1. Cascade Effects in Container ShippingImplication for Regional and Feeder PortsPortek International LimitedLarry Lam, ChairmanThe contents of this document are copyrighted and proprietary, and may not be reproduced without the permission of Portek International Limited

2. What we do Portek is both a provider of equipment, servicesand solutions to ports worldwide,& an operator of medium sized ports. 3. What we do As provider to ports: Modernize Port Equipment upgradingequipment from PX to PPX, turnkey Quick deployment of cranes to meetsurge in traffic; sale or lease Crane accidents recovery & repairs Port IT & Automation modules Traffic studies, marketing program toattract traffic, simulations 4. What we do As port operator: T009 & T300 (Jakarta, Indonesia) Bejaia Mediterranean Terminal(Algeria) Valetta Gateway Terminal (Malta) Port of Libreville & Port Gentil ( Gabon) 5. PORTEKCreating Global Footprints 6. Background 7. The Trend 12,5007,2004,5003,000 19801990 20002006Maximum Vessel Size 8. The Trend By end of 2007, there were 188Vessels of greater than 10 000TEUs on order By 2011, Post Panamax Vesselswill contribute 50% of allcontainer slots 9. Definitions Mid Panamax MPX ~ 2000 3500 TEUs Large Panamax LPX ~ 3500+ 4500 TEUs Post Panamax PPX ~ 4500+ 6000 TEUs Large Post Panamax LPPX ~ 6000+ 8000 TEUs Super Post Panamax SPPX (Mega Ships) ~ 8000+ 12500 TEUs 10. Cascade Effect 11. Cascade Effects Cascade effect: big shipsdisplacing small ships acrossall ship sizes 12. World Container FleetSupply Order book of 6.9 million TEU withan average ship size of 4,500 TEU. Existing world fleet is only 11.8 TEU,with an average ship size of lessthan 3,000 TEU. 13. LPPX/ SPPX 7,000 12,500TEUsDisplacingLPX/ SPX4,000 6,000TEUsDisplacing Small Vessels 2,000 4,000TEUsDisplacing Smaller Vessels 1,000 2,000TEUs 14. Cascade Patterns (1)Deployment of Megaships 15. Cascade Patterns (2)Routes for LPX/PPX 16. Cascade Patterns (2)New (Shuttle) Services for LPX/PPX 17. Cascade Patterns (3)Routes for MPX 18. Shipping EconomicsAnd Implications for regional and feeder shipping 19. Shipping Economics Shipping Economics :driven by need to fill thevessel to achieve low unitslot cost 20. What are the implications? More consolidation, M&A in the regionaland feeder trades? Slot sharing, gradual exit of smallerships? Increase in fuel cost will furtheraccentuate the cost difference Ship call frequency decrease due tolarger ships and bigger loads Reduced port calls, as port with low loadfactor will be dropped out 21. Impact on PortsImplications for regional and feeder ports 22. Regional Ports & FeederPorts Regional ports are ports servingIntra-continent of Intra-regionaltrades such as Intra-Asia trades, SEAsia Trades Feeder ports are mainly those thatfeed or receive cargo to and from aregional port or a major hub port 23. Challenges for Regional andFeeder Ports Questions confronting regional andfeeder ports: Are the (displaced) big ships coming toyour port? Are you pushed further into the feedertrades? Which ports can be winners and whichmay be bypassed? 24. The Future of Regional Ports2,500 TEU ships 5,000 TEU shipsSome regional ports may emerge asthe regional hubs, and attract moretransshipment traffic 25. The Future of Feeder Ports600 1,200 TEU ships2,500 TEU shipsFeeder ports who cannot service largerships will be marginalized, they maydropped as a port of call, will see reducedfrequency, and connectivity 26. Advantage = US$ 8 / TEU / day savings in slot cost= US$ 48 for a voyage of 6 days 27. Winners and Losers For South East Asia: Tg Priok (Jakarta)? Manila, Laem Chabang? Port Klang? Cai Mep Port? With throughput inVietnam growing at 25% a year,will Cai Mep be a winner? 