2014-04-08-TOC-AsiaThe relative resilience of Asian economies during the global financial crisis is prompting a shift in focus for many of the region’s countries. Intra-regional trade is becoming increasingly important as Asia transforms from a source of cheap production to a strong economic trading bloc in its own right. Nestle and John Deere join panel of shipping and trade experts at the 18th annual TOC Container Supply Chain Asia PSA CEO confirmed as Plenary keynote speaker

The Intra-Asia trade corridor is now the fastest growing trade area worldwide: Intra-Asia trade represents around 25% of Asia’s total of US$6 trillion annual exports and is predicted to rise strongly. For instance, intra-regional trade with China now accounts for more than 37% of the Association of Southeast Asian Nations’ (ASEAN) total trade, up from 26% in 2000 while ASEAN trade with the US has fallen from 20% in 2000 to 10% in 2011.

The drivers of this growth are varied. At an institutional level, bodies such as ASEAN are helping to further regional economic integration through the Economic Community Blueprint for 2015. Member countries have recognised that a large part of their future economic growth is dependent on increased economic and trade cooperation with emerging and developing economies.

Dr. Mark Yong, Business Development Director – Asia Pacific, for BMT Asia Pacific, who will be speaking at TOC Asia, also points out the emergence of bilateral trade deals between individual countries in the region reinforcing existing agreement such as the ASEAN Free Trade Agreement (AFTA).

China’s role

Trends in China are also accelerating regional economic integration and boosting intra-regional trade. Rising prices and shortages of skilled labour in China are encouraging companies to expand their production to other parts of Asia, such as Vietnam, Indonesia and Cambodia. Dr. Yong adds that more production of low value goods is being relocated to these countries, while high value goods are still predominantly being manufactured in places such as China due to better infrastructure and sourcing factors. However, this diversity places new demands on supply chains that require close integration of suppliers and production networks across the entire region.

Intra-regional trade is also being accelerated by another important phenomenon in China. After decades of export-driven growth, China is moving to a consumption-based economic model. Household consumption as a share of the country’s GDP remains internationally low at 34% of the economy (compared to 53% for South Korea and 60-70% for developed countries) but it is expected to grow strongly.

What does it all mean for ports and shipping?

All these factors point to growing container volumes moving between Asian countries rather than just exiting the region bound for markets in Europe and North America. However, a critical issue in ensuring intra-regional supply chains can be sustained during this transition is the rate at which logistics infrastructure can developed and expanded. This means not simply building new ports, but upgrading existing ones to handle larger sized container vessels that will cascade onto regional trades having been displaced from the principal Asia-Europe and Transpacific sea-routes.

This game-changing shift in trade patterns will be a key focus of discussion at the 18th TOC Container Supply Chain Asia Conference and Exhibition, taking place 8-9 April 2014 at the Marina Bay Sands Hotel, Singapore. Moderated by Dr. Mark Yong, Associate Director, BMT Asia Pacific, a panel of senior industry practitioners and experts will examine the outlook for this critical trade region and the implications for ports, shippers, carriers and logistics companies.

TOC spoke to some of the panellists ahead of the debate to gauge the key themes like to be raised during the discussion.

For Christian Brath, Head of Ocean Transport Procurement - Zone AOA, Asia, Oceania & Middle East, for global food giant Nestle, it is clear that growth of Intra-Asia trade is already helping to drive growth across his company’s markets as well as enabling Nestle to maximize and best utilize its production capacities across the region. Mr Brath sees solid growth right across Nestle’s food & beverage product throughout Asia.

However, properly managing the supply/demand balance remains a challenge. On the one hand new opportunities are arising to create new services and use new ports of call – he cites Batangas in The Philippines as an example.

On the other, vessel cascading into regional trades has been going on for some time now and is set to continue. This means that Intra-Asian markets continue to remain competitive, but terminal and landside congestion are the big challenges. Sufficient new investment in both terminals AND infrastructure is required, Mr Brath maintains.

Dr. Yong supports this argument, too. An issue with vessel cascading is that larger tonnage by itself can create problems of port congestion where terminals are not properly equipped to handle such vessels. Indonesia seems to be a prime example. This is compounded by longer dwell times which can have significant knock-on effects on supply chains.

