fold leap in its trade totalling about 2.95 million TEUs of which about 90 per cent, or about 2.6 million TEUs could be treated as transshipment traffic (contributed mainly by Maersk-Sealand which also holds 30 per cent equity in the RM3 billion port).

The hefty growth in transshipment traffic expected by PTP this year could place it ahead of Port Klang, which although expects a further improvement in its transshipment volume from 1.3 million TEUs handled last year, would be under some pressure to come anything close 2.0 million TEUs.

The transshipment scene this year could thus, witness some important structural changes.

The first notable development would be that about half of the total container throughput or about 8.5 million TEUs expected to be handled by ports this year would consist of transshipment traffic.

Secondly, about a two-thirds of this volume (or about 3.2 million TEUs) would comprise non-Malaysian containers diverted from Singapore by Malaysian ports.

The third development on the scene would be the emergence of PTP as the main transshipment port in the country, and even among the first dozen of the world's largest transshipment ports.

The emergence of PTP as the largest transshipment port in the country would in no way diminish the role of Port Klang which would continue to be the largest container port in the country.

This is because the strength of PTP could be its weakness as well.

Unlike Port Klang, which derives its strength from the strong base in hinterland traffic (accounting for about 60 per cent its total container volume) and attracts some 70 over shipping lines, PTP draws its base essentially from one shipping line.

To that extent therefore PTP's growth is limited to the ability of client, namely Maersk-Sealand to grow.

Although PTP has forecast its volume to move up to 3.45 million TEUs in 2002 and 5.0 million TEUs the year after, it is improbable that such volume could be generated by its principal client. And at this stage there are no other major lines that are expected to make a bee-line to the port.

Besides, PTP's ability to attract other major lines in the next three years seems somewhat limited since all its existing capacity would be utilized by the world giant container line, Maersk.

In the medium to longer term, PTP's ability to attract other major lines would depend on its future investment in building additional berths - a move which Maersk is likely to resist as a shareholder of PTP. Besides, as principal user of the port that the Danish line could end up it giving away its present competitive edge it has at PTP if it allows others to operate on the same terms.

The prospects for Port Klang could thus re-emerge after 2002 although this would depend on a number of factors, including changes in shipping alliances, shipping pattern, entry of larger containerships and the regional port development.

The immediate years ahead would place tremendous pressure on the terminals at Port Klang to look to transhipment as the source of growth (since hinterland traffic is expected to moderate). Inter-terminal rivalry could heighten between Westport and Northport as they look for new sources of growth.

Winning future transhipment traffic can however be more difficult since it basically involves taking away traffic from a port within the region (or even the country) to re-shipment.

Transhipment traffic is highly competitive and very exacting on the development of infrastructure.

Besides it offers low returns. The handling of a transhipment container at Port Klang yields an average of about RM70 per TEU (and RM100 per TEU at Port of Tanjung Pelepas). On the other hand the same box handled as hinterland cargo yields three times higher.

Yet to stay in contention, the ports must invest heavily in new generation shoreside cranes, deeper and longer berths and develop other shoreside and landside efficiencies and cope with lower yield.

The future growth of transshipment in Malaysia would also be determined by the ability of the ports to respond to the changing ship technology - namely the emergence of larger container ships.

At present only PTP and Westport at Port Klang have the capacity to receive the largest of the ships now afloat - the 6,500 TEUs capacity vessel of which about 62 are on order by 11 major shipping lines.

Vessels of 7,250 TEUs have just been ordered while 9,000 TEUs size containerships are expected to be ordered later this year. Lines, like P&O Nedlloyd are considering 10,000 TEUs ships while 12,000 TEUs ships are now being considered technically (and economically) feasible.

Give the present port infrastructure none of the local ports would be able to accommodate vessels above 7,000 TEUs, let alone handle the growing size of vessels. The new generation vessels could threaten Northport (due to draft limitation) and hamper the role of Port Klang as a transshipment hub.

Perhaps some structural changes should be made to the environment, including some form of cooperation or alliance between Northport and Westport (as fostered between Kelang Container Terminal and Klang Port Management) to strengthen the role of Port Klang in the regional transshipment trade.

Transhipment generates foreign exchange earnings (for non-Malaysian containers handled) and brings savings in foreign exchange (for Malaysian container traffic handled at local port rather than via a foreign port). Foreign exchange contributions from transshipment handled at local ports this year could top RM400 million - a significant sum that needs national strategies to be formulated to foster its growth.