THE head of Manila International Container Terminal (MICT) expressed optimism for the company’s business prospects in the Philippines as the Asia Pacific operations and flagship of International Container Terminal Services Inc. (ICTSI) recalibrates its strategy to focus on promising new areas amid a slowdown in global trade.
The head of the Philippine’s largest container port explained that conditions over the next few years appear to favor continued import growth.
“We’ve seen a bit of a volume drop, but still double-digit growth across all our facilities,” ICTSI Senior Vice President Christian R. Gonzalez, who is the general manager of the MICT and the company’s regional head for Asia Pacific, told The Manila Times in a phone interview.
“The Philippines is a little slow, surprisingly, but for us here at MICT that has been more a matter of some customer movement. Overall, things are a little challenging, but still generally positive.
“I think generally things are looking good,” Gonzalez said.
Although he expects exports here in the Philippines are to remain relatively flat due to the generally low manufacturing output, “We’re seeing good consumption and import growth, and see that continuing over the next couple years. In other parts of the world, exports will depend on the strength of the dollar, if that stays high, that will be positive,” he explained.
Company-wide, ICTSI’s revenue during the first half of 2016 eased to $550.8 million from $552.1 million in the corresponding period in 2015, while net income slipped to $92.6 million from $105.7 million.
In a separate report, the company attributed the drop in net income to unfavorable volume mix, lower non-containerized and storage revenues, as well as lower capitalized borrowing costs and higher depreciation and amortization expenses related to Tecplata S.A., the company’s new terminal in Buenos Aires, Argentina.
At the same time, port operations in the first six months of 2016 had increased 10 percent, with the consolidated volume rising to 4,264,633 twenty-foot equivalent units (TEUs) from the 3,888,130 TEUs handled in the same period in 2015.
Gonzalez noted that the company was seeing an increase in activity in several locations, most notably at its terminal in Iraq, as well as at Karachi, Pakistan, Jakarta, and Latin America. According to the company’s first-half income report, volume growth accelerated in the second quarter, rising 16 percent to 2,210,994 TEUs compared with 1,905,357 TEUs in the same period in 2015.
With respect to Philippine export trade, Gonzalez said, “I see it picking up in maybe five to ten years, if Clark and Subic see some growth from new businesses, and if we see more growth in Laguna.”
Looking outside Manila
Gonzalez’ outlook for the Philippines is reflected in the company’s current strategy. Even though ICTSI’s flagship operation is located in Manila, for the near term most of the company’s focus will be on other areas of the Philippines.
“Right now we’re not focusing too much on Manila, frankly,” Gonzalez said. “We’re actually looking for some growth in the Subic and Clark area. We have a big customer in the US (at ICTSI’s Portland, Oregon terminal) who’s expressed some interest…if they or some other potential customers locate in the Subic-Clark area, obviously that would be very good for us.”
The company is also maximizing its inland terminal located in Calamba, Laguna. “We opened that about a year ago as a joint venture with NYK [Nippon Yusen Kaisha Shipping], as a sort of ‘safety valve’ after the congestion problem in 2014,” Gonzalez said. “So we’re well positioned for growth in that area as well.”
Cargo rail plan
One possibly ‘game-changing’ project the company is backing is the resurrection of a cargo rail link between the port in Manila and the industrial area in Laguna.
Gonzalez explained, “As you know, we tried to do it back in the late 1990s, but we got burned by the trucking industry, who didn’t like the competition and simply cut their rates. The company took about a P1 billion hit on that, and at that time, that hurt.”
A large part of the failure of the first attempt could be traced to the difficulty in making a short-haul railroad profitable, Gonzalez added. The rule of thumb in the rail business is that in order for it to be profitable, the distance freight is carried should exceed that traveled by truck traffic in one day, or about 600 kilometers.
“The lesson in our first project was that we need an experienced rail operator, and specifically one who is experienced in short-haul operations,” he said. In the tie-up with the Meralco-owned MRail, the P10-billion project to link the existing Philippine National Railroad line to MICT and the Laguna inland facility would be largely handled by the rail operator.
“We’re supporting the project, and of course we’ve added our investment,” Gonzalez said. “But our role is really to guarantee MRail, ‘If you run this thing, we will provide the freight at either end.’”
In terms of a project timeline—MRail earlier reported it was hopeful it could get the government’s go-ahead by the fourth quarter of this year, and complete the necessary construction and acquisition of equipment within 24 months—Gonzalez said, “On our end, the Laguna terminal could be ready to go in a couple months. Here at the MICT, maybe six months.”