Port on the Rise

Malaysia

Economic News

22 Jul 2010
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The southern port of Tanjung Pelepas (PTP) can anticipate a windfall from the recently announced projects in the South Johor Economic Region, and has entered a bid to move into port management abroad.



Following news that PTP had been named Maritime Asia Container Terminal of the year by Lloyd's List, local media reported this week that the port will likely win a management stake in a planned seaport in Saudi Arabia's Jizan Economic City. MMC, which owns 70% of PTP, has just received a US$30bn joint venture contract to develop the new economic city.



In addition, the Malaysian government has recently outlined its plans for a RM15bn (US$4.1bn) investment in Johor. Many observers expect the 2500-sw km South Johor Economic Region to transform the state into a world-class business hub.



One plan, the South Johor Industrial Logistics Cluster, will group together manufacturing facilities for high value-added technical manufacturing, and leverage on the proximity to PTP, Johor Port and the local airport.



PTP has long counted on the same geographical advantage as the other major port in its vicinity - Singapore (PSA) - while capitalising on a lower cost environment and offering substantial incentives to attract services away from its rival.



Now the port is hoping to increase its capacity, as its Phase 2 expansion moves forward. Completion of two additional berths by the end of this year will see a greater handling capacity, as well as the addition of new high performance quay cranes to maximise throughput.



The port's number of refrigerated container electrical (reefer) points will increase to 3000, making it one of the largest reefer facilities in the region. Its overall handling capacity of containerised traffic will rise to 8m twenty-foot equivalent units (TEUs) annually.



Many ports in Asia are facing congestion and capacity constraints as well as the introduction of bigger vessels with deeper draft requirements. PTP, with a draft of 15 metres and 600 metre turning basin, is one of the few ports that can accommodate the largest container vessels currently in the world today. Emma Maersk, the world's largest container ship, called at PTP in October.



The port has seen rapid growth since its creation in 1999. In 2005, PTP handled 4.2m twenty-foot equivalent units (TEUs), a tenfold increase after only five years of operations. PTP has maintained its position as the country's busiest container port in the first nine months of 2006, with the total container throughput reaching 3.46m TEUs. PTP aims to handle close to 5m TEUs by the end of this year.



The port's growth has largely been driven by the new business brought from last year's successful merger of shipping firms Maersk Line and P&O Nedlloyd, as well as the continuous growth by Evergreen Marine Corp.



PTP's neighbouring 1000-acres of free zone land has attracted big firms such as Singapore's Flextronics and German carmaker BMW. Currently only 400 acres of developed land has been taken.



The ability of the free zone and the South Johor Economic Region to generate more indigenous cargo will be one of the key factors creating long-term growth in volumes at PTP, and increase its attractiveness to new main line operators (MLOs) for direct calls.



But the incentives used to lure the two large MLOs, Maersk Sealand and Evergreen, may no longer be available. One industry insider told OBG that "Both companies received massive incentive packages. Maersk Sealand owns a 30% stake, and enjoys a management contract to help run the port. What is good for one company could be bad for others. Management by Maersk might help make the port a more efficient operator, but it can also repel other MLOs from going there."

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