Saturday, 20 June 2009

Ports set for radical shake-up

PORTS are set for a radical shake-up of their business model as pressure grows on loss-making shipping lines to sell off non-core container terminal assets in order to survive the global downturn.
Moreover, a bankruptcy among the major container lines would put in train a series of terminal reshuffles as newly formed shipping alliances switched their global ports of call.
That is one scenario outlined by Drewry Shipping Consultants, which predicts that global container terminal operators will have to wait until 2012 for annual throughputs to exceed the 525m teu peak achieved in 2008.
Drewry director of ports Neil Davidson said: “It is clear that all the major shipping lines are losing a lot of money and they will come under increasing pressure to balance that out.
“They may be forced to sell their terminal assets and there is no doubt that the international stevedores and some financial investors would be very interested.”
Those more likely to sell assets would be Asian and European shipping lines for whom box terminals are a strategic extension of their core container transport arm rather than a stand-alone business.
But potential investors would have to be wary, Mr Davidson said.
“Some of these container terminal assets are more a cost centre than a profit sector, and an investor would have to find out how the pricing works.
“It could lead to some interesting negotiations on the price and conditions. However, a large number of these container terminal assets are in key locations around the world.”
Drewry said that quoted container terminal operators, whose share prices are now at historic lows, may well attract interest from financial investors seeking quick returns.
“The fundamentals of the container terminal business remain good and they are not discounting on tariffs. Their share price has been dragged down by general developments in the stock market. Yet they are resilient business and are still making money in the worst recession for decades.
“Their shares are undervalued by the stock market and they represent a opportunity for investors.”
Drewry, which forecasts global container volumes will fall 10% this year and that shipping lines face a $25bn revenue shortfall, warned that port operators also face radical challenges.
“There is the potential for a big shake up in the ports business if one of the major container lines goes bankrupt. It could stir up a change in their customer base, with business moving from one terminal to another as part of a domino effect. There will be winners and losers in the ports business because of this.”
Drewry expects European container port demand — a function of consumer spending — to fall 12% this year. It will be virtually static in 2010 and then return to 5% growth by 2011, with teu throughput reaching a par with 2008 volumes in 2013.
In the Far East, which has a global market to serve, the return to 2008 volumes will be achieved two years earlier, in 2011.
Drewry expects Far East container port demand to fall 9% this year, rise to 2% growth in 2010 and thereafter averaging just over 8% growth for the next three years.
If those forecasts are correct, then Drewry expects global terminal operators to push ahead with deferred expansion plans by the end of 2010.

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