MMC s PORT CONSOLIDATION INITIATIVE Migration of Johor Port s Containers to PTP

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1 MMC s PORT CONSOLIDATION INITIATIVE Migration of Johor Port s Containers to PTP

2 Ports in Johor Are Losing Their Competitiveness to Singapore Ports in Singapore Unethical And Anti Competition Actions Johor Port Inherent Weak Fundamentals For A Container Port Intra Port Competition PTP Incomplete Value Proposition- Full Potential Not Realized 1

3 JOHOR PORT IS FAST REACHING FULL CAPACITY Berth and yard congestion is becoming a norm and getting worse o Vessels are facing delays o Unreliable shipping schedule o Shipping lines unable to expand existing services No room for expansion and no potential as main container port o Less ideal location (passes through Singapore waters) o Limited draft -unable to accommodate latest generation vessels Risks to port users Lack of capacity and capability to provide a more efficient and cost-effective service to customers o Congestion at Johor Port increases cost of doing business Liners incur RM67 million p.a. due to vessel delays and low productivity Impending congestion surcharge of RM165 million p.a. o Limited direct sailings at Johor Port lead to feedering through Singapore -freight rates dependent on feedering cost and can only go higher o Limited competition among shipping lines at PTP no incentive for lower freight rates Higher cost of doing business & restricted growth opportunities for manufacturers 1

4 CONGESTION SURCHARGE LEVIED BY SHIPPING LINES IN PORTS Historical Data from around the World No Ports Congestion Surcharge (USD/TEU) 1 Los Angeles Chennai 75 3 Pakistani Ports Kota Kinabalu 43 5 Vancouver 80 6 Venezuela Vietnam Port 50 8 Le Harve Callao - Peru Apapa Kolkata Haldia 240 4

5 INITIATIVE TO CONSOLIDATE CONTAINER OPERATIONS Migration of Johor Port s Container Operations to PTP PTP LEADING CONTAINER PORT FOR THE REGION JOHOR PORT KEY CONVENTIONAL PORT FOR THE REGION Consolidation will reduce cost of doing business & facilitate business growth 2

6 POST CONSOLIDATION, SHIPPERS & MANUFACTURERS WILL ENJOY Freed-up container berths and container yard will improve service levels for conventional cargo Better facilities and higher efficiency at PTP will lower cost of doing business o Lower risk of vessel delays, missed connections and better shipping schedule o With surplus capacity in PTP, no congestion surcharges -eliminate the risk of manufactures paying upwards of RM 165 million p.a. 72% higher connectivityat PTP expected to save manufacturers/consignees up to RM220 million p.a. o Direct sailings - freight rates will not depend on feedering cost to Singapore o Liner competition expected to lower freight rates between USD100 USD150 per container -shipping lines have committed to move to PTP Haulage cost will either remains status-quo or reduce overtime due to industry developments and market competition More efficient logistics infrastructure improves competitiveness of Johor goods Significant spin-off business contribution from logistics industry to GDP will increase Improved port services will benefit port users and the nation 3

7 PTP S CONNECTIVITY WILL INCREASE BY 72% POST- CONSOLIDATION Destination PTP s Current Connectivity Johor Port s Current Connectivity Connectivity at PTP Post-Consolidation (per week) (per week) Connectivity (per week) Increase (%) Asia Oceania Middle-East Trans-Pacific Europe Africa % % % % % % Drewry forecasts consolidation of liner services will cause more direct calls and transshipment activities at PTP 7

8 WE ARE READY TO DO THIS Items/Areas 1. Availability of physical infrastructure to support additional volume (i.e. Berth, yard, Customs building, gate, etc.) PTP Readiness Ready spare capacity of 1.9 million TEUsper year and ample yard capacity to store laden and empty container New Customs Inspection & Clearance Centre (CICC) completed and running. 7 import and 7 export lanes equipped with weight bridges and Customs booth Total of 28 lorry parking bays, 20 inspection bays and 50 slots for container grounded 2. Depot Operation No longer a single depot operator for PTP o Over the last 6 months, few depot operators have plans to set updepots near PTP - a new facility (Container Integrated Terminal) built on 8 acres ofland (6,000-teu capacity) in Nusajaya commenced operations on 1 November o Within PTP, a new common depot facility with off-dock depot rates built on 20 acres of land (15,000-teu capacity) will be in place by the time the consolidation is implemented. This will eliminate monopolistic prices charged by a single depot operator Ample depot facility of at least 28 acres (21,000 teucapacity) will be sufficient to cater for shipping lines requirement of 25 acres (18,750 teu capacity) 3. Customs and other Government agencies readiness (OGAs) Commitment from Customs and OGAsto provide sufficient manpower prior to 1 st volume Customs procedures are the same in both ports Customs documentation/cargo clearance can be done 24/7 4

9 WE ARE READY TO DO THIS Items/Areas 4. Operational flexibility at PTP 5. IT Infrastructure for cargo processing and clearance 6. Availability of Logistics operators at PTP PTP Readiness PTP has similar closing time to PGU 8 hours prior to vessel arrival late gate in can be arranged on case by case basis with prior notice Proven IT infrastructure is used in PTP similar to 100 major ports globally, specializing in import/ export and transshipment cargoes Full integration with Customs and OGAs IT system PTP has a total of 1.3 million square feet warehousing space, ofwhich 300,000 square feet is immediately available Capacity, facilities and Infrastructure are readily available for all the logistics providers to set up their base in PTP Transition period for the migration will allows for logistics providers to set up their base 5

10 SUMMARY The inherent weaknesses of PTP and Johor Port prevent these ports from exploring their full potential in providing a more efficient level of service to industry This inefficient service level has severe negative implications to the ports, port users and the nation and increases the cost of doing business to industry Consolidating the container operations of both ports is necessary to enable the ports to serve industry better and bring the container port industry in Southern Malaysia to the next level We seek support on the consolidation initiative as its will benefit efit shippers, industries and the nation 10 6

11 FREIGHT RATES Freight rates at PTP is similar to freight rates at Johor Port o Intra-Asia freight rates from both PTP and Johor Port are the same o Some minor variations Freight rates from PTP to Rotterdam (USD1,364/teu) is USD59 higher compared to Johor Port On the other hand, the freight rates from PTP to Middle East arecheaper compared to Johor Port by USD200/teu Post consolidation, freight rates are expected to come down due to the higher supply of freight capacity o PTP sregional connectivity will be improved by 72% as a result of new liners from Johor Port calling into PTP. This will spur liners to bring their existing transshipment business to PTP and increase the freight capacity calling/supply at PTP - Drewry report o Excess of supply over demand will drive down freight rates at PTP by between USD100 - USD150/teu

12 SHIPPING LINES Currently, four shipping lines serve PTP Maersk, Evergreen, CMA-CGM and MISC Most Johor Port shipping lines are committed to move to PTP o Shipping lines want to continue serving the local market and maintain market share o Shipping lines will enjoy better facilities at PTP No congestions/delays, higher productivity, Strategic location - better location, less diversion time Opportunity to increase services and transshipment activities Equal treatment that all lines get at PTP no missed connections for shippers Post-consolidation, PTP will have higher connectivity compared to Johor Port o Europe will be 21 times more than Johor Port o Transpacific will be 5 times more than Johor Port o Intra-Asia will be 2.5 times more than Johor Port