PROJECT REPORT ON

COSCO CONTAINER LTD

&

CHENNAI PORT

SUBMITTED BY:GROUP NO. 3

ANKIT GUPTA (207) ANURAG NIGAM (208)ASHISH MAKHWANA (213) ARJUN ARORA (209) DISHA BATRA (217) PRERNA MITTAL (238)RAGHAV AGARWAL (241) SAHIL BHATIA (265)

COSCO CONTAINERS LTD

HISTORY OF COSCO CONTAINERS LTD

1950: On June 26, 1950, Chinese-Polish Joint Stock Shipping Company (CHIPOLBROK) came into operation in Tianjin. It is believed to be the first Joint Venture ever set up in Chinese mainland since the founding of the People's Republic of China.

1961: On April 27, 1961, China Ocean Shipping Company was founded in Beijing. On the same day, the Guangzhou Branch of it was established too. On April 28, a grand premier navigation ceremony for the first passenger liner "Guanghua" with the national flag of China was held in Huangpu Port, Guangzhou. Later, "Guanghua" arrived in Jakarta, Indonesia to take Chinese who were suffering there back.

1975: By the end of 1975, COSCO's fleet capacity in terms of DWT surpassed "FIVE MILLIONS", indicating an average annual increase of one million DWT. The fact immediately attracted the attention of the industry worldwide.

1979: In March 1979, COSCO got on with overseas contract employment business by signing an agreement with Iino Kaiun Kaisha Ltd. (IINO Lines) in Beijing. This is the first international manning cooperation ever happened in China.1987: On June 8, 1987, a Computer-Aided Operation Center was established in COSCO Guangzhou. The implementation of the new system showed that Chinese ocean shipping operation had stepped into a new era of automation.

1992: On December 25, 1992, with the approval of State Development Planning Commission, State System Reform Commission and the Trade and Economics Office of State Council, China Ocean Shipping Company was renamed into China Ocean Shipping (Group) Company (COSCO Group). They also approved to make China Ocean Shipping Company as the core enterprise to construct (China Ocean Shipping (Group) Company).

1993: On February 16, 1993, COSCO group was officially set up in Beijing.

1995: In March 20, 1995, COSCO signed an agreement with Shanghai Hudong Shipyard for the construction of three 27,000 DWT bulk carriers and a 70,000 DWT Panamax vessel. For the first time in history, COSCO placed order books at home using flag of convenience via overseas financing.1998: In February 1st, 1998, with the joint approval of State Economic & Trade Commission of PRC, State Administration of Taxation of PRC and Customs General Administration of PRC, COSCO Technology Center came into operation and became one of the first class technology centers nationwide.

2001: On July 25, 2001, COSCO headquarters successfully passed the jointly on-site certification review of ISO 9001 and 2000 quality management system, ISO 14000 environment management

system and OHSASI8001 occupational safety and health management system of the quality certification company of China Classification Society, Det Norske Veritas, Norway and State Occupational Safety and Health System Certification Center and became the first enterprise in China which has got "three" important management certificates.

2002: On January 8, 2002, COSCO Logistics Co. Ltd. put into operation in Beijing on the basis of integrated global logistics resources within the group. The reconstructed company has 8 regional subsidiaries across the nation, covering a wide range of areas from Dalian, Qingdao, Shanghai, Ningbo in Northern and Eastern China to Wuhan, Xiamen, Guangzhou in Central and SouthernChina.2004: On March 1st, 2004, COSCO Corporation (Singapore) Ltd. was made to become one of the component stocks of the Singapore Exchange's (SGX's) main benchmark Straits Times Index (STI). It is believed to be the first State-owned enterprise in China who was listed as one of the blue chips in SGX.

2005: On January 21, 2005, COSCO concluded a shipbuilding contract with South Korea's Hyundai Heavy Industries Co., Ltd. (HHI) to build four 10,000 TEU class super post-panamax containerships. The vessel, which is believed so far to be the first and largest of its kind ever to be built in the world in terms of the slot capacity, measures an overall length of 349 m, 45.6 m in width and 27.3 m in depth. On June 30, 2005, the shares of China COSCO Holdings Company Limited (China COSCO: 1919 HK) began trading on the main board of the Hong Kong Stock Exchange. As one of the world's leading integrated container shipping operators, China COSCO will take this IPO as a turning point to better realize its management values of maximizing operational profits, corporate value and shareholders' return

ORGANISATION STRUCTURE

COSCO Group is one of the largest liner shipping companies worldwide. The Group contains six listed companies and has more than 300 subsidiaries locally and abroad, providing services in freight forwarding, ship building, ship repair, terminal operation, container manufacturing, trade, financing, real estate, and information technology. The group is basically divided into 4 sub-groups:

1. COCSON- Cosco Container Lines Co. Ltd.

2. COSCO Bulk Carrier Co. Ltd.

3. COSCO Logistics

4. COSCO Pacific

As seen below, the range of services offered by COSCO, are divided among the various groups. This division is done so that the services don’t overlap each other and greater economies of scale can be applied to these subgroups. While COSCON caters to all container related services, the bulk division is concerned with big dry break bulks. There is a separate logistics arm taking care of the logistics requirement of the customer.

The management structure is basically hierarchical where there is a board of directors taking care of the whole group. The board is represented by CEO for communication of decisions within the organization. All the heads of the divisions directly report to the CEO of the group and to part (board) members during annual general meetings.

MANAGEMENT

Executive President and CEO

Capt. Wei Jiafu has been the President and CEO of China Ocean Shipping (Group) Company (COSCO Group) since November 1998. Prior to that, he had been managing directors in many COSCO subsidiaries both at home and abroad. With nearly twenty years sailing history and as a

well-experienced ship's master, Capt. Wei Jiafu has rich knowledge in international shipping management and operation. He is a senior engineer with a doctoral degree in naval architecture and a master's degree in shipping management.

