Matarbari Port

Update: Matarbari Port

Itallstartedasanewcoalterminalproject butsoonanadditionalcontainerand multi-purposeterminalwereaddedto thelist.ThomasFrancisreports…

The Matarbari Port is a new deep-sea port under development in the Bangladeshi city of Chittagong.The 283acre port is being constructed on land which was intended for salt flats on Maheshkhai island in Cox ’ s Bazar District, Chittagong. The construction of the deep-sea port was first proposed in August 2014, in order to receive imported coal for the planned 1,200 MW Matarbari power station, funded by the Japanese Government’ s Japan International CooperationAgency (JICA),with the Bangladesh government also receiving funds from JICA for construction for the new port.The Japanese prime minister offered USD4.8 billion in loans for the project, which would include the 1,200 MW Matarbari power station. JICA imagined the port to be part of a broader project to turn the area into an industrial corridor, and an important trade gateway to the rest of Asia and beyond.

The new coal terminal would be a joint venture between Coal Power Generation Company of Bangladesh Limited (CPGCBL) and Shumitomo Corporation of Japan.The 1,200 MW power station, a joint venture of Japan ’ s Mitsui and Company Ltd and Malaysia ’ s IMDB Energy Group Berhad, would be using about 3.73 million tonnes of coal annually.

With designer plans changing all the time it soon became apparent that Matarbari Port would extend up to the port of Sonadia. Here plans for a new port - the Sonadia Port - were on the table after a feasibility study was conducted in 2006 by Japan-based Pacific Consultant International (PCI). PCI found Sonadia Island suitable for the construction of the proposed port, but did not consider inclusion of coal, oil, and liquefied natural gas (LNG) jetties in the plan.In January 2015,it was reported that the proposed Sonadia Port, located approximately 25km away, would be abandoned and that Matarbari would be extended.

Five months later, in June 2015, JICA said that construction of the deep-sea port at Matarbari was set to start by January 2016. In September 2015, Bangladesh central government approved Japan ’ s proposal to finance and build the seaport in Matarbari, with JICA offering USD3.7 billion to build the estimated USD4.6 billion port and power complex.

In September 2017, local media reported that a Japanese consortium (comprising Sumitomo Corporation,Toshiba Corporation, and IHI Corporation) signed an engineering,procurement and construction contract for the new coal-fired power plant and the deep-sea port at Matarbari. In January 2018,it was reported that 18 percent of the project work had been completed and that Matarbari Port was planned for completion in July 2024.As part of its 39th Official Development Assistance (ODA) loan package, JICA approved another loan of USD24 million for the project in June 2018.

Fast forward to December 2020, and the first commercial ship - a foreign vessel named the MV VenusTriumph - came alongside the first jetty at the deep-sea port, with the assistance of a tugboat, as part of an operations trial. Construction of the first jetty, meant for unloading liquid fuel, was completed in 2020, and although the port is reportedly scheduled to be fully open by December 2026, ships were temporarily anchoring at the port to take part in the trials.

In July 2021, a bulk cargo vessel became the first to berth at the second jetty being constructed for unloading coal at the new power plant, with an annual capacity of 3.73 million tonnes (Mt) of coal, which will be imported from Indonesia,Australia, and South Africa.This latest arrival increased the total number of vessels that have been berthed at the two jetties since December 2020 to 18. Nearly 75% of the construction work for the 300m long second jetty has been completed.The jetty is expected to be fully constructed by the end of 2022.

According to a report published in November 2021, the port’ s new structure was finalised on the basis of conclusions obtained from a set of studies which were carried out by the Japan-based Koei Corp., Germany-based Pichner Corp., Japan-based TEPSCO Corp.,Australia-based SMEC Corp., and a few other companies.

The original length of the Matarbari sea port was set at 3km. It was increased to 14.3km when the decision was made to build the deep-sea port, thus abandoning plans for the proposed Sonadia Port. Similarly, the breadth of the channel was increased by 100m (from 250m to 350m) with the depth also increasing from 15m to 18.5m.In addition to the two jetties nearing construction completion, another six jetties are now expected to be built.

Container terminal plans

As construction for the new coal terminal developed and the new deep-sea port was taking shape, another decision was made by Chattogram Port Authority (CPA) regarding the port’ s proposed capacity.

