Kaohsiung’s loss Xiamen’s gain?

KaohsiungÆs loss XiamenÆs gain? APM Terminals to leave Taiwanese port in May. Will nearby mainland Chinese port of Xiamen become a true rival?

By Eric Johnson

      In 1994, the A.P. Moller – Maersk Group won a bid to operate a container terminal at the Port of Kaohsiung in Taiwan.
      At the time, Kaohsiung was one of the world's busiest ports and China had yet to become a container cargo powerhouse. But some 16 years later, Maersk will soon exit Kaohsiung, from a terminal operations perspective.
      APM Terminals, Maersk's terminal operating arm, said in early February it would hand over the lease for its last terminal in Kaohsiung to Hanjin Shipping's terminal operating subsidiary, Hanjin Pacific, as of May.
      It marks a relatively quick escape from Kaohsiung for Maersk, which until mid-2008 retained a sizable presence there. In October 2008, APM Terminals decided against renewing the lease at its other facility in the Taiwanese port.
      From the outside looking in, it seems as though APM Terminals is focusing its resources on the Port of Xiamen, which lies directly across the Taiwan Strait from Kaohsiung. And for good reason. While Kaohsiung has seen its cargo volume steadily decrease since the heady days of the 1990s, Xiamen's volume is on the rise.
      Xiamen's volume has doubled since 2003, even taking into account a 7 percent drop in 2009 to 4.7 million TEUs. Despite the drop, Xiamen moved into the world's top 20 busiest container ports last year, while Kaohsiung has fallen to 13th, with 8.6 million TEUs.
      Xiamen's and Kaohsiung's fall have everything to do with China's ability to more cheaply manufacture goods. Shippers relocate to where costs go down, and carriers follow.
      It was in 2004 that Maersk invested in Xiamen ' it has a 50 percent stake in its terminal there ' and as far back as 2007, Maersk Line seemed to be reducing its dependence on Kaohsiung.
      Huang Kuo Ying, deputy director general of the Kaohsiung Harbor Bureau, told Reuters that year Maersk's volume had already slipped in 2007 as it migrated some volume over to Xiamen.
      APM Terminals told American Shipper this February its departure from Kaohsiung had been in the works for a while and there was 'no connection' between leaving Kaohsiung and focusing on Xiamen.
      'The Kaohsiung lease was ending in March and we have been in dialogue for a year with the Kaohsiung Harbor Bureau, who was looking to better align their terminal locations,' said APM Terminals spokesman Tom Boyd.
      When the lease transfer to Hanjin was announced, Martin Gaard Christiansen, APM Terminals' Asia Pacific region chief executive, said, 'For APM Terminals this move is a clear result of the more proactive way we currently are looking at optimizing our global terminal network. The facility in Kaohsiung has served us well and we have been pleased with the support of the Kaohsiung Harbor Bureau throughout our association. Market conditions have changed and we have decided business-wise it makes sense to transfer our Kaohsiung location to Hanjin.'
      Indeed, Kaohsiung has been on a drive to consolidate its terminals into larger facilities ' somewhat akin to what the Port of Long Beach has been doing ' so that they are more appealing to the world's largest terminal operators and container lines.
      As for Maersk, container division Maersk Line continues to call at Kaohsiung, but barely. According to American Shipper research affiliate ComPair Data (www.ComPairData.com), only one of Maersk's transpacific services calls at Kaohsiung, the TP7 that connects the Far East to the U.S. East Coast and West Coast. But there are five calls in Asian ports between Kaohsiung and the first U.S. call. For instance, the transit time on the TP7 from Kaohsiung to Savannah (30 days), does not compare favorably to Evergreen Line's AUE service (22 days).
      Maersk also buys slots on a Horizon Lines express service, the TP1-PEX, to Los Angeles and Oakland that calls at Kaohsiung and Xiamen, with Kaohsiung as the last Asian call.
      On the Asia/Europe trade, Maersk only has one service that calls Kaohsiung, its mega 21-ship A1-A10 butterfly loop. Meanwhile, two Maersk services call at Xiamen ' the 10-ship AE7, operated almost entirely with Maersk's Emma-type 14,000-TEU behemoths, and the 14-ship long-line TP6-AE6, which swings between Europe and North America with the Far East as the pivot. Maersk also charters space on CMA CGM's FAL 1, which uses 10,000-TEU ships and calls at Xiamen, and not at Kaohsiung.
      In other words, Maersk's bigger ships are calling at Xiamen, not Kaohsiung. On the transpacific, Xiamen is only connected to North America by Maersk through the TP6-AE6 loop and though the slot arrangement with Horizon on the TP1-PEX.
      Interestingly, further research from ComPair Data shows that even as Maersk ' the world's biggest container line ' migrates away from Kaohsiung, weekly capacity into the Taiwanese port has increased substantially from a year ago (ComPair Data does not track intra-Asia services).
      From January 2009 to January 2010, weekly capacity jumped 18 percent to 229,583 TEUs. Even from January 2008 to January 2010, weekly capacity into Kaohsiung increased 8 percent, a significant uptake considering the carnage that ensued at the end of 2008.
      At the same time, Xiamen's weekly capacity in January 2010 fell 2 percent to 190,569 TEUs from January 2009. But it grew nearly 15 percent from January 2008.
      Kaohsiung's gains in the past year seem to be an anomaly, however. In January 2009, weekly capacity to Xiamen was almost dead even with weekly capacity to Kaohsiung ' a major development considering Kaohsiung's actual volume was double that of Xiamen. Even as Kaohsiung regained capacity by January 2010, weekly capacity into the Taiwanese port is only 21 percent greater than that into Xiamen despite being twice as big as the Chinese port.
      Also, for services that ComPair Data tracks, the average ship size calling at Xiamen was 5,995 TEUs, while the average size of vessels calling Kaohsiung was 4,884 TEUs.
      Let's not forget that Taiwan is home to Evergreen and Yang Ming, two of the world's biggest 16 carriers, and those two lines alone will drive volume through Kaohsiung. Evergreen, for example, operates three transpacific services that call at Kaohsiung (one of which also calls at Xiamen), it provides half the vessels on another transpacific service that calls at Kaohsiung and it buys slots on a fifth service operated by the New World Alliance.
      But if the capacity being sent by carriers to Xiamen is any indication, Xiamen will eventually develop into a hub to rival Kaohsiung.