South Asia Gateway Terminals (SAGT), a JKH associate that was originally managed by P&O Ports, saw container volumes surge last year, although growth slowed down towards the year-end.
Volumes handled by SAGT, which operates Colombo's Queen Elizabeth Quay container terminal, rose 11.6 percent in 2008 to 1,726,424 TEUs (Twenty-foot Equivalent Units or containers) from the year before.
The terminal was originally designed to handle just over a million containers when it was modernised and commissioned by P&O Ports after the government privatised the facility.
Volumes at SAGT have been growing rapidly in recent years and the private operator has managed to accommodate the growth through higher efficiency and new cargo handling equipment.
SAGT was one of the two main contributors to the profits of John Keells group in recent years.
The other contributor was the ship fuel or bunkering business of Lanka Marine Services, a former state monopoly which became a JKH subsidiary in a privatisation exercise.
The court also ended the effective monopoly LMS held in bunker fuel supply in Colombo port.
The loss of the fuel storage tanks and competition will affect the profitability of LMS, which opted to use floating storage, a more expensive option.
Analysts have been warning that SAGT was nearing capacity as its volumes continued to grow last year, although the growth was slower than in 2007 when volumes went up 15.8 percent to 1,546,497 TEUs compared with 2006.
Most of Colombo port's container volumes come from transhipment business from the Indian sub-continent.
Transhipment accounts for about 70 percent of Colombo's total box volumes.
But container volumes are now slowing down noticeably because of the global downturn in trade following recession in industrial economies.
SAGT's box volumes in December 2008 were down 9.3 percent to 123,038 TEUs from the same month a year ago.
It was the lowest monthly volume since November 2007 and first monthly year-on-year decline in volumes since December 2005, analysts said.
SAGT volumes have also been affected more recently by the loss of a key customer to the government owned terminal.
These developments might give SAGT some breathing space in the short-term, port officials and analysts.
Nevertheless, SAGT would have to get new capacity, such as in the new south port of Colombo being built next to the existing one, to be able to cope with growth in the longer term.
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