Secretary of Party Committee and Executive Vice President

Mr. Zhang Fusheng was appointed as Secretary of Party Committee and Executive Vice President of COSCO Group in June 2002. Prior to his current appointment, he was Secretary of Party Committee of the COSCO Container Lines.  He is expert in port operation, finance, human resource management and public relation. Mr. Zhang Fusheng graduated from Wuhan University of Transportation Science and Engineering with a Master degree in transport administration. He is a senior professional engineer.

Executive Vice President & Party Committee Member

Mr. Xu Lirong joined COSCO in 1975. Before becoming executive vice president and chairman of the union of COSCO in November 2006, he has been a marine captain and deputy director of the ship management department of COSCO Shanghai. Mr. Xu obtained a MBA degree from Shanghai Maritime University. Being a senior engineer, he has extensive experiences in corporate management, ship management as well as container business operation.

CFO

Ms. Sun Yueying, senior accountant, joined COSCO in 1982, became Chief Financial Officer in December 2000 and Party Committee Member of COSCO Group in April 2004. Prior to that, she had been the Deputy Director of the Financial Department of COSCO Tianjin, the financial Director of COSCO Japan ,the General manager of Finance & Capital Division of COSCO Group, and the Deputy Chief Financial Officer of COSCO Group. Ms. Sun has many years of rich experiences in accounting, assets-operating and financing as well.

KEY BUSINESS ACTIVITIES

Main Business activities of COSCO include:

Container Shipping: China COSCO operates its container shipping and related businesses through COSCO Container Lines Company Limited ("COSCON"), its wholly-owned subsidiary. COSCON operates in over 50 countries and regions across the world, and operates on 67 international routes, 11 international feeder service routes, 21 PRC coastal service routes and 61 Pearl River Delta and Yangtze River feeder service routes. COSCON has an extensive sales and services network across the world.

Dry Bulk Shipping: China COSCO operates its dry bulk cargo shipping business through COSCO Bulk Carrier Co., Ltd. ("COSCO Bulk"), Qingdao Ocean Shipping Company ("COSCO Qingdao"), COSCO (Hong Kong) Shipping Co., Ltd. ("COSCO HK Shipping") and Shenzhen Ocean Shipping Co., Ltd. ("COSCO Shenzhen").

Logistics: China COSCO provides integrated logistics services (including third party logistics, shipping agency and freight forwarding) through COSCO Logistics Co., Ltd. COSCO Logistics has established over 400 business branches in 29 provinces, municipalities and autonomous regions in the PRC, Hong Kong and overseas.

Terminals: China COSCO operates its terminal business through COSCO Pacific. COSCO Pacific had invested in 28 terminal projects globally, with a total of 142 berths, ranking the fifth in the world.

Container Leasing: China COSCO operates its container leasing business through Florens Container Holdings Limited (“Florens”), a subsidiary of COSCO Pacific. Florens owned and managed a container fleet of 1,582,614 TEUs. The container leasing business accounted for approximately 14.3% of the global market share, ranking the second in the world.

Container Manufacturing: China COSCO is engaged in the container manufacturing business through COSCO Pacific's associate China International Marine Containers r(Group) Co., Ltd. ("CIMC"), in which COSCO Pacific holds 21.8% equity interest. CIMC is currently the world's largest container manufacturer, accounting for approximately 50% of the market share.

FLEET AT COSCO

Container Ship

Number of vessels : 146

Total capacity :  561,038 TEUs

Newest Ship :   COSCO P ride , COSCO Glory , COSCO Development

Oldest Ship : Precious River, Star River, Bai Ani2 Name Built Year Length (m) Beam (m) Speed

(knots)TEU Flag

Cosco Pride 2011 13114Cosco Glory 2011 13114Cosco Development

2011 13114

Precious River

1982 153.62 22.8 13 969 Panama

Star River 1982 138.5 21.5 13 494 PanamaBai Ani2 1982 138.5 21.5 12 478 Panama

Bulk Carrier

Number of ships : Around  439 vessels

Total capacity : 36,572,031 DWT

Newest Ships : Heng Sheng, Heng Mao, Zhong Xing Hai, Yuan Wang Hai

Oldest Ships : Liulinhai

Name Built Year Length (m) Beam (m) Speed (knots)

TEU Flag

Heng Sheng 2011 300 50 14.4 208001 Hong KongHeng Mao 2011 300 50 14.2 207980 Hong KongZhong Xing Hai

2011 300 50 13.5 207978 Hong Kong

Yuan Wang Hai

2011 300 50 13.5 207906 Hong Kong

Liulinhai 1971 193.45 26.25 12 38405 China

Business is primarily focused on the transportation of major raw materials - iron ore and coal - which accounted for 45% and 29% respectively of total cargos. Grain was the third most important cargo, representing 15% of total freight carried.

