MMC’s PORT CONSOLIDATION INITIATIVEMigration of Johor Port’s Containers to PTP

Ports in Johor Are Losing Their Competitiveness to Singapore

Inherent Weak

Fundamentals For A

Container Port

Incomplete Value

Proposition-

Full Potential Not Realized

Johor

Port

Ports in Singapore

Intra Port Competition

Unethical And

Anti Competition Actions

PTP

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� 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

JOHOR PORT IS FAST REACHING FULL CAPACITY

� 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

Risks to

port users

Higher cost of doing business & restricted growth opportunities Higher cost of doing business & restricted growth opportunities for for manufacturersmanufacturers

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CONGESTION SURCHARGE LEVIED BY SHIPPING LINES IN PORTS

No Ports

Congestion Surcharge

(USD/TEU)

1 Los Angeles 200

2 Chennai 75

3 Pakistani Ports 100

4 Kota Kinabalu 43

5 Vancouver 80

6 Venezuela 150

7 Vietnam Port 50

8 Le Harve 250

9 Callao - Peru 70

10 Apapa 35

11 Kolkata 240

12 Haldia 240

Historical Data from around the World

Consolidation will reduce cost of doing business & facilitate buConsolidation will reduce cost of doing business & facilitate business growth siness growth

INITIATIVE TO CONSOLIDATE CONTAINER OPERATIONS

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JOHOR PORT

KEY CONVENTIONAL PORT FOR THE REGION

Migration of Johor Port’s Container

Operations to PTP

PTP

LEADING CONTAINER PORT FOR THE REGION

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 connectivity at 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

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Improved port services will benefit port users and the nationImproved port services will benefit port users and the nation

PTP’S CONNECTIVITY WILL INCREASE BY 72% POST- CONSOLIDATION

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Destination

PTP’s Current Connectivity

(per week)

Johor Port’s Current

Connectivity

(per week)

Connectivity at PTPPost-Consolidation

Connectivity (per week)

Increase (%)

Asia73 38 166 127%

Oceania4 1 7 75%

Middle-East15 1 24 60%

Trans-Pacific11 - 16 50%

Europe16 - 24 50%

Africa11 2 19 73%

DrewryDrewry forecasts consolidation of liner services will cause more direcforecasts consolidation of liner services will cause more direct t calls and transshipment activities at PTPcalls and transshipment activities at PTP

WE ARE READY TO DO THIS

Items/Areas PTP Readiness

1. Availability of physical

infrastructure to

support additional

volume (i.e. Berth, yard,

Customs building, gate,

etc.)

� Ready spare capacity of 1.9 million TEUs per 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 up depots near PTP - a

new facility (Container Integrated Terminal) built on 8 acres of land (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 – teu capacity) 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 OGAs to provide sufficient manpower prior to 1st volume

� Customs procedures are the same in both ports

� Customs documentation/cargo clearance can be done 24/7

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WE ARE READY TO DO THIS

Items/Areas PTP Readiness

4. Operational flexibility at

PTP

� 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

5. IT Infrastructure for

cargo processing and

clearance

� 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

6. Availability of Logistics

operators at PTP

� PTP has a total of 1.3 million square feet warehousing space, of which 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

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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

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We seek support on the consolidation initiative as its will benWe seek support on the consolidation initiative as its will benefit efit shippers, industries and the nationshippers, industries and the nation

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 are cheaper 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’s regional 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

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