Whats the fuss over Hambantota Port of Sri Lanka - a lesson to be learnt

Hambantota port, gateway to world

(SO – by Shirajiv Sirimane in Hambantota)
For centuries Sri Lanka was famous for the export of tea, rubber, gems and many other items. However, only less than one percent of the population may know that centuries ago, the then Ceylon exported metal to Rome, Europe, Arab and other developed countries mainly to manufacture armour, including swords.
In a rocky area in Samanalawewa, near Embilitpitiya a mistrial furnace powered by strong monsoon winds was built. Field trials using replica furnaces confirm that this furnace-type used a wind-based air-supply principle that is distinct from either forced or natural draught and can produce high-carbon steel. This technology sustained a major industry in this area during the first millennium AD.
The metal produced here was exported there was a time when ships sailed to Hambantota. (Sadly today Sri Lanka is spending millions of rupees to import steel.)
Constantinople was the trading point that linked China with Europe and it took almost two and a half years to transport goods along the Silk route overland. However, due to the conflicts between countries over the Silk Route, alternative routes had to be found to connect ancient Alexandria with China.
Then the Chinese and the Arab’s selected Hambantota in the centre of the former Maritime Silk Route around 250 BC for sea transportation.

The International Monetary Fund Mission Chief to Sri Lanka, Dr. Brian Aitkin with Chairman Ports Authority, Dr. Priyath Wickrama, Deputy Chief Engineer, Sri Lanka Ports Authority, Agil Hewageegana and Chinese officials inspecting the progress of the Hambantota Port.

The name “Hambantota” was derived from the Sinhala word “Hamban” and “Thota”. The former which was used to describe a certain variety of sailing craft and the latter which means the “port”. Hence “Hambantota” was really the “port for Hambans”.
Even today this sea route is operational with 36,000 ships passing Hambantota annually.
China, Korea and Japan are some of the highest oil consuming nations in the world with Crude oil from the Gulf and 4,500 tankers sail each year on the same route. Singapore is among the best three Ports in the World with over 5,000 ship companies. This caters to 4,500 oil tankers from Dubai and over 100,000 other vessels that anchor in Singapore.
These large ships, however, had to do a de route of three-and-a-half days to Singapore and also to India, Thailand, and Malaysian harbours for refuelling, buying provisions medical supplies and other essentials. However, the Colombo Port due to its location and limited capacity was never on this map of those tankers and other ships which sail close to Sri Lanka.
When the Hambantota Port is completed ships could save nearly three days sailing of time, fuel and enjoy numerous benefits by anchoring at Hambantota. It is envisaged that many of the 4,500 oil tankers would anchor in Hambantota for bunkering, ship repairing, and to purchase food, water and medical supplies and logistics.
It is expected that at least 20 percent of the shipping traffic mainly the oil tankers would call over at the Hambantota Port.
The neighbouring countries have suddenly realised that the Hambantota project is now a reality. Hence these countries are now taking precautions to keep the ships sailing to their harbours and keep the ship companies in their countries.
Thailand has launched several ambitious projects similar to India’s stalled Sethu Samudram project to woo these ships and Malaysia too is exploring feasibility of planing a new sea route.
However, these would take a long time to materialise and by that time Hambantota would be one of the busiest harbours in the region.

Project ignored for three decades

Work in progress at the Quay wall in dry conditions

The metal crushing plant

The progressive idea of constructing a Port in Hambantota had been in the air for over three decades with successive governments, taking no serious interest in it.
However, no government or a political leader had the vision to go ahead with the implementation of the project.
Even under the Southern Development Authority set up in 1977 the Hambantota Port project proposal was confined only to words and proposals. The proposal was only limited to feasibility studies again and again with budgets running into millions but to no avail.
There was one individual, a shipping industry-lover Ariya Wickramanayake of Master Divers who did a study with his own funds and presented it to President Mahinda Rajapaksa, then a Minister.
Rajapaksa who already knew the importance of the project presented this study project and several other proposals on the construction of the Port to the then leaders of the Country. Various excuses were trotted out and the project never got off the ground.
Rajapaksa as soon as he was elected President got the project moving and most importantly wooed the Chinese leaders for funds which too was not possible before making the project a reality.

