Drewry: Terminal operators will be challenged by weak container growth, rising costs

The London-based shipping consultant said the focus of the industry is shifting away from greenfield projects to mergers and acquisitions.    Terminal operators face the dual challenge of weaker demand growth and rising operating and capital costs due to larger vessels and alliances, according to London-based shipping consultant Drewry, which has just published its Global Container Terminal Operators Annual Review and Forecast 2016.
   Drewry expects global container port demand will grow at an annual rate of less than 3 percent over the next five years. Demand projections are “softened in particular due to the sharp slowdown in China’s exports,” Drewry said. “Positives are the resilience of the Middle East and South Asia and potential recovery of Russia (along with oil prices).
   “Terminal operators and investors have been urgently reviewing capacity expansion plans. Many projects within the five-year forecast horizon are already too far advanced to change significantly, but those scheduled to appear later in the period are subject to reconsideration in terms of timing and scale.”
   On stock markets, ports are increasingly seen as a mature value sector instead of a growth sector, Drewry said.
   Meanwhile, for terminal operators, the focus is on switching from greenfield developments to merger and acquisition activity, with a number of major deals already in the pipeline with more likely to come, Drewry said.
   Drewry pointed to deals such as APM Terminals acquisition of Grup TCB, CMA CGM’s purchase of NOL/APL and Yilport’s takeover of Tertir. In addition, Yilport has expressed an interest in acquiring Ports America.
   Earlier this year, Deutsche Bank said it was selling Maher Terminals in New York to a Macquarie infrastructure fund.
   Deutsche Bank said China Merchants Port Holdings, and the merged COSCO and China Shipping “have a strong appetite and significant activity in terms of expansion through buying existing businesses.”
   Drewry reported that by 2020, the combined COSCO-China Shipping entity will be the largest international terminal operator as measured by capacity, followed by APM Terminals, PSA International, Hutchison Port Holdings, DP World, MSC affiliate Terminal Investment Ltd. (TIL) and CMA CGM. Today, it ranks Hutchison as the largest terminal company followed by APMT, PSA, COSCO, DP World and TIL.
   Neil Davidson, Drewry’s senior analyst for ports and terminals, said “A natural response to the increasing size of liner alliances is for terminal operators to look to consolidate terminal ownership in parallel.
   “However, a dichotomy in approaches is evident. On the one hand, many of the established international players have become more cautious because they are concerned that returns may be less than what they are used to. But on the other hand, there are several expansion minded players like the Chinese operators and Yilport Holdings (a new entrant this year in Drewry’s league tables of global and international terminal operators) whose top strategic priority is to acquire more assets”, added Davidson.