æAgainst the wallÆ
APM executive says terminal operators must focus on how to emerge stronger from downturn.
By Eric Johnson
An APM Terminals executive said terminal operators that have widespread portfolios and who focus on how to emerge stronger from the current demand downturn will prosper.
In a speech in London at Containerization International's annual global liner shipping conference, APM's Chief Commercial Officer Richard Mitchell said the industry should brace for a drop of 20 percent in container movement in the first quarter of 2009.
'This in turn has led to decreased container terminal activity and pressure on terminal operators to meet new demands by our customers,' Mitchell said. 'Our backs are now against the wall. Also, the lack of credit worldwide means trade finance is limited, and funding for any large terminal or other infrastructure investment project is scarce. New terminal development is being delayed, postponed or cancelled outright.'
The economic downturn has forced APM to rein in its expansion, one that has carried it to the top five of operators worldwide.
'Once we saw the speed and possible long duration of the crisis, we, like many port operators, scaled back capital investments,' Mitchell said. 'We have seen many announcements in the press also announcing investment freezes. We still have 26 port projects in motion but the financial criteria for approval are much more demanding these days.'
The downturn can be navigated by companies that focus expansion on developing countries, with Mitchell saying those developing regions 'can have a positive impact on terminal operators with portfolios well represented in those areas.
'Reduced revenue and reduced profits are no surprise in a market projected to shrink for the first time since containerization began four decades ago,' Mitchell continued. 'The reductions are not uniform, however, as consumption in developed nations wanes while emerging markets are still growing as trade and the containerization of previously breakbulk cargoes continues. Geographically balanced portfolios will be able to weather this storm better; those concentrated in specific regions or ports may find otherwise.'
Mitchell said that silver linings these days are to be found in developing nations.
'A look at import and export trends over the past three years gives us an idea of where terminal operations and expansion may still have a bright future in the short- to medium-term,' he said. 'Clearly this crisis has a large impact on the key players in the industry and can significantly affect future results and rankings if not adequately addressed.'
Finally, Mitchell said APM Terminals was intent on emerging even better out of the crisis. 'Our thought was this: instead of just trying to survive this crisis, we should use it as an opportunity to create a better, more sustainable business model,' he said.