First ship to anchor in December

According to the Chairman of the Ports Authority, Priyath Wickrama, the first stage of the Hambantota Port Development is to be completed by the end of this year which is ahead of schedule. The total cost for the project is US$ 360 million.
Sri Lankan engineers and their Chinese counterparts from the China Harbour Engineering Company and Sinohydro Corporation are using maximum resources within the locality. Steps are also being taken to wash sea sand and use it for construction.
The 600 metre long jetty is now nearing completion and the depth of the basin would be 17 metres. In the Colombo harbour the depth is only 15.5 metres. The turning circle would be 600 metres and the breakwater would be 1450 metres.
One of the biggest advantages of the Port site is the 22 metre depth to the mouth of the harbour, a unique geographical feature which even the Indian Ports could not match.

Unique business opportunities

The business opportunities from the project locally and internationally will definitely trickle down to the masses with over 50,000 indirect employment opportunities being created.
A cement grinding and bagging plant would be set up along with fertiliser bagging plants.
Warehousing and offshore services too would create wealth to the area. The operation of an LP gas terminal for the first time in the country would create two tiers of pricing with the Southerners expected to receive LP gas at reduced prices due to low taxes and overheads.
The bunkering facility and the Tank Farm project too have commenced bringing more benefits to the country. The bunkering facility will comprise 14 tanks. Eight tanks will be used to provide oil for ships and aviation fuel while three will be used to store LP gas.
In a few years the Hambantota district per capita income is expected to be on par with the districts in the Western Province, which would be an achievement.
The US$ 600 million funds needed to launch the second project to be completed in 2014 too are expected to be found again with Chinese assistance. Under the third phase of development a Dockyard too would be constructed.

World accolades for Hambantota

Hambantota Port also holds several unique world achievements which Sri Lanka can be proud of.
The Port would be the world’s biggest harbour constructed on land in this century.
When completed the Hambantota harbour on 4,000 areas of land could accommodate 33 vessels to berth at any given time after completion, which would make it the biggest harbour in South Asia.
The proposed 15-storey administrative complex for the Port which could even withstand a tsunami would also be one of the best designed shipping structures in the SAARC region.
The port of Rotterdam from 1962-2004 was the world’s busiest ports until it was surpassed by Shanghai. It had higher volumes than the Singapore port. China’s Shanghai overtook Hong Kong to become the world’s second largest container port.
It is also the only harbour in the World where shippers could witness peacock and deer roaming freely in the 4,000 acre land as great care was taken to safeguard the environment.
Hambantota too is in line to be listed among the world’s busiest harbours and this would make Sri Lanka proud, a small country which was recently is elevated to a middle income country.

Malaysia - Shipping Outlook

Wednesday, February 3, 2010

Signs of recovery in container shipping but industry players are cautiously optimistic of 2010

Container shipping, the worst-hit shipping segment in the global economic downturn last year, is showing signs of recovery but industry players are being cautiously optimistic.

Maersk Line, the world’s largest liner company, sees an uphill climb for the industry this year.

Maersk Malaysia Sdn Bhd managing director Omar Shamsie told StarBiz that container shipping had seen significant value destruction last year and it must be prepared for an uphill climb this year.

“Last year, many shipping companies had postponed existing orders for new vessels, idled existing vessels and increased their scrapping programmes,” he said.

“All these in an effort to take the cost out and better match capacity to the prevailing demand where these combined actions had resulted in a larger-than-expected impact on vessel fleet growth and helped create tighter capacity.

“We expect this situation to continue in 2010 and this in turn will help increase rates further. But, although freight rates have increased in the last four to five months, they are still at a historic low level, and it will be a while before they reach a stage of sustainable returns,” Omar said.

Global markets are showing signs of recovery, but the outlook for the shipping market is still uncertain, according to Omar.

“We believe there is a positive momentum for growth due to a pick up in demand and efforts to curb capacity increases, but it will be a modest growth rate compared to an industry yearly average of 10% in the last 30 years.

“It will be a while more before traditional consumer markets like the US and Europe return to their former strength, and this will contribute to the modest growth rates we expect in the near future in container volumes,” he said.

The shipping industry went through what had been described as its worst period in the post containerised era with the highest number of ships laid idle at the height of the global economic downturn last year.

