Sea of indecision strikes capacity enhancement

Colombo Port

By Eng. D.GODAGE

(former Chief Engineer(Ports),
Managing Director SLPA and
Project Director – Colombo South Harbour Development Project
 
The shipping industry needs proper decisions as regards the functioning of the Port of Colombo. Those in the shipping industry, and others who wish the success of the Colombo Port have expressed concern over the delay in the commencement of operation of the East Container Terminal (ECT) of Colombo Port for nearly five years. The Chairman of Ceylon Association of Shipping Agents (CASA) has warned that Colombo hub status is sinking. He has emphasised the need to operationalise the East Container Terminal (ECT) of Colombo’s new South Harbour.

In February this year, a delegation of the German Industry and Commerce, in Colombo, said that Colombo Port needed further expansion to handle more container traffic.

The ECT issue was brought to public attention prior to the last general election, when three container handling cranes (costing over US$ 25 million) remained on the ship that had brought them to the port, as instructions had not been given for unloading them while Trade Union action by port employees against that inaction paralysed the port.

The cranes were unloaded onto the partly built ECT after discussions with the trade unions by the Prime Minister, prior to the parliamentary elections. The Prime Minister has appointed a committee to study and report. That report had been submitted to the Prime Minister.

When the construction of the ECT is completed, it will enhance Colombo container handling capacity by 2.4 million TEUs (container units). Current performance has been around 7.2 million TEUs. Unfortunately, due to failure of the previous government to take any pragmatic action over four years, under three ministers along the way, the partly built ECT idled, causing a massive financial loss to the Port. It is important to note that a minimum of two to three years will be needed to operationalise ECT from the date the green light is given to commence. Funds are needed to the tune of US$ 400 million.

The Colombo Port came into prominence as a result of container handling capacity enhancements and related infrastructure developments over the past four decades. Global ranking of ports is based on the annual container volumes handled by each port. It is known that Colombo ranked 138th position in 1980 and rose to 21st in 1997, after four berths of Jaya Container Terminal (JCT) was operational that resulted in handling 1.687 million TEUs. Colombo handled 7.05 million TEUs in all terminals in 2018 thereby reaching 24th global ranking, according to the Lloyds List. Volume handled in 2019 is recorded as 7.228 million TEUs. Though Corona pandemic slowed down the growth, yet 7 million TEUs at the end of 2020 is a possibility.

The handling volume growth trajectory has apparently not been affected much this year, and the container capacity expansion is urgent and critical. The Colombo South Harbor Business Plan 2005 envisaged that the whole ECT had to be operational by 2020 according to its traffic forecast. The National Port Master Plan, presented by the Ports Authority funded by the Asian Development Bank (ADB) in March 2019, stated that capacity shortage had started from 2020. All known studies and expert opinion indicate that the Colombo Port is running out of container handling capacity, and prompt action to expand capacity is essential and critical.

Geographic location advantage vs competing ports

The distinct geographic advantage of the country provides the shortest and least cost deviation from the international navigation lanes for all main shipping lines. But that alone cannot be relied upon to remain as a leading hub; other factors like the timely enhancement of capacity, availability of modern equipment, efficient operation, elimination of port congestion, and ensuring shortest waiting time for ships, and competitive commercial tariff with simplified clearing process are also equally essential.

The delay in expanding the Colombo container handling capacity as indicated in plans is an incentive to tho competing ports in the region, posing a potential threat to Colombo. Newly developing Vizhinjam International Deepwater Multipurpose Seaport in Kerala, funded by the Adani Group, is reported to be coming into operation from December 2020 and has a capacity of 4 million TEUs. They say the Colombo Port will face stiffer competition thereafter and experience a loss in its share of cargo from India, which would set-in an economic setback for the country.

Past experience with delayed expansion

The Ports Authority developed the first two berths at the Jaya Container Terminal (JCT) and reached a prominent position in 1988, but the delay in further expansion over nearly five years caused volume stagnation near 0.6 million TEUs. When the next two berths were completed by 1997, the container volume rose to 1.7 million TEUs, near a 3-fold increase. Capacity addition did not happen for the next 5 years and performance stagnated at nearly 1.7 million TEUs. Container traffic was moving out to other ports during this delay. New Omani port of Salalah opened and the SeaLand line moved there from Colombo. Colombo was losing traffic gradually to Singapore, Dubai and Salalah. Lloyds List reported in 1998 that All is not well with the Port of Colombo and fights to retain container traffic.

South Asia Gateway Terminals (SAGT) came in as a private operator from 2002, and the container volume in Colombo raised to nearly 3.5 million TEUs, but stagnated again without any signs of capacity enhancement. Cochin Port Trust was developing Vallarpadam International Container Terminal, and announced that Colombo transshipment hub has to run for its money. According to reports they were offering discounts and incentives to lure international shipping lines.

The Ports Authority embarked on the new South Harbor breakwater in 2008 completing it by 2012. In the meantime the first container terminal in this South Harbor came into operation as Colombo International Container Terminals (CICT), thereby adding capacity and reaching actual performance at 7.05 million TEUs in 2018 and 7.228 million TEUs in 2019.

Again the Colombo Port is running out of container capacity, as there is no expansion after CICT. In spite of the Corona pandemic, temporarily affecting cargo throughput, it appears that 2020 volume would reach 7 million TEUs and a rapid rise is possible. Keeping in mind the lead time needed for capacity addition as stated above, and to eliminate any risk of losing traffic, timely action is critical.

Action Required now

Those in the shipping industry and the Ports Authority know that enhancing the container handling capacity addition in Colombo is long overdue. It will take two to three years for the ECT to help achieve this target after the green light is given. However, the ECT section which has already been constructed and equipped with three container handling cranes can be operationalised soon. Due to the delay in ECT operation, the Colombo Port faces the danger of losing cargo volumes and global position in terms of connectivity. Colombo should not lose its transshipment hub status in the region due to delays in its expansion. Prompt action is therefore essential for operationalisation of the ECT as the second deep water container terminal.