Tanker

Number of ships : 33 vessels

Newest Ship : Cosglad Lake, Cosgold LakeOldest Ship : Ju YuanName Built Year Length (m) Beam (m) Speed

(knots)TEU Flag

Cosglad Lake

2011 330 60 15.4 297388 Panama

Cosgold Lake

2011 330 60 15.8 297163 Panama

Ju Yuan 1984 101.5 16 13 2999 China

General Cargo

Number of ships : 110 general cargo and specialized vessels

Total capacity : 1.8 million DWT

Newest Ship : Da Yu Xia, Da Qing Xia, Da cui Yun, Da Juan SongOldest Ship : Xiangjiang, Pingjiang, Qingjiang, Shuicheng

Name Built Year Length (m) Beam (m) Speed (knots)

TEU Flag

Da Yu Xia 2011 166.31 27.4 15 28451 Hong Kong

Da Qing Xia

2011 166.50 27.77 Null 28368 Hong Kong

Da Cui Yun

2011 166.50 27.77 15.2 28367.48 Hong Kong

Da Juan Song

2011 179.50 27.20 15.1 20676 Hong Kong

Xiangjiang 1978 149.8 21 18.1 16270 ChinaPingjiang 1978 144 20.42 13 15300 ChinaQingjiang 1978 144 20.42 15 15290 ChinaShuicheng 1978 161.9 21.2 17 13720 China

Specialized Vessel

Newest Ship : Xiang Yun Kou, Zhong Yuan Sheng Shi, Zhong Yuan Teng Fei

Oldest Ship : Sanjiangkou, Chi Feng Kou

Name Built Year Length (m) Beam (m) Speed (knots)

TEU Flag

Xiang Yun Kou

2011 216.7 43 48231 China

Zhong Yuan Sheng Shi

2011 173.90 32.2 20.2 14500 Panama

Zhong Yuan Teng Fei

2011 173.90 32.2 20.2 14500 Panama

Sanjiangkou 1980 146.5 22.7 15.3 13826 ChinaChi Feng Kou

1980 146.5 22.7 15.3 13810 China

The comprehensive strength of COSCO in the general cargo and specialized shipping market ranks No.2 in the world and No.1 in Asia.

DIVERSIFICATION OF BUSINESS

The Chinese shipping company has also further diversified its business. BMI notes that COSCO already has an advantage over some of its competitors in that it operates in both container shipping and dry bulk, in addition to its ports arm.

Spare Parts Business: COSCO announced in June that its subsidiary, Yuantong Marine Service, had acquired a company called Xing Yuan in Singapore, thus expanding its spare parts business. This was in addition to setting up a new company in Japan. Through these

two additions to its empire, COSCO is on its way to setting up a complete platform of marine equipment and spare parts supply network in the Asia Pacific region.

Buying AP Moller Maersk’s: COSCO has also further diversified by increasing its ports presence through buying AP Moller Maersk's 13.7% stake in the Yantian container terminal in China.

Cabotage Coal Shipments: The Company has also moved into cabotage. At the start of June 2010 COSCO and Chinese steel making firm Baosteel signed an agreement that COSCO would undertake the company's domestic cabotage coal shipments. This was in addition to a three-year deal between the two Chinese giants that COSCO would transport iron ore from Brazil to Baosteel's steel plants in China. About 450,000 tonnes of coal will be transported each year under this agreement.

New Services: Another measure taken by COSCO in order to capitalise on the renewed global shipping volume has been to introduce new services and reintroduce a number suspended during the economic downturn.

Peak Season Express Service: In June 2010 it announced it would commence its transpacific China-US West Coast Peak Season Express service. This was scheduled to have the rotation Shanghai, Fuzhou, Xiamen, Long Beach and back to Shanghai, and to be covered by five ships averaging 5,089 20-foot equivalent units (TEUs) each.

Pearl River-Southeast Asia-Suez Canal Express Service: Earlier, in April 2010, COSCO announced as part of the CKYH Alliance (comprising of K Line, Hanjin Shipping, Yang Ming Line and COSCO) a new Pearl River-Southeast Asia-Suez Canal express service to the North America East Coast, in conjunction with MOL. This sharing of services with other lines has been something seen by BMI occuring throughout the container shipping industry, as lines are reluctant to expose themselves to too much risk on new services until the recovery is assured.

Inter-Asian Services: Another theme observed by BMI across the industry has been the interest in inter-Asian services, and COSCO has been no exception. Like the sharing of services, it is a way to mitigate the risk posed by the potential backslides in east-west demand, and takes advantage of growing inter-Asian trade. COSCO Star, a passenger-cum-cargo liner, will travel from Xiamen in China to Kaoshiung Harbour in Taiwan. It only has capacity for 256TEUs, yet the fact that COSCO is transporting passengers as well is proof of further risk-mitigating diversification.

Introducing Rate Hikes: Another industry-wide means of recouping lost profits this year has been the introduction of rate hikes on various services. COSCO has implemented these on a number of its services. In June 2010, the line announced that it had agreed with clients an increase of US$800 per 40-foot equivalent unit (FEU) on its China-US west coast services, in addition to peak-season surcharges of about US$400 which was brought into effect in July 2010. Also from June 2010, COSCO announced a surcharge on all

cargo shipped from India to the US, and there was to be a 'container imbalance fee' placed on all shipments from north China to Southeast Asia.

How do COSCO face competition?

COSCO Group set itself against any unfair competitions and encouraged fair competitions. It didn’t adopt the operation strategy of dumping sales and monopoly. It can consciously safeguard the interests of the concerned parties and win the trust of the consumers and the social recognition through its own practical actions.

The orientation of products, services and prices of COSCO Group is:

High Quality

High Grade

High Technology

Low Cost

Low Consumption

The sales promotion strategy of COSCO Group is to make innovations, produce quality goods and win reputations; the promise of marketing management and the principles of accumulating credit in COSCO Group are to obey the laws and regulations and respect the requests of the customers.

Anti-monopoly Act of the PRC actively participated and promoted by COSCO Group has been put into effect officially. As a unit that participated and promoted the establishment and implement of the act, COSCO Group followed close to the line of anti-monopoly act and protected fair market competition; it improved the efficiency of economic operations; it preserved the interests of the consumers and social public interests; it enhanced the sound development of market economy. In 2009, COSCO Group didn’t have any contentious cases due to anti-competition action, anti-trust or monopolies.