In November 2008, freight rates in the Asia-Europe trade were slashed by more than 50% compared with the previous year and major shipping companies took evasive measures by cutting down on capacity and consolidating services.

In the same month that year, Singapore-based Neptune Orient Lines (NOL) disclosed that its shipping unit, APL, would reduce its capacity in the Asia-Europe trade by about 25% and by around 20% for its trans-Pacific trade.

Maersk Line had then also cut back on its Asia-Northern Europe network, resulting in a temporary removal of its AE8 service in November 2008.

And in the middle of last year, MISC Bhd announced its withdrawal from Grand Alliance, the world’s largest container shipping alliance effective Jan 1 this year.

Drewry Shipping Consultants Ltd believes that the industry has seen the worst of the global recession, but has forecast a very cautious recovery this year with the global container traffic expected to increase by 3.4%.

It said that rising container freight rates on many routes should not fool the industry into thinking that there was a full-scale recovery going on.

“This year will continue to be a very challenging one for all major stakeholders, even if we appear to have seen off the worst of this awful trade trough,” Drewry said.

Drewry Container Forecaster editor Neil Dekker said several large container operators would have “gone to the wall” in 2009 if major benefactors or governments had not stepped in to bail them out.

“There is a strong argument for thinking that if a major carrier had been allowed to fail, the market would have had a much better opportunity to correct itself and lay the foundations for a more profitable industry in the long term.

“A fairly large chunk of capacity would have been taken out of the market, allowing load factors and freight rates to improve,” he said in statement.

Dekker said even if the industry could secure the same amount of fresh cash in 2010 as it received from shareholders last year, it would not be sufficient to cover its needs.

“Another estimated US$1.4bil of cash may need to be found from other sources to keep the carriers trading. This may then prove to be the catalyst that leads operators to start selling assets – such as their terminals,” he said.

source: the star

Indian Shipping Industry Outlook

Gloomy outlook for Indian shipping industry

With the shipping industry still sailing in troubled waters, Fitch Ratings has taken a negative outlook on it for the year 2010: due to excess capacity across container ships coupled with declining freight and charter rates, the shipping industry is in a daunting state, the Financial Express India reported.

"Demand for Indian shipping is going to remain subdued in 2010 and 2011 due to the decline in overall global trade volumes," said the report.

Long-term charter contracts have reduced volatility to some extent, and provide some revenue visibility. And with the fall and rise in volatility of the charter rates, shipping companies now prefer long-term contracts to hedge risk. Companies with long-term contracts have been shielded to some extent from the sharp decline. However, these contracts generally have a tenor of around one year, and it is likely that charter rates will see some reduction upon renewal.

In the year ahead, shipping industry will need to line up further capex as about half of the cargo ships under the Indian flag are to be phased out in 2010, due to the International Maritime Organisation's (IMO) directive to replace single-hull ships with double-hulls. This coupled with older age of ships is a major factor contributing to the necessity for further capex this year.

However, most of the Indian companies have limited room to purchase new vessels, due to the lack of availability of funds and the reluctance of banks to lend to this sector.

"Order cancellations and postponements, and the phasing-out of single-hull vessels, have to some extent staggered the availability of excess capacity, but the global shipping market is bound to face excess supply over the medium term," explained Fitch in its report.

AIR ASIA FORAY INTO INDIA

Forbes India

In Full Flight

Cuckoo Paul, 02.08.10, 06:00 PM EST

Tony Fernandes, the feisty owner of AirAsia, has focused his sights on India. Making his no-frills model work here won't be easy.

The Genghis Khan of air travel in Asia has arrived. This guy is known to do to fares what the Mongolian warrior legend did to traitors' heads: Chop them. His slash-and-burn has already begun. His airline AirAsia is offering a return ticket to Malaysia from Indian cities for less than Rs. 10,000, half the price that everyone else is charging. "At these prices, demand is a no-brainer. Full-service airlines like Malaysia Airlines, Jet Airways and Thai stand no chance," says Madhav Oza, director of Blue Star Travels, one of the country's largest travel companies.

