1. 31/5/04Busan Development Institute1 Dr Dong-Wook Song The University of Hong Kong Asian Container Ports: Development, Competition & Implications for Busan

2. 31/5/04Busan Development Institute2 Discussion Points l Review of port development in the region l Competition status between the ports l Overview of transport logistics l Strategic Implications

3. 31/5/04Busan Development Institute3 Port in International Logistics and Trade International Trade Transport Logistics (international) Maritime Transport PortShipping

4. 31/5/04Busan Development Institute4 Implications from the Diagram derived l Transport demand is derived – not a direct, primary or final demand ! maritime transport international trade l Demand for maritime transport is derived particularly from international trade international logistics l At the same time, maritime transport is constrained by international logistics

5. 31/5/04Busan Development Institute5 World Top 10 Container Ports RankPort20032002%Country 1 Hong Kong 20,10019,1405.0China 2Singapore 18,10016,8007.7Singapore 3Shanghai 11,2808,61031.0China 4Shenzhen 10,6107,61339.4China 5Busan10,3679,4539.7Korea 6Kaoshuing 8,8408,4934.1Taiwan 7 Los Angeles 7,1806,10517.6USA 8Rotterdam 7,1006,5159.0Netherlands 9Hamburg 6,1385,37414.2Germany 10Antwerp 5,4454,77714.0Belgium (Unit:: 000 TEUs) Source: Containerisiation International (March, 2004)

6. 31/5/04Busan Development Institute6 World Top 20 Container Ports

7. 31/5/04Busan Development Institute7 Regional Container Ports in Asia Source: Loo and Hook (2002 )

8. 31/5/04Busan Development Institute8 Major Ports Feeder Ports Tanjung Pelepas Shenzhen Busan Kaoshuing Hong Kong Singapore to North America to Europe Competition from adjacent Ports Asian Container Port Network Shanghai

9. 31/5/04Busan Development Institute9 PortProjectQuay Length (metres) Annual Capacity (million TEUs per year) Completion by end TianjinContainer Terminal 3 North Basin: 5 New Berths 350 0.375 0.34 2004 2005 2006 2007 2008 2009 2010 2011 QingdaoP&O Ports Terminal - 5 th Berth - Two Berths - Further Berthage 487 800 2,800 0.50 1.00 3.40 2004 2005 2006-10 DalianDCT - Four Berths640 320 0.75 0.375 2004 2005 Committed & Planned Port Development - Northeast China - Source: Ocean Shipping Consultants (2003 )

10. 31/5/04Busan Development Institute10 PortProjectQuay Length (metres) Annual Capacity (million TEUs per year) Completion by end Hong KongTerminal 9 Terminal 10 350 1,560 1,500 0.48 2.12 2.50 2003 2004 2008 ShanghaiPhase III Phase IV Jinshanzui: new terminal Yangshan Port 665 600 2,000 0.60 0.40 2.20 12.50 2002 2003 2004 2008 2007-09 2010 - NingboFour Berths309.5 1,200 0.25 1.30 2004 2006-10 ShenzenYantian Phase III Shekou Phase II Chiwan 4 th Berth 350 700 350 700 0.50 1.00 0.50 0.80 0.70 2004 2005 2006 2004 Committed & Planned Port Development - East and Southeast China - Source: Ocean Shipping Consultants (2003 )

11. 31/5/04Busan Development Institute11 PortProjectQuay Length (metres) Annual Capacity (million TEUs per year) Completion by end PSA Efficiency Improvements Pasir Panjang: Phase II - 2,600 4,800 0.50 3.00 5.50 2002 2005-07 2008-10 2010- PTP Klang Phase II Further Phases Westport Expansion Northport 1,080 2,160 600 356 1.90 3.80 0.80 0.40 2004-05 2009-10 2020 2002 2003 T. PriokJICT: new berth & other80 433 0.20 0.50 2003 2005 Committed & Planned Port Development - Southeast Asia - Source: Ocean Shipping Consultants (2003 )

12. 31/5/04Busan Development Institute12 PortProjectQuay Length (metres) Annual Capacity (million TEUs per year) Completion by end Busan Shin-Gamman Terminal PECT Terminal Expansion 826 300 0.65 0.25 2002 2006 Newport (Busan) Phase I – 1 Stage A Phase I – 1 Stage B - Full Capacity Phase I - 2 1,000 1,2000 1.00 1.375 2.60 2006 2007 2009 2012-14 Gwangyang Phase II – Stage I Phase II – Stage 2 Phase III 1,350 1,150 1,400 0.72 1.25 1.56 2002 2004-05 2007-08 IncheonSouth Harbour CT 300 0.375 2003 2005 2008 UlsanCT1,000 0.85 2006 2011 Committed & Planned Port Development - Korea - Source: Ocean Shipping Consultants (2003 )

