Cosco to invest $3bn in Philippines hub

Terminal operators in the ports of Singapore and Hong Kong could face fresh competition after a senior official said one of China’s largest shipping companies intended to invest $3bn in projects in the Philippines, including a new cargo-handling hub.

Francis Chua, the Philippine government’s special adviser on China trade and investments, said a team from state-controlled China Ocean Shipping (Cosco) would arrive in Manila this month to inspect potential locations for a new facility.

As well as opportunities to develop a container terminal and logistics centre for handling cargo, Cosco was examining the Philippines as a potential base for shipbuilding and crew training, Mr Chua said.

If Cosco were to set up a facility in the Philippines for moving containers between ships – known as a transhipment hub – it could be a serious setback for Hong Kong and Singapore, which handle much of the trans-shipment in south-east Asia.

Cosco is the world’s number seven container shipping line but much more powerful in its home area around greater China.

However, shipping and port executives in the region warned that it was too early to be clear about how Cosco intended to use any facility in the Philippines or whether it would actually go ahead with a deal.

The company recently spent significant time discussing potential deals to build a similar terminal in Greece, but nothing has so far happened.

The Philippines authorities have just awarded a container terminal concession to ICTSI, a Manila-based container terminal operator, to operate at one of the sites Mr Chua said was a possible location for Cosco’s investment: Subic Bay, a former US naval base.

Mr Chua said Cosco would also look at the site of another former US navy base – Sangley Point in Cavite province, south of Manila – and Batangas province, which is home to the Philippines’second-biggest international port after Manila.

A new hub in the Philippines might allow Cosco to transfer some of its transhipment business to a location with a lower cost than either Singapore – the world’s busiest transhipment hub – or Hong Kong, which increasingly relies on transhipment because so much of its traditional business now goes straight to mainland China.

Any transfer of services to the Philippines could affect Singapore’s PSA, the world number three container terminal operator, and Hong Kong’s Hutchison Ports, the world number one. Both run terminals Cosco uses for transhipment.

Unlike the business of gateway ports, which handle goods travelling to and from nearby cities, transhipment hubs’ business can relatively easily shift to another location.

Mr Chua said Cosco would have to reconfigure its operations in the region to fit in with a new Philippines hub, although how that would affect its activities in other Asian countries was unclear.

Yet, Cosco looks unlikely to abandon the two major ports, partly because it has joint ventures with PSA and Hutchison to run the terminals its ships use and it would suffer financially if it withdrew from using them.

Neil Davidson, ports analyst at London-based Drewry Shipping Consultants, said no major line currently did transhipment in the Philippines but that if a major line such as Cosco committed to transhipping there, the project was nearly guaranteed success.