THE liner shipping industry is one of the most mismanaged industries in the world, where undercutting has become a regular practice and part of the business, says Kelang Multi Terminal Sdn Bhd (KMT) executive chairman Tan Sri G. Gnanalingam.He said this was reflected in the decline in Asia-to-Europe ocean freight rates from US$4,000 (US$l = RM3.80) per TEU (twenty-foot equivalent unit) in 1970 to US$2,500 in 1980. In 2000, rates softened further to US$1,500 and US$600 last year.

"The reason for the decline was that shipping lines were undercutting each other on price due to an oversupply of shipping capacity. "Last year freight rates reached a level which would have made most of them go out of business. Fortunately, rates bounced back to US$1,500 per TEU this year," Gnanalingam said' in his keynote address at the International Maritime Expo 2004 in Kuala Lumpur last Tuesday.

However, he said, the fluctuations in freight rates will continue to affect the liner shipping industry as well as container terminal operators such as KMT, which runs Westport in Port Klang. "Every time shipping lines pull their heads out of the water, somebody will make them put their heads into the water again. And each time when they are poor, we, at the ports, become poorer. So unless we both manage this industry, we will be on the losing end," he added.

Today, container terminal handling charges at ports around the world average US$126 for local boxes and US$44 for transhipment traffic. These only represent 5 per cent of overall logistics costs for the ports. Gnanalingam said he believes that the shipping industry would be better off if it can emulate the airline industry.

"For instance, in the airline business, there's First Class, Business Class, Economy Class and Apex (advance purchase of tickets) fares and passengers are divided according to their ability to pay. In Port Klang, however, we offer Economy Class fare, but the shipping lines are always requesting to be placed on stand-by fare if not Apex fare, while demanding for first-class facilities and service," he said. He highlighted the difficulty of port operators in increasing their container terminal handling charges unlike international air express operators.

"For example, customers are willing to accept a price increase from express delivery companies such as DHL Worldwide Express and Federal Express. When the customers pay that kind of tariffs, they say these organisations are fantastic and reliable," he added.

It has been reported previously that Westport, through Port Klang Authority, has proposed to raise marine service charges, as the rates have remained unchanged since 1966. However, this had met with objections from some shipping lines operating out of Port Klang.

Under the proposed tariff, pilotage and towage dues which are currently at RM1,901 will be increased to RM2,700, an increase of 42 per cent. Port of Tanjung Pelepas in Johor currently collects RM3,OOO for consolidated marine charges.

Gnanalingam conceded that the shipping business has a multitude of charges. "One thing that we have to do particularly in the conventional cargo business is to standardise and simplify tariffs. I've been to a few ports where the list of tariffs is as thick as the telephone book.

"In addition, while the container business has improved a lot, there's still mayhem in the conventional cargo business where there's no estimated time of arrival or departure, no berth-on-arrival concepts and no standards despite the fact that 80 per cent of the conventional business are now being containerised," he said.

Gnanalingam said the shipping industry went into the form of containers purely because it ensures greater protection to cargo against damage and pilferage. "Today, 60 per cent of China's cargo is containerised, while that of developing countries is 70 per cent and developed countries 80 per cent. However, in India, only 20 per cent of cargo is containerised. As such, there is tremendous potential for growth there," he said.

Today, 95 per cent of the world's cargo are transported by sea, 3 per cent by air and 2 per cent by rail. "However, 65 per cent of ships spent their time at ports. If we can reduce this to 50 per cent, shipping lines and the ports will all make money," he added. Gnanalingam also showed the vigorous growth in total world container throughput from 20 million TEUs in 1980 to 230 million TEUs in 2000. It is anticipated that total world container throughput in 2020 will grow to 2 billion TEUs.