In January 2018, in the first phase of construction, a new container terminal - the Patenga Container Terminal - would be built on 18 hectares with a 460m berth able to accommodate 8,000TEUs vessels.The terminal would have an annual capacity of 600,000TEUs up to 1.1 millionTEUs.The container terminal would then be expanded, comprising of 70 hectares, have a 1.85km berth, and have a 2.8 million tonnes capacity. In addition, a 17 hectares multi-purpose terminal - the Bay Terminal - was to be constructed with a 300m long berth, able to accommodate vessels up to 70,000 deadweight tonnage (dwt). Annual capacity of the terminal would be 2.25 million tonnes.

Earlier this year, Chattogram Port Authority (CPA) Chairman, Rear Admiral M Shahjahan, said that in comparison to 2020, the new deep-sea port of Matarbari attained a 13.19% growth in container handling, 14.06% in cargo handling, and 12.63% growth in ship handling in 2021. “The port became one of the key institutions not only for the people of Chattogram, but also for the whole nation. During the COVID-19 pandemic, the port handled the unloading of goods from 12 ships every day, ” said Shahjahan. “The port remained open 24 hours, seven days a week, at a time when the whole world remained stuck due to the pandemic.To ensure uninterrupted export-import activities, the port took timely measures for off-docking, shipping agents, feeder services and road cargo transportation. ”

The CPA chairman also said that he was hopeful about opening the Patenga Container Terminal within two or three months. If this would be correct, the opening of the new container terminal is expected in June or July 2022 with the Chattogram PortAuthority (CPA) in charge of running the Patenga container terminal, until a (foreign) terminal operator is appointed to operate the terminal. Five international operators have expressed interest in running the terminal under an “ equip, operate and maintain ” model, including Denmark’ s AP Moller-Maersk, Saudi Arabia-based Red Sea Gateway Terminal, Dubai-based DP World, India ’ s Adani Ports and Special Economic Zone Limited, and Singapore ’ s PSA International.

Progress on Bay Terminal

There is no doubt that the Matarbari Deep Sea Port, the Bay Terminal, and the Patenga ContainerTerminal have attracted the attention of many foreign companies all keen to invest, with some potential investors already submitting proposals for the Bay terminal, which will be operational between 2024 and 2025.The CPA chairman did point out that some weakness remained in land acquisition for the terminal and that the port authority has talked to the district administration regarding this issue. “It will be settled soon.A consultancy firm has already been finalised, ” Rear Admiral M Shahjahan added.

UkraineUkraine war:war: tradetrade impactimpact

WPDreportsonhowtheconflictinUkraine isimpactingtradeanddevelopment…

n recent months, both the United

Nations Conference on Trade and

Development (UNCTAD) and BIMCO have proffered up assessment of the war in Ukraine ’ s impact on trade and development. Their analysis shows a rapidly worsening outlook for the world economy with the situation especially alarming for least developed countries, a slowing of Russian exports as well as rising food, fuel and fertilser prices.

UNCTAD’ s report published in March also showed heightened financial volatility,sustainable development divestment, complex global supply chain reconfigurations and mounting trade costs. “The war in Ukraine has a huge cost in human suffering and is sending shocks through the world economy, ” UNCTAD Secretary-General Rebeca Grynspan said. “All these shocks threaten the gains made towards recovery from the COVID-19 pandemic and block the path towards sustainable development. ”

The two fundamental ‘Fs’

Concern abounds over the two fundamental ‘Fs ’ of commodity markets - food and fuels. Ukraine and Russia are global players in agrifood markets,representing 53% of global trade of sunflower oil and seeds and 27% of global trade of wheat.This rapidly evolving situation is especially alarming for developing nations.

As many as 26 African countries, including some least developed countries, import more than one third of their wheat from the two countries at war. For 17, the share is over half. “Soaring food and fuel prices will affect the most vulnerable in developing countries, putting pressure on the poorest households which spend the highest share of their income on food, resulting in hardship and hunger, ” confirms Grynspan.According to UNCTAD calculations, on average, more than 5% of the poorest countries ’ import basket is composed of the products that are likely to face a price hike due to the war.The share is below 1% for richer countries.

Risk of civil unrest

The risk of civil unrest, food shortages and inflation-induced recessions cannot be discounted, the report says, particularly given the fragile state of the global economy and the developing world due to the COVID-19 pandemic. “Long-standing effects of rising food prices are hard to predict, ” the report says, “but an UNCTAD analysis of historical data sheds light on some troubling possible trends. ” Agri-food commodity cycles, for example, have coincided with major political events, such as the 2007-2008 food riots and the 2011 Arab Spring.

