Robust export performance in the US, a recovering market in Europe and rising imports and exports to/from countries such as China, India, Mexico and South Africa are responsible for the healthy state of the ocean car-carrying sector, according to most industry analysts.

The latter three countries, along with Thailand, have attracted investment from a large number of the world’s biggest automakers, including BMW, Mercedes Benz, Volkswagen, Ford,  General Motors, Honda, Toyota and Nissan, while several of their ports regularly handle large PCC and PCTC tonnage.

Clearly, the traditional high-volume car-carrying trades – such as those between North East Asia (Japan and South Korea) and Europe, North East Asia and North America, and North  America and Europe – are being supported by new routes. This is being driven by manufacturers establishing factories in lower-cost countries, especially those located closer to the final consumers. It is also related to manufacturers’ desire to produce low cost vehicles in emerging markets, where the demand is rising, and to then also use these plants as production bases for other emerging countries. In the past three years, for instance, vehicle trade growth has been very strong from India to South Africa, Mexico and parts of South East Asia.

Indian exports

Volkswagen, a major producer of cars in India, has a large factory at Chakan, near Pune, where it builds its Vento and Polo models. Its exports are channelled through Mumbai, and in August the company shipped its 100,000th vehicle to Mexico – this within two years of its decision to sell Indian-built cars to the country. In all, its Chakan factory has assembled more than 0.5M cars since it opened in 2009.

In essence, the past decade has seen a more fragmented trade pattern emerge in the car-carrying business, with far more complex logistics solutions needed to support customers’ requirements. These are trends that will continue.

India will export more vehicles in the coming years, while car assembly plants in Morocco and those planned for Nigeria and elsewhere in Africa and Iran will potentially generate additional cargo. Prior to the various trade sanctions imposed on Iran, it had a strong auto industry, underpinned by Renault-Nissan and Peugeot Citroen. The two firms would ship CKDs to the country for assembly, with Peugeot selling 485,000 vehicles in Iran in 2011.

These new factories will also result in more components being shipped and to an increase in the proportion of global container trade accounted for by the automotive industry. In the case of Iran, the import of finished vehicles is also expected to expand very quickly.

PCTC diversification

Accompanying the more fragmented trade base has been the growth in nonvehicular cargo carried on PCTC ships, in particular. Agricultural and construction machinery, project and out-of-gauge cargo are regularly targeted by the main operators, and this has been supported by design changes to the ships. Heavier-duty ramps and a greater number of hoistable decks give shipowners/operators much more flexibility.

A recent report published by Oslo based investment bank DNB Markets revealed that in 2014, the global trade in cars increased by 5%, with further growth registered in H1 2015. Based on this recent growth trend, which followed two years of decline, and planned increases in vehicle production, DNB projected a 3% rise per year (up to 2017) in the annual tonne-miles demand for the car-carrying sector.

In terms of production, DNB expects global car output to reach 10.5M cars by 2017, with more than 60% of the growth coming from factories in China and India. Despite both countries exporting more vehicles and investing in additional specialised car handling facilities, the DNB believe a higher proportion of future production will be consumed do mestically, and that the impact on trade will not be so significant.

Its analysts wrote: “Historically, there is a multiplier effect ranging from 1.2 to 1.6 from production growth to demand growth for seaborne transportation, but as we assume that most of the production increases from China and India are destined for the domestic markets, we choose to assume a one-to-one relationship between production growth and trade growth in our forecast horizon for 2015 -2017.”

Chinese imports

Nonetheless, China was singled out as a strong driver of global vehicle traffic, on account of its rising imports. DNB viewed China as sustaining the trade in export cars from Germany and driving the market from the US, particularly for luxury marques. In 2014, for instance, Germany’s vehicle exports to China rose by 5%, with at least 2% rises expected in each of the next two years.

However, in both China and India considerable investment is needed in modern vehicle handling infrastructure, including marine terminals, distribution and processing centres, if these countries’ potential in the car-carrying trades is to be realised.

In India, this means increasing capacity and reducing the costs of moving cars, both domestically, and on corridors linking the production plants – mainly located in the metropolitan districts of Delhi (north), Mumbai (west), Chennai (south) and Kolkata (east) – to the ports.

Progress is being made and competition between ports to handle vehicles is intensifying. On the country’s eastern seaboard, the port of Kattupalli, 35 km north of Chennai, recently joined Chennai and Kamarajar (formerly Ennore) in processing vehicles. Its first consignments, handled in July, comprised Fuso-designed trucks, Daimler earthmoving equipment and Kobelco cranes.

Space a-plenty

Like Kamarajar, Kattupalli has plenty of space for storing cars (3,500 units), and its road and rail connections are less congested than those to Chennai, as the port is located away from the main city. Its traffic base is expected to grow quickly, and WorldCargo News understands that several car-carrying companies, including K-Line, Höegh Autoliners, NYK and Eukor, are in discussion with L&T Ports, the operator of the facilities.

In addition, companies such as Ford, Nissan and Toyota, which move containerised auto components through the port, are also evaluating it as an option for their finished vehicles. L&T has plans to expand the port’s car storage capacity to 10,000 units, and will do this in line with demand. Kamarajar is also confident, having reported a very strong start to its FY 2015-16, handling in excess of 47,500 CEU in the April/end-June period, up 11% year-on-year. The port’s main access channel will be dredged and new wharves/storage areas will be constructed, boosting its vehicle capacity by 300,000 CEU/year by 2018.

