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Cablegate: Singapore Port Down, but Not Out

VZCZCXRO1568
RR RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHGP #1223 3550744
ZNR UUUUU ZZH
R 210744Z DEC 09
FM AMEMBASSY SINGAPORE
TO RUEHC/SECSTATE WASHDC 7563
INFO RUCNASE/ASEAN MEMBER COLLECTIVE
RUEHHK/AMCONSUL HONG KONG 6512
RUCPDOC/DEPT OF COMMERCE WASHDC
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC

UNCLAS SINGAPORE 001223

STATE PASS USTR

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON ETRD EWWT SN

SUBJECT: SINGAPORE PORT DOWN, BUT NOT OUT

REF: A) 08 SINGAPORE 1319
B) SINGAPORE 308

1. (SBU) Summary: Singapore's port, the busiest container port in
the world, is beginning to recover from the global financial crisis
that crippled international trade, but volumes are still
dramatically off the heights from early 2008. The Port of Singapore
Authority (PSA) saw its annual container throughput in Singapore dip
a hefty 14 percent through November of 2009, though in November the
port finally reverted to year-on-year monthly growth. Despite the
economic setback and growing competition from regional ports, PSA is
cautiously expanding capacity as part of an ongoing port
development. End Summary.

Economies Recovering, Port Following
------------------------------------

2. (SBU) Port operator PSA Singapore Terminals, which handles about
one-fifth of the world's total container transshipment throughputs,
has handled 22.92 million twenty-foot equivalent units (TEUs) in the
first 11 months of 2009, down 14.6 percent from 2008. The global
financial crisis that struck the region late in 2008 particularly
impacted container volumes, hitting both demand for goods and the
availability of trade finance that fuels the shipping industry (Ref
A). The decline was most severe in the first two months of 2009,
when monthly container throughputs dipped 20 percent year-on-year to
below two million TEUs. GOH Hwee Shan of PSA's Research and
Statistics Division, told Econoff that the port began to see a
recovery in August, thanks mostly to rising intra-Asian trade.
Singapore port posted its first positive growth in volumes for the
year in November, though that was more a reflection of the sharp
dropoff in container volumes in the previous November. PSA forecast
that its annual container throughput in Singapore will reach only 25
million TEUs for 2009, down from 29 million TEUs in 2008.

Fighting for Market Share in the Recovery
-----------------------------------------

3. (SBU) Singapore has been fighting to retain its market share in
the transshipment business despite the slowdown in global trade.
Nearly 80 percent of the containers passing through Singapore are
transshipped to other locales. At the height of the economic
downturn, Singapore's Maritime and Port Authority (MPA) instituted
concessions on port dues and related fees to encourage shipping
business (Ref B). OH Bee Lock, Senior Vice President of PSA
Corporate Planning, told Econoffs that Singapore faces strong
competition from traditional rivals like Hong Kong, as well as ports
in Malaysia, Thailand and Vietnam which are now battling for a
bigger slice of the global container transshipment market. Shippers
are also increasingly looking to cut costs by shipping directly from
port to port and avoiding transshipment charges.

4. (SBU) Also of concern for the port of Singapore is the financial
health of shipping companies that are plagued by continuing low
freight rates. Approximately 10 percent of the world's container
vessels were idled in 2009 and MPA observed that operating container
vessels were only 50-60 percent full (Ref B). Neil Dekker of Drewry
Shipping forecasts that the world's major container carriers would
lose US$20 billion in 2009 as a result of a global container traffic
slowdown of 10.3 percent. That would mark a 27 million TEU decline
from the 2007 level worldwide. Drewry sees the Asia-Europe route,
one of the most competitive globally, witnessing a 29.5 percent
reduction in shipping rates in 2009.

Singapore Plans Expansion Despite Setbacks
------------------------------------------

5. (SBU) Despite the current economic slowdown, Singapore intends
to expand the port's container capacity in order to remain
competitive in the global market. During the economic downturn, MPA
continued with land reclamation projects at the port to support
PSA's future expansion plans for its operations in Singapore (Ref
B). PSA's most advanced Pasir Panjang terminal is equipped with
berths up to 16 meters deep and with quay cranes able to reach
across 22 rows of containers so it can handle the newest generation
of super container vessels carrying 12,000 TEUs. PSA intends to add
ten new container berths in the next few years at Pasir Panjang,
bringing PSA's total to 54 container berths in Singapore. For the
longer term, PSA is planning subsequent phases of expansion in Pasir
Panjang Terminal aimed at eventually increasing container volume
capacity at the port from the current 35 million TEUs to
approximately 50 million TEUs annually.

SHIELDS

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