PTP operator Pelabuhan Tanjung Pelepas Sdn Bhd trumpets the move as 'the biggest single shift in the port industry in Southeast Asia'. It is a bole claim, but most industry-watchers say it is not an idle one. They agree that the Maersk Sealand deal, announced on Aug 18, is nothing less than a coup for PTP, which began operating only 10 months ago. 'It's one way of starting with a bang,' say one observer.

Due to its location and strategy, PTP has from the outset been seen as an alternative port to Singapore. Understandably, the initial targets were somewhat modest and unthreatening. The aim was to grab 10 per cent of Singapore's container business. Even so, the official line was PTP would concentrate on spillover cargo that our southern neighbour could not handle.

However, the pact with Maersk Sealand involves quite a bit more than spillover cargo. The company will switch its container cargo operations to PTP by December, making the port the largest hub within the Maersk Sealand global network. This means all main line vessels (with the exception of the New Zealand and West Australian services) will call at PTP instead of Singapore.

With this arrangement, PTP gains a guaranteed annual volume of two million 20-foot equivalent units (TEUs) next year. And this is not counting the boxes anticipated from additional feeder lines now in negotiations with PTP for Southeast Asian and South Asian routes. In comparison, PTP handled 48,668 TEUs in the first half of this year.

This is surely a development the state-owned Port of Singapore Authority Corporation (PSA) cannot afford to ignore. As it is, Singapore is locked in intense competition with Hong Kong, and PSA is due to be listed later this year. Analysts believe the loss of 85 per cent of Maersk Sealand's container cargo translates into a 10 per cent drop in PSA's business. Even previously, there had been signs that Singapore was less than comfortable about the challenge posed by PTP. For example, there was quite a stir when APL, the container shipping arm of Singapore's national shipping line, NOL group, began using PTP a few months back. So much so the NOL Group CEO was compelled to defend what he described as a 'commercial decision'.

Still, PSA has put up a brave front in the wake of the PTP-Maersk Sealand announcement. It issued a statement saying the pull-out might slow its growth rates by a couple of percentage points or so, but would not significantly impact its profitability. PSA vice-president (corporate development) Wong Fong Tze said in a statement : 'The addition of each new port or new port or new terminal capacities inevitably results in some readjustment of existing cargo pattern. This has been ongoing over the years in other parts of the world. Southeast Asia is no exception.'

That may be so, but a more pertinent issue here is why Maersk Sealand has chosen to migrate. In the Aug 18 press release, CEO for Asia, Flemming Ipsen, put it tersely as 'a quantum leap for Maersk Sealand to master its own destiny'. He elaborated on this in his interview with a Singapore daily by giving two reasons-cost-savings and a desire to be deeply involved in the operations of a container terminal. In other words, it is a question of competitiveness.

PTP has always marketed itself as an equal of Singapore in terms of service level but at lower costs. PTP's charges are reportedly 30 per cent cheaper than those of PSA. It is no surprise then that analysts now say a price war is possible following Maersk Sealand's shift to PTP.

Even if PSA tinkers with its pricing, there is still the issue of the shipping lines wanting more say. This is an aspect where PTP has a clear advantage.

As PTP CEO Mohd Sidik Shaik Osman explained when interviewed by Malaysian Business about a year ago, the port could customise the terminal according to the shipping companies' requirements. 'I offer them control,' he said. 'It's something that others can't offer because we're just starting.'

In Maersk Sealand's case, the offer of 30 per cent interest in PTP the remaining 70 per cent is held by Seaport Terminal Sdn Bhd must have been irresistible. An industry source points out that the financial perks for Maersk sealand go beyond the cost-savings. Because of its shareholding in PTP, almost a third of every ringgit the port earns is attributable to the shipping line. Also, the source wonders if the terminal management agreement signed by PTP and Maersk Sealand will yield more income for the latter. According to PTP, the agreement is necessary because of the expected surge in volumes. Maersk will operate the terminal 'to ensure immediate high efficiency and transfer of operational expertise'.

Singapore is not the only one to suffer due to Maersk Sealand's preference for PTP. Port Klang's Westport was previously the firm's hub for Malaysian boxes. According to one recent news report, Westport lost about 12 per cent of its 2.5 million TEU throughput when Maersk Sealand started diverting five weekly calls to PTP last June. But the gloom for Westport may not be for long. There is talk that Li Ka Shing's Hutchison Whampoa, through Hutchison International Terminals, is eyeing a 30 per cent stake in Klang Multi Terminal Sdn Bhd, Westport's operator. If this indeed works out, Westport is certain to have financial, managerial and technical expertise inflows. More importantly, this will underscore the importance of Malaysia's port players embracing foreign partners as a means of getting ahead regionally.

Now that PTP has vaulted into the major league, the shipping community waits to see whether the tie-up with Maersk Sealand will lead to even bigger things. Detractors sensibly argue that the other leading shipping lines will be in no hurry to choose PTP over Singapore until they are convinced that there are solid and lasting benefits. Obviously, picking up a stake in PTP is no longer an incentive, but if the facilities, services and charges at Pelepas prove to be more than fair, the folks down south are in for a tough fight.