The expansion of container facilities at South Korea's port of Incheon, to enable it handle larger ships, will ensure that the port keeps pace with the industry-wide trend towards larger box ships. BMI also highlights that the project offers upside risk to our throughput forecasts for the port.
The expansion project at the port of Incheon is scheduled for completion by the end of 2014. Phase 1-1 of Incheon's development is underway and will eventually see the port able to handle 10,000 twenty-foot equivalent units (TEU) ships, up from the current 4,000TEU ships. As part of the port project, two new terminals will be built, each with an annual handling capacity of 1.2mn TEUs, a total of six berths; 1.6km of quay line are also being added. Once Phase 1-1 of the port development is complete in 2014, work will begin on deepening the port's draught to 16m so that Incheon will eventually be able to handle vessels of 15,000TEU.
The CEO of the Incheon Port Authority, Kim Choon-sun, said of the port project: 'We are the gateway to Seoul Metropolitan area with a massive hinterland area. The port is also strategically located for trading with China as well as intra-Asia.'
South Korea's geographical location means that the country's major ports benefit from being well-positioned for the Asia-Europe and Transpacific routes, as well as intra-Asian trade. The port of Busan, South Korea's largest port by container volumes, benefits from being a transhipment hub for the bigger Asia-Europe and Transpacific routes. Incheon, however, finds itself further into the Yellow Sea between China and the Korean peninsula - out of the way of Asia-Europe route. The port of Incheon, on the other hand, caters for domestic demand, as it is located close to the South Korean capital and economic hub, Seoul.
|Strong Growth Ahead|
|Port Of Incheon Container Throughput, 2008-2018 (TEUs & % chg y-o-y)|
Incheon's port development project is essential to support its container operations in the years ahead, particularly as the maritime industry's vessels get bigger. BMI has previously highlighted the trend within the shipping industry of 'bigger is better', with shipping lines opting to build mega vessels, which offer greater economies of scale. Incheon's port development will not cater for these mega vessels, however, but it is the effects of cascading - the process of larger ships displacing smaller ones - that has provided the impetus for Incheon's expansion project. This is why Incheon must upgrade from 4,000TEU vessels to 10,000TEU capacity ships.
Incheon is heavily exposed to South Korea's domestic demand, with the facility playing a key role in goods in and out of capital city Seoul, where the majority of South Korea's population and industry is based. Over the medium term (2013-2018), we project Incheon's container throughput to expand by 48.9%, an annual average increase of 8.3% to reach a throughput level of 3.2mn TEUs in 2018. We believe that the Incheon expansion project currently underway at the port poses upside risk to its container throughput once the project is completed in 2014.