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ECRL resumption to have positive spillover effects on ports

Wednesday, 17 April 2019 | 00:00

The resumption of the East Coast Railway Link (ECRL) project will have its spillover effects on ports in Malaysia, specifically for Kuantan Port and Port Klang.

The ECRL project will resume with a new price tag of RM44 billion, a 32.8 per cent reduction from the initial cost of RM66 billion. Commencement of construction work is expected to start soon with the revised date of completion delayed two years to 2026.

A 40km reduction has also been made to the route connecting Kota Bharu to Port Klang, shortening the route to 648km.

“The only main change from the previous plan connecting to ports was the removal of Integrated Transport Terminal (ITT) in Gombak under the Mentakab-Port Klang route,” said MIDF Amanah Investment Bank Bhd.

“In lieu of this, Port Klang will be connected to Mentakab via Putrajaya, Bangi Kajang, Kuala Kelawang and Jelebu.”

The reason for change is to avoid the ECRL from passing across the 16km-long Klang Gates Quartz Ridge. Passing across this area would entail a high cost to build a 17.8km tunnel from Bentong to Gombak, trimming the chance for Selangor’s bid to list the Quartz Ridge as a UNESCO heritage site.

“Despite the rerouting of the ECRL from Gombak to Negeri Sembilan, we opine that this should not heavily impact the flow of freight traffic,” MIDF Research added.

“We still believe that travel time taken from Shenzhen, China via Kuantan Port and ECRL to Port Klang could be reduced by slightly more than a day instead of passing by the Straits of Malacca.

“Although cost estimates of using Kuantan Port and ECRL are slightly higher with railway accommodating around 100 TEUs of containers per service compared 20,000 TEUs that can be carried by mega vessels.

“Nonetheless, we reckon that this could be partially mitigated by demand to transport time sensitive goods especially during peak festive seasons. Demand at Kuantan Port remained strong during ECRL suspension.”

During the period of suspension of the ECRL project, the research firm saw that demand at Kuantan Port remained robust as container and cargo throughput grew by two per cent year on year (y-o-y) and 2.9 per cent y-o-y respectively in 2018.

The factor for Kuantan Port growth lies in the Malaysia-China Kuantan Industrial Park (MCKIP) which has reignited interest from Chinese industry players following the inception of the trade war between the US and China in 2018.

“The Sino-US trade war has prompted industrial players from China to relocate their hubs in regions such as Asean to avoid the imposition of high tariffs by the US To date, both the MCKIP and Kuantan Port have attracted a total investment value of above RM40 billion,” MIDF Research added.

“As interest from Chinese industrial players pick up, throughput in the form of products of companies such as Alliance Steel is expected to increase.

“Therefore, the capacity of Kuantan Port would need to cater for this type of throughput through the construction of a New Deep Water Terminal (NDWT) with that will double the capacity to 52 million freight weight tonnes (FWT) from 26 million FWT to cater for larger container ships of up to 18,000 TEUs.”

From this, Port Klang is slated to indirectly benefit from the increase in throughput at Kuantan Port.

“The ECRL may serve as a buffer for gateway volumes in Port Klang especially following the recalibration of shipping alliances in April 2017 which saw container volumes being relocated to Singapore.

“Moreover, COSCO and Evergreen are part of the OCEAN alliance, an alliance which contributes a lot of volume to Westports. Therefore, with Port Klang being a part of ECRL, we do not discount the possibility that more Chinese vessels will be used to retrieve the cargo transported via the land bridge.”

With more throughputs expected to be handled with the resumption of ECRL, especially at Kuantan Port and Port Klang, MIDF Research was optimistic that utilisation rates will increase.

“In the case of Westports, the increase of utilization rates to a level of around 75 per cent would serve as a trigger point to start expanding new container terminals.”
Source: The Borneo Post

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