Is There Enough Cargo To Move Around?

In the last few years there has been an upsurge in the ships that move cargo. First, that became noticeable with the LCTs that became ore carriers of the black sand mining in a few provinces and particularly in Surigao where opening of mines close to the sea boomed. That happened because of the sudden great demand then of metals in China.

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An aggregates carrier LCT off Taganito, Surigao

Just after the peak of that demand, a fleet of brand-new LCTs built in China appeared in north Mactan Channel. That happened when the demand for metallic ores in China was beginning to wane. And so initially those LCTs especially those owned by Broadway One Shipping and Cebu Sea Charterers were just anchored in the channel. Those LCTs were only known by their numbers but in size those were bigger than the average Philippine LCT. Generally, their powers and speeds were also higher and better.

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Row of newly-arrived LCTs in north Mactan Channel

With nowhere to go these LCTs including those owned by others but also built in China (like the Poseidon LCTs, the Meiling LCTs, those owned by Premium Megastructures Inc., Adnama Resources, etc.) became aggregates carriers and Cargo RORO LCTs and in the latter it challenged in the business then dominated by Goldenbridge Shipping which had a route from Labogon, Mandaue to Hindang, Leyte. Sand is gold in Cebu because of its construction needs and it is not readily available in the island in quantity because of its upraised sea floor origins which meant just a lot of limestone. And so sand is transported from Leyte whose land is volcanic in origin and thus there is plenty of sand and hard rock. Aggregates carrier LCTs go as far as Samar and some also go to Bohol.

The value of Cargo RORO LCTs was highlighted when the super-typhoon “Yolanda” struck and lots of trucks have to move to Leyte and long queues of truck formed in Matnog and Lipata ports and there was also a lot of needed bottoms for trucks crossing from Cebu to Leyte. The LCTs filled this need and suddenly the Cargo RORO LCT segment was here to stay. It challenged not only old LCT operators like Mandaue Transport and Simpoi Shipping but also the overnight ferry companies operating ROROs that Roble Shipping even felt the need to charter LCTs from Asian Shipping Corporation (ASC), owner of many LCTs for charter. Now Cargo RORO LCTs connects many islands and it is also a viable transporter now of container vans from Manila to the Visayas and Mindanao, a mode pioneered by Ocean Transport that also started by chartering LCTs from Asian Shipping Corporation before acquiring their own China-built LCTs.

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On the left is an LCT of Asian Shipping Corporation chartered by Roble Shipping

I can understand the need and value of LCTs which have proven their uses and versatility recently and that is why it is still continuing to increase in number. But in the same period I also noticed the rise in the numbers of our container ships and general-purpose cargo ships which are mainly freighters on tramper duty. In general that is a surprise for me as I know our local inter-island trade is flat and intermodal trucks have already stolen a significant portion of their cargo and that can be shown in the queue of trucks in many short-distance crossings like in the routes to Panay, the routes to Eastern Visayas and Surigao and Cargo RORO LCTs are used by these intermodal trucks along with short-distance ferry-ROROs. Cargo RORO LCTs are also used by tractor-trailers hauling container vans to serve islands where local container ships are now gone or where the service is weak or the rate expensive. Examples of these are Samar, Leyte and Bohol islands.

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A Cargo-RORO LCT

I have been contacted by a writer doing the history of Delgado Brothers or Delbros which once dominated the Manila ports and which was also involved in shipping then (it was also the first employer of my late father). Delbros happened to by one of the two dominant leasers of container vans locally together with Waterfront and they cannot resolve the problem of flat leasing for several years already and they cannot fathom the reason why. I told her the reason is simple – the intermodal trucks are stealing their business.

But in recent years I have seen our container shipping companies add and add container ships. Most remarkable is Oceanic Container Lines (OCLI) which has the most number of container ships now. Notable too is Philippine Span Asia Container Corporation (PSACC), the new name of the controversial Sulpicio Lines. Lorenzo Shipping and Solid Shipping have also added a few. There are new players which are Moreta Shipping Lines which was formerly in overnight ferries, Meridian Shipping and Seaborne Shipping and these new players are also expanding their route networks. To this might be added Trans-Asia Shipping Lines Incorporated (TASLI) which now has a container ship to Manila.