To overcome challenges facing the shipping industry, CKYH - the Green Alliance was formed. It comprises of alliances formed between COSCO, "K" LINE, Yang Ming, and Hanjin Shipping. COSCO motive is to continuously harmonize its services to enhance its core competitiveness. At the same time, all members can take positive action to take full advantage of regional tranship hubs, build up extensive feeder networks, extend cooperation to the North/South trades & new emerging markets, widen the scope of cooperation to other sections of the Transport Chain by optimizing the alliance's resources such as terminals, chassis, inter-modal facilities and equipment.

CKYH - the Green Alliance has always strived to build up a cohesive relationship with clients by offering the best services to meet their needs. In the future, CKYH - the Green Alliance will make utmost endeavours to provide high-quality, competitive, globally-integrated container shipping services to its esteemed customers, ensuring reliable, stable and comprehensive worldwide coverage.

GROWTH & FINANCIAL ANALYSIS

Revenue 2010 2009 YoY

Container shipping 46,312 27,510 68%

Dry bulk shipping 32,777 27,367 20%

Logistics 15,212 12,127 25%

Terminal 1,255 755 72%

Container leasing 864 667 30%

Figures in RMB million

Container Shipping-Cargo Volume by Market

Container Shipping-Cargo Volume by Revenue

(All taken from: www.coscon.com)

CURRENT STATUS

As of July 2010, COSCON is the seventh-largest global operator of container vessels, according to AXS-Alphaliner's (AXS) rankings of the world's largest container fleets.

According to AXS Alphaliner data in April 2010, the company to charter vessel ratio is almost even at 42.9%, with owned vessels making up 92 of the 136 ships operated and chartered vessels accounting for the other 44 vessels

The Company had 16 new container vessels with a total capacity of 101,313 TEUs delivered and put into operation in 2010. As at 31 December 2010, the Company operated 150 container vessels with a total capacity of 614,092 TEUs, representing an increase of 9.5% as compared to the year end of 2009.There was no new vessel order in 2010. As at the year end of 2010, the Company had an order book of 38 container vessels with a total capacity of 313,526 TEUs, which will be delivered in 2011 to 2013. In 2011, the Company expects to be made available 6 new vessels with a total capacity of 69,358 TEUs, representing 6 chartered-in 69,358 TEUs vessels.

According to forecast by certain authority, the global container shipping volume will increase by 8% to 10% and exceed 150 million TEUs. Among the two major eastern and western routes, the container shipping volume of Asia Europe route will see the largest growth of up to 10.4%, while Trans-Pacific route will grow by 9.3%. In respect of shipping capacity, as reported by AXS-Alphaliner, there will be new container vessels with an additional shipping capacity of 1.3 million TEUs entering the market, representing an increase of 8.8% in the overall shipping capacity.

SWOT ANALYSIS OF COSCOStrengths

COSCO is highly diversified, with operations in the container, dry bulk, tanker, terminal operating, logistics, ship building and finance sectors. This should support sustained growth and stability.

The carrier has a good relationship with the Bank of China, which has provided the company a source of credit since the 1960s.

COSCO's investment in a number of shipyards allows the company flexibility in adapting its order book to the economic climate.

Weaknesses

COSCO's container line holds the largest order book relative to current fleet capacity of the world's 10 largest liners, putting it at increased risk of fielding excess capacity and resulting in significant financing obligations.

The company's core business, its container shipping arm, is reliant on China's export sector for growth and has relatively little diversification into domestic and coastal shipping.

Opportunities

The opening of direct shipping routes between China and Taiwan is likely to provide long-term growth opportunities for COSCO's container and bulk shipping lines. COSCO is also rumoured to be eying investment in the port of Kaohsiung.

China's growing raw material demands are expected to drive long-term demand for dry bulk shipping services.

Threats

Vessel operating costs are expected to rise in 2010 as the world economy emerges from recession, with rising fuel prices and labour costs eating into companies' bottom lines.

Overcapacity remains a major threat, particularly within the container shipping market, and the decision to re-activate idled vessels too soon would undermine the company's ability to introduce further rate-hikes.

GROWTH DRIVERS

On June 30, 2005, COSCO Holdings Company Limited (China COSCO: 1919 HK) began trading on the main board of the Hong Kong Stock Exchange. China COSCO will take this IPO as a turning point to better realize its management values of maximizing operational profits, corporate value and shareholders' return.

COSCO has expanded its presence in the container shipping sector over the last quarter, allowing it to increase its market share from 3.5% to 3.7% between April and July 2010. Over the quarter, the number of vessels in the carrier's fleet rose from 132 to 136 ships.  Meanwhile, the total capacity of the COSCON fleet grew from 479,906 20-foot equivalent units (TEUs) to 526,001TEUs. This suggests that the company has removed older, smaller capacity vessels from its fleet in favour of bringing large ships online.

COSCO's liquid bulk division currently constitutes a relatively small proportion of its total operations but it represents one of the company's fastest growing areas of business. Following an aggressive fleet expansion strategy, the company almost doubled the size of its tanker fleet since 2006 and, according to the most recent company data available, operates 15 very large crude carriers (VLCCs), nine Panamax tankers, four Handysize tankers and six liquid petroleum gas (LPG) ships. According to the news source, Cosco is planning to acquire 18 multipurpose and

heavy-lift vessels, in addition to the 50,000 deadweight tonne (DWT) semi-submersible vessels it already has on order.

CHENNAI PORT

INTRODUCTION

Chennai Port, the third oldest port among the 12 major ports, is an emerging hub port in the East Coast of India. This gateway port for all cargo has completed 128 years of glorious service to the nation’s maritime trade.