David A. Panjwani, Global Logistics Manager, Asia/Africa, John Deere WWL points out that some ports along intra-Asia trade lanes are highly developed and can handle the frequency and size of the vessels being used. Others, however, are still in growth mode and are not fully prepared to cope with this growth.

“This can create challenges when liners are trying to establish reliable schedules and offer a competitive product,” he says. “Clearly, we are seeing very large vessels focus on core trades like Asia–Europe and the medium size vessels are cascading into intra-Asia. This seems to be allowing for adequate capacity in Intra-Asia, keeping rates at somewhat depressed levels which in the long run are not beneficial to the carrier industry. Operationally, ports like Singapore, Laem Chabang, and Hong Kong can easily handle these cascading vessels but there should be concern for ports elsewhere (in terms of their) preparedness, for example in Indonesia, Vietnam, or Cambodia.

And speaking of Vietnam, Soren S. Pedersen, VP Marketing of SSA Marine International’s operations in Vietnam, states that many observers speculate that the country has more to gain from the Trans Pacific Partnership trade agreement (TPP) than any other treaty member country. “Some expect as much as a doubling of export volumes in categories such as footwear and garments,” he comments.

For this reason, being able to operate the largest possible vessels at export gateways is very much the order of the day for intra-Asia carriers. “Any gain in scale found through additional dredging/productivity improvements at the terminals will be exploited,” he states.

Cometh the C Dragon

Although Intra-Asia trade is one of the fastest growing container trades in the world, draft and length restrictions are still a challenge in a number of Asian ports, adds Jost Bergmann, Segment Director for Container Ships at DNV GL, the world’s largest classification society.

Average vessel size of the ‘Intra-Asia feeder’ has been growing dramatically in the past couple of years, he says. However, wide beam and shallow draft vessels have an advantage on this compared with conventional designs. This reasoning is behind DNV GL's development of the C-Dragon ship, an innovative vessel concept which its designers claim will make container transport within Asia more competitive.

C-Dragon measures 211.9m in length between perpendiculars and 37.3m in width with a loading capacity of 3,736 TEU. The concept targets the actual condition of Intra-Asia trade with short roundtrips and many port calls, being designed to outperform cascading older tonnage now deployed in the region in terms of fuel efficiency, port turnaround and cargo intake.

C-Dragon has a high ratio of on-deck to total TEU capacity (2,376 TEU vs. 3,736 TEU) and fewer bays. This layout is instrumental in reducing port stay duration because the greater number of containers on deck reduces the need to remove hatch covers, while fewer bays result in fewer crane movements. Port efficiency simulations conducted using prototype software from DNV GL demonstrated that the average port stay was reduced from 15 to 14 hours for C-Dragon for each harbour stay.

Clearly intra-Asia trade is growing rapidly and set to continue into the foreseeable future. But issues and challenges remain and TOC CSC Asia’s panel discussion (Day 1, 8 April 2014. 14:00-15:30) will examine the outlook for this critically important region and the implications for ports, shippers, carriers and logistics companies operating on these trades.

PSA CEO to keynote

TOC Events is delighted to announce that Mr Tan Chong Meng, Group Chief Executive Officer of PSA International, will keynote the Opening Plenary Session of TOC CSC Asia 2014. Mr Tan spent 23 years at Shell before taking the helm at PSA in 2011, and TOC CSC delegates will be fascinated to hear Mr Tan’s thoughts on the future of the global terminal industry.

Convened under the theme Asia’s Changing Role in the Global Trade Economy, TOC CSC Asia 2014 returns to Singapore as part of Singapore Maritime Week (SMW), running from 6-11 April 2014. TOC CSC Asia will once again provide a macro-to-micro perspective on global and regional container supply chains and trade, bringing together a diverse group of stakeholders to explore current challenges and solutions. In a new format designed to promote peer group networking and knowledge exchange, the 2014 event will incorporate two concurrent debating forums – the Container Supply Chain (CSC) Conference and the TECH TOC Conference – supported by a common networking zone where attendees at both events will gather together for social events and joint sessions.

CSC is an executive-level discussion forum focused on international trade, container shipping, port development and logistics, bringing together shippers, shipping lines, 3PLs, port authorities, terminal operators, government and other key supply chain members. TECH TOC is aimed at operational executives and focuses on the practicalities of port and terminal performance, with in-depth debates on facility design, automation, operations, equipment and technology from berth to gate.

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