Battle underway for control of Straits of Malacca
this month, various media outlets reported that China and Thailand had signed an agreement to build the longawaited Kra Canal.
However, both China and Thailand have denied this deal.
The Kra Canal is an estimated 100km-long canal cutting through southern Thailand, linking the Indian and Pacific Ocean. This idea has been mooted since the 17th century.
This canal would shorten travel time by 1,200km, or about five sailing days.
Today, the Straits of Malacca is one of the busiest shipping routes in the world and, due to its depth (25m) and width restrictions of 2.5km at it narrowest point, it is a true maritime bottleneck!
Not surprisingly, the industry is keen on removing this bottleneck i n the l arge East-West trade.
The Kra Canal benefits shipping lines and commodity trade. This is due to its shorter shipping route; ability to handle large container, bulk and oil & gas vessels; and risk management by having an alternative to the straits.
Thailand has the vision of becoming the l ogistics hub of Asean. Like Suez and Panama, the Kra Canal will make Thailand automatically a maritime hub (which it is currently not).
On the other hand, Singapore is afraid of a further erosion of its transshipment function, as it has a small home market and industrial cluster to rely on.
Malaysian ports will likely also see their transshipment volumes affected by this new canal, as a significant part of the shipping lines will switch to the Kra Canal route instead of sailing the straits via Singapore.
Although I am confident that the Kra Canal will materialise one day, there are also various other mega port projects in the pipeline that will impact trade flows in the Straits of Malacca.
In Malaysia, the Melaka Gateway features a deep-sea port and cruise terminal to be built on Pulau Melaka off the coast of Melaka. The project is a joint venture between the Malacca government’s KAJ Development Sdn Bhd and Chinese energy company PowerChina International.
MMC Corp Bhd, Sime Darby Bhd and Adani Ports and Special Economic Zone Ltd are planning to develop a new port on Carey Island.
This port is positioned as an expansion of Port Klang, but will be able to handle more cargo than Northport and Westports combined.
Port of Kuala Tanjung in North Sumatra (Indonesia) is a joint project between Indonesia’s Pelindo I and the Dutch Port of Rotterdam.
Kuala Tanjung is a deep-sea port that is envisioned to be the next mega transshipment hub that would be able to receive next generation container vessels and serve smaller container vessels from surrounding Southeast Asian countries.
At a very strategic location, Dawei deep sea port in Myanmar would allow a superior sea-rail or sea-road intermodal connection from Dawei, via Bangkok, all the way to China.
This project has featured for many years in the news, but lack of agreement on external financing has resulted in the project not yet starting.
Finally, Singapore is expanding its container terminals through the development of its Tuas Container Terminal in four phases over the coming 30 years.
South and Southeast Asia is becoming the new manufacturing hub of the world, after production costs in China have become too expensive.
This shift will increase the trade flows between East and West, where the Straits of Malacca becomes the centre of gravity in the maritime “Silk Road”.
The battle for the Straits of Malacca container business is on!