Olongapo SubicBay BatangGapo Newscenter

Friday, March 31, 2006

Philippines aspires to be Asian grain hub

MANILA, (Reuters) - Alison Sy dreams of massive cargo ships docking at her automated grain handling facility in the northern Philippines after it opens in May or June.
The grains port, the biggest of three such terminals in the country, has ambitions to become a transhipment hub in Asia.

Sy will be the first port operator to test this set-up for grains in Asia, traders said. Singapore and Hong Kong are classified as transhipment hubs for container cargoes, they said.

Her terminal is a miniscule version of Rotterdam, Europe's busiest port, which handled 185 million tonnes of all types of cargo -- from animal feed, coal and crude oil to soybeans, tapioca and vegetable oils -- in the first half of 2005.

"My dream is to bring capesize ships into the country," Sy told Reuters as she leafed through shipping magazines at her office in Manila's Makati business district.

"If you order bigger ships to transport grain, it's cheaper. That's economies of scale," said Sy, whose family has been involved in local trading of rice and corn since 1969. ADVERTISEMENT

News that Sy's Nation Granary Inc. will open a 3.2 billion peso ($62.5 million) bulk terminal to accommodate ships holding more than 85,000 tonnes of grain created ripples in the market

It also raised eyebrows as the facility lies in the sleepy town of Sariaya in Quezon province, where there is lack of infrastructure and communist rebels are active.

"I think people would think twice about bringing a capesize with a cargo worth $30-$40 million to the Philippines, where support infrastructure is poor," said a chartering manager with a multinational grains trading firm.

Local grain traders were concerned about the security of the port and their cargoes when they were transported by truck to feedmills and poultry and hog farms in other provinces.

Communist guerrillas have attacked power pylons, telephone towers and police stations in various areas in recent years.

An executive at one of the country's largest feedmills said he had not seen any capesize vessel delivering grains to the Philippines as local buyers import only what they need each month to avoid additional stocking costs.

Capesize vessels can carry 85,000 to 150,000 tonnes of cargo and are built mainly to ship iron ore and coal.

"The transhipment concept is a questionable proposition," the executive said, adding it was costly to transfer the grain from a big ship to smaller vessels and then bring it to other countries.

He also said the bulk of Philippine imports of milling wheat come from the United States, while soybeans and soymeal come mostly from Argentina and pass through the Panama Canal, which can take only Panamax or smaller ships like Handymax vessels.

Panamax vessels carry 60,000 to 84,999 tonnes of freight, while Handymax vessels carry 40,000 to 59,999 tonnes.


But Sy insisted her concept was the future of the grains trade. "Capesize for grains is not for today. It's for the future. We expect 20 such ships to be coming on the grains market in 2007," she said.

Sy, chairwoman and chief executive of Nation Granary, recently imported 33,000 tonnes of Chinese corn, 55,000 tonnes of Argentine wheat and 30,000 tonnes of Argentine soymeal to test the unloader at her port.

They were the first grain imports for Sy, who also brings in liquid petroleum gas for the local market.

Grains experts say the possibility of the Philippines importing from non-traditional suppliers that can handle capesize ships hinges on the price of the commodity and freight charges.

"Economics dictate the market. You buy from the cheapest source," a trader said, adding that the Philippines has bought big volumes of feed wheat from Europe in the last two years.

The chartering manager with a grain trading firm agreed. "It's possible to bring capesize sometimes but not most of the time," he said. "It's nothing you can plan in the long term."


Traders said Nation Granary's new port will be busy handling imports for local consumption -- even if it does not become a transhipment hub.

The Philippines is one of Asia's biggest importers of rice, its main food staple, and other grains and feedstuffs because of its rapidly rising population and poor farming infrastructure.

The country bought 1.8 million tonnes of rice last year. In a typical year, it imports up to 3 million tonnes of both milling and feed wheat, 1.5 million tonnes of soymeal, 400,000 tonnes of soybeans and sometimes corn.

The Philippines does not grow wheat or soybeans.

"There is business locally," said Eduardo Alino, president of Subic Bay Freeport Grain Terminal Services Inc. "There is enough volume. You don't need to go into transhipment."

Alino's grain bulk handling facility at Subic, a former U.S. military base northwest of Manila, opened in January but he is already planning to double its capacity to 200,000 tonnes to meet the country's growing appetite.

Nation Granary will have capacity of 225,000 tonnes, while the Mariveles facility of Asian Terminals Inc. in Bataan, also on Luzon island, has a 180,000-tonne capacity.

Ric Pinca, vice president of the Philippine Association of Feedmillers Inc., said more grain ports would eventually reduce the cost of animal feed, bread, noodles, chicken and pork.

"All these developments should change the way the Philippines imports grain. As unloading becomes more efficient, our costs will be cheaper," Pinca said. "In the long run, this will be good for the country as this will reduce the cost of food."


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