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A deck loading ship

Another notable addition is Fiesta Cargo and Logistics (this is not the exact name of the company) which operates true deck loading ships. These ships have flat decks like those in LCTs and booms for cargo handling. Aside from this and container ships, the Asian Marine Transport Corporation (AMTC) also added a few RORO Cargo ships, their forte and choice of transport.

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A RORO Cargo ship

For NMC Container Lines and 2GO there was no noticeable addition although the latter have chartered container ships from Caprotec and they also charter ships from Ocean Transport (or is it Key West?). Hard to say because of the rumored split between the two. Escano/Loadstar meanwhile seems to be exhibiting a decline in their fleet.

In general-cargo ships a few companies showed newly-acquired ones and probably topping the list is Avega Brothers which from chartering ships from Asian Shipping Corporation went on a spree of acquiring trampers that though Manila in origin they regularly anchor ships now in north Mactan Channel. Medallion Transport and Roble Shipping also both acquired a significant number of freighters. Aside from the three mentioned many other shipping companies also added freighters to their fleet.

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Asian Shipping Corporation LCTs in their Mandaue port

Asian Shipping Corporation which specializes in chartering ships and operating barges aside from LCTs needs special mention because of the rate they are adding ships annually. As of last year their fleet total is nearly 200 ships already including the lowly tugs but MARINA (Maritime Industry Authority) has noted that they already have the biggest fleet in the country in terms of Gross Tonnage (GT), the traditional method of comparing ship and fleet size and that they have already displaced 2GO from its old Number 1 perch. 2GO temporarily regained the top ranking with their acquisition of the liner St. Therese of Child Jesus but I wonder if they did not slide to Number 2 again with the sale of the liner St. Joan of Arc. For an operator of supposedly “lowly” ships the achievement of Asian Shipping Corporation certainly has to be lauded.

But all of these leads me to the question, “Is there enough cargo to move around?” I know many of the trampers are just carriers of cement and other construction/hardware/electrical materials that they are practically “cement carriers”. Some are “copra carriers”. And these trampers are also carrier of bagged flour of various kinds and also other bagged products like fertilizers and feeds. But our freighters seldom carry rice and corn now unlike in the past. Ditto for cassava – the volume now is small.

Is there really a significant rise in the volume of these products? Maybe in cement and related materials because of the construction boom. But I wonder about the others. Are there other products being carried now? What I know is a lot of grocery items is now carried by the intermodal trucks.

Coal might be big now because of the rise in number of our coal plants. But freighters do not carry that. Other types of fuel are carried by the tankers.

There are incentives now from the government on the acquisition of new ships and it even opened a loan window with the government-owned Development Bank of the Philippines (DBP). Are shipping companies taking advantage of that just to hoard ships?

What I know is shipping rates in the country are high if compared to other countries. That can cover low cargo volume. The most visible show of that are our container ships. Seldom will one see them full or even near that. Well, operating ships is expensive especially since MARINA exactions adds to the cost.

Whatever, newer ships are always good. I just want to see where this would lead. Lower rates? Probably not. Better service? That is hard to measure on cargo ships. More availability of ships? Maybe one can count on that.

Anyway, this article is just meant as an update on one aspect of our cargo shipping.

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The China-built LCTs

It seems that just like in buses, in due time China-made LCTs might rule our waves just like China-made buses are now beginning to rule the Luzon highways. The process will not be that sudden though because ships last longer than buses and it is much more costlier to acquire ships. We too have that attachment to our old ships and we don’t suddenly just let them go. But then who knows if some crazy people try to cull our old ferries? I am sure many of the replacements of them will be Cargo RORO LCTs and ROPAX LCTs from China. They are simply that cheap and the terms are good. One thing sure though is the replacements will not be local-built ships. Local-builds generally cost much more than China-builds and the price of the ship is a key decision point.

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A Meiling LCT a.k.a. deck loading ship

A decade ago, China-built LCTs were practically unknown in the country as we were building our own LCTs in many shipyards around the country. Then the first palpable show of LCTs happened early this decade was when a lot of brand-new LCTs suddenly appeared and anchored for long in North Mactan Channel waiting for business. Some of these were rumored to be destined for the mines of Surigao which was then booming. That area already had China-owned and -built LCTs to carry ores to China just like some other provinces which allowed black sand mining had China-owned LCTs docking. But then here, I am talking of China-built LCTs that are locally-operated or owned. However, the Surigao mining boom when world metal prices spiked a decade ago because of China demand was one of our key introduction to China-built LCTs.

