The Port of Tanjung Pelepas (PTP) dealt a severe blow to Singapore terminal operator PSA Corporation last week in the fight for boxes following Maersk Sealand's decision to shift its transhipment hub from the republic to PTP.

The move by the world's largest container line will see PTP gaining a guaranteed annual volume of two million TEUs next year.

The Danish line's move changes the face of the entire transhipment business in South-East Asia.

It has begun the move to PTP and by December, port calls will be switched from Singapore to PTP.

This shift is believed to be the biggest single shift in the port industry in South-East Asia.

According to industry sources, Maersk Sealand's dissatisfaction with PSA Corp arose from two causes cost and control.

PSA Corp had been inflexible over the issue of port charges and Maersk Sealand had made clear its preference for dedicated or leased facilities an option not available in Singapore and unlikely to be in the near future.

With Maersk Sealand moving to PTP, PSA Corp may have to fight to retain customers doing business with the Danish line.

There is nothing tying shipping lines to the republic other than its strategic position, connectivity and efficient service and until now there has been no other port in the neighbourhood presenting a serious challenge.

PSA Corp deputy group president (international business division) Goon Kok Loon, in an interview with The Star in May last year, said that PSA Corp could not stop competition. He viewed it has part of business and fact of lift.

In reference to a PTP statement, he said: "PTP's statement is to compete with PSA Corp, so we will have to compete. I mean, I will compete for every single box."

PSA Corp acknowledge the competition it faced from PTP and other ports in the region.

Operating in a very competitive environment, PSA Corp knows that in a willing-buyer willing-seller relationship, customer always look for alternatives.

One PSA Corp officer said the port had been competing all these years and it would provide high value-added services not available in other ports.

But customers make their own decisions on port of call.

PSA Corp sees the loss of a major client as having no significant adverse effect on its credit profile because of its well-diversified customer base.

Singapore is the world's second busiest container port after Hong Kong and it handled 15.9 million TEUs last year, about 9% of the world's total. The majority of its volume is transhipment.

With the world's largest shipping line going elsewhere, the market will closely watch for PSA Corp's next move.

According to PTP Chief Executive Officer Mohd Sidik Shaik Osman, the Maersk Sealand deal was finalise on Aug 17 and it saw Maersk Sealand buying 30% equity in PTP's holding company, Seaport Terminal. PTP was built RM2.4bil.

"This volume does not yet factor in the volumes of feeder lines that are in negotiation with us for South-East Asian and South-Asian routes," said Sidik.

The equity deal sees Seaport holding a 70% stake in PTP and Maersk Sealand holding 30%. Seaport had earlier bought back a 40% stake in PTP from Khazanah National, the Malaysian Government's investment arm.

Khazanah had bought the 40% stake from Seaport in Aug 1998.

Following this development, Sidik said that Maersk Sealand wuld move its transhipment hub from Singapore to PTP, tentatively by Decemebr when six berths supported by 14 quayside cranes will be operational.

The move will see PTP becoming the largest hub in the Maersk Sealand global network and will mean that all mainline vessels, with the exception of New Zealand and West Australian services, will call at PTP instead of Singapore.

Sidik said that coverage of PTP would be enhance by the introduction of a high frequency shuttle feeder service which would be controlled and managed by Maersk Sealand.

He said this feeder service would see cargo being feedered from Singapore and transhipped via PTP.

"The deal will mean that Malaysia will move to the forefront of transhipment in South-East Asia after playing second fiddle to Singapore over the last three decades.

"With the high level of energy and dynamism in PTP, we have managed to chang the entire economics of transhipment within one year of beginning operations.

"PTP has made world history and headlines by securing two million TEUs in a short period of time," he said, adding that no other new port in the world has managed this.

PTP records reveal that Maersk Line, the largest shipping line prior to it merger with Sealand, began calling at PTP with its Super Post Panamax mother vessel Munkebo Maersk on Oct 21, 1999.

The 294m Munkebo Maersk called at PTP and discharged 2,229 boxes. It marked the start of more Maersk mother-vessel calls on an ad-hoc basis to reposition empty containers at PTP until June 8, 2000, when Maersk Sealand put in five weekly calls at PTP to US/Europe and Mid East.Mediterranean.

Albeit the stake, Sidik said that PTP would continue managing and operating the port and terminal as a common-user terminal to serve all shipping lines.

He said that PTP's status as a common-user terminal would be complemented by other mainlines in discussion with PTP to shift operations as well.

"With this surge in volume, Maersk Sealand, via a terminal management agreement, will operate the terminal at PTP to ensure immediate high-efficiency and transfer of operational expertise."

Sidik said the development of the Maersk Sealand-PTP deal was giving rise to tremendous spin-off benefit to PTP.

He said the shift had seen a significant number of consolidation and regional distribution centres establishing and beginning talks with PTP.

"We are confident that with the completion of Phase One facilities and the full ratio of equipment in place, talks with other mainline operators will advance at a faster pace.

"The entire area around PTP is set to be developed as a regional centre for warehousing and consolidation.

"Early anchor tenants will be well poised to take advantage of the impending shift," he said.

Based on the increased demand, Sidik said PTP was planning to undertake Phase Two.

Phase Two currently being planned conceptually, will see another three to six berths being constructed, taking PTP's total to between nine and 12 berths.

It will involve dredging and reclamation works and is expected to be implemented in 2001.