Reports of the death of port and terminal profitability are greatly exaggerated…..
The famous author Mark Twain is attributed with once saying “reports of my death are greatly exaggerated” (it’s not actually exactly what he said but you get the gist).
Listening to some of the presentations and discussions at the TOC conference in Amsterdam this week, I got the same feeling about port and terminal profitability. There was much talk of the supreme “kingmaker” power of the new mega-alliances to make or break ports, extreme (downward) pressure on handling charges and alarming media coverage about likely “catastrophic economic failure” of some terminals.
For sure, there are very real pressures, and in the transhipment sector in particular, there will be big winners and big losers, as activity naturally coalesces into fewer, larger hubs, leaving some others out in the cold.
But before we all get too carried away (and terminal operators and investors get too depressed), let’s remember a few things:
- Bigger ships and bigger alliances sharply reduce shipping lines’ available port and terminal choices, and this (at least partly) counteracts their perceived increased bargaining power
- The liner alliances may look stable right now, but in 5 or 10 years’ time, who thinks that all three of them will be exactly the same as they are today? They are marriages of convenience, not god-like creations. (There might even come a day when the market is large enough for some of the carriers get enough business to be able to run their very large ships on their own again!)
- The vast majority of the world’s container port activity is gateway cargo, much more captive and less footloose than transhipment (and with more direct services due to bigger alliances, gateway will become increasingly important)
- Why talk about “kingmakers” when cargo is already king?
If you look at the current financial results of the world’s major port and terminal operators (and bear in mind they have been living with bigger ships and bigger alliances for some years now), they are all, in the main, still generating healthy profit margins. The industry is moving from “exceptionally successful” to “successful”. Hardly the end of the world?
Free thinking international European
7 年Thanks for sharing your thoughts Neil! I am an optimist by nature and see where you are coming from and you probably have a point against those who look more black into the future. At the same time I am a realist and especially in Europe ports must adjust, even when making certain profits and cheering that all is fine. It will take courage from both port authorities and maritime operators to see eye to eye with fast changing times and circumstances: some do and some do not, but even the maritime industry cannot look away from this.
Due Diligence Coaching Mentoring
7 年Thank you Neil. Indeed I remember an article you once wrote a few years ago discussing the probability of Regional Hubs playing an important and effective role in the supply chain. Finding Terminals with capabilities of handling the 14,000 TEU Range is and will continue to be forefront in many a shipping line's mind let alone any alliance's mind ! I say the glass is half full not half empty.
Running PierTrucker.com, serving 40K+ port professionals since 2009
7 年Good read ??! If I were terminal operator, I would drumbeat end-of-the-world idea. Why not ??
Maritime transport & Freight Consultant
7 年Managing the huge introduction of the new generations of Ultra Large carriers will demand a newer agility in the realisation of PORT; reflecting its new evolving state into a supply hub and sometimes even prompting logistic core behaviour. I am trying to redefine NEW PORT with existing definitions of supply chain and logistics..