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Row of LCTs in North Mactan Channel

Then the demand for ore of China suddenly weakened and so those brand-new China-built LCTs that showed in Mactan Channel owned by Cebu Sea Charterers (of the renowned Premship group), Broadway One Shipping and Concrete Solutions Incorporated went into regular cargo moving. Later, the two companies plus others like Primary Trident Solutions (owner of the Poseidon series of LCTs), and Adnama Mining Resources which also acquired China-made LCTs went into Cargo RORO LCT operations like the Cebu Sea Charterers which meant conveying rolling cargo or vehicles between islands. The Cebu to Leyte routes was the first staple of the Cargo RORO LCTs. Cargo RORO LCTs were also fielded in the key Matnog-Allen and Liloan-Lipata routes to ease backlogs of trucks waiting to be loaded. They became the augmentations to short-distance ferry-ROROs in heavily crowded routes during peak season or when there are disruptions after typhoons.

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Cargo RORO LCTs in Carmen port

The old overnight passenger-shipping companies of Cebu more than noticed the emergence of the Cargo RORO LCTs and felt its threat to their trade and so they also joined the bandwagon in acquiring China-built LCTs. Roble Shipping first chartered LCTs from Asian Shipping Corporation before buying their own and those were China-made LCTs. However, it was Lite Ferries that made a bet in acquiring new China LCTs to be converted into passenger-cargo LCTs after some modifications. Outside of Cebu the shipping company 2GO, under the name NN+ATS and brand “Sulit Ferries” chartered China-built LCTs from Concrete Solutions Incorporated, which are the Poseidon LCTs for use in their Matnog-Allen route.

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A ROPAX LCT operated by Sulit Ferries (LCT Poseidon 26)

Meanwhile, LCTs were also tried by Ocean Transport & Key West Shipping as container ships. When they started they also chartered LCTs from Asian Shipping Corporation like Roble Shipping. They were successful in using LCTs as container ships and they were always full (and maybe to the chagrin of the CHA-RO messiah Enrico Basilio). This mode might be a no-frills way of moving goods through container vans but it is actually the cheaper way as LCTs are cheap to operate. Later, Ocean Transport & Key West Shipping also acquired their own LCTs with the blessings of Asian Shipping Corporation. Ocean Transport & Key West Shipping might have been successful in showing a new mode of transport but the self-proclaimed “shipping experts” never took notice of them nor studied their craft and mode.

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Brizu, a container carrier LCT by Ocean Transport

Asian Shipping Corporation (ASC) which really has a lot of LCTs for charter and probably with the most number in the country started by building their own LCTs right in their yards in Navotas just like some other smaller shipping had their LCTs built in Metro Manila wharves. Asian Shipping Corporation have not completely turned their back of own-built LCTs but more and more they are acquiring China-built LCTs which come out cheaper than local-builds. Shipbuilding on the lower technology level like LCT-building is at times can also be viewed too as selling of steel and China is the cheapest seller of steel in the whole world. Their engines and marine equipment are also on cheap end.

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ASC Ashley of Asian Shipping Corporation

Another big operator of China-built LCTs that must be noted is the Royal Dragon Ocean Transport which owns the Meiling series of LCTs. Many of their LCTs can be found in Surigao serving the mines there. Right now, China-built LCTs are already mushrooming in Central and Eastern Visayas but in other parts of the country they are still practically unknown except in Manila or when passing by or calling. Ironically, it might actually be a typhoon, the super-typhoon “Yolanda” which devastated Leyte that might have given the China LCTs a big break because they were used in Leyte and in the eastern seaboard routes (in San Bernardino Strait and Surigao Strait) when there a big need for sea transport after the typhoon and their potential was exposed. The super-typhoon also showed the need for Cargo RORO LCTs separate from short-distance ferry-ROROs.