Chennai port is an artificial harbour was built and made operable in 1881.The cargo operations were carried out on the northern pier, located on the north-eastern side of Fort St. George in Chennai. In the first couple of years the port registered traffic of 3 lakh tonnes of cargo handling 600 ships.

Being an artificial harbour, the port was vulnerable to the cyclones, accretion of sand inside the basin due to underwater currents, which reduced the draft. The shifting of the entrance of the port from eastern side to the North Eastern side protected the port to a large extent from the natural vulnerabilities. By the end of 1920 the port was equipped with a dock consisting of four berths in the West Quays, one each in the East & South Quay along with the transit sheds, warehouses and a marshalling yard to facilitate the transfer of cargo from land to sea and vice versa. Additional berths were added with a berth at South Quay and another between WQ2 & WQ3 in the forties.

India’s Independence saw the port gathering development, momentum. The topography of the Port changed in 1964 when the Jawahar dock with capacity to berth 6 vessels to handle Dry Bulk cargoes such as Coal, Iron ore, Fertilizer and non-hazardous liquid cargoes was carved out on the southern side.

In tune with the international maritime developments, the port developed the Outer Harbour, named Bharathi Dock for handling Petroleum in 1972 and for mechanized handling of Iron Ore in 1974. The Iron ore terminal is equipped with Mechanized ore handling plant, one of the three such facilities in the country, with a capacity of handling 8 million tonnes. The Chennai port’s share of Iron ore export from India is 12%. The dedicated facility for oil led to the development of oil refinery in the hinterland. This oil terminal is capable of handling Suezmax vessels.

In 1983, the port heralded the country’s first dedicated container terminal facility commissioned by the then prime minister Smt. Indira Gandhi on 18th December 1983. The Port privatized this terminal and is operated by Chennai Container Terminal Private Limited. Having the capability of handling fourth generation vessels, the terminal is ranked in the top 100 container ports in the world. Witnessing a phenomenal growth in container handling year after year the port is added with the Second Container Terminal with a capacity to handle 1.5 M TEUs to meet the demand. To cater to the latest generation of vessels and to exploit the steep increase in containerized cargo the port is planning to welcome the future with a Mega Container Terminal, capable of handling 5 Million TEUs expected to be operational from 2013.

The Chennai port is one among the major ports having Terminal Shunting Yard and running their own Railway operations inside the harbour on the East Coast. The port is having railway lines running up to 68 kms and handles 25% of the total volume of the cargo, 4360 rakes (239412 wagons) during 2009-10.

The port with three Docks, 24 berths and draft ranging from 12m to 16.5m has become a hub port for Containers, Cars and Project Cargo in the East Coast. The port has handled an all time high of 61.06 Million tonnes of cargo registering an increase of 6.2% over previous year. An increase of 10.14% in handling of cars from 273917 Units in the year 2009-10 when compared with 248697 Units in the year 2008-09 and an increase of 6.39% in handling of containers from 1143373 TEUs in the year 2008-09 to 1216438 TEUs in the year 2009-10. The long term plan for Chennai Port envisages that the Port will mainly handle 4C’s i.e. Containers, Cars, Cruise and Clean Cargo.

FEATURES OF CHENNAI PORT

Chennai Port is a ISPS (International Ship & Port Security) Compliant Port Chennai Port Trust is awarded with Certification of ISO 14001 : 2004 It has 21 deep drafted berths It is all weather port Port operates round the clock It handles multiple cargo & is positioned third among all major Indian ports Best efficiency indicators are:

o Pre-Berthing detention of 0.9 Hrs

o Average turnover 2.4 Days

o Berthing on arrival

Its passenger terminal is of international standard First of its kind in Indian Ports, Chennai Port has established the Marine Pollution

Management which ensures Protection for Marine life It has EDI(Electronic Data Interchange) connectivity with Customs, Bank, Online Port

users Portal established and various port activities are under process such as:o Excellent Rail Connectivity

o Excellent Road Connectivity

SPECIAL FEATURES

● Meteorological functions - The cyclone detection radar station of the Southern Regional Meteorological Centre is located at the "Centenary Building", the administrative building of the port. The Port Meteorological Office also functions from the same building. The India Meteorological Department (IMD) maintains Voluntary Observing Fleet (VOF) through the Port Meteorological Office comprising ships of Merchant Navy, Indian Navy and foreign agencies through which meteorological observations from the ocean area are collected on real-time basis for operational forecasting and climatological purpose.

● The Chennai port is one among the major ports having Terminal Shunting Yard and running their own Railway operations inside the harbour on the East Coast. The port is having railway lines running up to 68 kms and handles 25% of the total volume of the cargo, 4360 rakes (239412 wagons) during 2009-10.

FACILITIES AT CHENNAI PORT

There are 3 docks namely Jawahar Dock (JD), Ambedkar Dock (AD), Bharathi Dock (BD) and one container terminal at Chennai Port.

1. Oil Terminals BD1 & BD3

First Oil berth at BD-I can handle tankers : 100,000 DWT Second Oil Berth at BD-III can handle tankers : 140,000 DWT Maximum LOA at BD - I & BD - III : 280.4 m (920 ft) Minimum LOA BD - I : 108.15 m Capacity (per annum) : 13 Million Tonnes Marine Loading Arms installed at BD-I : 5 Marine Loading Arms installed at BD-III : 6 Berths with following diameter are laid for conveying various liquids-

o Crude - 762 mm (30") dia

o White Oil Product - 500 mm (20") dia

o Furnace Oil - 350 mm (14") dia

Separate Pipelines for Crude, Furnace Oil, White Oil Products, De-ballasting, Tower Monitor, Fire Hydrant and Fresh Water

Service Lines for LDO Bunker, Furnace Oil Bunker and Lubricant Oil Bunker The facilities include pumping at the rate of 3000 Tonnes per hour for Crude oil and 1000

