Economist: With advances in shipping, ECRL is no

‘game changer’
Robin Augustin | August 18, 2017

More shipping companies are opting for mammoth container vessels

which usually dock at main ports in a region, and Singapore’s Tuas port
will serve their needs more efficiently in Asean, says Hoo Ke Ping.

PETALING JAYA: The East Coast Rail Link (ECRL) may not be the game
changer it is touted to be as the growing use of mammoth container ships for
maritime trade is changing how shipping companies operate, says a veteran
economist.
Speaking to FMT, Hoo Ke Ping said more shipping companies, particularly
the five biggest container lines which controlled over 60% of the global
market, were shifting towards using larger container ships.
“The big container lines are moving towards using massive ships with
capacities of 18,000 TEU which are much bigger than ships with capacities of
10,000 TEU.”
TEU, which is short for twenty-foot equivalent unit, is the most common
international standard for describing a ship’s cargo-carrying capacity.
In a recent Bloomberg report, Seoul-based Shinyoung Securities analyst Um
Kyung-a said the shipping industry was becoming more dominated by top
players with big ships.
She said the use of such large ships allowed companies to deploy fewer
vessels and move more cargo in a single journey.
She estimated that there were 58 carriers worldwide which could carry more
than 18,000 containers, and that this number would likely double in just a few
years.

Mammoth ships will choose Singapore

Hoo said mammoth vessels like those with a 18,000 TEU capacity would only
dock at main ports on their journey due to their size, and wouldn’t stop at
different ports like smaller ships would.
“It’s more economically viable for the mammoth ships plying the Malacca
Straits to dock at one port rather than a few.
“In this case, that port is likely to be Singapore’s Tuas port,” he said, referring
to the mega port which is currently being developed.
The Tuas mega port will eventually be able to handle 65 million TEU per year.
“So a ship which has a 18,000 TEU capacity is likely to end up in Tuas and
unlikely to stop at Port Klang.
“What they will do is dock at Tuas, and from there, feeder ships will take the
cargo to various ports in the region, effectively serving over 600 million people
in the region.”
This, Hoo said, was because of the size and infrastructure at Tuas port, and
the fact that Singapore was known for its efficiency.
He added, this meant container ships could dock, unload cargo and move the
cargo out of the port faster.
“Even though Port Klang is one of the largest ports in the world, it and other
ports in Thailand and Indonesia will be far behind the Tuas port.”

Hoo added that the estimated impact of the RM55 billion ECRL on the Tuas
Port would be limited.
The ECRL will create a land bridge between the Kuantan port on Malaysia’s
east coast and Port Klang, which is located along the Malacca Straits.
Some had previously labelled it as a “game changer” which could threaten
Singapore, as it would see ships from China bypassing the city-state to
access the Malacca Straits.
But Hoo said Chinese shipping companies, which included Cosco Shipping
Holdings, Asia’s biggest container line and the smaller Orient Overseas
International of Hong Kong, only had a global market share of 11.7%.
“Compared with the other players, 11.7% is peanuts. Maersk controls 16.7%,
Mediterranean Shipping controls 14.5%, while CMA CGM controls 11.6%, and
the various other players make up 38.3% of the market share.
“So to begin with, the Chinese shipping companies don’t really represent big
business for Singapore.
“And with the trend of the use of mammoth ships, Tuas will remain as the
main port in the region because the other shipping companies will naturally go
to Tuas as it would make more economic sense.”

China persisting with ECRL

Hoo said it was highly unlikely that China was not aware of the change in
shipping trends and that this would likely mean the ECRL wouldn’t be the
“game changer” many think it would be.
“But I don’t believe China will fund the construction of something which
doesn’t serve its interests.
“So, in the ECRL, I don’t believe China is motivated by economic purposes,
but rather geopolitical interests.”
Recently, PKR’s Wong Chen raised concerns over China’s motives in pushing
through with the ECRL, questioning the commercial feasibility of the project in
the wake of China’s capital controls.
He said if a project undertaken by a Chinese state-owned enterprise wasn’t
commercially feasible, like the ECRL, then China must have other reasons to
move forward with the project.
The Kelana Jaya MP said such reasons could include regional security
interests.