KHB 39- A1 Kaohsiung Harbor faces rigorous challenges

KHB 39- A1 Kaohsiung Harbor faces rigorous challenges Due to the global economic and financial crisis, the container handling volume at Kaohsiung Harbor in 2008 totaled 9.67 million TEU, down 5.66% from 2007. Although facing fierce competition from Asia-Pacific countries, the container volume of Kaohsiung Harbor has declined because of the magnet effect of China's economy and progress of harbour construction. The reasons for this anaemic growth are many and varied. They include the relocation of Taiwan s industry to cheaper manufacturing countries; the growing number of alternatives for shipping companies; the booming Chinese economy; and the upgrading of ports in neighboring countries, which allows freighters to sail directly to Europe or America without transshipment through Kaohsiung Harbor. The net result has been tardy growth in Kaohsiung Harbor s container throughput. Furthermore, in addition to these fundamental changes, a number of short-term factors have also profoundly impacted container traffic recently. For instance, the rapidly-rising oil price from the beginning of 2008, the ripple effect this had on commodity-related container shipments, and the global economic recession beginning late 2008, have all resulted in a sharp, 20% decline in container volume in December 2008. Given such a harsh operating environment, the Kaohsiung Harbor Bureau (KHB) has committed itself to lowering costs across the board for both shipping companies and for Kaohsiung Harbor, in order to maintain their competitiveness. Steps include the ongoing construction of phase one of the Kaohsiung Intercontinental Terminal (the sixth container terminal), the harbor overpass, the reconstruction of Wharf No s 68 69 118 and 119, and the expansion & dredging of the first and second harbor entrances. In particular, the completion of the sixth container terminal (to a depth of -16 meters) will overcome the current deficiency in wharves and allow an increase of 2 million TEU in annual volume. The terminal is expected to be completed by 2013. The global appeal of Kaohsiung Harbor will increase dramatically upon the resumption of cross-strait direct shipping between China and Taiwan, which will boost Kaohsiung Harbor s claim to be a world-class value-added center. In addition to promoting harbor business, cross-strait ties will encourage Taiwanese businesspeople to look to Taiwan for investment in their operation bases. A special committee has been formed to steer port-related business, and some of the measures adopted so far include: 1. Expanding harbor marketing: raising the profile of Kaohsiung harbor among foreign shipping companies by visits to encourage investment and cooperation. 2. Promoting port business: new container and general cargo areas have been launched since 2007, and 25 firms have started operating since 2008. It is anticipated that more 1

and more operators will participate in the vibrant port business. 3. Creating private investment opportunities: reviewing and increasing the use of port land, and, based on the Commercial Port Law and cooperation of private sectors, attracting private participation in harbor construction and business. 4. Easing restrictions and simplifying procedures: implementing amendments to the relevant regulations to meet the demand of operators of port facilities. 5. Full computerization: the development of the Port IT Portal, providing a single widow portal for operators to cut their time and costs. 6. Improving the efficiency of port operations: coordinating container wharves to maximize efficiency and co-operation, and encouraging operators to replace obsolescent machinery with new purchases to enhance their operational capability. KHB 39-A2 KHB views 2009 as a Construction Year To strengthen the interaction between staff members and pass along the experience of retired staff, the Kaohsiung Harbor Bureau (KHB) held a Chinese New Year Greeting on Feb.4, 2009. Director-General Hsieh presented his blessings for 2009, expressing his confidence that the Port of Kaohsiung would weather any setbacks, and continue to make steady progress in the current economic downturn. Director-General Hsieh also noted that this year, 2009, will be a year of construction for Kaohsiung Harbor, in terms of both port construction and renovation. KHB intends to accelerate the pace of the following projects: 1. The first-phase construction of the Intercontinental Container Terminal: four new deep-water wharves are to be completed by 2013. Upon completion, the new wharves will increase container-handling capacity by 2.8 million TEU annually and accommodate larger container ships, thus alleviating the current difficulties caused by an insufficient number of deep-water wharves and the problem of scattered container bases for shipping companies. 2. Development of the land in the Chienchen Commercial Port area: the acquisition of land from Taiwan Railway has been completed. The land holdings of Tangeng Ironworks Co., Ltd and Lon Chen Fa Ironworks Co. Ltd will be acquired before 2010. This land will then be put to use for logistics. 3. Construction of KaoPort s connecting overpass: the completion of the new overpass will improve traffic flow along Kaohsiung Port s outer transportation routes. 4. Feasibility study: to relax the height restrictions on container gantry cranes in the Sixth, Third, and Fifth Container Terminals and carry out a safety assessment for 2

