Hapag-Lloyd

Heavy port charges in region to be studied, says Hapag-Lloyd executive

PUBLISHED : Wednesday, 18 September, 1996, 12:00am
UPDATED : Wednesday, 18 September, 1996, 12:00am

Shipping lines will be forced to continue with corporate productivity and restructuring measures to survive and are not likely to enjoy prosperity over the next three years, a shipping executive says.


Hapag-Lloyd (Asia)'s managing director Wulf Dehn said while liner shipping had never faced the financial bloodletting of the airlines industry, average profits in container shipping were consistently low.


Over the short and medium terms, container lines would strive to reduce operational costs.


Mr Dehn, who was speaking at the Asia Ports '96 conference organised by the Institute for International Research, said the lines would study whether ports or terminals were charging uncompetitive prices compared with other regional ports.


In the last six years, ports in Japan were the most expensive in Asia on a US dollar per teu basis, with a further 7 per cent cost increase for Hapag-Lloyd when comparing 1990 with 1996.


'This increase, however, is only caused by the rate of earnings related to the US dollar; expressed in yen, the terminal-port cost has slightly gone down,' he said.


Hapag-Lloyd feared that the Japanese freight rates were gradually approaching the average Asean rate level. There was a tendency to bypass Japanese ports for export cargo to save operational costs.


While Hong Kong port-terminal costs at US$130 per teu were nearly half of Japanese port costs in 1990 for Hapag Lloyd, now it was 76 per cent.


'In other words, our Hong Kong terminal operator has chosen a price policy that has increased the cost for us by around 58 per cent over a period of seven years,' Mr Dehn said.


'Bearing in mind that the overall port volume throughput in the period 1990-1995 went simultaneously up by 148 per cent, this reflects clearly the classic market behaviour of a monopolist.' As other port options were coming up on the horizon, Hong Kong terminal operators would have to ask whether the continuation of this price policy was still advisable, he said.


The port-terminal costs of $160 per teu at South Korea's Pusan port were definitely too high for the service it was delivering, Mr Dehn said.


'According to our statistics, we achieved in 1995 a productivity of only 40 and 50 per cent respectively when comparing performances with Singapore and Hong Kong,' he said. Kaohsiung's costs were 30 per cent lower than Hong Kong's.


George Hayashi, chairman of APL Ltd, who also spoke at the conference, said since alliances wanted to capitalise on economies of scale, especially as they engaged in combined marketing programmes, vessel sizes would increase.


While ports were preparing to handle 5,000 to 6,000 teu ships at high production, only two ports - Rotterdam and Singapore - had the water depth, including APL's new terminal at Los Angeles.


The real issue was whether adequate infrastructure could be developed to enable operators to handle the throughput of boxes, he said.