Tonnes per hour for Petroleum Products Provision of Oil reception facilities in accordance with MARPOL convention for

receiving oily ballast, sludge and slop

Both the jetties are equipped with fire monitors There is a separate fire fighting pump house with diesel and electrically driven pumps to

supply fire hydrant and tower monitors

2. Iron ORE Terminal (BD2 )

Mechanised Ore handling Plant commissioned in 1977 at Bharathi Dock-II. It has following features-

Can handle Ore carriers of maximum size : 1,45,000 DWT & LOA of 280.4 mts Capacity (per annum) : 8 Million Tonnes Loading rate (per hour) : 6000 Tonnes Capable of receiving, stockpiling, reclaiming, weighing, sampling and ship loading Consists of two rotary wagon tipplers, ten lines of conveyors, two rail-mounted stackers,

two rail-mounted bucket-wheel reclaimers and two rail-mounted shiploaders Equipped with automatic belt weigher, sampling facilities, self-contained maintenance

workshop and a service station Separate receiving line and shipping line, which can also function as interconnected

system Availability of two control rooms for the automatic operation of various equipment and

conveyors Well-connected rail lines Back-up of 33 KV receiving sub-station Ore Stock Yard Capacity : 6.4 Lakh tones Rotary Wagon Tippler can handle : 1200 MT/hr @ 20 wagons per hour Receiving Conveyors (4 Nos.) can handle : 1500 MT/hr/stream of two conveyors Shipping Conveyors (6 Nos.) can handle : 4000 MT/hr/stream of three

conveyors Rated capacity:

o Stackers - 1500 MT/hr each

o Reclaimer - 3000 MT/hr each

o Shiploaders - 3000 MT/hr each 3. CCTPL (Terminal - I)

Quay Length : 885m Depth : 13.4m Ground Slots : 3942 Yard Capacity : 19710 Reefer Plugs : 240 Quay Cranes : 7 RTG's : 24

ICD Trains : Daily4. Container Terminal 2 (M/s Chennai International Terminal Pvt.Ltd) - Berths - SCB1, SCB2, SCB3

5. CITPL (Terminal - II)

Quay Length : 832 m Depth : 15.5 m Ground Slots : 5424 Yard Capacity : 27120 Reefer Plugs : 120 Quay Cranes : 3 RTG's : 10 ICD Trains : Daily

General Cargo Terminal

Berth No. of Cranes Capacity

West Quay 1 1 15t

West Quay 2 1 15t

Center Berth 1 15t

West Quay 3 1 15t

West Quay 4 1 15t

South Quay 1 2 10 T-1 No., 40 T-1 No

South Quay 2 -- --

South Quay 3 -- --

Jawahar Dock 1 1 10t

Jawahar Dock 3 2 15t

Jawahar Dock 5 (Privatised Berth)

Brs Brs

Jawahar Dock 4 & 6 -- --

Coal Conveyer (Jd Iv & Jd Vi)

Semi mechanized closed conveyer system for coal handling of two streams Commissioned on Nov 2009 Capacity (per annum) : 15 million MT Handling rated capacity : 1500 MT/hr/stream Coal discharged into the Hoppers located at JD IV & JD VI is conveyed to coal plots

through conveyors/Tripper cars equipped with Belt Weigher

Cargo Handling Equipment

S.No. Equipment Numbers Capacity

1 Floating Crane 1 150 Tons

2 Mobile Crane 3 10 Tons

3 Low Capacity Diesel Fork-Lift Truck 10 3 Tons

4 High Capacity Diesel Fork-Lift Truck

10 10 Tons - 3 Nos15 Tons - 5 Nos25 Tons - 2 Nos

5 Payloader 2 3 Tons

6 Diesel Electric Locomotive 14 700hp - 12 Nos1400hp - 2 Nos

TURNAROUND TIME AT CHENNAI PORT

Average Turnaround Time of Vessels Cargo-Wise (In Days)

Average Ship Berth Day Output (In Tonnes)

Vessels Handled In Numbers

Average Pre Berthing Detention (In Hours)

(Source: www.chennaiport.gov.in)

COMPETITIVE POSITION

Porter’s 5 Force Analysis of Chennai Port

Threat of New Entrants

Chennai Port will face threat from new entrants which are non-major ports of Tamil Nadu and other neighbouring states and upcoming projects of major ports in the region. Non major ports in the hinterland area of Chennai Port are fast moving forward to grab traffic by providing special service options like developing Single Point Mooring (SPM) for different customers. However, the efficient facilities provided by Chennai Port will help in maintaining the existing tonnage growth. The non-major ports will take some time to attract a large customer base. Amongst upcoming minor ports, biggest threat is likely to come from Krishnapatnam Port. Krishnapatnam

Port Company Ltd. (KPCL) has been awarded the concession by the Government of Andhra Pradesh to develop the existing minor port into a modern deep water port. The port is designed with deep draft to handle ships of size up to 200,000 DWT. Krishnapatnam has a total cargo potential of about 20 Mtpa per year in the short term and over 37 Mtpa in the long term. The port has expansion plans to build up to 30 berths. Krishnapatnam port has the potential to attract iron ore cargo of Chennai Port. Sethusamudram Project is expected to result in acting as catalyst for rise in coastal trade.

Rivalry among Existing Players

The shape of the Southern Indian peninsula is such that hinterland of different ports increasingly overlaps as one move from the north to the south. This phenomenon results in smaller hinterland area for ports in Southern peninsula and larger hinterland to serve for ports as we move northward. This creates immense competitive pressures among ports in the south because they compete for the same cargo, and this requires a focused planning for identifying desired niche cargo and to be the first in grabbing this traffic.