aviation, in order to allow the operation of large container gantry cranes for super-sized container ships. The study is expected to be completed by the end of April, 2009. 5. Construction of a cross-harbor bridge linking the sixth Terminal with the fourth Terminal, and a second cross-harbor tunnel, the renovation of Wharf No s 68, 69, 118 and 119, and the dredging of the first and second harbor channels. 6. Enhancing E-service: to add value to transshipment by replacing manpower with technology, the VDMS system was introduced. (Vessel Dynamic Movement System: the movement of vessels is shown on the net and passed by e-mail to assist shipping operators) A similar motive drove the development of the Automatic System for Vehicle Entry & Exit Control in Chungtao Commercial Port. Cost-cutting and improved efficiency will continue to be sought through the development and introduction of new technology. In future, as part of the development of the Kaohsiung Free Trade Zone, KHB will establish networking with other ports in an effort to enhance industry supply-chain value. KHB 39-A3 The significance of the Kaohsiung Intercontinental Container Terminal The first phase of the Kaohsiung Intercontinental Container Terminal project is designed to cater for the trend toward larger-size vessels, but it also provides other economic benefits, such as introducing private investment and management expertise to solve the problem of berthing larger container ships, providing more alternatives for shipping companies and creating a large number of job opportunities. The tender for the first phase of construction, in accordance with the Act for Promotion of Private Participation in Infrastructure Projects, was acquired by Kaoming Container Terminal Corporation, which began construction in December, 2007. Dr. Ohmae recently commented that since Kaohsiung Harbor is not deep enough, and some wharves are currently idle, it makes sense that the second phase of the Kaohsiung Intercontinental Container Terminal be suspended. In response to his statement, the Kaohsiung Harbor Bureau (KHB) noted that the depth of the second harbor channels are -16 meters, and all the wharves are between -14 and -15 meters, and are therefore capable of accommodating 8000-TEU ships. Since the wharves in Kaohsiung Harbor are not for public use, they are leased by shipping companies on a tenancy basis. The berthing frequency depends on the shippers container volume. At present, the number and capacity of wharves is simply not adequate to cope with future container growth. In addition, the second Harbor Channel is limited in its access to ships of less than 10,000 TEU. It is therefore essential to build a new deep-water terminal in the outer harbor to handle larger-size ships. 3

Furthermore, due to the global economic crisis, container throughput in major ports around the world has been influenced dramatically, and so has Kaohsiung Harbor. Nevertheless, it is prudent to plan and prepare ahead for the inevitable upswing in future economic conditions. Kaohsiung Harbor has been designated a Logistics Port by the Ministry of Transportation and Communications (MOTC). However, Kaohsiung Harbor has long faced the problem of insufficient land for logistics development. To enable its logistics potential to be fulfilled, Kaohsiung Harbor has therefore been actively acquiring land to the rear of the second container terminal, and has committed itself to the construction of the first phase of the Intercontinental Container Terminal, in order to expand the area available for development. To cope with future demands, the second phase of the Intercontinental Container Terminal is scheduled to be implemented. Petrochemical wharves in the old port area will also be removed to decrease the threat to neighboring areas. Once the second phase is completed, there will be considerable additional land available between the inner & outer port. KHB added that completion of the second phase is expected to take ten years; it will be too late if commencement is delayed until problems arise. KHB 39-A4 Yang Ming purchases New Crane from ZPMC The largest port crane manufacturing company in the China, Shanghai Zhenhua Port Machinery Co. (ZPMC), held a contract signing ceremony at Kaohsiung Harbor. The Yang Ming Group purchased eight gantry cranes from ZPMC, at a cost of US$100 million. The new cranes are expected to increase containers loading & unloading efficiency by 50%. source:http://cn.zpmc.com The president of ZPMC was quoted as saying Kaohsiung Harbor is an outstanding natural port. Taipei Harbor has also purchased container cranes and other relevant equipment from ZPMC. It is evidence of future business opportunities for ZPMC. The eight new twin 40ft STS cranes are the most advanced in the world, and can be operated semi-automatically. In the past three years, ZPMC has already sold 276 units worldwide. source:http://cn.zpmc.com 4

