China ban stymies Korea, Miami eyes a Carnival terminal, Copenhagen and Hamburg poised to build

China’s politically motivated suspension of permission for its people to cruise to Korea has cast a shadow over the expansion plans for the main Korean cruise port of Jeju, described by John Tercek, vp new business development, Royal Caribbean Cruises Ltd., as 'the number one cruise port in Asia.'

Speaking at the 'Port Capacity – To Invest Or Not?' conference session at Seatrade Cruise Global, Cruise Industry Association of Jeju chairman Eui-Keun Kim admitted he did not know whether the port’s forecast of 1.5m cruise passengers this year—following a doubling of traffic to 1.2m between 2014 and 2016—could now be achieved.

'In 2011, just 150,000 cruise passengers came to Korea on 149 ship calls and, by 2016, the total had increased to 1.95m on 791 calls but 92% of the passengers were Chinese. China has been central to our growth and future increases were looking inevitable before the ban was imposed earlier this month.'

The Koreans—and the cruise lines—will be looking for an early resolution as ambitious plans are already in place for major expansion of Korean cruise port infrastructure.

Session moderator Tercek said: 'We approached the Koreans a few years ago saying that we were worried about getting all our new ships into their cruise ports.

'The Korean government said "What are you worried about? Just tell us what you need and give us a couple of years and we will take care of it."

'That kind of positive response very rarely happens to us but they have been as good as their word.'

Kim said: 'The total number of cruise berths in Korea will increase from eight to 11 by the end of 2017. This will include two new berths designed for 220,000gt ships opening at Jeju in July this year.

'We decided we needed five berths on the island by 2020 and 10 by 2030 so we are creating a new port in the north with four berths planned by 2030.'

In the short term, Japan may gain from Korea’s loss of Chinese cruise visitors. This will be a further boost to its already burgeoning cruise tourism sector which, according to Tercek, has transformed Japan into the leading destination country for cruising in Asia.

From Japan’s Ministry of Land, Infrastructure, Transport and Tourism Hiroshi Ishihara told the session cruise calls to Japanese ports had more than doubled from 929 to 2,018 between 2010 and 2016 with Hakata leading the way with 328 calls.

He said: 'Japan had 1.99m cruise visitors in 2016 and our target is 5m by 2020.'

Although the Japanese government does not directly operate any ports or harbors, it does have the power to approve port plans and one of these is to develop international cruise hubs through public/private partnerships involving the cruise lines. Six ports (including Yokohama) have been identified for this concept.

Tercek welcome this initiative: 'We have been scrambling to find suitable ports to park the ships and the Ministry has been working very closely with all of us to find the right solution. The government has now invited ports to partner with the cruise lines to create the required long-term infrastructure.'

Consistent investment in infrastructure has been the key to PortMiami’s success in maintaining its position as the global cruise industry’s leading homeport. And it will also be crucial if it is to meet the challenge from China.

The Florida port’s deputy director Kevin Lynsky said: 'It will be interesting to compare our growth over the next three to five years with that of China. If you take the low end of their projections and the high end of ours, there is a chance that we will add even more passengers than it does.

'No one has talked about this and it might seem absolutely impossible but let’s wait and see. But to make it happen, we will have to do an awful lot of building.'

Which is exactly the plan.

Lynsky said: 'We have six major cruise terminals but, after a couple of years when our growth stalled, we are about to take off again with a record 5m passengers expected this year.

'We have just broken ground on a seventh terminal being built by Royal Caribbean and we still have room for an eighth about which we are in discussions with Carnival.

'Both these will be built on a new financial model for the port. We built the first terminals here on an "if we build them, the ships will come" on-spec basis, using capital funds secured from the community in general obligation bonds.

'From the 1990s, these facilities became more expensive as people did not want to stand outside in the hot Miami sun anymore so we had to build more elaborate, fully air conditioned facilities. This meant selling revenue bonds to the market rather than taxing the community and required pledges on future passenger numbers from the cruise lines.

'This $200m RCL terminal (to be opened next year) has a new business model because it was conceived at a time when we had just secured $500m bonds in the market and we didn’t think we could sell any more to build a terminal.  

'This deal almost looks like a land lease to us with RCL doing all the financing, design, building and maintenance work while we just cleared the land, developed the road systems and will eventually be collecting a rent check.

'This will probably be the model we use with Carnival but it will be the last time we use it. Port finances are looking good these days and we have always been good at deploying our capital.

'The whole port covers just 530 acres and, long term, we will have major space constraints. The cargo area of the port will remain just that for the foreseeable future and this puts a pinch on future cruise growth.

'The eighth terminal could also be the last we have on this physical footprint.'

Germany’s port of Hamburg is also looking for more space to service a fast-growing cruise market.  

Cruise Gate Hamburg managing director Sacha Rougier said: 'Ships are getting bigger and key clients like AIDA, MSC and TUI are deploying more ships so we are expecting a lot of growth to 2030. We are, therefore, trying to identify where and when the bottleneck could be.

'We are currently looking at nine different locations in the port, analyzing infrastructure, the quays and nautical issues to see if there is a viable option for a terminal within this port. We should have an outcome by the end of spring.'

Copenhagen is also hoping for an imminent go-ahead for a new terminal plan.

Cruise, Ferries and Maritime Service Copenhagen Malmö Port chief operating officer Arnt Møller said: 'Our plan is for a fourth terminal on top of Terminal 3 that will be 10,000 square meters (5,000 square meters for each of its two floors). We hope to get the OK in time to get it up and running in 2020 and it will cost Dkr250m (about $40m).

'We are a private company so it is all our investment rather than government-funded.'

The company also runs the cross-border Swedish port of Malmö which, from this year, can handle ships up to 300 meters instead of the previous limit of 240 meters. From 2018, it will also be operating another Swedish port: Visby.

Møller said: 'Visby has also been limited on ship size and so calls have gradually reduced from 150 to 50 a year as ships got larger and the lines preferred not to tender.

'We have agreed with the local municipality that we will invest in the port—installing a pier like the one they have in Tallinn so it can dock two big ships at the same time—and in return be able to run it for 20 years from 2018.

'We are also converting a warehouse into a terminal as part of our initial $30m investment and we look forward to putting Visby firmly back on the cruise map. We already have 70 call bookings bringing 80,000 passengers.'

Posted 21 March 2017

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