Say hello to Tony Fernandes, the 46-year-old Malaysian entrepreneur of Indian origin who turned a tottering airline into Asia's most successful low-cost carrier. Coming off a three-year campaign in China, Fernandes declares rather gleefully that 2010 will be his "India year." He is bringing frightful commitment to his Indian campaign. "It is easy to roll over and play dead. We plan to stay and fight. In India there hasn't been anyone who has done this," he says.

The Indian market is second only to China in growth. Singapore, Malaysia and Thailand are top-of-the-charts holiday spots for Indians, and everyone loves a good deal. Over the next year he plans to ferry 2 million passengers--many of them first-time air travelers--to India and back on about 148 weekly flights.Why India?
Fifteen months ago AirAsia began operating on the fringes of the Indian market, connecting Malaysia to Kolkata, Trichy, Kochi and Trivandrum. But starting at the end of April, it will up the ante. The airline plans to gradually link New Delhi, Chennai, Bangalore, Hyderabad and Mumbai to Kuala Lumpur and Penang and from there to over 130 routes.

There is also an emotional reason why Fernandes is keen on India. His family hails from Goa. "My dad would have been over the moon to see AirAsia connect to India," he says, "If I can't make it work here, I might as well pack up and go back to the music business."

That's the other thing you should know about Fernandes. He had no experience in airlines till nine years ago. Fernandes ran a music business when he was introduced to the wily Malaysian prime minister Mahathir Mohamad in 2001. Mohamad persuaded Fernandes to buy out his government's stake in the struggling Air Asia for just one ringgit. It was a terrible time for a new entrepreneur to step in. The global aviation industry was in a complete funk after the terror attacks of Sept. 11. Passenger traffic was at an alltime low. But Fernandes not only turned around AirAsia, paying off all the debts, he even figured out a way to go one up on his role model, the Irish airline Ryanair, till then considered to be the best low-cost airline in the world. At $3.21 per available seat kilometer, AirAsia's costs are today the lowest in the world. Since then AirAsia has consistently expanded its network in the Asia-Pacific region, making it the region's biggest low-cost carrier and developing a formidable reputation for management innovation. And Fernandes, with his bright red baseball cap, is now a Malaysian icon and a formidable adversary.

Back home Fernandes had to go through a similar tussle with Malaysian Airports, the operator of the KL airport (incidentally, a partner in the Hyderabad airport). He has called the airport operators 'parasites' and resents not being allowed to build and operate his own terminal near the capital city. "Low-cost airlines drive up passenger numbers and nonaeronautical revenues through shopping, food and other income, and can be a massive earner,'' he says. The Indian airports are not being very smart. "They look at the airlines as cash tills.''Turbulence Expected
His Indian adventure though, won't be smooth sailing--something that Fernandes has already begun to realize. To make his low-cost model work, Fernandes needs airport operators--which include the government-owned ones--to play ball. For nearly three years AirAsia has been negotiating with the Airport Authority of India and private firms that run airports in Mumbai, Delhi, Bangalore and Hyderabad for better terms compared to the network carriers. But he's had little success. They aren't willing to make any special allowances for him. Both ground handling charges and security costs remain very high. "Both the government and private Indian airports have not woken up yet. The high airport costs are one reason why no low-cost carrier has done well in India,'' he says.

Add the growing congestion in major airports like Mumbai, which will mean burning more expensive fuel. The legendary 25-minute turnarounds, that help the airline flog its planes for up to 13 hours daily, look tough at the large airports here.

So if the costs are the same for every airline, be it full-service or low-cost, the question that aviation watchers are asking: How will AirAsia sustain their aggressive pricing? This is something that even lowcost evangelist Captain G.R. Gopinath found tough. "Tony Fernandes is a brilliant guy and has lower costs than others,'' said Gopinath. "In India airlines have formed a cartel, and no one is willing to break. AirAsia and Tony are not afraid to rock the boat--they have done it in the rest of the world," he says.

