History with China key in preparing for post-Panamax.

Jamaica becoming global logistics hub.

 

In Jamaica, there are so many Chinese merchants importing goods and selling in shops that the Jamaicans call these businesses “chin shops.”

The term is not intended to be derogatory. Jamaica has a long history with China, dating back to the 1840s when Chinese came as indentured servants. Today, many operate as merchants, selling the same Chinese goods that everyone sells worldwide, representing how important Chinese trade is with Jamaica. But for more reasons, shippers in Asia need to be aware of big changes coming to the island.

Jamaica today is embarking on what it dubs Vision 2030 – an agenda that aims to propel that nation towards “developed country status” by 2030. Part of that agenda centres around a strategy to become a global logistics hub for the Western Hemisphere such as Dubai, Rotterdam and Singapore are to their markets.

The impetus is the Panama Canal, which will open its expansion early next year to accommodate large post-Panamax vessels up to 8,000 teus. But Jamaica’s most pressing challenge is the country’s debt, which now hovers around 140% and is among the highest in the developing world.

The International Monetary Fund lent Jamaica US$932.3 million in 2013 during the global economic recession to help the island. Loan terms are 48 months. To get the loan, Jamaican politicians had to prove they could create jobs and put the island on sound fiscal foundation. Creating a global logistics hub is part of Jamaica’s economic plan. 

To become such a hub, Jamaican officials first envision the Port of Kingston diversifying and developing into a world-class multipurpose port.

The port naturally has a geographic North-South, East-West advantage to accessing large commercial markets in North, Central and South America that total over 800 million consumers. More so, Kingston has the world’s 7th-largest natural harbor.

In addition, Kingston Container Terminal (KCT) is used already by major global shipping lines; Zim Shipping Line has been operating its regional hub there for 40 years. Kingston is also a primary regional hub for CMA CGM.

“Goods are shipped from Asia to this Hemisphere to the West Coast or through the Panama Canal to the Caribbean where they are transshipped by a network of international and regional carriers,” said Gordon Shirley, Chairman and CEO of The Port Authority of Jamaica, during the Jamaica Investment Forum 2015 held March 11-12 in Montego Bay. “This is why transshipment has emerged as a very large industry.”

But given a shift in manufacturing and distribution to a just-in-time basis, shipping trends are changing. Sellers of goods want to accommodate customers quicker while maintaining costs.

“This has created an opportunity for one particular type of logistical operations: value-added,” he said.

In particular, the rapid increase in operations costs in Asia are causing manufacturers, especially those in China, to look for locations where they can perform light manufacturing and/or value-added tasks closer to the end consumer.

“This creates another set of opportunities for parts and components to be warehoused here, as well as after sales services,” Shirley added.

The fact ships are getting larger and larger and calling on fewer ports with less frequency creates a good argument for Jamaica as a global logistics hub.

“The large ships are creating a problem for ships in the region because they have to deepen their access channels and put in bigger cranes and equipment to accommodate them,” he continued.

In a major move, in March, the Jamaican government reached an agreement with Terminal Link, the third-largest container company in the world, to privatize KTC.

Terminal Link is owned by France-based CMA CGM (51%) and China Merchants Holdings International (49%).

“Changes that will occur as a result of this agreement include investments in infrastructure upgrades, the dredging of the channel to accommodate post-Panamax vessels, modern terminal facilities, new technology, new handling equipment, and cranes,” said Edmond E Marsh, vice president for business development at the Port Authority of Jamaica.

While the 6,000-hectare Muriel Port currently under development in Cuba may be competition in time, Marsh noted that that project is years away.  “Plus we have developed relationships with steamship lines over the years. That counts for a lot in this business,” Marsh said.

The bigger competitor is Caucedo Multimodal Port in the Dominican Republic, which is constructing the US$15 million Caucedo Logistics Center – part of an overall investment of US$150 million to be executed this year.

That centre is designed to accommodate post-Panamax ships. In 2013, Caucedo Multimodal Port became the base for four leading marine transport operations on North-South America transshipment routes: Evergreen, NYK, Hyundai Merchant Marine (HMM) and Hanjin.

To help increase foreign direct investment in Jamaica, retain targeted investments, sustain economic activity across various sectors of the Jamaican economy and build up trade opportunities, plans also call for developing 16 special economic zones (SEZs) around the island that will ultimately replace free zones.

“We will have everything in place by December 15 to be compliant with the World Trade Organization (WTO) Agreement on (Export) Subsidies and Countervailing Measures,” reported Patricia Francis, chair of the SEZ policy steering committee.

With a population of 10.8 million, the SEZs offer job opportunities for Jamaicans, particularly in the island’s south and northwest, and will feed into value-added logistics activities.

The Chinese also are trying to seize opportunities by developing approximately 2,400 hectares of logistics facilities, industrial parks and manufacturing sites on Jamaica’s Goat Islands, as well as building a deep water port capable of handling transshipment cargo. 

“That is currently undergoing technical studies,” said Marsh. “We should know the results soon.”

The project, proposed by China Harbour Engineering Company (CHEC), has come under heavy criticism, however. Environmentalists have kept a keen eye on the project and are monitoring the process. So far, an environmental impact study has not been done.

“The government will be very involved, as will the Port Authority,” Marsh commented. “But the promise of 10,000 jobs is attractive. The mix of heavy industrial, the building of a power plant – and even the assembly of cranes – makes this our answer to Cuba’s Muriel.”

He also sees it as a testimony to Jamaica’s ability to attract world class companies.

For now, the primary focus is on the Port of Kingston, where developments are underway to facilitate Jamaica’s Logistics Hub Initiative.

Kingston Wharves Limited (KWL), a major terminal operator at the Port, has introduced a three-phase, US$70 million plan development that officials say will strengthen the company’s base as a world-class terminal operator and double its throughput to one million teus by 2019.

Phase I involves a US$20 million, 14,800 square-metre total logistics facility that will operate 24/7. Construction began in October; completion is expected in early 2016.

Grantley Stephensen, KWL’s chief executive officer, calls the facility a game-changer since the expansion will allow KWL to modify shipped items, repackage and ship to other near-market destinations, and create value-added services for cargo handler operations.

In addition, the container yard will be expanded and refurbished.

Phase 2 involves a major harbour dredging project that will take KWL’s berthing facility to the 15.24 feet depth required by post-Panamax class vessels. Modular warehouse space at a minimum of 10,000 square feet will also be added.     

Phase 3 entails the installation of gantry crane rails to be able the introduction of an array of post-Panamax handling equipment. KWL is also continue to expand its port boundary and free zone footprint and augment its fleet equipment with modern and efficient equipment.

 

By Karen E Thuermer

Correspondent | Washington