28. River Ports VS. Sea Ports Cascade effect will tilt thebalance in favour of sea ports: Ho Chi Minh VS. Cai Mep Bangkok VS. Laem Chabang Ports along Yangtze VS. coastalports (Yangshan, Ningbo, etc.) 29. Winners and Losers For Indian subcontinent/ ArabianSea: Will Nhava Sheva emerge as amajor port of calls for PostPanamax vessels? Karachi, Bandar Abbas 30. ChallengesWhat can regional and feeder ports do? 31. Challenges Insufficient cargo volume for new sizeof ships Physical infrastructural constraints Equipment constraints IT & communication system constraints Administrative issues bureaucraticred tape, labour management issues,custom inspection, adopt bestpractices 32. Cargo Volume Constraints There must be sufficient cargo orload factor for the ship to justifymaking a call. Regional Ports must: Expand its hinterland; seize initiativesto be a gateway port for the country,and neighboring countries. Attracting transshipment traffic Stimulate a more balanced trade 33. Round TRIPSimulationSystem 34. Physical InfrastructuralConstraints Draft: Regional ports : 13 15 m Feeder ports : 10 12 m Sufficient turning radius Berth Length: Regional ports: 300 330 m Feeder ports : 200 250 m 35. Physical InfrastructuralConstraints Yard space: The more usual constraint A lot of yard space needed foran exchange of 2,000 to 3,000boxes 36. Equipment Constraints Panamax Quay Crane Lift Height (26 m30 32 m) Outreach (12 13 rows14 15rows) Crane speeds possible to increaseincrementally 37. Equipment Constraints Panamax Quay Crane Drive change improve reliability,parts absolescence General refurbishment better cabinergonomics, greater safety as inbraking systems, etc. Twin lift 2 X 20 can be incorporatedwithout major change in operatingprocedures 38. Quay cranemodification & drivechange in Penang,Malaysia 39. Boom extensionin Tuticorin,India 40. QC Drive change in PSA, Singapore 41. RTG speed increase inPenang, Malaysia 42. Equipment Constraints Yard Equipment RTG height of 1 over 4 (or 1 over 3) to1over 5 or 1over 6 Yard space is at a premium Straddle carriers of 1 over 2configuration are being phased out infavour of 1 over 3 43. Portek T300 Terminal 44. IT & CommunicationSystems The port IT system must be ableto cope with an exchange of3,000 to 4,000 moves per shipwithin a 24 hour period 45. Upgrading of CTMS 46. Review of Operationalprocedures 47. Radio DataTerminals foraccurate real timeinformation 48. GPS SatellitesFixed GPS(reference) Send Error Correction Data Mobile GPS Position Determination Systems 49. Optical Character Recognition SystemsCYLU4236936 50. Administrative Issues Streamlining customs procedure anddocumentation flow many ports indeveloping countries have timeconsuming custom inspection, andcomplicated documentation,resulting in a dwell time ofcontainers 51. Administrative Issues Dealing with Bureaucracy - state ownedports slow to respond to customer needs,cumbersome procurement process, notable to gear up quickly to handleincreased traffic Labour issues - Some unionized labourforce continuing with outdated workpractices, resist changes and newtechnology 52. Conclusions 53. Conclusion: Mega Hub andRegional Port Big ships reinforce the hub andspoke pattern of shipping, favoringmega hub ports Some regional ports will be winnersand emerge as regional hubs. Manywill be bypassed 54. Conclusion: Feeder Portsand Feeder Shipping Feeder ports face pressure as feedervessels scale up. Failure to cope means:high freight costs, low connectivity andbecoming less relevant Further shake-out in regional and feedershipping through mergers andacquisitions. Smaller ships of less than1000 TEU size will retreat to marginal orniche routes or to domestic, inter-islandroutes 55. Thank YouQuestions?enquiry@portek.com