News / Westports volumes and profits up at Port Klang, but new alliances spark concern

Port Klang terminal operator Westports reported increased profits and volumes in the third quarter, but there is still uncertainty at the Malaya transhipment hub over next year’s alliance reshuffle.

With third-quarter volumes up 9% to 2.49m teu, Westports produced a net profit of MYR151m (US$34.7m), a 16% year-on-year increase attributed to the strong volume growth and a 15% tariff hike last November.

Throughput over the first nine months of 2016 was up 10%, to 7.39m teu. Transhipment, which accounts for 75% of volumes, increased 14% on the back of bustling intra-Asia trade.

Westports chief executive Ruben Emir Gnanalingam said the port had “benefited from shipping clients’ ad-hoc handling requirements as they introduced larger vessels into their container shipping services”.

He said Westports would now begin its Container Terminal 9 (CT9) Phase 1 expansion, following sustained high volume growth and heavy terminal utilisation, which, according to analysts, has exceeded 80% due to higher-than-expected growth.

CT9 is scheduled for completion by December 2017 and comes hot on the heels of CT8 Phase 2 which should be completed mid-2017, bringing total capacity to 13.5m teu.

Despite the strong performance of what is South-east Asia’s cheapest transhipment port, much uncertainty remains regarding the impact on Westports from the new carrier alliances launching next year and their intended transhipment strategies.

While both Ocean Alliance and THE Alliance have recently published their networks for the April 2017 launch neither has confirmed its chosen transhipment hubs along the Malacca Straits. For example, the Ocean Alliance scheduled Port Klang into its Asia-east coast North America and Asia-Middle East calls, but listed only “South-east Asia hub” for the Asia-North Europe, Asia-Mediterranean, and Asia-Red Sea strings.

Similarly, THE Alliance noted only “South-east Asia hub” for all its services.

Speculation on whether Westports might lose transhipment volumes to Singapore surfaced when PSA struck a partnership deal with Ocean member CMA CGM on a dedicated four-berth terminal called CMA CGM–PSA Lion Terminals. The joint-venture was put in place after CMA CGM acquired Singapore-based carrier APL.

CMA CGM is currently an anchor tenant at Westports, accounting for around a third of current volumes.

Kuala Lumpur-based CIMB Equities Research told investors: “We find it hard to believe that the alliances would not already have a good idea which port they would want to call at.

“However, the strategic ambiguity may be a means for the two alliances to extract price concessions from the port of Singapore, Westports, as well as the port of Tanjung Pelepas, in exchange for their combined business.”

It added: “We are less concerned that Westports would see its volumes decline, as it is one of the cheapest transhipment ports in ASEAN. Pricing, however, could be a separate consideration.”

Mr Gnanalingam told The Loadstar: “The purpose of the announcements so far is that shippers are aware of what services there are. For most of these shippers – ie, those from China, the US and Europe – which hub is being used in South-east Asia is of little consequence. This then gives both alliances more time to plan accordingly.”

He said it was “way too early to tell” whether Westports would gain any more calls than those already announced.