Transcript Game Theory and Maritime Economics

Asian Container Ports:
Development, Competition & Implications for Busan
Dr Dong-Wook Song
The University of Hong Kong
31/5/04
Busan Development Institute
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Discussion Points

Review of port development in the region

Competition status between the ports

Overview of transport logistics

Strategic Implications
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Busan Development Institute
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Port in International Logistics and Trade
International Trade
Transport Logistics (international)
Maritime Transport
Shipping
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Port
Busan Development Institute
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Implications from the Diagram



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Transport demand is derived – not a direct, primary
or final demand !
Demand for maritime transport is derived
particularly from international trade
At the same time, maritime transport is constrained
by international logistics
Busan Development Institute
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World Top 10 Container Ports
(Unit:: 000 TEUs)
Rank
Port
2003
2002
%
Country
1
Hong Kong
20,100
19,140
5.0
China
2
Singapore
18,100
16,800
7.7
Singapore
3
Shanghai
11,280
8,610
31.0
China
4
Shenzhen
10,610
7,613
39.4
China
5
Busan
10,367
9,453
9.7
Korea
6
Kaoshuing
8,840
8,493
4.1
Taiwan
7
Los Angeles
7,180
6,105
17.6
USA
8
Rotterdam
7,100
6,515
9.0
Netherlands
9
Hamburg
6,138
5,374
14.2
Germany
10
Antwerp
5,445
4,777
14.0
Belgium
Source: Containerisiation International (March, 2004)
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World Top 20 Container Ports
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Regional Container Ports in Asia
Source: Loo and Hook (2002)
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Asian Container Port Network
Major Ports
Feeder Ports
Busan
Competition
from adjacent Ports
Shanghai
to North America
Shenzhen
Kaoshuing
Tanjung Pelepas
Hong Kong
to Europe
Singapore
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Committed & Planned Port Development
- Northeast China Port
Tianjin
Project
Container Terminal 3
North Basin: 5 New Berths
Qingdao
Dalian
P&O Ports Terminal
- 5th Berth
- Two Berths
- Further Berthage
DCT
- Four Berths
Quay Length
Annual Capacity
(metres)
(million TEUs per year)
Completion
by end
350
350
350
350
350
350
350
350
0.375
0.375
0.375
0.34
0.34
0.34
0.34
0.34
2004
2005
2006
2007
2008
2009
2010
2011
487
800
2,800
0.50
1.00
3.40
2004
2005
2006-10
640
320
0.75
0.375
2004
2005
Source: Ocean Shipping Consultants (2003)
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Busan Development Institute
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Committed & Planned Port Development
- East and Southeast China Port
Hong Kong
Project
Terminal 9
Terminal 10
Shanghai
Phase III
Phase IV
Jinshanzui: new terminal
Yangshan Port
Ningbo
Four Berths
Shenzen
Yantian Phase III
Shekou Phase II
Chiwan 4th Berth
Quay Length
Annual Capacity
(metres)
(million TEUs per year)
Completion
by end
350
1,560
1,500
0.48
2.12
2.50
2003
2004
2008
665
665
600
600
2,000
0.60
0.60
0.60
0.40
2.20
12.50
2002
2003
2004
2008
2007-09
2010 -
309.5
1,200
0.25
1.30
2004
2006-10
350
700
350
700
700
0.50
1.00
0.50
0.80
0.70
2004
2005
2006
2006
2004
Source: Ocean Shipping Consultants (2003)
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Committed & Planned Port Development
- Southeast Asia Port
PSA
Project
Quay Length
Annual Capacity
(metres)
(million TEUs per year)
Completion
by end
-
0.50
2002
2,600
3.00
2005-07
2,600
3.00
2008-10
4,800
5.50
2010-
Phase II
1,080
1.90
2004-05
Further Phases
1,080
1.90
2009-10
2,160
3.80
2020
Westport Expansion
600
0.80
2002
Northport
356
0.40
2003
JICT: new berth & other
80
0.20
2003
433
0.50
2005
Efficiency Improvements
Pasir Panjang: Phase II
PTP
Klang
T. Priok
Source: Ocean Shipping Consultants (2003)
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Committed & Planned Port Development
- Korea Port
Busan
Project
Quay Length
Annual Capacity
(metres)
(million TEUs per year)
Completion
by end
Shin-Gamman Terminal
826
0.65
2002
PECT Terminal Expansion
300
0.25
2006
Newport
Phase I – 1 Stage A
1,000
1.00
2006
(Busan)
Phase I – 1 Stage B
1,000
1.00
2007
1.375
2009
- Full Capacity
Gwangyang
Incheon
Ulsan
Phase I - 2
1,2000
2.60
2012-14
Phase II – Stage I
1,350
0.72
2002
Phase II – Stage 2
1,150
1.25
2004-05
Phase III
1,400
1.56
2007-08
300
0.375
2003
300
0.375
2005
300
0.375
2008
1,000
0.85
2006
1,000
0.85
2011
South Harbour CT
CT
Source: Ocean Shipping Consultants (2003)
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Supply and Demand (HK)
35
Supply
Demand
30
Million TEUs
25
20
15
10
5
0
2000
2001
2002
2003
2004
2005
2010
Year
Source: Ocean Shipping Consultants (2001)
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Supply and Demand (Singapore)
Supply
35
Demand
30
Million TEUs
25
20
15
10
5
0
2000
2001
2002
2003
2004
2005
2010
Year
Source: Ocean Shipping Consultants (2001)
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Supply and Demand (China)
Supply
Demand
45
40
35
Million TEUs
30
25
20
15
10
5
0
2000
2001
2002
2003
2004
2005
2010
Year
Source: Ocean Shipping Consultants (2001)
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Supply and Demand (Korea)
25
Supply
Demand
Million TEUs
20
15
10
5
0
2001
2002
2003
2004
Year
2005
2010
Source: Ocean Shipping Consultants (2003)
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Points to be noted !!!