Comparison Of Different Competitors

Chennai Tuticorn Ennore Cochin Vizag New Mangalore

Berths 24 11 2 10 26 13

Main Berth Types

Coal, iron, POL, General Cargo

Dry bulk, oil & coal

Coal General Cargo, liquid bulk, POL, fertilizer

POL, iron ore, general cargo, fertilizer, LPG

General Cargo, POL, iron ore

Container Terminal

885m long, 13.4 m deep

370m long, 10.7m deep

573m long, 12.5m deep

451m long, 15m deep

Storage Facility

172 acre owned port, 200 acre & 14000 KL of liquid by private parties

137 acre inside security wall, 2518 acres outside the main gate

14 acre of covered area, 25 acre of open area, 125400 tons of liquid cargo by private parties

300 acres, 2 Mt of various cargo storage owned by private parties

20 acres, 64000 tons of cargo storage by private parties

Cargo 1 floating 6 electri 2 shore 12 electric 25 electric 3 electric

Handling Equipment

crane, 12 electric wharf, 3 mobile cranes, 3 gantry cranes, 29 fork lift trucks

wharf cranes, 4 lift trucks

qantry type grab, 1 mobile hopper, 6 temp. hopper

wharf cranes, 2 mobile cranes, 26 fork lift trucks, 1 floating crane, 9 transfer cranes, 2 mobile cranes, 2 gantry cranes

wharf cranes, 4 mobile cranes, 15 fork lift trucks, 92 top lift carrier

wharf cranes, 2 mobile cranes, 7 fork lift trucks

Flotilla 7 tugs, 3 pilot launches, 4 mooring machines

5 towing tugs, 2 pilot launches 3 mooring launches

3 tugs, 2 pilot launches, 3 mooring launches

3 barges, 3 mooring launches, 2 floating cranes, 4 pilot launches

5 pull tugs, 3 pilot launches, 4 mooring launches

Other Facilities

Mechanized ore handling facility, water supply & Bunkering crude oil handling facility

Mechanized ore handling facility, raw fertilizers, crude oil and liquid chemicals handling facility, Ship repair facility, Water supply & Bunkering

(Source: http://www.chennaiport.gov.in)

While both Ennore and Tuticorin pose competitive threats to Chennai Port, Tuticorin is perceived to be major threat to Chennai in terms of containers compared to Ennore. Tuticorin is a competitor for Chennai mainly for container cargo originating from south of Chennai Port.

Tuticorin Port has plans for further expansion in capacity for containers, coal and POL products. Cochin, being just 11 nautical miles from international sea route, has planned for major projects including a trans-shipment hub to explore the opportunities offered by its geography. Major traffic of New Mangalore port comprises of iron ore and POL of Kudremukh Iron Ore Company Ltd. and Mangalore Refineries & Petrochemicals Ltd. respectively. The port has planned for LNG terminal and coal handling facilities. However, Mangalore, situated on the seaward side of Western Ghats does not share a major common hinterland with Chennai and therefore is not considered to be a threat to Chennai.Chennai Port has identified its role to be a hub port in the Indian subcontinent on the eastern coast. However, Chennai will face competition for container cargo, coal, iron ore and POL products. In the nearby hinterland area, Chennai has the presence of global vehicle manufacturing giants like Ford, Caterpillar, Hyundai, BMW and Mitsubishi as well as domestic heavyweights like MRF, TI cycles of India, Ashok Leyland, Royal Enfield, TAFE Tractors and TVS. Hyundai has also signed a MOU with Chennai guaranteeing traffic at Chennai. Chennai, therefore, enjoys a strong competitive advantage so far as automotive exports are concerned.

Bargaining Power of Suppliers

Suppliers for the Chennai Port consist of the following:1. Stevedores2. Civil Construction Contractors3. Work Contractors & Equipment Suppliers4. Labour Unions & Dock Labour Boards5. Private Operators & Concessionaries

Stevedores: Chennai Port has been able to withstand pressures from these players because of its government protected monopoly. Even though these agencies are given opportunity to participate in management decisions by having a representative on port trust board, their say in the decision making might be limited.However, considering the fact that the cargo to be handled at Chennai Port is mostly containers and its consolidation, stuffing/de-stuffing happens outside the port limits.

Work Contractors & Equipment Supplier: Chennai Port enjoys good relations with contractors. The port is able to get the desired performance from the contractors, while the contractors have been able to get timely payments with decent tender terms and conditions.

Labour Unions & Dock Labour Boards: Even though the port has not faced any man-day loss due to labour unrest in the past, the port does face problems of surplus labour and poor efficiency coupled with commensurate higher wage bill. As and when the Port will try to address these issues by taking tougher decisions, it is expected that there will be immediate fallout on port performance. Labour issues faced by CCTL (the container terminal operator in Chennai) are a

matter of great concern because it affects the credibility of Chennai Port and reduction in revenue share because of effect on cargo volume handled.Private Players & Concessionaries: Chennai Port has substantial experience of dealing with private players ever since the introduction of the berth reservation scheme in 1995. The port has privatized a container terminal and plans to establish second container terminal through BOT operator.