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Owned LCTs by Roble Shipping

Ocean Transport of Cebu, as stated earlier, now also have their own China LCTs to haul container vans from Manila after initially chartering from Asian Shipping Corporation. The same is true for Roble Shipping which initially chartered Cargo RORO LCTs from Asian Shipping Corporation for Cebu-Leyte use. Now other Cebu passenger shipping companies are also beginning to acquire their China LCTs. And that even includes Medallion Transport. Actually there are so many LCTs now from China that don’t have a name but just sports a number (i.e. LCT 308, etc.). But among Cebu overnight ferry companies, it is actually Lite Ferries who is betting the biggest on China LCTs that carries passengers too after some modifications.

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PMI-3, a Cargo RORO LCT of Premium Megastructures Inc.

In the following years I still see a lot of China-built LCTs coming and that will include LCTs that have provisions for passenger accommodations. If the government cull the old (but still good) ferries, I bet that type will suddenly mushroom especially in the short-distance routes. But of course it will not have the speed nor the comfort of the basic, short-distance ferry-ROROS. But who knows if that is actually the wish of some decision-making foggy old bureaucrats who don’t ride ships anyway? They will just be giving China yards and engine makers a big break. And a final note – LCTs from China are also called as “deck loading ships”. So don’t get confused.

Now let us just see how these China imports grow in size and importance.

It Seems They Are Beginning To Fear The Cargo RORO LCTs Now

Once upon a time, in the early days of connecting islands, LCTs had a place as exemplified by Millennium Shipping in the 1970’s and the LCTs connecting Mactan island and the islands of Samar and Leyte. But as it moved into the 1980’s and the 1990’s, it was the short-distance ferry-ROROs that began connecting the islands like in San Bernardino Strait, in Surigao Strait, in Verde Island Passage, in Guimaras Strait, in Tanon Strait, in Bohol Strait, across Camotes Sea, in Basilan Strait and in Panguil Bay. LCTs began losing favor then and some of the reason might be psychological. There was a belief then that LCTs were “less safe”.

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It was actually only Maayo Shipping and Tri-Star Megalink which bucked the trend in those decades before the change of the millennium by still using LCTs as passenger-cargo carriers. To some extent, Asian Marine Transport Corporation (AMTC) can also be counted here before the start of the new millennium. Among the the most notable operator of passenger-cargo LCTS in this millennium are Lite Ferries and Starhorse Shipping Lines. Of course, LCTs also connected Samal island, Guimaras and Olutanga islands but I would rather exclude it here as they were very short connections like the connection across Sula Channel of Albay to Cagraray island.

LCTs as means of transport are slow and slower than short-distance ferry-ROROs. Their passenger accommodations are also very basic and small and can be uncomfortable. They were never really meant to be people carrier unless one is talking of the hybrid Korean LCTs (like the Ma. Angelica Grace, Reina Banderada, Reina Justisya and Star San Carlos among others) which have more comfortable passenger accommodations and even airconditioning plus bigger engines which afford speeds higher than the basic, short-distance ferry-ROROs.

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I do not know which started the trend of using LCTs for vehicles mainly with not much intent to carry passengers. The most significant I noticed that had an operation like this was Golden Bridge Shipping of the Lua family (owner of a tramper company and Oceanjet) which has its base in Cansaga Bay and had a route to Hindang, Leyte. Early on they were known as Socor Shipping. Of course, Mandaue Transport also had a route from Mandaue to Tagbilaran and Simpoi Shipping had a route from Carmen to Ormoc.

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There were also LCTs that were used not for rolling cargo but as container van carriers. Ocean Transport chartered LCTs from Asian Shipping Corporation for this purpose which was copied by others until they were able to acquire their own LCTs. But of course, transit time from Manila to Cebu can take up to 4 days but container vans won’t protest unlike passengers. Some Asian Shipping Corporation LCTs were also chartered to load container vans from Manila to Cagayan de Oro.

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These operations are of course Cargo RORO operations. The only difference is instead of using Cargo RORO or RORO Cargo ships, LCTs are used. That is why I termed these LCTs as “Cargo RORO LCTs”.

Starting in 2012, LCTs from China began appearing in great number in Mactan Channel and the biggest owners were Cebu Sea Charterers, Broadway One Shipping, Concrete Solutions/Primary Trident Marine Solutions and Royal Dragon Ocean Transport. The first two simply had numbers as names of the LCTs. The third one was the owner of the Poseidon LCTs and the last one was the owner of the Meiling LCTs. Asian Shipping Corporation also bulked up their LCT fleet. Supposedly, these LCTs which were called “deck loading ships” in China will be used to transport ores from Surigao to China.

