An influential shipping industry body recently said delays in the construction and operations of the East Container Terminal (ECT) of the Colombo Port may result in investors and container volumes shifting to regional ports.
“Delay in the construction and operation of the Eat Container Terminal may result existing bidders dropping their decision to invest in Sri Lanka and to invest in other regional ports. This will result in container volumes shifting to regional ports along with the consortium volumes,” Ceylon Association of Shipping Agents (CASA) said in a statement.
CASA also noted that the sudden changing of terms and conditions of the bidding process after the bids were closed will drive away investors.
“Investors will think twice for future SLPA (Sri Lanka Ports Authority)/government driven projects in the port sector. This will severely affect the confidence of investors in investing in Sri Lanka,” CASA statement said.
It has been three months since the closing of the bids for submitting expression of interests (EOIs) for ECT and no decision has still been taken by the Cabinet Appointed Negotiating Committee (CANC) and the government.
“CASA reliably understands that the government is trying to introduce new conditions after the EOI bids have been closed, which totally contradicts the initial conditions. These new conditions will eliminate all or most of the bidders, which defeats the transparency and good governance processes.” CASA statement noted.
The industry body stressed that if Sri Lanka is serious about maintaining its transshipment shipping hub status and expanding its position to be the regional maritime hub, it’s paramount to expedite ECT project in a transparent manner.
While highlighting the future capacity issues that could soon be experienced by the Colombo Port, CASA said that unless swift actions were taken, the traffic would be attracted by new regional ports who would offer discounted prices.
“Development of regional ports with modern facilities will create major competition for the Port of Colombo in that these ports are going to attract vessels to call directly there. This will affect the transshipment volumes at the Port of Colombo as well as affect vessel calls at Colombo.
“New regional ports will offer early bird/special discounts to attract volumes. Once volumes moved from Colombo to regional ports it is very difficult to bring back the same as lines would enter into long term partnerships with respective terminals of regional ports,” CASA noted.
The forecast for the container volume throughput at the Colombo port for 2016 is approximately 5.6 million TEUs. The total capacity of the port is approximately 7.2 million TEUs. According to CASA the signs of the capacity tightening are already starting to show as seen in the daily operational issues of the Colombo Port.
The SLPA and South Asia Gateway Terminal (SAGT) have draft limitations and are only capable of handling vessels having drafts which are less than14.25 metres. Colombo Port has only one deep draft terminal namely Colombo International Container Terminal (CICT) with a depth of 18 metres and capacity of 2.4 million TEUs. The CICT’s berth occupancy rate is approximately 65 percent (weekly) and it will further increase with the arrival of the ultra large vessels after April 2017.
Colombo Port deep draft terminal is unable to berth three 400 metre vessels, if 3 vessels arrive on the same day as their berth length is 1200 metres. This is a huge negative factor for major international shipping lines when considering if it is to move services to Colombo and considering using Colombo as a transshipment hub. The daily operating cost of an ultra large vessel is over US$ 50,000 and keeping vessels waiting for a berth is not an attractive option for shipping lines.