Report foresees low prospect for businesses in 2016 over global slowdown

Following the continuous slowdown in the global business environment, Drewry recent report has lowered its 2016 business growth forecast to 3.3 percent from the initial 4.9 percent projection.

The report also halved its global growth forecast for container shipping this year, down to 2.2 percent from 4.3 percent and this reflects the “significant nature” of the global slowdown, which started in the past few months.

Neil Davidson, Drewry ports and terminals director, said at the launch of its latest Global Container Terminal Operators Annual Review & Forecast report, that the downgrade came after the demand outlook dramatically worsened.

“The revised demand forecast will inevitably have an impact on the capacity forecast for terminals,” said Davidson. Although, he added, it would take time to assess the difference this would make to terminal expansion projects because for some, it would be like turning around a super tanker, given how far advanced they are, while others may be delayed.

Davidson said this illustrated the differing natures of demand and supply, with the former prone to quick and dynamic changes, while capacity comes in large chunks which are almost impossible to adapt.

He added that international port operators’ strategy of focusing on emerging markets for expansion projects and in Greenfield locations continues, while “opportunistic” Mergers & Acqusition activity such as APM Terminal’s recent acquisition of established Spanish operator Grup Maritim TCB would take place regardless of the market status.

“But by far the biggest challenges facing the ports and terminals today are the larger ships and bigger alliances that have led to lower frequency of services but higher peaks in throughput.”

Continuing, he said: “Maintaining margins for terminal operators in this environment has become more challenging because big ships and big alliances push up operating costs and compel operators to expand to accommodate their customers’ new requirements.”

Terminal operators could respond by increasing quay crane handling rates, although Davidson admitted this would be unlikely to succeed in the current climate.

However, he also argued that ports and terminals should look at taking a leaf out of their customers’ books by forming strategic alliances and collaborating more with the shipping lines to mitigate rising costs and resolve bottlenecks.

“For instance, the Northwest Seaport Alliance between the US west coast ports of Seattle and Tacoma is an example of port collaboration, although some might find regulatory authorities raising objections.”

One wonders how much sympathy carriers are willing to extend to the ports they use, given that the sector continues to be highly profitable– and generally enjoying a far higher return on investment than their carrier customers – as well as holding valuable long-term assets.

Hutchison remained the leading container terminal operator in 2014, based on throughput at 80 million Twenty Equivalent Units (TEUs), followed by APM Terminals at 71 million TEU, PSA at 65 million TEU, Cosco at 64 million TEU and DP World at 58 million TEU.

UZOAMAKA ANAGOR-Ewuzie