KHB 39-A5 Kaochun Investment in Logistics The Kaochun Stevedoring Co., Ltd invested NT$6.5 million in building its second logistics warehouse in the Wharf No.122 logistics area to expand its 600,000-ton pulp paper business. This marks the first new investment since the opening of cross-strait shipping. In addition to the transshipment of pulp paper, hardware, and all kinds of mineral and metal products, the Wharf No.122 logistics area will be utilized for the transshipment of general merchandise imported from China. Kaochun is composed of more than ten shipping agents and general cargo shippers. Due to the insufficient capacity of the warehouse previously leased, and perceiving cross-strait direct shipping as a new business opportunity, Kaochun plans to build another new logistics warehouse on a BOT basis in the Fourth Container Terminal. The new warehouse is scheduled to be completed by June, 2009 and put into operation in July. Kaochun s operational volume reached 2.5 million tons last year, the greatest of any in the Kaohsiung Logistcs Zone. Despite the recent downturn in the economy, Kaochun maintains a bright vision for the future, and has taken the first step with this new investment. The Norwegian Gearbulk Group owns 84 Handymax general cargo ships (total weight between 40,000 and 50,000 tons) the total carrying capacity is 2.5 million tons, which is the largest of the global general cargo shippers. Gearbulk Group intends to cooperate with Kaochun and occupy the logistics area provided by Kaochun in Kaohsiung Harbor as its distribution center for Asia. Gearbulk possesses distribution centers in China and Malaysia to reduce the cost of its operations and delivery. However, Gearbulk will withdraw from its base in Malaysia and move its pulp paper and metal products business to Kaohsiung Harbor. KHB 39-A6 New Dike for the KICT Bidding for the first phase of the new dike of the Kaohsiung Intercontinental Container Terminal was won by Hung Hua Construction Ltd. Its bid was estimated at NT$2.4 billion, and the project launched on November 2, 2008. Construction is scheduled to be completed by the end of December 2012. Construction of a temporary rubble storage area was finished on Feb.18, 2009. The construction project involves the building of a rubble storage area, caisson construction and dike (total length 2,648 meters). Reclaimed land will be increased by 120 hectares after completion. According to the Kaohsiung Harbor Bureau, the temporary rubble storage area will act as a distribution center for rubblework shipments, as well as accelerating dike construction itself. 5

KHB 39-B1 Ferry route from Makung to Xiamen The first passenger ferry to China since cross-strait direct shipping commenced embarked from Penghu on Feb. 18, 2009. The Ho Fu Express, carrying 429 passengers, traveled from Chiayi City, via Penghu, to China on a religious pilgrimage. With assistance from all the relevant departments ( Migration Bureau, Disease Control and Prevention Center, Port Police, Customs Bureau), Makung Harbor expedited customs clearance for the passengers. source:www.penghutime.com.tw The shipping operator responsible for this inaugural voyage is scheduled to commence a regular ferry service, Keelung Xiamen Makung, in April, 2009. It is expected to boost the tourism industry of Penghu and attract Taiwan businessmen interested in a new shipping route. KHB 39-B2 Chinese New Year greetings to passengers Conscious of the growing importance of marine transportation, Director-General Hsieh of the Kaohsiung Harbor Bureau (KHB) boarded the Tai Hwa in person on Jan.23, 2009. He appealed to all concerned to carefully monitor the safety of all vessels and their passengers, as well as providing superior service. In addition to addressing the crew, he conveyed his New Year greetings to the passengers. KHB 39-B3 Cruise ships bring tourists to Kaohsiung The Panamanian-registered cruise ship M/V DELPHIN VOYAGER, represented by Jardines Mateheson & Co., Ltd, made her maiden visit to the Port of Kaohsiung on March 4, 2009, the same Panamanian-registered cruise ship M/S Silver Whisper, operated by San Chiang Shipping Agency, Ltd., made her maiden visit to the Port of Kaohsiung on 6 March, 2009, both of them berthing at Wharf No.2. Deputy Harbor Master Liu presented a commemoratory plaque to welcome her arrival. The M/V Delphin Voyager weighs 23,287 gross tons and measures 174 meters in length and 24 meters in width. It is arriving in Kaohsiung from the Port of Okinawa in Japan with some 300 foreign passengers. The M/S Silver Whisper weighs in at 28,257 gross tons and measures 186 meters in length and 27.4 meters in width. It too is arriving from Okinawa, carrying 380 foreign passengers. Local tours for both groups have been arranged in the Kaohsiung and Tainan areas. Ships are scheduled for 5 o clock evening departures to their next destinations. The Port of Kaohsiung welcomed nearly 20 thousand passenger visits during 2008. The KHB hopes that even more will visit the port during 2009. 6

