As Samsung Electronics Co. (005930) and Honda Motor Co. (7267) are building new factories in Vietnam and Thailand, Singapore is readying a mega port to handle all those mobile phones, TVs and cars.
The city-state is building a new port west of the current 1,000 hectare (2,471 acre) site, to double capacity to 65 million boxes a year. That will help Singapore, home to the world’s second-busiest container port, lure goods made in Southeast Asian nations and then ship them worldwide.
Singapore’s ambition is an example of how countries are spending billions of dollars to add capacity as trade within Asia is expected to expand twice as fast as that between Asia and Europe. That’s raising stakes for Hong Kong billionaire Li Ka-shing’s port operator Hutchison Whampoa Ltd. (13) in a region which accounts for 41 percent of global container shipments.
“We want to make sure we have capacity to be able to service the growth that can take place going forward,” Singapore’s Transport Minister Lui Tuck Yew said in an interview last week. “We have seen the European countries mired in difficulties for a number of years but will that always be so? We need to be able to look beyond the current difficulties.”
The first phase of Singapore’s proposed expansion may be completed within the next 10 years, according to the Maritime and Port Authority of Singapore. Port building costs could top S$10 billion ($7.9 billion), according to Vishnu Varathan, an economist at Mizuho Bank Ltd. in Singapore.
The expansion plan could make Singapore the world’s biggest port in terms of capacity, according to London-based Drewry Shipping Consultants Ltd. In 2013, Singapore handled 32.6 million 20-foot boxes, 2.9 percent more than a year earlier. Shanghai processed 31 million in the first 11 months.
Singapore-based PSA International Pte, the world’s biggest container-port operator, currently runs five terminals in the city-state and is spending S$3.5 billion by 2020 to add 15 more berths.
Rivaling Singapore is China, which in September inaugurated a free-trade zone in Shanghai, home to the world’s busiest container port. The zone is a test of free-market policies that Premier Li Keqiang has signaled may be implemented more broadly. Shanghai also plans to expand its Yangshan port, Shanghai Securities News said Dec. 3.
Hong Kong has been reviewing plans for a 10th terminal to increase capacity to 27.9 million containers. That plan, which may cost almost HK$100 billion ($13 billion), may not be financially viable, the South China Morning Post newspaper said on Dec. 2, citing a consultancy report expected this month.
One risk for this expansion spree is global economic growth. Concerns about weakening spending in Europe and the withdrawal of monetary stimulus in the U.S. might slow Asia’s advance.
China, the world’s biggest exporter of goods in 2012, is expected to grow 7.7 percent this year, slower than the 8 percent expansion projected in June, Washington-based World Bank said Jan. 15. The world’s second-largest economy is shifting “to slower but more sustainable consumption-led growth,” it said.
Samsung, the world’s biggest mobile phone maker, expects to start test operations of its $2 billion handset plant in Vietnam next month. It first manufactured mobile phones there in 2009.
Intel Corp. (INTC:US), the world’s largest chipmaker, opened a $1 billion assembly and testing plant in Ho Chi Minh City in 2010. Nokia Oyj (NOK1V) said its facility near Hanoi producing Asha smartphones and handsets became fully operational in the third quarter. LG Electronics Inc. (066570) is building a new 400,000 square meter complex in Vietnam to make TVs and appliances as part of a $1.5 billion investment plan.
To support that growth, Vietnam will build a $3.6 billion port that can handle vessels that can carry as many as 17,000 containers each. Construction may be completed after 2020.
Honda, Japan’s third-biggest carmaker, said in February that it will build a new factory in Thailand with an annual capacity of 120,000 units when it starts operations in 2015. Yokohama Rubber Co. (5101) in April said it will put a second tire-manufacturing plant in Thailand.
Thailand plans to help Myanmar build an $8.6 billion deep-sea port and industrial zone in Dawei, less than 300 kilometers from Bangkok, from which it will export Thai products.
Intra-Asia transshipments, or cargo moving from one Asian port to another, are expected to grow by double the estimated 4 percent to 5 percent increase for East and West trade, said Rahul Kapoor, a director at Drewry in Singapore.
Trade within Asia is expected to reach 80.4 million containers in 2015, growing on average about 10 percent a year, according to the United Nations Economic and Social Commission for Asia and the Pacific. A total of 53 percent of Asian products were shipped within the region in 2012, according to the World Trade Organization.
Shipping companies are ordering bigger vessels to transport more goods at lower costs. A.P. Moeller-Maersk A/S (MAERSKB) currently operates four of the world’s biggest container vessels and has 16 more on order, according to data compiled by Bloomberg. Each ship can carry 18,000 boxes.
Singapore will redevelop the current port region into the Southern Waterfront City by 2027 when leases for the terminals expire, minister Lui said. The facility overlooks the Sentosa island, home to Genting Singapore Plc (GENS)’s casino, Universal Studios theme park and the world’s largest aquarium.
“You must always be able to give a forward look to the industries, airlines as well as the shipping community, that we are not here only for the next 5 years 10 years but that really over the long term you will have a place with us.” Lui said.
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