Sri Lanka port opportunities seen from recession

Aug 02, 2009, www.lankabusinessonline.com

The recession that triggered a steep slump in shipping may throw up opportunities for Sri Lanka's Colombo port, a senior official of a company that has bid for a terminal in the harbour said.

Dr Parakrama Dissanayake, chairman, Aitken Spence Maritime, part of the Aitken Spence conglomerate, said the recession was causing huge losses for shipping lines and sharply reduced port cargo volumes.

These may lead to consolidation among shipping lines which may benefit Colombo port as lines look to call at fewer transhipment ports, he said.

Many ships were plying half empty and freight rates had plunged because of the economic slump worsened by a glut of new ships ordered during the boom years, Dissanayake told a forum on logistics.

It was organised by the Sri Lanka branch of the Chartered Institute of Logistics & Transport.

There was concern about the flood of new ships, many much bigger than older vessels, that had caused a serious imbalance between demand and supply, Dissanayake said.

"Despite the recession the growth in the fleet of container ships has hit double digits," he said.

"The top carriers have ordered mega-vessels of 12,000 TEUs (twenty-foot equivalent units or containers) with a 16-metre draft," Dissanayake said.

"So Colombo port must build the new port - if not it can't accommodate the new vessels."

Construction work is underway on a new deep-draft port next to the existing harbour which is nearing its capacity.

The Aitken Spence group has partnered with China Merchant Holdings, a big Chinese port operator, to make the sole bid to build and operate the first container terminal in the new port.

Dissanayake said the crisis in shipping might lead to bankruptcies and mergers and acquisitions, which might actually throw up opportunities for Colombo port.

"Large ships are calling fewer ports," he said.

"Mergers tend to benefit some transhipment hubs. So Colombo may have an opportunity arising from recession because shipping lines are looking at focusing on fewer transhipment ports."

Colombo is south Asia's transhipment hub, where smaller vessels feed cargo from Indian ports to be transferred to bigger ships for the onward voyage to markets in Europe and North America.

Dissanayake also warned that recession could also have a negative impact on ports as losses made by shipping lines might force them to demand lower tariffs.

"Shipping lines are expecting large losses. That means port will come under pressure to reduce charges."