Bali’s IDR10 trillion LRT project on track, will link airport with Kuta

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Bali is getting its own light rail transit (LRT) system, officials said, which will whisk passengers from the Ngurah Rai International Airport to the bustling tourist hub of Kuta.

The LRT project has been in the works for years, but it has now received the official nod from the central government for an expected 2027 completion date.

Bali Governor Wayan Koster announced on Tuesday that the Ministry of Transportation and the National Development Planning Agency (Bappenas) have agreed to fund and support the LRT project, which Transportation Agency Head IGW Samsi Gunarta previously said will cost a whopping IDR10 trillion (US$671 million).

The LRT project is a collaboration between the Bali provincial government and the South Korean government, which will provide technical assistance and funding through a soft loan scheme.

Following a feasibility study launched in 2021, officials said the LRT route will cover 9.46 kilometers, with four stops along the way: the airport, Central Parkir Kuta, Discovery Mall, and Seminyak. The LRT will run on a track that is partly underground and partly elevated.

The LRT project is part of Bali’s long-term plan to develop an integrated public transportation system.The plan aims to reduce Bali’s dependence on private vehicles and motorcycles, which have contributed to air pollution and road accidents on the island.

In 2020, a 4.78 kilometer LRT line connecting Ngurah Rai and a planned satellite terminal in Kuta was seemingly underway. Before the project evolved to its current iteration, officials said then that the LRT would cost IDR5 trillion (US$335 million) and be up and running by 2022.

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Reality of ocean container volume far cry from China reopening hype

As the global trade recession began to materialize in 2022, there was a great deal of hype over the potential boost to ocean container demand once the Chinese government ended its COVID restrictions and lockdown measures. But now that hype has faded and what was once hoped to be a great reopening and much-needed boost to volumes is looking more and more like a great flop.

In the chart above, the Inbound Ocean TEU Volume Index from China to the U.S. provides a seasonality view that compares 2023 volumes thus far (white line) with volumes over the past four years. It was late March/early April of 2022 (green line) when the Chinese government announced another round of COVID restrictions and lockdowns. This new round of lockdowns at first appeared as if they would make the transportation of goods to and from major manufacturing hubs nearly impossible. That caused some to automatically (and haphazardly) assume the following scenario: The lockdowns would cause a backlog of goods and pent-up demand that would eventually cause another container surge similar to what occurred after the first round of lockdowns in 2020. But we were able to see a different story playing out in real time through our bookings data.

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Those who were expecting an impending freight surge hadn’t realized that, even though access to the Port of Shanghai was largely blocked due to landside restrictions (i.e., road closures), shippers were able to reroute volumes through the closest alternate major port in nearby Ningbo. As the chart above clearly displays, the resulting decline in Shanghai bookings and container volumes was more than offset by a surge of volumes through Ningbo during that time (from the rerouted Shanghai bookings).

As the year progressed into the second half, global container volumes began plummeting, and there were still no signs of a surge in volumes coming out of China. As the hopes of a potential freight wave eventually began to fade, it was still widely believed that China’s reopening would (at least) be a major factor in helping boost volumes and possibly create a “soft landing” for the global ocean container market. Unfortunately, that boost in volumes never appeared. Instead, volumes continued to soften out of China during a largely nonexistent peak season. The weakening volumes were then met by emerging headwinds such as the inventory glut, weakening consumer demand and increasingly negative economic landscape.


Bali Airport Off to Strong Start in 2023

The Class I Immigration Office at Bali’s Ngurah Rai Airport reports that Australian nationals represented the largest number of foreigners entering Bal in January 2023. For January, 99,075 Australians were processed through the immigration desks at Bali’s airport. Australians were followed by Russians (22,703) and Indians (22,116).

Arial View of Bali Airport

Handy Heryudhitiawan, general manager of Bali’s Airport, told Beritabali.com that domestic traffic at Bali’s Ngurah Rai Airport continued to grow as the 2023 New Year dawned. In January, 757,863 passengers arrived and departed from Bali, representing an increase of 27% compared to passengers handled in January 2022.

Most domestic arrivals in Bali emanate from Jakarta’s Soekarno-Hatta International Airport, from which 328,939 passengers flew to Bali. Meanwhile, Surabaya’s Juanda Airport had 85,433 passenger departures for Bali, and Ujung Pandang embarked 42,717 passengers for the Island.

Handy is optimistic that passenger traffic will grow in 2023 at higher levels than in 2022. His optimism is buoyed by the steadily increasing number of international flights and plans by Emirates Airline to operate a Jumbo Airbus A380 aircraft beginning in June.

Most basically, Handy says Indonesia’s proven ability to control the COVID-19 outbreak and the return of international flights are the most likely factors to contribute to growing arrivals numbers for the remainder of 2023.

Bali’s Airport handles a daily average of 45,811 international and domestic passengers.

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Global liners enter familiar price war territory

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Liner shipping has entered a price war, a race to the bottom that has characterised almost every cycle of this shipping sector for the last 50 years.

Analysts at Sea-Intelligence have suggested that the decision by the big global container carriers to not reduce capacity in line with the dropping demand registered over the past six months can only be explained by the fact the market participants have entered into a price war.

“A choice to allow overcapacity to persist is also a choice to allow rates to continue to drop. Such a choice has a description: A price war,” Sea-Intelligence experts wrote in their latest weekly report.

“It has been obvious for a number of months that carriers have reverted to type – the instinct to preserve volumes and price lower to secure short-term bookings has taken over,” commented Simon Heaney, senior manager of container research for UK-based Drewry. “The idea that the extreme profits had changed mindsets has been proven to be totally false.”

Heaney predicted that today’s price cutting will mean freight rates land more closely to pre-pandemic levels, as will profits. Drewry estimates liner shipping made record combined operational profits of $290bn last year, something that will slide to just $15bn in 2023.

“The carriers do not have a choice as a price war is bound to happen whether they want it or not,” argued Hua Joo Tan, the founder of Asia-based consultancy Linerlytica, in conversation with Splash today. “What we have is a perfect storm with excess supply coinciding with the collapse in demand with none of the main carriers willing or able to make an exit from the market,” Tan said.

Commenting on how the market dynamics might play out, Lars Jensen, CEO of Danish consultancy Vespucci Maritime, told Splash that today’s price war will likely be a temporary one, whereupon more capacity will be pulled to stabilise the market.

“But it should be noted that the market is at the same time entering a cyclical downturn which in itself adds negative pressure,” Jensen cautioned.

Korean flagship liner HMM issued record annual profits today of $7.88bn, but became the latest carrier to warn that 2023 will be a challenging year.

“Unfavorable market conditions are expected to continue due to widespread inflation and weak economic growth, putting pressure on demand,” the Seoul-based carrier stated.

“Container freight rates have fallen materially over the past six months and are hovering at 2020 lows across several routes,” Jefferies noted in a recent note to clients, calling for a “major supply response” to right-size the market.

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