Containerised dry bulk cargo and its impact to port operations

Dr. Saut Gurning, Lecturer, researcher, and port-consultant at

Institut Teknologi Sepuluh Nopember (ITS) Surabaya, Email: sautg@its.ac.id

1Presented on 31st of May 2012 10th ASEAN Ports and Shipping 2012 Exhibition and Conference, at Hotel IndonesiaKempinski, Jakarta

Presentation Outline

• Continues improvement of dry market

• Containerisation of dry bulk in Indonesia

• Adaptations that need to be taken

• Problems and strategies

2

CONTINUES IMPROVEMENT OF DRY BULK CARGO MARKET

Stable growth of dry bulk cargoes

• Market is reflected with higher ship carrying capacity compared to the dry shipping demand at 2-3 percen t indicating freight will be more competitive

• Dry bulk cargoes orientating to and from Europe will decline 10 percent . But in contrary with the growth happening in China, Japan, India , and Indonesia

Global dry bulk cargoes

• Annual quantity is predicted around 3,4-3,6 bilyun ton of dry bulk cargoes transporting via sea with an average growth of 5,0-5,5 % per year (DVB 2012, Lloyd List 2012)

• Dominant global cargoes: iron-ores, coal, grains, steel, cement, forest products, agricultural and mining products

• Global unit of dry bulk fleet has been constantly growing at 7-8 percent in 2008-2011

Indonesia dry bulk cargoes (2010-2011)

The volume quantity at 400 million ton (2011) with the annual growth 5-7 percent from 2000-20011

28%

60%

6%

1%

2%4%

Grains

Coal

Fertilizer

Alumunium

Cement

Steel products

Why container shipping is chosen?

• In some cases and periods: Lower charter / freight rate and transportation costs

• Availability of container ships better than dry bulk carrier

• The growth of containerisation of transport operation

• Better logistics supports

• However, the lack of port supporting facilities may hinder cargo owners applying containerised shipping

CONTAINERISATION OF DRY BULK IN INDONESIA

0%

5%

10%

15%

20%

25%

30%

1995 1997 1999 2001 2003 2005 2007 2009

Percentage

Year

RATIO OF CONTAINERISATION BULK CARGOES

Container Services

Containerisation of Dry Bulk in Indonesia

• Exploration study/survey on grains products in Indonesia (2008-2011) finds that 28-30 percents of national dry bulk cargo has been transported by containers

• The level is intented to be higher if national dry bulk carriers can not be fulfilled

• In addition, the demand of containerised dry bulk cargoes will increase as the impact of better and more efficient performance of containerised logistics operations

10

IBT

Adang

Taboneo

BCT

Jorong

Apar

30 DOMINANT DRY BULK TERMINALS IN INDONESIA

15-30 MT

10-14 MT

Less than 10MT

KBS

Gresik,

Lamongan

Tanjungwangi

Berlian

Studi Case of Australia-Indonesia wheat supply chain (2006-2011)

3.0

3.0

3.0

3.0

14.0

5.9

14.0

7.0

5.0

13.0

6.0

12.0

2.7

3.0

1.0

3.6

2.0

3.0

3.0

3.0

21.0

21.0

3.0

3.0

0 5 10 15 20 25 30 35 40 45 50

Bulk to Perak

Container to Perak

Bulk to Priok

Container to Priok

Days

farm

handl+proc

Distrib + ter

Shipment

Saler+Ret

Fin-Cons

BelawanPriok

PerakTj Emas

BaritoMakassar

Container (TEU)

Bulk (20 tons)

0

500

1000

1500

2000

2500

3000

3500

4000

Cost (US$)Container (TEU)

Bulk (20 tons)

The container transport of raw wheat has been more competitive

than dry bulk transport operation

Potential market to be explored

• National service level for dry bulk logistics (mainly for non-coal cargoes) is limited

• Internally, the throughput progress of dry bulk-related cargoes is growing including asset utilisation (ship unloader/quay crane, and land) and revenues

• The service of containerised dry bulk cargoes both at container and dry bulk terminal in Indonesia which is relatively rare in Indonesia

