TAIPEI LIKELY TO REPLACE KEELUNG AS TAIWAN'S

UNCLAS AIT TAIPEI 000961

SIPDIS

SENSITIVE
SIPDIS

STATE FOR EAP/TC
HONG KONG FOR DHS/ICE MARK STEELE

E.O. 12958: N/A
TAGS: EWWT ECON TW
SUBJECT: TAIPEI LIKELY TO REPLACE KEELUNG AS TAIWAN'S
SECOND LARGEST CONTAINER PORT

REF: A. TAIPEI 240


B. TAIPEI 729

Summary
--------------


1. (SBU) The construction of container wharfs at Taiwan's
Port of Taipei will reduce container traffic at Keelung
Harbor where the Department of Homeland Security plans to
implement the Container Security Initiative (CSI). The
Port of Taipei will have seven container wharfs that will
begin operations in succession from 2008 to 2013. AIT/T
believes that the Port of Taipei will replace Keelung as
the departure point for most container traffic leaving
northern Taiwan for the United States. This will affect
planning for CSI operations for northern Taiwan's ports.
However, because Taipei's facilities will open
successively, it may take some time for Taipei to displace
Keelung. End summary.

Development Plan - Seven Wharfs by 2013
--------------


2. (U) Taiwan is developing the Port of Taipei as a
subsidiary port to Keelung Harbor. To date, nine bulk or
general cargo wharfs are finished and three more are under
construction. Most of the cargo that passes through the
port consists of sand, gravel, petroleum products, and
automobiles.


2. (U) Currently, seven container wharfs are under
construction. A joint venture owned by Evergreen Marine,
Wan Hai Lines and Yang Ming Marine Transport, Taiwan's
major shipping companies, is building the wharfs under a
build-operate-transfer (BOT) contract with the Taiwan
government. Evergreen, Wan Hai and Yang Ming own 50
percent, 40 percent, and 10 percent of the joint venture,
respectively. The joint venture will build the wharfs and
have the exclusive right to operate them for 50 years until

2053.


3. (U) Under the current schedule, the first two container
wharfs will be completed and begin operations in March

2008. One new wharf will be completed each year until 2013
when all seven wharfs will be in operation. Each wharf
will be large enough to berth ships with capacities of up
to 8,000 TEU (twenty-foot equivalent units). The total
estimated yearly capacity for the seven wharfs when
completed is 2-3.5 million TEU. In comparison, 2.09
million TEU passed through Keelung Harbor in 2005.

Advantages Over Keelung - Capacity and Geography
-------------- ---


4. (U) The Port of Taipei will have several advantages over
Keelung Harbor that will attract container traffic away
from the older port, especially U.S.-bound container
traffic. The Port of Taipei's main advantage is the size
of its wharfs. Keelung's 15 container wharfs will
outnumber those at the Port of Taipei, but Taipei will be
able to accommodate larger vessels. The average length of
the container wharfs at Taipei is 336 meters compared to
234 meters at Keelung. The average depths are 15.5 meters
for Taipei and 12 meters for Keelung. Each berth in the
Port of Taipei can accommodate Post-Panamax ships with
capacities of up to 8,000 TEU. In comparison, even the
largest wharf in Keelung, which is 324.3 meters long and
14.5 meters deep, can accommodate ships with a maximum
capacity of no more than 5,500 TEU. The other fourteen
berths are substantially smaller. Shipping companies are
more likely to use the larger vessels that will be able
stop at Port of Taipei for longer routes, such as trans-
Pacific routes to the United States.


5. (U) The Port of Taipei has several geographic advantages
as well. It is closer to many of the manufacturing centers
of northern Taiwan such as Taoyuan and Hsinchu. It also

has a better link to Taiwan's highway network. In
addition, the area of the port itself is larger than
Keelung's, which is surrounded by the city of Keelung and
mountains on all sides. Shipping and logistics companies
will, therefore, be able to build larger facilities at the
Port of Taipei.
Other Variables - Overall Trends and Shipping Companies
-------------- --------------


6. (U) There are other factors that make it hard to predict
how much the construction of the Port of Taipei will cut
into cargo traffic in other ports in Taiwan. One important
variable is the overall trend for cargo volumes passing
through Taiwan's ports. The total volume of containers
passing through Taiwan's ports fell last year for the first
time since 2001. Taiwan's economy was suffering a
recession in 2001, but 2005's 1.8 percent decline in
container volum came in a year when Taiwan's economy grew
by 4.1 percent. Last year's decline may be the start of a
trend driven by the rapid growth of cargo being handled by
ports in Mainland China. If volumes continue to decline in
Taiwan, traffic from Keelung's smaller facilities will fall
even more quickly.


7. (SBU) Another important factor will be the strategy of
shipping companies. They will decide how to direct
container traffic that passes through northern Taiwan's
ports. Ministry of Transportation and Communications
Senior Specialist Chen Jin-sheng pointed out to AIT/T that
shipping companies currently ship 800,000 to 900,000 TEU
annually from Keelung to Kaohsiung before exporting out of
Taiwan. This constitutes 80 to 90 percent of Keelung's
total outgoing container traffic. Chen believes that most
of this traffic will be exported from Taipei instead of
Kaohsiung.

Assessment - Port of Taipei Will Displace Keelung's Role
-------------- --------------


8. (SBU) Given the advantages of the Port of Taipei for
larger vessels, AIT/T believes that it will eventually
displace Keelung Harbor as the departure point for most
container traffic leaving northern Taiwan for the United
States. However, because the container wharfs will open
successively, this may not happen immediately when the
first wharfs begin operations in 2008. Many of Taiwan's
large-scale transportation BOT projects, such as the high-
speed rail, Kaohsiung mass rapid transit system, and
highway electronic toll collection system, have suffered
serious problems and delays (reftels). To date, we are not
aware of any problems associated with the Port of Taipei
BOT project, but the possibility of delays in the current
schedule cannot be ruled out.
YOUNG