Concern expressed over bid conditions for Sri Lanka’s East Container Terminal
ECONOMYNEXT – An influential shipping industry body has warned that conditions set for investors to build and operate a container terminal in Sri Lanka’s Colombo may discourage larger operators and reduce overall interest.
The expression for interest (EOI) for Colombo’s East Container Terminal (ECT) by Sri Lanka Ports Authority requires one of the top 20 container shipping lines to be a member of the bidding consortium, who will also have to guarantee one million containers a year.
Bids will close on July 21.
At a pre-EOI conference on June 30, among those present were Sri Lanka’s John Keells Holdings which runs the South Asia Gateway Terminal, Aitken Spence, China Merchants Holdings, Colombo International Container Terminals, NYK Lines, South African port operators Transnet, shipping industry sources said.
The Ceylon Association of Shipping Agents, an industry body has warned that shipping lines around the world are divesting their stakes in terminals, the mandatory requirement for a shipping line to guarantee volumes and be part of the consortium may restrict the number of bidders.
Even the top five global terminal operators may not be able to bid, the industry body said in a letter to the ports agency.
CASA said a better method is to ask the terminal operator to guarantee a million twenty foot equivalent (TEU) containers and pay a fixed charge based on the output.
Sri Lanka Ports Authority is keen to get a shipping line in the bidding consortium to stop ‘cannibalizing’ existing business and bring in new volumes, Chairman Dhammika Ranatunga has said.
Compared to the bid conditions to the South Terminal, any operator bidding for ECT need only have experience in running a terminal with a throughput of 1.3 million TEUs.
The CASA also said in the current conditions require operators to have only 1.2 million TEUs, which was lower than the requirement for the South Terminal, where Colombo International Container Terminal is now built.
Even a river terminal operator could bid and there was no requirement for transhipment experience, which may not be the best strategy.
However if a floor like 2.0 million was set, South Asia Gateway Terminals, now owned by John Keells Holdings would be excluded, analysts say.
Originally SAGT was expected to get first refusal to build the East Terminal, but the SLPA started to build a 400 meter length of the terminal in order to be able to handle larger ships.
The new bidders will have to complete it and run it.