Major Container Shipping Lines of Singapore and Port Klang - Research Paper Example

Singapore and Port Klang have become in recent years highly competitive, with respect to the container trade, within their region. Explain what is meant by competitive advantage and discuss the nature of competition between regional ports. Using the ports of Singapore and Port Klang as examples evaluate the role of major container shipping lines and how they have influenced competition between these two ports. Advantages and meaning of regional port competition Port competition is self-explanatory, as it is a competition between different ports and the port companies themselves. This is known as intra-port or inter-port competition. This creates competition between multiple division operations within the port. This competition is defined as different ports sharing the same shore in the same vicinity. Often, intra-port competition is beneficial to everyone involved, most often those being the users of the port and the governmental body of the region. This kind of competition is dependent on the vessel volumes, which may or may not be enough to allow more than one company to run their business in an optimal fashion. The transhipment container trade concerns each region where ports are striving to realize higher supply and demand. In the South Asian region, Singapore and Klang ports are competing with Tan Jung ports and the Port of Rotterdam is in competition with Antwerp and Hamburg. The competition is fierce, but there are no interchangeable ports and none of them functions on a zero cost effective manner. There are three different categories of port competition. Those are inter-port, intra-port and intra-terminal. Inter-port is when two ports in the same or different parts of the world contending with each other for the same vessel. Inter-port competition is dependent on the size of the associated ports and the areas in which they operate. Intra-terminal competition includes two or more companies that are battling within the same terminal to increase their space and/or operational activities over another company. Advantages of regional port competition Some of the advantages of regional port competition are: Each company that is in business in the same port or vicinity are striving to keep a stronghold in their port in order to increase the supply and demand Regional port competition increases intra-terminal competition, resulting in congestion and the addition of more transportation needed into the vicinity The vicinity in which the port operates often have higher quality operations due to a large amount of entry and exit Portal competition causes fluctuations in costs, thus often causing shipping companies to reduce their costs of transportation to increase customer base and contention Competition between Singapore and Klang Singapore and Klang ports sit on the Strait of Malacca, which is a very busy line of traffic. This allows container terminals to operate more efficiently by making the most out of each opportunity in the trade of containers. This competition is most often between massive economic regions such as Europe, East Asia and North America. In 2004, both Klang and Singapore ports had calls from 24.5 million TEU’s of ASC. This showed a growth rate of 17.3% per annum since 1999. Of these, Singapore received 47.8% of that total, while dual calls to Singapore and Klang accounted for 28% of the total. Therefore, ASC calling to Singapore port accounted for 83.8% of the market, with the comparative numbers being 99.5%. This shows how Klang port has increased its marketability and growth rates. Since 1999, Klang and Tan Jung Pelepas have become more visible in comparison to Singapore. Singapore started losing calls on their transhipment containers, as larger shipping companies like China Shipping and Maersk Sealand had moved to Klang port. This is due to Klang’s lower costs at port. For instance, in 1999, 58.4% of ASC by Maersk Sealand called both Klang and Singapore ports. This transfer created a higher number of calls to Klang port by ASC. Singapore, however, is still the dominant company in the region in terms of its market share as determined by ASC. Singapore has been affected by the progress made by Klang port. Both are striving to increase their performances at a cumulative level, which will only assist them in the dynamics of competition in trade routes of the transhipment container market. Slot capacity There are six capacities of slots in the Singapore and Klang ports. They are: Those that called both ports Those that made comparable calls to Singapore and Klang Those that made comparable calls to Singapore Those that made comparable calls to Klang Those that called Singapore solely Those that called Klang solely The changes in each of these capacities explain the aim, development and attendance of competition for the transhipment containers between the two ports. For instance, by improving the market share for those that called Klang solely is a strong indication of Klang’s competitiveness. On the other hand, by improving the market share for those that called both Klang and Singapore would be dependent on the dynamics of the trade route in question. Increasing comparable calls two both ports may mean increased competitiveness for the port with a low market share. Oppositely, this call increase could reduce the competitiveness of the port that began with a higher market share. Singapore and Klang ports have dominated the competitive market in Southeast Asia for years. Because of this, both are trying to attract more shipping giants, which would be operated at their respective terminal. Each port’s development has attracted other shippers, namely feeder operators. Klang Klang port is a national centre with suitability to any region. Because of the competition in the area, the Port Klang Authority implemented a port infrastructure which will increase its operations efficiency. As a leading port in Malaysia, Klang has made changes in their operations and operators like: Employ highly trained and