In contrast, Chennai’s car handling volumes have fallen. In Q2 2015, volumes slipped from over 59,000 CEU to 43,000 CEU.

At Pipavav in Gujarat, APM Terminals and NYK Auto Logistics (India) recently opened a common-user ro-ro facility. Its first consignment of vehicles, 1,300 Ford Figo cars – built at Sanand, 290 km to the north – was loaded aboard Cido Shipping’s GRAND DAHLIA this month. Featuring a PDI facility, the terminal can store 4,200 cars and has an annual capacity of 250,000 CEU. Keld Pedersen, managing director of APMT Pipavav, believes the new auto segment will add to the business’s top and bottom line performance, and offers the terminal long-term growth prospects.

It was a view shared by Hiroyuki Okamoto, corporate officer of NYK Automotive Transportation. “With Gujarat becoming a hub for automobile manufacturing in India, we hope utilisation of our automobile yard at Pipavav will pick up quickly,” he said. The executive sees Pipavav emerging as one of the largest vehicle exporting centres in India and its investment in the ro-ro terminal as cementing NYK’s position as one of the country’s leading vehicle processing and distribution companies.

NYK and K Line have already scheduled calls at the terminal, but C. K. Rajan, head of APMT Pipavav’s container division, believes that all the main car-carrying lines will call. “We have a scalable terminal and have earmarked another 25 acres of land for the facility,” he said. “We are also one of only five Indian ports permitted to handle imported vehicles.” However, he sees this sector remaining small, and limited to topend luxury cars.

Eyeing up autos

India’s Mahindra Logistics is keen to expand its involvement in the auto sector, and to reduce its reliance on in-house Mahindra Group contracts. This year, it has acquired a majority stake in Lords Freight India, which is engaged in international freight forwarding, and signed a joint venture agreement with Indian Vehicle Carriers. 

Called 2×2 Logistics, the JV’s principal objective is to offer a reliable network of services linking the main production centres for vehicles in the north, south, east and west of the country with the main areas of consumption. In particular, 2×2 Logistics is investing in new equipment that caters for the wide range of vehicle sizes, including motorcycles, which need to be transported around the country.

“We have a very specific focus on design innovation in car carriers at 2×2 Logistics,” explained Sushil Rathi, senior vice president of Mahindra Logistics. “This joint venture allows us to directly operate assets, and serve our customers with a greater degree of predictability and control.”

Investing in assets is unusual for logistics groups, but Rathi believes that the significant expansion programmes planned by manufacturers in India and the diverse nature of vehicles being produced could lead to shortages and service difficulties, and are issues that 2×2 Logistics can bridge. To date, 100 car-carrying trailers have been ordered.

Landside

But landside infrastructure in India remains poor, and shifting cargo around the country is often chaotic and always costly and time-consuming. The incidences of pilferage and damage are also high.

While the government’s planned highway construction and the eastern and western rail corridor projects will help the situation, the recent decision to liberalise specific aspects of the country’s maritime cabotage laws could prove highly significant. The automotive industry and owners/operators of ro-ro tonnage will be the initial winners (see box story).

In South Africa, Volkswagen is investing about ZAR4.5B on increasing the output of its factory at Uitenhage, near Port Elizabeth, by 50% to 150,000 cars a year. According to Thomas Schaefer, managing director of Volkswagen South Africa, the factory will produce several new models, and exports will be a key feature of the group’s future strategy in the country.

When it comes to purchasing cars, nations in South East Asia and the Middle East continue to register solid rates of growth. In the former region, rising disposable incomes are making cars affordable to a larger proportion of the population, while that very ownership has become something of a lifestyle achievement.

In Indonesia, car sales surpassed 1.2M units last year according to data published by the Indonesian Automotive Industry Association. However, the facilities needed to handle, process and distribute these vehicles remain extremely limited. To help change this, PKT Logistics, one of Malaysia’s main logistics service providers, has teamed up with Multi-Terminal Indonesia (MTI) to develop an auto hub at the port of Tanjong Priok (Jakarta). MTI is the logistics arm of Indonesia’s national port authority, PT Pelabuhan Indonesia.

In Saudi Arabia, NYK has concluded a deal with the country’s Ports Development Company to set up a dedicated ro-ro terminal at King Abdullah port. The KAP ro-ro terminal will have the capacity to handle 600,000 CEU/ year, and it is scheduled to commence operations in Q3 2016.

New tonnage

Buoyed on by the positive prospects in the ocean car-carrier sector, and a need to achieve both better economies of scale and greater cargo loading flexibility on their ships, several of the world’s leading operators of carcarrying and deepsea ro-ro ships have recently announced tonnage investment programmes. 

These include Grimaldi Naples, which in the past six months or so has finalised contracts worth in excess of US$460M, and affiliate ACL, which in the next 18 months will take delivery of two con-ro ships with for 1,307 cars (see “Gaining access”, p45).

Elsewhere, Mitsui OSK Bulk Shipping, a division of Japanese shipping giant Mitsui OSK Lines, has ordered four car carriers with the capacity to load 6,800 CEU. They will be delivered in 2017 and 2018. 

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This complete item is approximately 2000 words in length, and appeared in the September 2015 issue of WorldCargo News, on page 49. To access this issue download the PDF here.