Smoking Aces
Call it tsunami marketing. That's how Kathleen Tan, who heads the airline's commercial operations in India, describes their approach. "We do not believe in half measures," she says. AirAsia group's entry into India will be through three separate companies--a strategy never tried by any other airline before. The Government of India clearances weren't easy but are now finally in place. The Sepang-based parent AirAsia Bhd will start flights from Kuala Lumpur to Hyderabad, Banglore and Chennai in stages this year. This is in addition to Trichy, Kolkata, Kochi and Thiruvananthapuram, which are already connected. Thai AirAsia (a joint venture with Shin Corp) will start with flights from Bangkok to four points in India later this year. This will open up Phuket, Krabi and nine other points in Thailand to passengers from India, who can connect to them from the AirAsia Bangkok hub. The third company, the group's long-haul airline AirAsia X (a venture with the Virgin group), will start flying to Mumbai and Delhi by the middle of the year with bigger A330 planes.

The plan has been carefully laid out and banks on rapid expansion and improved frequencies over the next few years. "When the India flights were announced this week, we started marketing them in India and began promoting them in Singapore, Jakarta, Melbourne and China," she says. She recently met an Indian entrepreneur on the flight from Kolkata to Kuala Lumpur, who says he can now connect to China much more easily. The journey via Delhi would have taken him two days. Tan is also leading the move to transactions on the Internet, cutting out travel agents from the picture. "We have to be disciplined. I know the agent community in India is very strong, but there is no way we will sell them tickets cheaper than to the passenger," she says. Red tape and government-owned airlines and airports are an obstacle in most markets. "But we are like pit bulls. We will keep at it, until we get our way," she adds.

Fernandes says he will depend on the culture of innovation in AirAsia. The company has a very flat organization. No one has any titles. "Unlike most Asian companies, we have controlled anarchy in AirAsia. I'd rather have 6,000 brains working for me than just 10,'' he says.

Beyond Selling Tickets
AirAsia has been able to increase ancillary revenues, much beyond Indian low-cost carriers. Revenue coming from hotels (it has its own chain), baggage, food sale and on-board duty-free sales, accounted for 20% of the airline's sales in the last quarter of 2009. AirAsia has a policy of no fuel surcharge on its tickets, but all checked baggage is charged. In India passengers can buy this space for bags of up to 15 kg at Rs. 450, with prices going up with the weight. They can also buy blankets and pillows. A Malaysian Nasi Lemak or a smoky, barbeque chicken meal is priced at Rs. 150. Meals have to be paid for even in the premium economy section of AirAsia X. The premium seat, with a fully flat bed is available at roughly three times the economy ticket.

The AirAsia group made $38 million in ancillary revenue in the quarter ended Sept 2009, earning close to $10 from every passenger apart from the ticket cost. The plan is to increase this to $12 this year. LCCs have triggered an ancillary revenue (merchandising) revolution and a CAPA report expects airlines to earn close to $58 billion from selling seat allocation to concert tickets and mobile credits.

At the back end the airline has looked for new ways to keep ahead. The most recent big move in January was an alliance with rival Australian low-cost carrier (LCC) Jetstar to pool spares and expertise that will result in huge savings for both the airlines. Jetstar is a subsidiary of Australian airline Qantas. LCCs typically operate on their own. This is the first time two growing players in the Asia-Pacific region, one of the fastest-growing markets in the world, are seeing value in working together. "The relationship is a foundation of much bigger things,'' said Alan Joyce, the Qantas managing director, while announcing the partnership in January this year.

For the moment, though, Fernandes knows he has his task cut out in India--and he isn't shying away from it.

Shipping Outlook - costlier

Container shipping may get costlier

The spot rate for container shipping on the Asia-Europe route is likely to rise to US$2000 per TEU in two months as carriers plan to take out more capacity following the Chinese New Year due from the middle of this month, the Hindu Business Line reported.

The present rate is $1763 per TEU. The Asia-Europe route has been defined at the route between the Chinese ports of Shanghai, Ningbo and Shenzhen and the European ports of Antwerp, Rotterdam, Bremerhaven and Hamburg and the spot rate as the charge for transporting a 20-ft container plus all surcharges excluding the terminal handling charges.

At present, carriers are charging 18 surcharges including the peak season surcharges although it is over. Meanwhile, the Shanghai Containerised Freight Index recently surged 7.2 percent as spot rates on Asia-Europe and Asia-US routes went up considerably.

According to Paris-based consultancy Alphaliner, the world's container fleet capacity decreased by 142,000 TEUs between the beginning of January and early February.