motivated people to exceed the growing demands Create and employ a highly organized environment in which to provide customers with an edge in the global market Create and employ supply driven facilities and services in order to gain a larger regional foothold. These implemented changes were highly successful, thus increasing the negative impact to Singapore’s business in port. They increased Klang’s business by 45% in 2004, causing Singapore to lose just below 25% of their operations. Their successes also encouraged Maersk Sealand and China Shipping to move their hubs from Singapore to Klang, thusly gaining Klang East-West and Intra-Asia markets. Singapore As mentioned prior, Singapore lost four transhipment companies to Klang, reducing their annualized slot capacity. Singapore then lost the slot for the Mediterranean-Far East route by 40.7%. They also noticed a decrease in their slot capacity in Far East Africa, Transpacific and Europe-Far East routes. The competitiveness and lower costs at Klang port caused Singapore to reduce their transhipment of containers to other ports in the world, such as Southeast Asia-Indian Subcontinent and Southeast Asia-Australasia, which are the second and third main sources of feeder containers, respectively. Klang port primarily focused on transhipment container operations, reducing the trade in Singapore to less than 25% of exclusive calls per year. Klang and Singapore Ports’ roles of transhipment container lines International transhipment container lines have integrated with other services and suppliers liked terminal operators, port authorities, chartered vessel operators, trucking and logistics companies and freight forwarders in order to make their operational actions more efficient. This allows them to take more control of their business operations in port. They also can create benefits and value to their business, which also benefits the location of the port, its region and supply chains. There are plethoras of shipping lines, which operate transhipment containers for a wide variety of customers. The most widely known are Maersk Sealand, Mediterranean Shipping Company and Hapag-Lloyd. Transhipment container roles in port Several hundred transhipment lines from Southeast Asia expand to the rest of the world. Approximately 80% of its total cargo is shipped via container. Each of the shipping lines available in Singapore and Klang all offer a wide range of services, but they all share the common thread of the transportation of containers around the globe. The shipping lines available provide efficient, cost effective and high quality services to their customers. The world’s leader in transhipment of containers is Maersk Sealand. They currently have a 15% share of the container market and they continually expand their fleet by about 8% per annum to keep up the economic growth of each port. As a shipping giant, Maersk Sealand is an active participant in the Maritime Singapore Green Initiative, shown through their commitment to using only low-sulphur diesel. In 2006, they also advocated the reduction of sulphur beyond the current regulation as well as the advocation of the creation of a level playing field among ports, shipping lines, authorities and customers. Their primary goal is to achieve zero sulphur emissions and cutting their carbon dioxide emissions by at least 25% by the year 2020. To further seal their commitment to the environment, Maersk Sealand signed the Maritime Singapore Green Pledge in April 2011. This pledge is to commit to protect the Singaporean environment using cleaner and more fuel-efficient services. At Klang port, Hapag-Lloyd is the shipping leader. Their contribution to the development of the port comes in the shape of business transactions and investments, such as the acquiring, chartering and renting of containers and vessels that correspond to their respective investment. Hapag-Lloyd also keeps a good eye on the productivity and efficiency of Klang port in order to protect the environment and the facilities of other terminals around the world. Conclusion Singapore adjusted to competition by dedicating certain facilities for particular shipping lines. The key to Singapore coming out on top of the transhipment war is dependent on their ability to bring back old customers that they have lost to other terminals, cement their relationship with current customers and ensure that they have the capacity to accommodate the transhipment container vessels that are continually growing larger. Klang has been able to attract some of the world’s largest transhipment container carriers away from Singapore and Tan Jung Pelepas. In order for them to continue on this path, Klang port needs to create and employ a viable and independent feeder network and to continue attracting other new transhipment lines to their port. References International Conference on Logistics, Shipping and Port Management, 2007. Competition for Transhipment Containers by Major Ports in Southeast Asia: Slot Capacity Analysis. [online] Available at: [Accessed 15 August, 2011]. The Logistics Institute-Asia Pacific and School of Industrial Systems Engineering, 2002. Competition Between the Ports of Singapore and Malaysia. [online]. Available at: [Accessed 15 August, 2011]. Gateway: A Publication of Port Klang Authority, 2011. Crossing Trade Boundaries. [online]. Available at: [Accessed 15 August, 2011]. BSR Sustainability Trends in the Container Shipping Industry, 2010. A Future Trends Research Summary. [online]. Available at: [Accessed 15 August, 2011]. Competition for Transhipment Containers by Major Ports in Southeast Asia: Slot Capacity Analysis, 2006. [online]. Available at: [Accessed 15 August, 2011]. Container Port Competition: A Southeast Asia Case Study, n.d. [online] Available at: [Accessed 15 August, 2011]. Promoting Efficient and Competitive Intra-ASEAN Shipping Services, 2005. Singapore County Report. [online]. Available at: [Accessed 15 August, 2011]. Container Transportation, 2011. Maritime Container Terminal. [online]. Available at: [Accessed 15 August, 2011]. Read More