Transshipment Evolves

Transshipment is evolving as a tool via which to serve peripheral markets. Experience in the Indian Ocean confi rms this and the ongoing requirement for port investment, as Andrew Penfold explains

8 ICTSI has

transformed container handling operations in Toamasina, Madagascar and capacity here is on course for a major upgrade including providing for handling vessels of up to 14,000TEU

The focus of attention has been on the major east-west trades in the past eighteen months, with freight rates reaching unprecedented levels. What is the knock-on impact in the secondary, lower volume, trades? Let’s take a look at the Indian Ocean insular markets.

HOW BIG ARE THESE MARKETS?

The Indian Ocean markets of Reunion, Mauritius, the Seychelles, and Madagascar are individually quite limited but together represent a significant market. However, the interests of these markets rank fairly low on the global radar of the major liner companies. They are consequently vulnerable to changes outside their direct control that make the involved economies susceptible to adverse shifts.

Considered together, these markets recorded a total of around 1.2m TEU in 2021. In common with all markets, these economies have been battered by COVID-19, with this especially impacting on demand generated by the tourism sector. There are only limited local industries, with Mauritius heavily dependent on clothing and tuna and the Seychelles also a major focus of the fisheries sector. Madagascar has seen volumes grow based directly on the broad prism of consumer demand. Reunion is an outlier as a département of France, with an economy dependent to a large degree on the needs of local retirees and the port dominated by French labour relations.

Despite these differences, they form a cohesive market for shipping lines.

As noted, overall volumes reached nearly 1.2m TEU in 2021 and the indications are that renewed growth is continuing with an estimated annualised increase of around 5-6 per cent in the first half of 2022. Within this total, transshipment demand has increased steadily from 20 per cent of port volumes in 2016 to some 27 per cent at present. Transshipment has long been the established strategy at Port Louis and Reunion has seen some success in this sector despite high stevedoring costs. Underlying import/export demand increased sharply by 15 per cent between 2016 and 2019 but fell back as Covid hit the region. Recovery is now underway.

HOW DOES TRANSSHIPMENT WORK?

These relatively small-scale markets were in the past served by multiport container and semi container services linking them with European markets and some feedering from East African ports such as Mombasa. However, as part of the broader reorientation of the trades in favour of the Far East – especially China – there has been a far-reaching revision in service structures. Initially this was focused on developing transshipment hubs within the region, with Port Louis a pioneer in this approach. As vessel sizes increased and demand volumes ran ahead of port capacity in various east Africa markets, feeder services were established from the Mauritius hub. Regional intra-island services were superimposed on this to provide a strong and stable demand structure based on a regional hub role, local demand and feedering to/from the other insular markets.