DP World Ltd. said as much as $1 billion may be invested in the first Indian port able to handle the largest container ships as the company tries to challenge Colombo’s grip on India’s maritime trade with Europe and China.
“What we are trying to do is compete in the regional and international market,” Anil Singh, the company’s India head, said in an interview in Mumbai yesterday. “It will change the logistic pattern of the country.”
The new terminal at Vallarpadam in Kochi, south India, which is due to open in August, will be able to handle the 13,000-container capacity ships commonly used on Asia-to-Europe routes. Presently, these long-haul vessels are unable to stop in India, which forces the nation’s importers and exporters to spend an extra $150 million a year ferrying goods to and from Colombo, Singapore or Dubai, Singh said.
DP World, controlled by Dubai World, spent about 13 billion rupees ($288 million) on the first phase of the Vallarpadam facility, which will have an initial capacity of 1 million twenty-foot equivalent containers a year, Singh said. The remainder of the investment will cover a second phase, which will add another 3 million boxes of capacity within five years, he said. Container Corp. of India Ltd. is among three other partners in the terminal venture.
DP World will pay for its share of the investment using its own funds, Singh said. Financial difficulties at Dubai World have had no impact on expansion plans, he said. DP World, which is preparing to sell shares in London, has risen 12 percent this year in Dubai trading. The shares were unchanged at 48 cents on Nasdaq Dubai at 3:29 p.m. local time.
The Indian government is also dredging Kochi port and building rail links to help boost traffic, Singh said. The government has also agreed to reduce port fees that are presently more than eight times higher than Colombo’s for larger ships to help boost traffic, he said. These fees are separate from terminal charges.
Kochi aims to lure large container vessels from Colombo, which presently handles as much as 40 percent of India’s transshipment trade, according to Singh. Indian shippers use the Sri Lankan port because of lower costs, deepwater facilities and looser regulations.
8 Million Containers
Sri Lanka, some 31 kilometers (19 miles) southeast of India, is also boosting its port facilities to tap growing Asia-Europe trade and rising intra-Asia traffic. Colombo is set to build a fourth container terminal, while Hambantota port is also planning to add facilities.
DP World already handles almost half of India’s 8 million annual container volume at five ports across the country, Singh said. The company, which has spent about 80 billion rupees in India, is pursuing further projects and expansion plans in the country, he said.
Worldwide, the port operator runs terminals in 27 countries from the U.K. to China, and is building new facilities in four other nations. It handled 43.3 million containers at 50 ports last year, including at those it operates without ownership. The company, now the world’s fourth-largest container terminal operator, began services about 35 years ago with one port. In 2006, it bought Peninsular & Oriental Steam Navigation Co. for $6.8 billion.
Dubai World, the state-owned holding company that owns 80 percent of DP World, is seeking to restructure as much as $22 billion of debt. The company has said that DP World isn’t a part of its debt restructuring.