Singapore must boost productivity, lower costs

The Singapore port and shipping industry has been locked in turbulent waters for most of the downturn, and should be careful to keep a keen eye on costs as the world slowly emerges from the 2008/2009 slump.

Players in the ocean freight industry have not had it easy, with Singapore-based container shipping, logistics and terminals company Neptune Orient Lines (NOL) reporting massive losses amounting to US$245 million in the first quarter of 2009, the height of the recession. Its container shipping arm, APL, transported 481,000 FEUs in the same quarter, 27 percent less than the same quarter a year earlier. Revenues at APL fell 34 percent to $241 million.

Now that the global economy is improving, the demand for ocean freight has started to head north. NOL managed to narrow its losses by 60 percent to $98 million in the first quarter of 2010, while APL revenue was up 39 percent to $1.8 billion.

"The result, while reflecting improvement, still is not satisfactory," said NOL Group president and chief executive officer Ronald Widdows. "But the increase in volume and revenue provides a foundation for turning around our performance as the global economy recovers and we begin to see the effects of rate and asset utilisation improvement, particularly in the transpacific trade."

Singapore's prime location and it's efficient port operations have helped cushion the effects of the downturn, said APL's South Asia president, Goh Teik Poh.

"In addition to trade growth, what is contributing to Singapore's increased container volumes would be PSA's efficiency as a port operator, and the fact that the regional ports in Southeast Asia continue to languish behind in terms of port productivity. It makes sense to relay bigger mainline ships onto smaller ones here," he said.

Official figures from the Ministry of Trade and Industry have put first quarter 2010 throughput as having expanded 15 percent compared to a 0.6 percent decline in the previous quarter. Singapore, despite the decline, managed to retain its position as the busiest container port in the world in 2009 and top position for bunker sales and vessel arrival tonnage. Bunker sales and vessel arrival tonnage bucked the trend and grew by 4.2 percent and 10.1 percent respectively, a Maritime and Port Authority of Singapore (MPA) spokesperson told Cargonews Asia.

The container shipping business seems to be headed back to health, but volumes are expected to rise only six to eight percent by the end of this year, said shipping consultants Drewry Maritime.

Divay Goel, head of Asia operations at Drewry Maritime Services Asia, said: "If the contagion spreads to the bigger economies, there would be a sentimental reaction, like we saw in 2008's last quarter and 2009 - a slowdown in credit which affects trade because it would become difficult to get letters of credit."

Shipping companies and ports would be best advised to focus on bringing talent up to scratch and keeping a keen eye on costs, said International Association of Ports and Harbours (IAPH) president and Kenya Ports Authority managing director Gichiri Ndua. "Ports should re-engineer operations with a view to raising productivity while at the same time containing their costs," he said.

 
MPA agreed with the notion and to this end has introduced various initiatives to help companies lower business costs and alleviate short-term difficulties including a port due concession of up to 20 percent. The association said it is also in partnership with the industry and unions to invest in talent development in the sector. It launched the Graduate Attachment Programme to provide fresh graduates with on-the-job training opportunities in maritime companies, a move it believes will help build a pool of ready talent that companies can tap into when the economy recovers.

"We hope our focus on partnership and people will continue to foster a unique environment that is both pro-business and pro-workers, and one which will help sustain the growth of maritime Singapore," the MPA spokesperson said.

In the meantime, shipping rates are expected to strengthen. Contract freight rates for Asia-Europe and transpacific routes have risen up to 25 percent since the start of the year.

"At this point, rates are likely to strengthen because we are at a peak and there is a spoke in demand for space, couple with a shortage of space, particularly in some sectors. The equipment shortage is also leading to increased rates, more than anything else," Goh said.

Intra-Asia rates have gained approximately 12 percent and are generally expected to remain steady due to fewer macro-economic risks.
(Source:www.cargonewsasia.com)