SINGAPORE PORT DOWN, BUT NOT OUT

UNCLAS SINGAPORE 001223 STATE PASS USTR SENSITIVE SIPDIS E.O. 12958: N/A TAGS: ECON ETRD EWWT SN SUBJECT: SINGAPORE PORT DOWN, BUT NOT OUT REF: A) 08 SINGAPORE 1319 B) SINGAPORE 308 ¶1. (SBU) Summary: Singapore's port, the busiest container port in the world, is beginning to recover from the global financial crisis that crippled international trade, but volumes are still dramatically off the heights from early 2008. The Port of Singapore Authority (PSA) saw its annual container throughput in Singapore dip a hefty 14 percent through November of 2009, though in November the port finally reverted to year-on-year monthly growth. Despite the economic setback and growing competition from regional ports, PSA is cautiously expanding capacity as part of an ongoing port development. End Summary. Economies Recovering, Port Following -------------- ¶2. (SBU) Port operator PSA Singapore Terminals, which handles about one-fifth of the world's total container transshipment throughputs, has handled 22.92 million twenty-foot equivalent units (TEUs) in the first 11 months of 2009, down 14.6 percent from 2008. The global financial crisis that struck the region late in 2008 particularly impacted container volumes, hitting both demand for goods and the availability of trade finance that fuels the shipping industry (Ref A). The decline was most severe in the first two months of 2009, when monthly container throughputs dipped 20 percent year-on-year to below two million TEUs. GOH Hwee Shan of PSA's Research and Statistics Division, told Econoff that the port began to see a recovery in August, thanks mostly to rising intra-Asian trade. Singapore port posted its first positive growth in volumes for the year in November, though that was more a reflection of the sharp dropoff in container volumes in the previous November. PSA forecast that its annual container throughput in Singapore will reach only 25 million TEUs for 2009, down from 29 million TEUs in 2008. Fighting for Market Share in the Recovery -------------- ¶3. (SBU) Singapore has been fighting to retain its market share in the transshipment business despite the slowdown in global trade. Nearly 80 percent of the containers passing through Singapore are transshipped to other locales. At the height of the economic downturn, Singapore's Maritime and Port Authority (MPA) instituted concessions on port dues and related fees to encourage shipping business (Ref B). OH Bee Lock, Senior Vice President of PSA Corporate Planning, told Econoffs that Singapore faces strong competition from traditional rivals like Hong Kong, as well as ports in Malaysia, Thailand and Vietnam which are now battling for a bigger slice of the global container transshipment market. Shippers are also increasingly looking to cut costs by shipping directly from port to port and avoiding transshipment charges. ¶4. (SBU) Also of concern for the port of Singapore is the financial health of shipping companies that are plagued by continuing low freight rates. Approximately 10 percent of the world's container vessels were idled in 2009 and MPA observed that operating container vessels were only 50-60 percent full (Ref B). Neil Dekker of Drewry Shipping forecasts that the world's major container carriers would lose US$20 billion in 2009 as a result of a global container traffic slowdown of 10.3 percent. That would mark a 27 million TEU decline from the 2007 level worldwide. Drewry sees the Asia-Europe route, one of the most competitive globally, witnessing a 29.5 percent reduction in shipping rates in 2009. Singapore Plans Expansion Despite Setbacks -------------- ¶5. (SBU) Despite the current economic slowdown, Singapore intends to expand the port's container capacity in order to remain competitive in the global market. During the economic downturn, MPA continued with land reclamation projects at the port to support PSA's future expansion plans for its operations in Singapore (Ref B). PSA's most advanced Pasir Panjang terminal is equipped with berths up to 16 meters deep and with quay cranes able to reach across 22 rows of containers so it can handle the newest generation of super container vessels carrying 12,000 TEUs. PSA intends to add ten new container berths in the next few years at Pasir Panjang, bringing PSA's total to 54 container berths in Singapore. For the longer term, PSA is planning subsequent phases of expansion in Pasir Panjang Terminal aimed at eventually increasing container volume capacity at the port from the current 35 million TEUs to approximately 50 million TEUs annually. SHIELDS