Forecast is forecast: forecast tends to be optimistic !!

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 ?

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.
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Asian Container Throughput by Region
(Unit: %)
1990
2002
Northeast Asian Ports
35.3
25.7
Chinese Ports
34.9
42.2
Southeast Asian Port
29.8
32.1
100
100
Total
Source: Ocean Shipping Consultants (2003)
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Some Thoughts on Port Demand


Demand for shipping services is derived from international trade.
Demand for port services is derived from or subject to shipping
lines’ decision.

Shipping demand is the second; Port demand is the third ?

Ports become a ‘prawn’ in international trade !!!
* * * * *
How should a port react and respond ?
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Port Market Driven

To become more price competitive

To improve service quality

To expand service range

To cope with increased customer's negotiation power
(e.g. shipping alliances, ever-increasing vessel size)
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Structural Changes in Transport Logistics
• 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
Fordism
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Post-Fordism
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Current Development in Transport Logistics

More logistics activities ‘outsourced’

Logistics services ‘integrated’ and ‘improved’

Information technology (IT) widely ‘applied’

3PLs service scope ‘expanded’
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Barge
Operator
Rail
Operator
Terminal
Operator
Warehouse
Shipping
Company
Supplier
Road
Hauler
LLP or 4PL
(Logistics Integrator)
Client
Consumer
Information flow between LLP and 3PLs
Information flow in the supply chain of client
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A Strategic Response from Ports

The ‘Three Generic Strategies’ for creating a
defensible position and outperforming competitors
(Porter, 1980)
1. Cost leadership strategy
2. Differentiation strategy
3. Focus strategy
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A Strategic Response from Ports (I)
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A Strategic Response from Ports (II)
Focus or Positioning
•
•
Hub port
Feeder port
A comprehensive market analysis is a pre-requisite !!
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Strategic Options in General
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
Competition in 1980s – ‘Win & Lose Game’

Co-operation in 1990s – ‘Win & Win Game’

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
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Source: Lloyd’s Freight Transport Buyer Asia (July/August, 2002)
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For Competitive and Successful
Port Management in the Logistics Era







To constantly cope with changing market environment
To be global business players beyond port boundaries
To be global logistics service providers to customers
To achieve economies of scale being complemented by
economies of scope
To focus on core competencies & outsource other logistics
functions
To be technologically innovative
To be more commercially oriented
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Concluding Remarks




Maritime transport is subject to international trade and
transport logistics chains.
Ever-changing business environment in maritime
transport and logistics is a fact of challenging as well as
opportunity.
New strategies are to continuously developed and
implemented to be competitive and sustainable.
Objective market analysis and market positioning seem a
key for Busan’s further success
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