13. 31/5/04Busan Development Institute13 Source: Ocean Shipping Consultants (2001 )

14. 31/5/04Busan Development Institute14 Source: Ocean Shipping Consultants (2001 )

15. 31/5/04Busan Development Institute15 Source: Ocean Shipping Consultants (2001 )

16. 31/5/04Busan Development Institute16 Source: Ocean Shipping Consultants (2003 )

17. 31/5/04Busan Development Institute17 l Forecast is forecast l Forecast is forecast : forecast tends to be optimistic !! l Thus, we have to seriously answer questions below - Do we have enough cargoes (or demand) ? Is the ever-expansion of port capacity justifiable or only a solution ? l However, at the same time, the following facts are to be taken into account – Only those ports which have enough capacity and / or proper facility can enjoy demand increased – like a lottery !!! Lead time, capital intensive investment, high sunk costs ….. make decision-making problems delicate and complicated. Points to be noted !!!

18. 31/5/04Busan Development Institute18 Asian Container Throughput by Region 1990 2002 Northeast Asian Ports 35.325.7 Chinese Ports 34.942.2 Southeast Asian Port 29.832.1 Total 100 (Unit: %) Source: Ocean Shipping Consultants (2003)

19. 31/5/04Busan Development Institute19 Some Thoughts on Port Demand l Demand for shipping services l Demand for shipping services is derived from international trade. l Demand for port servicesshipping lines’ decision l Demand for port services is derived from or subject to shipping lines’ decision. l Shipping demand is the second; Port demand is the third ? l Ports become a ‘prawn’ in international trade !!! * * * * * How should a port react and respond ?

20. 31/5/04Busan Development Institute20 Port Market Driven l To become more price competitive l To improve service quality l To expand service range l To cope with increased customer's negotiation power (e.g. shipping alliances, ever-increasing vessel size)

21. 31/5/04Busan Development Institute21 Structural Changes in Transport Logistics FordismPost-Fordism Economies of scale Economies of scale Standardisation Quantity-oriented Long trade cycle Uni-modal transport Others Economies of scope Flexibility Quality-oriented Short trade cycle Multi-modal transport Global operation Outsourcing VAL services Others

22. 31/5/04Busan Development Institute22 Current Development in Transport Logistics l More logistics activities ‘outsourced’ l Logistics services ‘integrated’ and ‘improved’ l Information technology (IT) widely ‘applied’ l 3PLs service scope ‘expanded’

23. 31/5/04Busan Development Institute23 Client Supplier Consumer LLP or 4PL (Logistics Integrator) Shipping Company Rail Operator Terminal Operator Warehouse Road Hauler Barge Operator Information flow between LLP and 3PLs Information flow in the supply chain of client

24. 31/5/04Busan Development Institute24 A Strategic Response from Ports Three Generic Strategies l The ‘ Three Generic Strategies ’ for creating a defensible position and outperforming competitors (Porter, 1980) 1.Cost leadership strategy 2.Differentiation strategy 3.Focus strategy

25. 31/5/04Busan Development Institute25 A Strategic Response from Ports (I)

26. 31/5/04Busan Development Institute26 A Strategic Response from Ports (II) Hub port Hub port Feeder port Feeder port A comprehensive market analysis is a pre-requisite !! Focus Positioning Focus or Positioning

27. 31/5/04Busan Development Institute27 Strategic Options in General l Competition ‘Win & Lose Game’ l Competition in 1980s – ‘Win & Lose Game’ l Co-operation ‘Win & Win Game’ l Co-operation in 1990s – ‘Win & Win Game’ l Co-opetition l Co-opetition in the Millennium  ‘Selective Win & Lose Game’  ‘Co-operate to Compete’  To identify your collaborator and competitor  e.g. Port alliances against shipping alliances

28. 31/5/04Busan Development Institute28 Source: Lloyd’s Freight Transport Buyer Asia (July/August, 2002)

29. 31/5/04Busan Development Institute29 m To constantly cope with changing market environment m To be global business players beyond port boundaries m To be global logistics service providers to customers m To achieve economies of scale being complemented by economies of scope m To focus on core competencies & outsource other logistics functions m To be technologically innovative m To be more commercially oriented For Competitive and Successful Port Management in the Logistics Era

30. 31/5/04Busan Development Institute30 Concluding Remarks l Maritime transport is subject to international trade and transport logistics chains. l Ever-changing business environment in maritime transport and logistics is a fact of challenging as well as opportunity. l New strategies are to continuously developed and implemented to be competitive and sustainable. l Objective market analysismarket positioning l Objective market analysis and market positioning seem a key for Busan’s further success