Korean port expansions come at a tough time

By Staff -- Logistics Management, 4/1/1998

Two major port developments in South Korea have come on-line just as trade volumes have dropped significantly. These new investments, on the drawing board for a number of years, are likely to add to the troubles being experienced by Korean public- and private-sector businesses as a result of Asia's ongoing financial crisis.

In December, the first phase of the brand-new Kwangyang container port opened for business. The facility offers four berths with an annual capacity of 960,000 20-foot equivalent units (TEUs). Customers include the three largest South Korean ocean carriers--Hanjin Shipping, Hyundai Merchant Marine, and Cho Yang Shipping--along with their alliance partners. Phase Two will add eight more berths, and Phase Three will add another 12 berths.

With its new high-speed highway connections and an on-dock rail line now under construction, Kwangyang will offer fast, uncongested, and cheaper service than crowded Busan, the world's fifth-largest port in terms of container volumes. But Busan also has added capacity in recent months. Last November, the Kam-Cheon Container Terminal opened close by Busan's main port complex. The new facility eventually will boast 20 vessel berths. More new terminals are on the way, as Busan also is scheduled to open the Kamman Container Terminal by the middle of this year.

The major Korean carriers have financial stakes in the new container facilities' construction and operation. These investments, coming at the height of the nation's economic crisis, may become a drain on their reduced resources. Some carriers, such as Hanjin, are redeploying vessels, selling off inefficient ships, and revising their equipment lease/buy structures to help them weather the economic storm. Still, taking on the additional commitments of building and operating the new terminals is bound to be painful, at least until the region's economy revives and growth in freight volumes returns to the levels that originally prompted the need for new port development.