Increased grain demand prompts port improvements in Southeast Asia.

   In the world grain trade, it's generally accepted that where economic growth goes, increased grain demand follows; it's also true that when grain demand increases, adequate infrastructure becomes essential. In recent years, those axioms have been borne out in several Southeast Asian countries.

   Thriving economies have meant rising living standards, especially in Malaysia and Indonesia. Between 1985 and 1993, per capita gross national product in Malaysia increased annually by 5.7%, while Indonesia's annual growth registered 4.8%, both substantially higher than most other nations in the same period, according to World Bank figures.

   At the same time, annual increases in consumption of grains averaged 4.5% in Malaysia, exceeding the annual population growth rate of 2.4%. In Indonesia, grain consumption increased by an average of 4% each year, again outpacing population growth of 1.8%.

   This expansion in demand for grain is expected to continue through the next decade. Coarse grain consumption, in particular, is projected to surge, based on rapid growth in the regional feed industry.

   Past expansion in grain use and prospects for future demand increases have caused both Indonesia and Malaysia to confront several issues. Because neither is self-sufficient in grains, supply sources and the existing state of grain-handling infrastructures are among the more pressing concerns.


   In Indonesia, grain handling issues center almost exclusively on coarse grains, primarily maize. The country has a sophisticated wheat flour milling industry, and because its wheat supplies always have been imported, bulk unloading facilities have long been available at the country's large flour mills.

   Indonesia itself grows a subtantial amount of maize, which made the need for bulk shipunloading facilities at deepwater ports minimal — until recently. But expansion in the feed industry in the past five years increased demand for maize, forcing Indonesia to import supplies, primarily from China, to augment its own production.

   Before 1990, Indonesia imported maize only occasionally, and annual amounts never exceeded 200,000 tonnes. Since then, imports have grown sharply and will reach an estimated 1.2 million tonnes this season.

   A poor harvest contributed to this year's large import needs. But demand should continue to outpace domestic supplies for the foreseeable future because the feed industry is growing at 10% to 20% annually. Some analysts predict Indonesia may need to import up to 4 million tonnes of maize a year by 2000.

   Anticipating the need for imports, the Indonesian government in 1994 reduced tariffs on imported maize and other feed ingredients. But grain import handling mechanisms presented other constraints that were more difficult to address.

   Traditionally, coarse grains have been handled exclusively in bags. Ships are off-loaded in bags, a process that sometimes includes labor-intensive shoveling of grain from the ship's hold into bags; slow unloading rates of only 1,500 tonnes per day, port congestion and high demurrage costs are not uncommon.

   Indonesia also uses grab and hopper systems, which involve a clamshell to transfer grain from ship to hopper and then to the bagging equipment; this technique speeds up the unloading process to discharge rates of 2,500 tonnes per day, but this is still much slower than the 20,000-tonne daily discharge rates attained in other importing countries.

   Potential pressures on Indonesia's traditional handling system began to increase when it became clear that China's maize exporting days were numbered; indeed, China, the world's second largest maize exporter in 1993-94, pulled out of the export market entirely in late 1994, and it is unclear when or if exports will resume. For Indonesia, the availability of maize that could be delivered relatively quickly, in small vessels and at cheap freight rates was diminished.

   As early as 1993, Indonesia's government began to re-examine its import infrastructure with an eye to improving receival capacity. With the help of consultants provided by the U.S. Feed Grains Council, Indonesia studied lightering systems — by which grain is discharged from ships anchored offshore to barges using a pneumatic evacuator — and began a feasibility study on construction of a new deepwater port and grain handling facility. In the meantime, Indonesia has purchased several new bagging machines and portable evacuators to unload ships.

   In early February, a Panamax-sized vessel, loaded with 60,000 tonnes of U.S. maize, arrived in Indonesia at the port of Cigiding. The event marked the first time a vessel of that size had delivered grain to Indonesia; additional vessels have since arrived.

   Grain from the first Panamax ship was unloaded using a combination of old and new methods and equipment — a technique dubbed “half lightering.” The pneumatic evacuators discharged grain from the ship to trucks for bulk delivery to feedmills or to hoppers for bagging on the pier; clamshells also were used. The improvements increased discharge rates to as high as 4,400 tonnes per day, unadjusted for rain delays.

   Despite this milestone, further improvements to the country's grain import infrastructure will be necessary to cut freight and handling costs and enable continued growth in Indonesia's feed industry. Indonesia has few ports that can accommodate Panamax vessels, and none of the deepwater berths is dedicated to grain.

   The first Panamax ship was unloaded at a deepwater berth managed by a steel mill; under these conditions, other cargoes are likely to receive unloading priority, which still could create delays and demurrage for grain vessels.

   Even though Indonesia's domestic distribution system is based on bagged grain, many of Indonesia's feedmills — their margins squeezed by high domestic maize prices and import handling costs — are eager to replace bags with bulk. Analysts have estimated bulk handling could reduce demurrage costs, quality losses and other handling expenses by U.S.$15 to $20 per tonne, while a “full” lightering system would save $8 to $11.

   Currently, the Indonesian government is interested in developing a dedicated grain berth and bulk handling facilities at a deepwater port, and study continues.


   Malaysia already uses bulk grain systems to handle imports, but consumption growth has strained capacity.

   Malaysia's feed industry has grown as rapidly as Indonesia's in recent years, but unlike its neighbor, Malaysia produces no coarse grains and must import virtually all its needs. Maize imports have increased by 47% in the past five years, making maize Malaysia's largest single agricultural import in terms of value.

   As with Indonesia, Malaysia traditionally has relied on relatively cheap Chinese maize, which is no longer available. Malaysian feed margins also have been squeezed in the past year, based on tighter regional supplies and higher freight rates from more distant sources.

   In Malaysia, work already is under way on major infrastructure improvements that should help reduce grain import costs; a new 428-hectare port development is under construction at Port Klang, 40 kilometers from the capital of Kuala Lumpur. The new gateway, West Port, will include the country's first dry bulk berths large enough and deep enough to accommodate 80,000-dwt Panamax vessels.

   When completed, West Port's dry bulk capacity at its four berths will total 2 million tonnes annually, doubling Port Klang's existing dry bulk capacity. The gateway is being built in phases, with the first grain berth expected to be completed in the spring of 1996.

   Port Klang, founded as a railway port in 1901, thrives as a commercial shipping center, handling container, breakbulk, liquid and dry bulk cargoes for export, import and domestic markets. The two existing gateways have a total of three dry bulk berths accommodating vessels of up to 45,000 dwt and a total annual capacity of 2 million tonnes for grain.

   Privately operated grain storage facilities are in place at the existing gateways, but Port Klang authorities envision a larger role for West Port. The new gateway has been designated a Free Industrial Zone and a Free Commercial Zone, features authorities hope will attract value-added activities.

   Indeed, a number of grain and oilseed processors plan to build facilities there. Malaysia's domestic transporation infrastructure involves waterways, and a processing plant at the port will facilitate domestic product distribution.

   Port improvements also are occurring elsewhere in Southeast Asia. In the Philippines, a new U.S.$36 million bulk grain import terminal is set to open at mid-year at Mariveles and will be the first in that country capable of handling grain from vessels of up to 60,000 dwt (see May 1995 World Grain). The Vietnamese government recently announced plans to invest U.S.$3.9 billion over five years to build a deepwater port to accommodate 30,000- to 50,000-dwt grain vessels at Cailan.