The Korean ports of Busan and Incheon are both counting on new facilities to boost their performance and standing in the global shipping industry.
Busan Port, South Korea’s busiest, handled 19.4 million TEUs in 2015, a 4.4% increase over the previous year. Last year was also the first time that Busan surpassed 10 million TEUs in its transhipment volume.
Busan’s main priorities for the year ahead are all geared toward developing its New Port into the world’s second-largest transhipment hub. The project, which began in 1995 and is scheduled to last until 2020, consists of three terminals providing 45 vessel berths, 23 of which are now in operation, and four Distripark areas that will support the growth of the port with employment and foreign investment.
“In 2015, 12.9 million TEUs were handled at Busan New Port, which accounts for about 66% of Busan’s total container volume,” says a spokesperson for the port. “Next, we need to propel the development of phase 2-4 of the project, at the South Container Terminal. We’ll have to demolish To Island, located at the entrance of New Port, to improve navigational safety, and deepen the draft to 17-18m to accommodate ultra-large ships more safely.”
Whereas Busan is heavily focused on transhipment, Incheon Port, which is approximately 40km away from the capital Seoul, is geared toward the local market.
“Incheon is ideally located adjacent to a metropolitan area where the living standard is now improving and so there is an increase in demand for consumer goods” says C.K. Yoo, president of the Incheon Port Authority. “Incheon has always been and will continue to be imports-oriented.”
The authority is working on a brand new development which is located to the south of the current port.
“We’re building a new facility, called Incheon New Port, and for the first time, we now offer a modern, deep-sea terminal,” says Yoo. “We used to be handicapped by our shallow draught, so we decided to build a new deep-sea port to overcome that. The new port offers a constant 14m draught and by the end of next year, we’ll be able to offer 16m and accommodate 13,000-14,000 TEU ships.”
The plan for the new port consists of three phases leading up to 2030, with a cost of up to US$3 billion. The first phase involved the construction of a 1.6km berth, with a depth of 16m by the end of next year. The port currently has two terminals with a combined capacity of 1.2 million TEUs: the Sun Kwang New Container Terminal, which opened in June 2015, and the Hanjin Incheon Container Terminal, which opened in March 2016.
In the second phase, the quay will be extended by another 1.7km, making room for more container terminals. This is to be carried out in 2020-2025, depending on cargo volumes.
To take advantage of the improved capabilities of the new port, Incheon has been on the hunt for new lines and services.
“Last year, we introduced 6,800 TEU ships from the G6 alliance running directly between the US West Coast and Incheon,” says Yoo. “This year, we’re looking at introducing another long-haul service, either from South America, Europe or Australia.”
Yoo admits that the current economic climate in South America and Europe might not be conducive to the launch of new routes.
“I think that is quite troublesome,” he says. “On top of that, the regrouping of global alliances is under way. It’s not the ideal time for us to induce long-haul services from these areas. We’re targeting the latter part of this year, when the regrouping of alliance structure is settled.”
The slowing Chinese economy has also hurt the ports of Busan and Incheon. “We can definitely feel the slowdown of the Chinese economy,” says Yoo. “Last year, we grew only 1.8% in terms of throughput, which was a bit disappointing because in previous years we grew by an average of 8% for three consecutive years. So far, this year’s throughput has been going up, in contrast to other major Asian ports like Hong Kong, Singapore and Shanghai.”
According to the spokesperson for Busan Port, China is the most influential market for the port and is the biggest trading partner of transhipment cargo, accounting for more than 30% of the total transhipment volume.
“To attract more transhipment cargo, we’ve set up the aggressive goal of 20 million containers for 2016,” the spokesperson says. “We’re conducting target marketing for global shipping lines and their alliances. The focus is transhipment cargo instead of local cargo, for which there is a limit point in line with the domestic market. Also, China and Japan are implementing strategies to develop some of their ports as transhipment hubs. To deal with these strategies against Busan Port, we need to actively develop a reactive strategy and establish amicable relations with them.”
Both Busan and Incheon are planning to redevelop their old ports into public spaces. “For the development of a harmonious relationship between the port and the city, part of Busan Old Port will become a diverse and attractive maritime tourism spot in Northeast Asia with state-of-the-art innovative buildings, an international passenger terminal and a citizen-friendly waterfront area,” says the spokesperson.
Yoo says that Incheon Port Authority is in discussions with its stakeholders. “The redevelopment of old terminals is a difficult part of our job,” he says. “It’s exciting to develop new ports, but when we relocate container operations we see all that empty space, so we have to figure out what to do with it. That’s on the agenda. Some of it will be open for public use and we could build facilities such as museums and theatres.”
In the meantime, the ports will have to deal with having a split operation. Busan, for example, has allocated separate functions for its old and new ports.
“The new port is our transhipment hub to accommodate bigger container vessels of the global shipping lines, while the old port is used as a feeder network to connect intra-Asia shipping lines,” the spokesperson says. “From 2016, BPA provides incentives for cargo going between the two ports to support shipping lines with cutting down costs. In the long term, BPA is aiming to operate Busan New Port in an optimized and efficient way like the port operation in Singapore and Hong Kong.”
Like the rest of the world, the Korean shipping market is going through some difficult times. But Busan is expecting somewhat of an improvement not too far ahead.
“It seems that the major Korean shipping lines and shipbuilding companies are in a negative environment to overcome the downturn for the moment,” says the spokesperson. “Preparing a strategy to derive beneficial effects from factors such as the expansion of the Panama Canal and the lifting of economic sanctions on Iran will help the Korean shipping market overcome these difficult times and bring growth to global trade.”
Incheon Port is also optimistic that there will be some more growth this year. Part of that growth will come from China, with which South Korea signed a free trade agreement that went into effect in December 2015, and Southeast Asia.
“The other part is due to domestic shippers changing the nature of their logistics flow,” says Yoo. “They used to carry goods via Busan or other South Korean ports and drive them up all the way to metropolitan areas. Now, as the frequency of services improves, they have an option to use Incheon Port directly and cut their logistics costs.”
Because of that, Yoo says that the port is now gradually seeing more and more commodities from the US that it had never handled before, such as certain citrus fruits, agricultural products and hay. Incheon is also importing an increasingly large amount of Australian beef, which has now surpassed US beef imports.
“I think the shipping industry is at the end of a very long and dark tunnel,” he says. “We should see some light next year.”
By Jeffrey Lee
Asia Cargo News | Hong Kong
