Olongapo SubicBay BatangGapo Newscenter

Monday, May 18, 2009

Subic port cashing in on shipping slump

SUBIC BAY, Philippines: Deep water ports around the Philippines are fast resembling parking lots as shipping companies caught by the slump in global trade look for places to park their unused vessels.

At the former US naval base at Subic Bay, north of Manila, and in waters around the southern city of Davao, dozens of foreign ships are now “laid up” waiting for world markets to pick up.

The global trade collapse has hurt Asia’s export powerhouses and left more than 1,000 vessels unemployed around the world, according to Norway-based shipping risk management foundation, Det Norske Veritas. The Baltic Dry Index, which tracks the cost of shipping raw materials, fell from a record high of 11,793 points on May 2, 2008, to 663 on December 5, 2008, its lowest level in two decades.

Shipping companies are scouring the world looking for deepwater ports where they can park their vessels until markets pick up again but not every Asian nation is being approached. In Malaysia, an official from Port Klang, the national load centre, said there is no large number of laid up cargo ships due to the economic downturn.

But in the placid waters off Subic more than 20 foreign cargo vessels are silently bobbing like toys in a giant bathtub. “We haven’t been aggressively inviting them,” said Armand Arreza, executive director of the Subic Bay Metropolitan Authority. It was the shipping companies that approached Subic officials and some ships have been in Subic since December, said Arreza, whose agency oversees the port.

Another 13 ships are anchored in the waters off Davao City with more applying to come in, said local ports authority supervisor Jacinto Albarracin. Helmut Sohmen, chairman of the shipping and offshore services group, BW Group, said in a recent lecture in Singapore that the world shipping industry was going through bleak times, with demand for ships plunging even as more new ships are completed. He said possible solutions to such over-capacity included putting more ships in dry-docks for maintenance and “laying up more vessels as is happening already”. Arreza believes shipping companies chose Subic because the area is generally protected from typhoons and because its berthing fees are lower than other ports in Asia.

Subic also has ample ship repair facilities. As it faces the South China Sea, ships can easily be redeployed to Hong Kong or China once global trade picks up. “In a moment’s notice, they can pull anchor and leave,” Arreza said. Emerson Lorenzo, head of the shipyard regulation office of the country’s maritime authority, said the Philippines should be very attractive as a site for laid-up ships.

“We can accommodate larger ships of more than 50,000 tonnes,” he said. The berthing fee in the Philippines is a modest $91 a day but there is a multiplier effect as shipping companies use local ship-repair facilities and buy supplies locally, Lorenzo said. Arreza said Subic Bay can earn $230,000 a month from the ships currently laid up. In Subic Bay, resort owners complained that the vessels were marring the view from the beach so Arreza required the ship-owners to move them 2km from the shore. Lorenzo says the pollution from the ships is minimal.

However a senior source in the maritime authority says there have been some concerns by shipowners about berthing in Davao due to violent incidents involving extremists in the southwestern side of the island of Mindanao. To avoid higher insurance premiums for these ships, authorities are compiling military and police statistics to show that Davao ports are largely untroubled by piracy or terrorism and are almost 4,000km away from the areas plagued by unrest.

Video showing on-going dredging operation to declog Kalaklan River mouth and the noticeable number of ships laid up at Subic Bay (Video by Jhec)

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