Entrepot and Transshipment Trade in Sri Lanka

15/03/2018

Entrepot and Transshipment Trade in Sri Lanka

Situated on a key East-West trade route and set close to India, Sri Lanka possesses the essential locational advantage to become a key logistics hub in South Asia. It’s potential to become an important transshipment hub in the region, a site where many shipping lines consolidate and de-consolidate cargo for transshipment to other destinations.

According to the Top 50 World Container Ports Ranking by the World Shipping Council, Colombo Port Sri Lanka was only South Asia port to be ranked among the top 50 according to the volume of the containers handled for five consecutive years. In the first eleven months of 2014, the Port of Colombo reported a steady growth of 4.5% in container traffic and transshipment volume accounted for more than 75% of the total container quantity.

As a leading maritime hub of the South Asian region, cargo originating from and destined to Europe, East and South Asia, the Persian Gulf and East Africa is conveniently connected through the Colombo Port. To accommodate the growing demand for international logistical services, the Sri Lankan government has launched the Colombo Port Expansion Project which will add three more container terminals increasing the total number of terminals to six.

The South Container Terminal, the first terminal to commence operation under the new expansion is the first terminal in South Asia that can accommodate mega-sized vessels. The completion of the ambitious Colombo Port Expansion Project would increase the container handling capacity of the Colombo Port to a 12 Million TEUs per year making it one of the largest container ports in the world.

Incidentally, the ambitious Colombo Port expansion project is one of the many marine infrastructure developments that coincides with the ‘One Belt One Road’ (OBOR) initiative launched by the China Merchants Group, a state-owned corporation. One of the most prime stakeholders in the 21st Century Maritime Silk Road is the newly built Hambantota Port in Sri Lanka.

Situated only 10 to 12 nautical miles from the main Indian Ocean Sea-lane linking the Suez Canal and the Malacca Strait, the Hambantota Port is conveniently located to the regional imports and exports sailing right past, which averages to 10 large container ships and oil tankers passing by every hour every day.

The Hambantota Port also has one geographical contribute most of its neighboring ports lack, a deep-water coastline close to Indian Ocean Shipping Lanes, conducive to build large deepwater ports able to handle the world’s largest container ships and supertankers, which would make the Hambantota the ideal transshipment point for goods and natural resources going into and out of the subcontinent.

Even before China’s ambitious OBOR policy, Sri Lankan ports are seen as key strategic and commercial beachheads transshipment trade. In fact, the transshipments at the Port of Colombo grew by 20.4% during the year between January 2017 and January 2018, mainly due to the commencement of operations at the South Container Terminal as well as the revising of entrepot trade-related rules and regulations by the Government of Sri Lanka.