Price war on regional transshipment looms

Price war on regional transshipment looms

KUALA LUMPUR (AFP): The decision by giant container line
Maersk Sealand to shift its regional transshipment hub to
Malaysia has dealt a blow to Singapore's port and may lead to a
price war, analysts said Monday.

Maersk Sealand announced Friday it would move to the Port of
Tanjung Pelepas (PTP) in Malaysia's southern state of Johor, 45
kilometers (27 miles) north of Singapore's port -- one of the
largest in the world.

The Copenhagen-based company said the move followed its
acquisition of a 30 percent stake in PTP, allowing it to operate
a terminal at the port. It plans to shift by December, when six
new berths will be in operation.

"The move to PTP represents a quantum leap for Maersk Sealand
to master its own destiny and yet another step to remain in the
forefront of the industry," said its Asia chief executive
Flemming Ipsen in a statement.

PTP has described the deal as a "dramatic move that changes
the face of the entire transshipment business" in the region.

"The deal will also mean that Malaysia will finally move to
the forefront of transshipment business in Southeast Asia after
having had to play second fiddle to Singapore for the last three
decades," it said.

PTP said in a statement it would be guaranteed an annual
volume of two million TEUs (twenty-foot-equivalent-units) from
Maersk Sealand from 2001.

Analysts said the decision was a big boost for Malaysia but
may hurt the Port of Singapore Authority (PSA) Corp., which is
due to list on the stock exchange later this year.

"It is a big scoop for Malaysia to actually drag away such a
major client from PSA," said Sani Hamid, economist with
Singapore-based Standard and Poors' MMS.

Sani said PTP's offer of a stake to Maersk Sealand was the
"pull factor" behind the shift, as it allowed the shipping giant
to run its own show at one of the terminals.

"PTP's offer probably fell in line with Maerk's long-term
goal. But it is too early in the game to say if others will
follow," he said.

Sani said it would hurt PSA over the short-term but noted that
Singapore authorities had coped with such "disappointments" in
the past.

"It has happened before and I expect PSA to innovate and offer
better products and services to be in a better competitive
position to make up for it," he said.

"If there is a threat of losing more customers, it may start a
price war. It all depends on how PSA views the shift."

Janice Chua, shipping analyst at Vickers Ballas in Singapore,
said it was "bad news" for Singapore's port industry which
already faces fierce competition from Hong Kong.

Singapore is the world's second busiest container port after
Hong Kong. It handled some 15.9 million TEUs last year, about
nine percent of the world's total, with the majority of its
volume from transshipment.

Chua cited cost as the main reason behind the shift, as PTP
was still new and lags Singapore port in infrastructure and
technology.

The Star newspaper quoted industry sources as saying Monday
that Maersk Sealand was dissatisfied with PSA over costs and
control.

It said PSA had been "inflexible" over port charges and Maersk
Sealand had made clear its preference for dedicated or leased
facilities, an option not available in Singapore.