Sri Lanka has been planning to become a maritime hub since the beginning of the last decade with the launch of the Hambantota Port, but policy changes with new governments has put the country’s ports behind those of its competitors, threatening its business prospects.
The country has four main ports in each part of the island – Colombo, Hambantota, Trincomalee, and Kankesanthurai – out of which the Colombo Port has taken centre stage for many decades, declaring itself a transshipment hub handling cargo destined to and from India and Bangladesh.
Colombo Port top global performer in H1 ’24
According to Alphaliner, a leading information platform for the liner shipping industry, the Colombo Port was recognised as the best performing port globally for the first quarter of 2024, with business growing by 23.6%, surpassing all other ports worldwide. The Port of Long Beach in Los Angeles, secured second place with a growth rate of 23.3%, while the Port of Tanjung Pelepas secured third place with a growth rate of 22.7%.
Releasing a statement, the Sri Lanka Ports Authority (SLPA) said that the first half of 2024 had been particularly impressive for the Port of Colombo (POC). Comparing the performance to the same period in 2023, as domestic volumes increased by 19.2%, transshipment volumes grew by 9.6% and total volumes surged by 12.5%.
Meanwhile, it said that the terminals had been pivotal in driving this outstanding performance. From January to June this year, the SLPA terminals recorded a 23.6% increase in domestic volumes, a 15.5% rise in transshipment volumes, and a total volume growth of 17.7%.
The POC is the only deep-water commercial port in South Asia, and the only hub port between Singapore and Dubai that can accommodate the new generation of large vessels. It boasts several main container terminals, including the Jaya Container Terminal (JCT), Colombo East Container Terminal (CECT), South Asia Gateway Terminals (SAGT), and Colombo International Container Terminals (CICT).
These terminals collectively offer a substantial capacity to handle increasing cargo volumes efficiently. The JCT and CECT are operated by the SLPA, while the SAGT and CICT are operated by private entities.
POC benefited from Red Sea disruptions
Speaking to The Sunday Morning, SLPA Assistant Managing Director – Operations D.L.R. Weerasinghe said that the Red Sea crisis had primarily contributed to the Colombo Port becoming the best performing port globally.
Moreover, he said that transshipment congestion, which was due to the increase of sailing time of vessels due to vessels taking the longer route around South Africa to avoid the Red Sea, had reduced considerably, with a little congestion still remaining at the Colombo Port.
New capacity means new competition for POC
Speaking to The Sunday Morning, shipping and logistics veteran Rohan Masakorala said that the emergence of any new capacity anywhere in the region would be competition for cargo.
“It is not a threat to Colombo, but it is competition,” he added, noting that the Adani Group’s Vizhinjam Port was posed to challenge the transshipment business of the Colombo Port.
He said that in the long run, Sri Lanka would have to see how the Vizhinjam Port operated as it had a limited capacity with a berth of approximately 800 m, which is to be extended up to 2,000 m according to plans.
Masakorala said that there could be competition developing in the long run and that it would induce the Colombo Port to get its act together in order to increase services at the port in terms of productivity, efficiency, and facilitating ship owners.
“We also need to look at port legal structures which were built to suit the requirements of 50 years ago. They require reforms to attract international investors,” he said.
Moreover, he added that there were plenty of models around the world to follow when it came to attracting international capital, including the liberalisation of port and shipping activities to suit investor confidence.
Masakorala further noted that competition was vital, which entailed attracting more service providers to Sri Lanka, while observing that although Colombo Port seemed to be having its advantages at the moment, these could be short-lived if Sri Lanka did not intervene in the right manner at the right time.
POC terminals to see more work next year
Meanwhile, Weerasinghe said that the SLPA had recently embarked on completing the East Container Terminal (ECT) project at the Colombo Port and had renamed the terminal as CECT.
“We are planning to conclude the project by the end of 2025 while the equipment has been received at the terminal,” he said.
He added that the first phase of operations at the West Container Terminal (WCT) by the Adani Group would commence early next year even as the SLPA was already progressing with a plan to expand the JCT yard and other key areas.
Cost provides final decision for ship owners
Masakorala further said that for ship owners, everything revolved around the final cost, which involved calculations into every possible aspect such as the time taken to load a container onto a vessel, fuel cost, terminal cost, and how much cargo was available at a particular port.
The Vizhinjam Port has lowered its single-day transshipment charges to $ 10,000 in order to provide competition to Colombo; single day transshipment charges at Colombo Port range between $ 20,000-25,000.
As an example, Masakorala said that Sri Lanka did not provide domestic cargo in terms of attracting shipping lines and that it relied on transshipments.
“Therefore, we really need to up our game in terms of productivity and servicing ship owners,” he said, adding that the expansion project of the Colombo Port would help ship owners and the country to attract larger and a greater number of ships to Colombo.
He further added that the Colombo Port currently had the best feeder network in the region as a transshipment hub.
Last year, it was announced that the existing 8.5 million Twenty-foot Equivalent Unit (TEU) capacity at the Colombo Port, which mainly facilitated handling transshipments of countries such as India and Bangladesh, would be further expanded to 15 million TEUs by 2025.
It was announced that in order to expand the capacity at the Colombo Port, the ECT was being developed with Government investment while upgrading the JCT, while the completion of the WCT by India’s Adani Group was also expected to contribute to the expansion of TEU capacity.
The SLPA expects to add another 10 million TEUs through the Colombo North Port Development Project, which will give a total capacity of 25 million TEUs at the Colombo Port by 2040.
Way behind in becoming maritime hub
Masakorala said that the Colombo Port was 10-15 years behind its requirements while legally it was 25 years behind ports such as Singapore or those in Europe. “The legal environment is the most important aspect for businesses to come into this country,” he said.