The port fee for vessels on their maiden voyage is up to 50% off B4-1 The M/V YM Utility, belonging to Yang Ming Marine, was delivered on Jan.7, 2009. She made her first call to Kaohsiung Harbor, docking at Wharf No.70. The M/V YM Utility has a total weight of 90,389 GT, and a length of 335 meters, a width of 42 meters, a draft of 145 meters and a carrying capacity of 8,200 TEU. It will operate on the Asia Europe route. B4-2 The M/V Hanjin Norfolk, registered in Panama and owned by Shin Hai Shipping Agency Co. Ltd., made her maiden voyage on Jan.30, 2009, docking at Wharf No.78. The M/V Hanjin Norfolk, delivered in April, 2008, is 40,487 tons in total weight, 261.4 meters in length, 32 meters in width, 12.6 meters in draft and is capable of carrying 4,300TEU. It serves on the regular route: North America North East Asia (including China). B4-3 The M/V Victoria Bridge, registered in Panama and represented by Taiwan Kawasaki Kaisha (K-Line Taiwan) made its maiden voyages on Feb.2, 2009, docking at Wharf No.120. Built in 2004, the M/V Victoria Bridge has a total weight of 54,519 tons, a length of 283.83 meters, a width of 32.2 meters and a carrying capacity of 4,014 TEU. It will serve on the route: Yantian Hong Kong Kaohsiung New York. B4-4 The M/V Suez Canal Bridge, represented by Taiwan Kawasaki Kaisha (K-Line Taiwan), made its first call to Kaohsiung Harbor on Feb.23, 2009, docking at Wharf No.70. With a total weight of 68,687 tons, a length of 285 meters, and a width of 40 meters, the M/V Suez Canal Bridge is capable of carrying 5,610 TEU. She will be deployed on the route: Kobe Tokyo Nagoya Kaohsiung Hong Kong. B4-5 The M/V Al Hilal, represented by Jardine Shipping Services and registered in Saudi Arabia made her first call at Kaohsung Harbor on Jan.29, 2009, docking at Wharf No.78. With a total weight of 75,579 tons, the M/V Al Hilal has a length of 306 meters, a width of 40 meters, a draft of 14 meters and a capacity of 6,912 TEU. Delivered in Feb. 2008, it has served on the same route as the M/V Al Safat. B4-6 The M/V Chiswick Bridge, registered in Panama and represented by Taiwan Kawasaki Kaisha (K-Line Taiwan), made her maiden voyage to Kaohsiung Harbor on Feb.1, 2009, docking at Wharf No.70. With a capacity of 5,610 TEU, the M//V Chiswick Bridge was built in 2001 and has a total weight of 68,687 tons, a length of 285 meters, and a width of 40 meters. She is currently serving the route: Kobe Tokyo Nagoya Kaohsiung Hong Kong. 7

B4-7 The M/V Chembulk Lindy Alice, registered in Panama and represented by Taiwan Kawasaki Kaisha (K-Line Taiwan), made her maiden voyage to Kaohsiung Harbor on Feb.22, 2009, docking at Wharf No.70. A liquid chemical cargo ship, the M/V Chembulk Lindy Alice is 19,391 tons in weight, 170 meters in length, and 26.6 meters in width. She will serve on the route: Puasan Ranzan Zhangjiagang Ningbo Kaohsiung. B4-8 The M/V Hyundai Mercury, registered in the U.K and represented by the Hyundai Ocean Pioneer shipping service, made her maiden voyage to Kaohsiung Harbor on Feb.12, 2009, docking at Wharf No.119. The M/V Hyundai Mercury has a total weight of 94,511 tons, a length of 324.82 meters, a width of 45.6 meters and a capacity of 8,566 TEU. Delivered on Feb.5, 2009, she will join the European regular (AEX) route: Hakata KwangYang Pusan Shanghai Kaohsiung Hong Kong Sigapore Rotterdam Hamburg Thames Colombo. B4-9 The M/V Hyundai Loyalty, registered in the U.K and represented by the Hyundai Ocean Pioneer shipping service, made her maiden voyage to Kaohsiung Harbor on Feb.26, 2009, docking at Wharf No.119. The M/V Hyundai Mercury has a total weight of 94,511 tons, a length of 324.82 meters, a width of 45.6 meters and a capacity of 8,566 TEU. Delivered on Feb.19, 2009, she will join the European regular (AEX) route: Hakata Kwang Yang Pusan Shanghai Kaohsiung Hong Kong Sigapore Rotterdam Hambur Thames Colombo. 8