Freight rate hikes

Restrictive measures on airspace, contractor uncertainty and security concerns are complicating all trade routes going through Russia and Ukraine.The two countries are a key geographical component of the Eurasian Land Bridge. In 2021, 1.5 million containers were shipped by rail west from China to Europe. If the volumes currently going by container rail were added to the Asia-Europe ocean freight demand, this would mean a 5% to 8% increase in an already congested trade route.

“Due to higher fuel costs, rerouting efforts and zero capacity in maritime logistics, the impact of the war in Ukraine can be expected to lead to even higher freight rates, ” the report says. Such increases would have a significant impact on economies and households. In 2021, UNCTAD simulated that the freight rate increase during the pandemic raised global consumer prices by 1.5%, “ with particularly oversized effects in vulnerable economies such as small island developing states, landlocked developing states and least developed countries ” .

Global economic growth

In a more recent market analysis, BIMCO’ s Chief Shipping Analyst Niels Rasmussen echoed UNCTAD’ s fears of a food shortage and negative fallout for the world’ s poorest countries. His report acknowledges that the war ’ s full impact on the global economy naturally remains unknown, however, prices for energy and agricultural commodities remain elevated and a global food crisis appears unavoidable. “Hunger must be expected to increase in fragile developing economies that have yet to recover from the impacts of COVID, ” he states.

Rasmussen goes on to say that we will see discretionary spending reduce across the world as businesses and consumers attempt to cope with increasing food and energy prices stating: “Global economic growth must be expected to be significantly lower than the 4.0-4.5% forecast before the war.Especially Europe is expected to see lower growth than previously forecast. ”

Bulk freight rates

BIMCO’ s analysis confirmed that immediately following Russia ’ s invasion of Ukraine, Baltic Exchange indices for bulk vessels moved lower but two weeks into the war the Baltic Dry Index (BDI) had recouped losses and moved higher as had the size specific indices.Since,there ’ s been a downward correction as the Capesize index (BCI) has moved to a level lower than pre-war. Not included in the BDI calculation, the Handysize index (BHSI) has seen the sharpest rise of all at some 400 points above pre-war level.Volume wise, Russia ’ s exports have, unsurprisingly, moved lower week by week since the invasion in week eight, and were in week 11 about 25% lower than the 2022 pre-war average.The reductions appear equally spread across ports, vessel sizes, and commodities although coal out of the Russian Far East appear to be mostly unaffected.

“Ukraine ’ s exports remain at a standstill whereas global volumes have increased only marginally compared to the early 2022 average. The increase is approximately 5 percentage points lower than what we have seen during the same period in previous years. Particularly iron ore and grain shipments are unseasonably low whereas coal shipments so far seem unimpacted by the higher commodity prices. ”

Russian crude oil and exports down

Volumes of crude oil and products export from Russia are sharply down since the beginning of the war. Compared to the three weeks before the war, volumes are down 30%. Still, Baltic Exchange rate indices for most vessel types and sizes are up due to rocketing rates out of Russia.Though not involved in Russia trade,VLCC’ s initially also saw some much-needed improvement, however, earnings have since slipped back towards pre-war levels. The mainstay of the Russia trade,Aframaxes, have naturally been the main beneficiary of events and earnings are, according to Clarkson, now five times higher than earlier in the year.

“The fundamentals of the crude tanker market have, however, not changed. In fact, the current high prices are discouraging buyers and unless prices move lower, and global production increases, we do not see much change in the supply/demand situation in the short-term, ” says Rasmussen. OPEC, however, is sticking to earlier laid plans for ramping up production but has so far not even met those targets. If successful, ongoing negotiations withVenezuela and Iran may deliver some new barrels to the market but this remains uncertain. On the other hand, there is a continued risk that Russia ’ s export to Europe may also be sanctioned.

The container market

According to Rasmussen ’ s report, so far the biggest direct consequence of the war on the container market has been the sanctioning of Russian Railways and past China-Europe rail volumes turning to liner operators for transport. Separately, factory closures during China ’ s recent COVID lockdowns will reduce Chinese exports in the short term and have again wreaked havoc on liner operators ’ sailing schedules. In the short term this has helped reduce the number of vessels waiting off the Southern Californian coast, however, this may quickly be reversed when full vessels again start sailing from China.

China export container rate indices, as measured by the Shanghai Shipping Exchange, have recently shown some level of weakness, particularly for shipments to Europe.

“The main concern for the container market, however, remains slower economic growth and in particular lower goods trade as consumer uncertainty increases and discretionary spending decreases, ” confirms Rasmussen. He goes on to add that “fleet growth, however, will be low during 2022, which more than likely will ensure that container rates in any case remain at very profitable levels. ”WPD will continue to give readers further updates as the siutation unfolds.