Better ports, shipping strategies needed

By Jessica Anne D. Hermosa, BusinessWorld

Posted at Jan 28 2011 03:01 PM | Updated as of Jan 28 2011 11:02 PM

MANILA, Philippines - Shipping firms face a continued surge in trade flows this year as the Philippines tracks the region’s appetite for goods, but the country will have to upgrade its ports to gain from the growth, industry experts said at a conference on Jan. 27.

Carriers, for their part, will have to pursue more agile strategies like customized services in the face of an oversupply of vessels, speakers said at the start of the 6th Philippine Ports and Shipping Conference on Jan. 27 in Makati City.

"[Cargo volume here grew by] more than the 8% target in 2010. It will grow by another 8%-11% this year...because of business confidence. It’s more of inbound cargo," Philippine Ports Authority (PPA) General Manager Juan C. Sta Ana said at the sidelines of the event.

Already, official figures show that cargo volumes passing through Philippine ports grew by 12.5% to 125.6 million metric tons in the first three quarters of 2010, Transportation and CommunIcations Undersecretary Aristotle B. Batuhan said in his keynote speech.

Representatives of the local units of container shipping giants Maersk Line of Denmark and NYK Line of Japan also cited this uptrend.

Cargo volumes worldwide grew 6.8% last year, with Asia accounting for nearly two-thirds of the flows, NYK-FilJapan Shipping Corp. General Manager Daniel Ventanilla told the conference.

"And the Philippine market continues to be strong. It is driven primarily by imports," Mr. Ventanilla said.

Maersk-Filipinas Inc. Country Manager Sylvia Ding similarly said that "most indicators point to global trade increasing."

This could augur well for shipping firms here if the Philippines upgrades its ports to be able to handle the surge, Mr. Ventanilla said.

Until then, the Philippines remains a "feeder port" that can handle only small vessels and is thus bested by bigger ports in the region where carrier don’t have to pay transhipment fees, he said.

"I hope [President Benigno S. C. Aquino III] continues to be strong and promote public-private partnerships and welcome more investors here," Mr. Ventanilla said.

The government, meanwhile, conceded that several Philippine ports, particularly the one in Manila, are choking up.

"We need to increase port capacity, especially the Manila gateways," Hector E. Miole, PPA’s head for corporate affairs, told BusinessWorld on the sidelines.

In order to cope, the state agency has submitted a list of ports up for privatization and development, with at least one "most likely" to be auctioned off this year, Mr. Miole said.

Ports in Davao, Zamboanga, General Santos, Cagayan de Oro, and Iloilo are being eyed for privatization, Mr. Batuhan said, which in turn drew the interest of Harbour Centre Port Holdings, Inc. (HCPHI).

"We haven’t reviewed [the projects], but we want to be in the forefront of that," HCPHI CEO Michael L. Romero told reporters.

Shipping firms, for their part, will have to apply more flexible strategies to get more clients on board, conference speakers said.

These are needed as "short-term disruptions in supply and demand" are still expected despite the projected uptrend, Ms. Ding said.

Also, such strategies are critical with some 230 new vessels entering the industry this year and driving capacity up by roughly a tenth, Mr. Ventanilla said. The United Nations Commission on Trade and Development had projected that the recovery in global trade flows this year will be insufficient to fully exploit the oversupply of vessels around the world.

One sorely needed tack is "differentiated pricing," whereby customers can customize the services they want just as the airline industry has been doing, said Rene Bendt, director of shipping industry technology provider ARL Consulting B.V.

"Airlines are breaking up the palette of services. We in container transport seem to be struggling [in contrast]," Mr. Bendt said.