A&P 2005 - Terminal operators vie for global box business

By: | at 07:00 PM | Channel(s): Ports & Terminals  

Container terminal operators are competing for box business around the globe. Spurred by burgeoning China trade, TOs are seeking to add new container terminals through building conversions and acquisitions on a grand scale. Will 2006 reshape the TO business for decades to come?By George Lauriat, Editor-in-Chief, AJOTThe reality of the Port Authority business is that ocean carriers can change ports at whim. The ability to leave a port is the ultimate recourse when the relationship between a steamship line and a port deteriorates. It is this ability to pick and choose that gives ocean carriers a significant edge in dealing with Port Authorities.
With mega-carriers like Maersk-Sealand and Mediterranean Shipping Company (MSC), or global alliances like the Grand Alliance or the New World Alliance, a port stands to lose or conversely, to gain, a great deal with any shift in carrier service. This paradigm is somewhat altered when a steamship line, like Maersk-Sealand (APM Terminals), Evergreen, NYK, P&O Ports or OOCL, owns and/or operates their own terminals. The huge investment in a terminal and the various landside systems reduces the likelihood of a container carrier leaving a port for a competing facility. The flip side is that a single user or dedicated terminal reduces a Port Authority’s flexibility in attracting competing carriers.
Size counts for plenty in the TO business. When mega-carriers negotiate with the mega-terminal operators like HPH (Hutchinson Port Holdings, a subsidiary of Hutchinson Whampoa), PSA (67% held by Temasek, the Singapore Government’s investment arm), SSA Marine, or the newly created DP World (wholly owned by the government of Dubai), they negotiate as equals. The TO’s global reach and teu terminal capacity equates to leverage.
Terminal operators such as HPH or PSA have a global annual throughput in excess of 47 million teus, and 30 million teus, respectively, from their terminals. (See chart for details). In contrast, the Grand Alliance [sans Hapag Lloyd/CP Ships] has a total of 257 boxships, with a capacity of almost 790,000 teus. Rival New World Alliance has another 110 vessels, with a capacity of close to 700,000 teus, and Maersk-Sealand/P&O Nedlloyd with a combined fleet of 568 ships, has close to 1.6 million teus.
There is an old saying, “A rising tide lifts all” [ships]. Over the past decade the boom in the China trade has certainly lifted the fortunes of Terminal Operating companies. This is particularly evident in the rapid growth experienced over the last four years. In 2000, two-way trade between the People’s Republic of China (PRC) and Europe amounted to 2.4 million teus. US-PRC trade for the same period amounted to 4.93 million teus. By 2004, PRC-Europe trade had grown to over 4.51 million teus while US-PRC trade reached almost 9.1 million teus.
The rise in container volumes has translated to the TOs’ bottom lines. Bremen-based Eurogate reported that its 2004 net profit was up over 58% to EUR 58.2 million (US$68.2 million), from 2003. HPH, the world’s largest terminal operator, had revenues of HK$3,469,420 (US$3.47 billion) a 17% increase over 2003. For FY2004, Singapore’s PSA posted 5.3% growth in consolidated revenues to S$3.6 billion (US$2.12 bn) and net profit increased 29% to S$881.3 million (US$518.42 mn).
Mr. Ma Zehua, Executive Vice President of the Cosco Group, (which also own terminal operator/container leasing company Cosco Pacific), underscored the importance of North America to the box business when he spoke recently at the Propeller Club of US’s annual meeting. “North American ports now account for 12% of world volume,” said Mr. Ma Zehua. “From 1999-2004, container throughput growth in North America climbed an average of 8.2% each year. According to Clarkson forecast, containers handled by North American ports in 2005 will see a 10.5% net increase, reaching 42 million teus. Cosco has a total shipping capacity of 300,000 teus with 40% of that allocated to US ports.”
Bremen-based Eurogate reported that its 2004 net pro

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American Journal of Transportation