Cargo giants call on Sihanoukville port

A China Ocean Shipping Company (COSCO) container ship sits docked at the Port of Oakland, California, in October last year. Bloomberg

Cargo giants call on Sihanoukville port

Thu, 17 March 2016 ppp

Sor Chandara

As Cambodia's sole deep-sea port in Sihanoukville looks to increase its presence on global shipping routes, the decision by two major Chinese shipping companies six months ago to call at the port has seen mixed results, with one firm already dropping out due to low container traffic.

Last September, China Shipping Container Lines (CSCL) and the state-run China Ocean Shipping Group Company (COSCO) signed agreements with the Sihanoukville Autonomous Port (SAP) to create a direct route to China for Cambodian exports.

The two shipping firms, with a combined annual capacity of more than 1.2 million standard 20-foot containers, also known as TEUs, provided local exporters with the option of directly shipping to China, bypassing the usual stopover at Vietnam’s Cai Mep port.

SAP’s director general Lou Kim Chhun said that while COSCO was currently operating one port call every two weeks, CSCL had decided to scale back its operations and was instead booking slots at the port only when there was a critical mass of containers.

Yet despite CSCL’s withdrawal, Kim Chhun said the incremental increase in Cambodia’s volume of exports had garnered the attention of international shipping firms, which were considering calling at the coastal port to meet this increasing demand.

“The market for shipping services to come to Cambodia is still available,” he said. “There is still a demand for such services at the port.”

He noted that Korea-based HMM Logistics announced last week that it had included SAP on its Shanghai-Thailand Express, which is expected to reach the port for the first time on Sunday, creating a direct eight-day route to South Korea.

Kim Chhun said the increase in shipping companies using SAP had resulted in benefits for exporters – where costs had seen a “significant” reduction compared to previous years.

“It is normal when there are more international direct shipping routes that the cost of logistics will increase savings and reduce time, as well as increase the output of containers, making our export sector more competitive,” he said.

With container ships now capable of transporting an average of 700 TEUs, he said it significantly increased the amount of containers that can depart from Sihanoukville port.

Chim Peter, a business development executive at DB Schenker (Cambodia) Ltd, the local arm of the German transportation and logistics services firm, said that supply space for shipping carriers was no longer a problem and the cost of shipping on carriers had dropped significantly recently due to more competitors serving the Cambodian market.

“We always had problem with space last year, but now there are more containers with space and it’s cheaper,” he said.

Peter added that costs were now comparable to inland transportation costs and clients had seen their logistics outlays drop by 20 to 30 per cent.

“Short containers now cost around $200 to South Korea, compared to $500 to $800 that it used to cost in the past,” he added.

With the increase in shipping routes to China, exports will see an uptick in their price competitiveness, including to other ASEAN member nations, said Nuon Ratana, sales and marketing manager at RDL Logistics.

“This could contribute to cost competitiveness,” he said. “These companies should be able to provide better rates than the current price.”