Bargaining Power of Port Users

Chennai Port like most other major ports provides very little room for negotiation or bargaining with their users. The tariffs are fixed and the service delivery and efficiency is not comparable to private ports. Given the increasing need for international reach and the extreme congestion on rail/road traffic modes, industry players have started to look for ports as an alternative for transfer of their goods.All these factors clearly indicate that Chennai Port is increasingly facing or bound to face tremendous pressure from the corporate players in terms of creating their captive ports or single buoy moorings and thus shift the cargo volume from the port. Chennai Port will have to look for options like berth reservation or private participation in the port facilities. However, the port user industry might prefer berth reservation only if the port trust is able to achieve considerable efficiency improvement. Similarly, increasing container trade and break bulk cargo will result in reduction of dependency of the port trust on a particular port user.The port should move towards a partnership model directly with its customers. For instance, partnerships with automobile manufacturers like Ford and Hyundai ought to be envisaged.For iron ore cargo, Chennai Port faces competition from other major ports like Tuticorin and Vishakhapatnam, so the iron ore exporters can shift their cargo handling to other ports if the efficiency is higher, or port charges are lower and the connectivity is not the major problem. Increasing awareness about pollution issues and judicial action will require that either these cargos be shifted from Chennai Port or be handled with more environment management initiatives.

Bargaining power of steamer agents, shipping lines, CHA’s

These user support agencies have very little bargaining power in terms of direct interface with Chennai Port. However, these agencies may have power in terms of influencing the decision of the actual port users (cargo importers/ exporters) for selection of any particular port facility. However, the small port users, who trade and handle small quantity of general cargo, will switch the port facility only if the total cost results in sufficient cost reduction, because the land transportation cost is higher than the sea transportation cost. These users will also have less bargaining power because of less importance to Chennai Port due to lower traffic and revenue.

Threat of Substitutes

The main commodities of traffic handled by the port include POL, iron ore, container cargo and other cargo. Out of the different type of cargo handled by the port, only the export of iron ore has the potential substitute source. The majority of the iron ore exported at the Chennai Port is carried to the ports of China. However, the National Steel Policy of the Indian government seeks to give Indian steel producers priority in the use of domestic iron ore production.

CONTAINER TERMINALS

Chennai has two container terminals, run separately by DP World Pvt. Ltd and Singapore's PSA International Pte Ltd, with a combined capacity to handle 2.8 million standard containers a year. The two terminals loaded 1.11 million standard containers between April and December 2010, up from 886,000 containers a year earlier. There are plans to build a mega container terminal, the third one at the port, with private funds worth 36,860 million.

Chennai Container Terminal

Chennai Container Terminal (CCT) is the first container terminal in Chennai port built in 1983. The container terminal was privatized in 2001 and is operated by DP World since 30 November 2001 with a capacity of 1.2 million TEUs. CCT is managed under a 30 year build-operate-transfer agreement set up with the Chennai Port Trust of the Government of India. The terminal is capable of handling fifth generation vessels up to 6,400 TEU and has direct services to China, West Africa, Europe and the United States. The terminal crossed the "one million TEU" mark in 2007. It enjoys aquay length of 885 m (2,904 ft) and has 4 berths with an alongside depth of 13.4 m (44 ft), height (ISLW to Top of Cope) of 34 m (112 ft), channel length of 6,700 m (22,000 ft) and channel depth of 19.2 m (63 ft). The total terminal area covers 21.1 hectares, and yard stacking area covers 17 hectares (42 acres). The terminal has an on-site rail track. It has a berth productivity of 22 moves per hour and an average turnaround of 26 hours. The operator has invested around US$128 million to get new equipment at the terminal. At present, 7 quay cranes with Super Post Panamax handling capacity and 24 rubber-tyred gantry cranes (RTGs) form part of the inventory. The operator has also taken over from Chennai Port 4 quay cranes, 10 RTGs, 3 reach stackers and 2 top lifters and one empty container handler. CCT is ranked at the 79th position among the top 100 container terminals in the world.It is one of the fastest growing terminals in India with a CAGR of 20 per cent. It presently has four mainline services with direct connectivity to Mediterranean, Europe, Thailand, Vietnam, China and Korea. The mainline services are complemented by seven weekly feeder services and one coastal service to Colombo,

Vizag, Penang, Port Klang, Singapore, Yangon and Port Blair, respectively. Presently, CCT is connected to 50+ ports worldwide. A container freight station, with a covered area of 6,500 m2 (70,000 sq ft), operates within the port offering such services as inspection, LCL de-stuffing and delivery of import cargo. CCT has plans to invest 1 billion to install two quay cranes.Chennai International Terminal

This is the second container terminal that started operations from June 22, 2009. The build-operate-transfer facility, built at a cost of about US$110 million, is a joint venture between PSA International and Chennai-based Sical Logistics Ltd. With 35 ha (86 acres) of yard space and three berths with a total quay length of 832 m (2,730 ft), the terminal offers an annual capacity of 1.5 million TEUs. It has 3 rail-mounted quay crane (RMQC), 10 rubber-tyred gantry crane (RTGC) and 6 reach stacker. Once fully commissioned, CITPL would be able to accommodate 8,000-TEU vessels with drafts up to 15.5 m (51 ft).

Ro-ro car terminal

Car export (mainly Hyundai) increased by 80.25 per cent to touch 2,48,697 during 2008-09 as against 1,37,971 in the previous year. The port handled 65 car carriers compared with 40 in the previous year. The port is now the number one ro-ro car terminal in the country. After Hyundai, the port has started attracting global manufacturers like Mahindra, Toyota, and Ford. Ford has decided to move exports to Chennai Port by 2010.Hyundai Motor India is coming up with a first-of-its-kind dedicated automobile terminal at the Chennai port. The Chennai port facility is expected to be on the lines of its Ulsan Port, from where it exports half of Korea's 1,500,000 vehicles annually. The export terminal at the Chennai port would cater to its total export target of 300,000 cars, which would be 50 per cent of its total production by 2009-10. The company has plans to develop the land into a dedicated terminal to serve as an export base. It is believed that the terminal would basically cater to its export of compact cars from India. The new terminal would be spread over 10,000 m2 (110,000 sq ft) of land. It would have a six-storey multi-level dedicated parking yard for 6,000 cars. The terminal would cater to other car exporters through the terminal also.