The good news for PSA is that Evergreen is following a blueprint pattern set by Maersk Sealand, which would be hard for others to follow.

 

The two liner giants are both stand-alone companies that can move their business unilaterally without consulting their alliance partners. Another crucial factor is that both companies have their own in-house feeder network and are not solely shackled to a common feeder system serving Singapore.

 

Reports suggest Evergreen and Uniglory handle 1.2m teu in Singapore, with much of its transshipment done elsewhere.

 

The only transpacific service calling at Singapore is on the eastbound Round-the-World Service, because all the other business is transshipped from Taiwan where Evergreen has several large terminals.

 

All of the European services and one of the Australia services call there with hubbing for Malaysia, Thailand and Vietnam. Uniglory also hubs in Singapore for their Middle Eastern shipments.

 

Symbolically though it is major blow for PSA as the two top container lines snub it in favour of a port that just 18 months ago many thought would be a white elephant.

 

Evergreen is also the anchor customer for PSA’s state-of-the-art Pasir Panjang Terminal.

 

Like Maersk last year, rumours of Evergreen’s departure had been circulating for months.

 

Evergreen had actively looked for an alternative southeast Asia hub before with aborted plans to build its own deep water port in Vung Tau, Vietnam in 1997.

 

What is surprising though is that the Taiwanese line is looking to a port 30% owned by its rival Maersk.

 

The players involved are not saying much.

 

“We are still studying the possibility, buy we have not made a final decision,” said Elysia Chen, Evergreen’s public relations manager in Taipei.

 

“PTP has given us some plans, which we are looking at,” she added. Reports indicate that cost savings are the main carrot for the Taiwanese line.

 

The 1.2m teu in Evergreen/Uniglory business if true would translate to about 750,000 box moves. Nominal savings estimates from industry sources range from $10m to nearly $30m.

 

PTP is also offering dedicated berths, which would give Evergreen better control over their vessels and allow better programming of their shipments and shuffle on-dock boxes. PSA has long maintained such facilities are simply not economical in land-scarce Singapore. It will be interesting to see if the defection of two major customers and saround 5m in excess annual capacity alters this view.

 

PSA was tight-lipped. “PSA does not and cannot comment on confidential agreements with our customers,” said a spokesman, citing “contractual obligations not to comment on its business operations and dealings with its customers.”

 

The Evergreen defection, possibly starting as early as August 2002, clearly was leaked out of Malaysia where PTP handled 1.48m teu in the first nine months of 2001, compared with PSA’s 7.55m in the first six months.

 

While the move remains unconfirmed by both PTP and Evergreen the Malaysian port would appear to be gearing up for a major surge in volumes.

 

Present capacity meant it was looking for regional lines with a volume of 500,000 teu or less, however it recently placed two separate orders for sets of five super post panamax gantry cranes, The order was split to meet PTP’s tight delivery schedule, which wanted the cranes up and running by the second quarter next year. This will give it 4m teu in annual capacity far more that it need for Maersk.

 

With PTP already planning phase II, the obvious question arises: will there be more defections from Singapore?

 

Fortunately for PSA not many companies fit the business profile of Maersk and Evergreen. COSCO for example is doing a lot of regional business, but most of this is direct end-to-end business from mainland ports so the mainland carrier is somewhat captive to Singapore’s feeder network. Just last month, COSCO signed a virtual terminal agreement (VTA) with PSA Corp that would allow berthing on arrival.

 

There do appear to be few long-term guarantees in the VTA scheme. Maersk Sealand broke a similar agreement, shifting its regional hub to PTP, where it was able to take a 30% stake in the port.

 

Apparently a periodic review within the VTA contract enables carriers to walk away without being hit by heavy penalty clauses. PSA’s first publicized 10-year VTA ceased to exist when the Global Alliance, which signed the deal, broke apart following the acquisition of APL by Neptune Orient Lines (NOL).

 

The trade off between efficiency and cost has always been central to Singapore’s claims to have the edge in retaining transshipment business.

 

Any carrier is going to look at reduced cargo handling costs estimated at 20% to 30% lower in Malaysia and is going to ask, “What will stop me from moving over there?” The obvious answer seems to be resistance from alliance members while a lack of feeder services are a big disincentive.

 

There was a lot made of the decision of Mitsui OSK Lines (MOL) to pull out PTP on a Straits service due to claims of poor quality service. The MOL defection from PTP looks like more of an issue that they could not tap into Malaysian cargoes and the service call was never intended to be a transshipment hub in the Maersk/Evergreen mould.

 

Some of the local feeder operators in Singapore are as big as the main container lines and the transshipment function would seen to make this a logical formula. Regional Container Lines (RCL) handled more that 1.4 m teu last year, while Indonesian-owned Samudera Shipping Line also crossed the 1mm mark.

 

Most feeder companies enjoy volume discounts at PSA terminal in Singapore and are tied into “shuttle services” which call directly between Singapore and the regional or port of origin.

 

If Evergreen does pull out, it seems like another nail in the coffin of PSA’s long-awaited and already shelved initial public offering, with it appearing to ruin any change of a pick-up in volumes in 2002.

 

Evergreen has to save costs as it shifts to a new revenue base. With the outlook getting grimmer for the trades at the end of year, then PTP must have started looking like a more attractive option.

 

There must be a lot of smiles across the causeway not PTP can shed its image as a one-line port.