ADAPTATIONS THAT NEED TO BE TAKEN

Development options based on dry bulk service innovation

Hinterland/

Foreland

Facility

Expansion

For dry

Container

Barge

Service

Jetty Mgmt

Service

Objectives

• Logistics efficiency

• Higher Value added value

Regional dry bulk

Centres in

Indonesia

Rail service

for dry bulk

cargoes

Strategic

Cooperation

Logistic

Services on

Dry Bulk

New Innovation on dry bulk cargoes

Containerised Dry Bulk Transport: Container Shipping and Rail Services

Service strategies that may be developed:

• The development of Dry bulk terminal • The provision of dedicated terminal for containerised dry bulk cargoes

for LCL/FCL* Consolidating service for containerised dry bulk cargoes

Regionalitation dan Polarisation of Dry Bulk Operations

Terminalition of dry cargo chain

Port of Los Angeles/Long Beach (2009)Rodrigue dan Notteboom (2009)

Jetty Management Service

Various dry bulk-related cargo providers and owners are quite reluctant to have their own operation team particularly on :• Electrical generation plant• Cement plant• Fertilizers’plant• Nickel ore plant• Sands• Grains

Containerised Barge Service

• Emerging dry bulk cargo areas in Indonesia such as Kalimantan/Borneo and Sulawesi/Celebes require a significant quantity of Container Barge

• Orientation for domestic market and small parcels of less than 200 TEUs

Rail Service for Dry Bulk Cargo

The availability of new rail service for dry bulk cargoes on various marketable corridors such as :• Jakarta-Bekasi-Karawang• Cilegon-Bekasi-Surabaya• Jakarta – Merak, Cilegon –

Bojonegara, Rangkasbitung –Pandeglang – Labuan

• Semarang-Surabaya-Probolinggo• East, South, and Central Kalimantan

PROBLEMS AND STRATEGIES

Shipping Cargo

Owners

Terminal

owner

Land

transport

Logistics

providers

• Monopoly

logistics

services

• Adjustment of

tarrif control

• Basic

infrastructure

on dry bulk

cargoes

Higher

inventory

carrying costs

Lower

transportation

budget

Temporary

cargo demand

Difficult to

have a long-

term terminal

contract

Discontinue

of service

volume

Short term

contract

Limitation of

equipment

availability for

dry-bulk

related cargo

Long customs

and

quarantine

procedure

Limitation of

land transport

hauliers/trucks

Availability of

wagon based

on rail

services

The reliability

operation of

land operation

The limitation

of land

infrastructure

including

roads/bridges

Insufficient

Logistics

knowledge

Land

availability for

logistics

centres

The shortage

of skillful

personnel for

dry bulk

logistics

services

Problems and risks of dry bulk logistics

Logistics strategy of Containerised Dry Bulk Cargoes

Logistics

Strategy for

Dry Bulk

FinanceBudgeting?

Insurance?

Investation?

Cargo ownerType of commodity?

Level volumes?

Costs? Quality?

Delivery?

Land TransportRoutes?

Distribution centres?

Frequency? Time?

Quality of Roads?

Number of trucks?

Terminal / JettyContinuity of trafic in/out

Handling equipment?

Inventory facility?

Mar Infor SysIT Solution that may all

Chain linked and

effective?

ShippingCargo guarantee

Standard required

Cargo consolidation

Best practices of implementation

CONCEPT

DEVELOPMENT

PLANNING

DESIGN AND

DEVELOPMENT

COMMERCIAL

PREPARATION

LAUNCH

DEVELOPMENT TIME

Coordination, coopetation,

and collaboration may be

the best strategies to be

implemented

PROVISION OF AREA FOR CONT DRY BULK CARGO

EQUIPMENT/ INVENTORY

CONTAINERISED AND BULK FEEDERING SERVICE

JETTY & FLOATING TERMINAL SERVICES

STRATEGIS ALLIANCE (SOC, JV, JO)

INV

ES

TM

EN

T L

EV

EL

RAIL SERVICE & LOGISTICS SERVICES