He noted that Sri Lanka should secure legal openness for doing business, whether it was for ports, shipping, or logistics.
Masakorala further added that the Colombo Port was not fully a landlord port whereas India had fully landlord ports which were open for foreign investments. He observed that Sri Lanka was stuck with government-to-government arrangements and did not allow foreign shipping lines to come and invest in the terminals.
“Those are our customers; if we lose our customers in the long run, we will face risks in terms of business,” he said.
Moreover, he said that Sri Lanka was not among the worst in terms of becoming a maritime hub, while in terms of transshipment and volumes, the country certainly was in this list. He added that global maritime hubs were a different designation where financial and legal aspects were up to global standards.
“If we don’t get the legal and business environment right, we won’t become a maritime hub. In retaining the transshipment business, we are under threat because there is insufficient policy intervention at the right time, as well as delays relating to infrastructure and reforms,” Masakorala said.
Trinco Port looking for investors
The Trincomalee Port is one of the largest natural deep-water harbours in the world. However, it has not utilised its full capacity at present despite having high potential to cater to the global marine and offshore services industry if properly developed.
In June 2022, the SLPA proposed to develop an industrial harbour in Trincomalee as a longstanding plan to monetise land that belonged to the authority. This involved obtaining foreign and local investment for a special economic zone, an industrial park, or an energy hub, which would also entail the development of the port for non-containerised cargo traffic such as cement, coal, or other industrial raw material.
But in August 2023, President Ranil Wickremesinghe said that Sri Lanka planned to develop the Eastern Province in collaboration with India in order to make Trincomalee a national and regional hub for industry, energy, and economic activity.
Speaking to The Sunday Morning, Weerasinghe said that the Trincomalee Port was open for any investor and that the SLPA was not focusing on a specific type of investment. “Any type of investment is welcome as long as we give priority to the cargo-generating industry,” he said.
However, he added that the SLPA was planning to call Expressions of Interests (EOIs) for the Trincomalee Port.
H’tota looks to become a transshipment hub
The Hambantota Port, which was leased out for 99 years to the Hambantota International Port Group, is Sri Lanka’s most diversified deep-water, multipurpose port specialised in handling bulk cargos, general cargos, Roll-On/Roll-Off (RORO) cargos, and liquid bulk. It operates across a number of business sectors, namely, RORO, conventional cargo, dry bulk cargo, breakbulk cargo, project cargo, liquid bulk cargo (LPG, LNG), petrochemicals, marine bunker fuel, and cruise terminals.
In 2023, it proved itself as the fastest growing RORO transshipment port in the region with 700,000 transshipment vehicles handled, marking a significant 26% increase from 2022 figures. The milestone figure was achieved with Glovis vessel MV Hae Shin V.003B handling 3,626 units for transshipment to the Ulsan Port in South Korea.
In April, the Hambantota Port commenced its inaugural container transshipment service operated by the Mediterranean Shipping Company (MSC).
The second quarter report on LPG operations at Hambantota Port records an increase of approximately 100% in volumes handled compared to 2023 numbers. Bunker volumes at the port have also increased considerably by almost 128%.
In the first six months alone, it achieved a 91% increase in LPG volumes compared to last year. The overall LPG throughput at the end of June this year reached 149,980 MT, compared to 78,724 MT last year. This increase, driven by robust demand from both imports and transshipment sectors, underscores the port’s strategic importance in the regional energy landscape.
The rise in operational volumes is not limited to LPG, as bunker services surged with a 128% increase. The volume reached 66,044 MT within the first five months of 2024, compared to 28,923 MT handled during the same period last year.
This growth encompasses bunker supplies within the port, at anchorage, and in Outside Port Limit (OPL) areas, highlighting the port’s strategic and technological advantages, coupled with growing capability and efficiency in handling complex maritime services.
India looking to operate Kankesanthurai Port
In March this year, the Government of India pledged a $ 61.5 million grant to fully develop the Port of Kankesanthurai (KKS) in Jaffna, where it will look to construct a new breakwater and dredge up to a depth of 30 m to accommodate deep-draft vessels.
Speaking to The Sunday Morning, Ministry of Ports, Shipping, and Aviation Secretary K.D.S. Ruwanchandra said that authorities were having discussions with India on a Build-Own-Operate model of the KKS Port for 30 years.
He said that India was seeking to operate the port for 30 years after the completion of construction, based on the grant provided by the country.
Moreover, the India-Sri Lanka ferry service commenced on Friday (16) at the KKS Port. Although scheduled to begin in October 2023, the Shipping Corporation of India put it on hold due to the unavailability of an exclusive ferry. It was later scheduled to begin in May this year, but was delayed again for various reasons.
The cruise ship Sivaganga will be operated by a private firm called IndSri Ferry Services Ltd. through the age-old sea route, which has turned into a point of contention due to the issues in the Park Strait between the Sri Lanka Navy and Tamil fishermen.
The ferry service is expected to fulfil the longstanding demand for a reliable sea route between Tamil Nadu and Sri Lanka. It will run for seven days a week and take four hours for the cruise to reach Kankesanthurai from Nagapattinam and vice versa. The cruise ship Sivaganga has 133 seats in the ordinary class and 27 seats in the premium class.
The ticket price for a one-way journey is close to Rs. 15,000 for ordinary class and Rs. 25,000 for premium class. Passengers can carry up to 60 kg in luggage and 5 kg in handbags.
SLPA growth statistics for H1 2024
Increase in domestic volumes
Increase in transshipment volumes
Increase in total volumes
Port of Colombo
19.2%
9.6%
12.5%
SLPA terminals
23.6%
15.5%
17.7%
(Source: SLPA)