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However, two major happenings intervened. One, the need of China for ores declined and in November of 2013, Typhoon “Yolanda” wreaked havoc in Eastern Visayas. In the aftermath, in the need for relief and rehabilitation of the region, trucks and trailers have to cross. This happened during a time that the long-distance trucks were already running via Eastern Visayas as substitute for the ship-borne container vans and many of these are still destined for Mindanao.

Immediately, mile-long queues of trucks formed in the ports of Matnog, Allen, Liloan, Benit and Lipata leading to loud protests. MARINA then allowed the temporary use of LCTs which became de facto permanent until today. Meanwhile, there was also a great demand for bottoms to be used by trucks across Camotes Bay. Suddenly, the moored “deck loading ships” in Cansaga Bay was crossing Camotes Bay, San Bernardino Strait and Surigao Strait. Cebu Sea Charterers and the Poseidon LCTs slowly begans Cargo RORO LCT operations together with the Adnama LCTs (many more were used in Surigao and elsewhere). Roble Shipping meanwhile chartered LCTs from Asian Shipping Corporation which they replaced when they were able to acquire their own LCTs.

There was also an upsurge in LCT demand to Bohol and some old LCT began plying routes. Feeling their grip threatened, Lite Ferries bought them all lock, stock and barrel aside from buying additional LCTs. Meanwhile, Cebu Sea Charterers invaded other routes like the Carmen-Ormoc, the Dumangas-Banago and the Tuburan-Escalante routes. Suddenly, the lowly LCTs which became Cargo RORO LCTs looked menacing. Even the pioneer Golden Bridge Shipping which had queues even before “Yolanda” feels threatened now.

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How did this come to be? One reason is at the start, the overnight ferry companies crossing Camotes Sea did not give due regard to the rolling cargo or vehicles. They were too content in their successful palletized and loose cargo operations and they underestimated the need of the rolling cargo. At the start only Golden Bridge Shipping, Simpoi Shipping and Asian Marine Transport Corporation were servicing them. It seems Lite Ferries saw the need earlier than their fellow overnight ferry companies. Well, they are strong in rolling cargo operation in Bohol and is even dominating it.

Secondly, in terms of rates none can beat the Cargo RORO LCTs. They might be slow but in terms of rates they are far cheaper than the overnight ferry companies as in they can give rates that are cheaper by 40%. Well, they don’t need to invest in passenger services and accommodations and they have small engines compared to overnight ROROs. Now they even carry container vans not in trailers to Leyte from Cebu superseding the container ships that used to call in Leyte ports from Manila.

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That is always the danger brought by Cargo RORO LCTs, the low rates. Now feeling they can’t beat it, the overnight ferry companies are beginning to acquire their own LCTs. Lite Ferries is so well ahead in this game but Roble Shipping is already following suit. Medallion Transport seems not to be that worried yet because compared to other they saw immediately the need for rolling cargo operations and were not too dependent on palletized and loose cargo operations. After all they started in short-distance ferry-RORO operations and so they might have had a better understanding of rolling cargo from the start.

The old ROROs better adjust now. From what I heard even the big Asian Shipping Corporation which has the most number of ships in the Philippines is joining the fray. It seems they might have already tired of just chartering LCTs.

In the eastern seaboard, I heard the Cargo RORO LCTs are already the favorites of the truckers. As they say money talks. Price point as decision point is simply too easy not to miss. Everybody wants savings.

To me, it is no longer a question if the Cargo RORO LCT sector will take a slice of the pie. The question is how much. From container ships to liners to overnight ships to short-distance ferries, all are threatened. They will not be overwhelmed but they must be prepared to share the pie with the Cargo RORO LCTs. By how much, now that is the guessing game. All I know is the Cargo RORO LCT rates are simply unbeatable. And that might be sending shivers now down the spine of the competition.

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And I dare say this development is good. Rolling rates are simply too high in the Philippines because the regulatory agency MARINA never learned how to compute rates. It is as if fuel and distance are never really factored in.

Rolling cargo rates of the LCTs across Camotes Sea is now lower than RORO rate across Surigao Strait. How did that happen?