AlixPartners: Container industry trends creating new challenges for port terminals

Carrier consolidation and the deployment of larger containerships, coupled with lagging infrastructure has created significant issues for North American terminals, according to a new report from consulting firm AlixPartners.    The restructuring of container carrier alliances back in April, combined with other recent merger and acquisition activity and bankruptcies in the container shipping business have generally strengthened the industry, but have caused headwinds for North American container terminals, according to a new report from consulting firm AlixPartners.
   The continuous deployment of larger containerships has also highlighted infrastructure challenges at ports, placing further strain on container terminals.
   The report, titled, “Braving container terminal headwinds: a playbook for investors,” said that chronic underinvestment in U.S. infrastructure critically limits the ability of ports and terminals to efficiently unload, store and distribute containers. It also noted how the U.S. has been spending “shockingly little” in infrastructure during the past several decades compared with other countries, particularly China, Japan and India.
   Fewer but larger containerships mean less calls, which reduces terminals’ customer bases. The trend also means more containers are discharged with each call, creating operational challenges for ports with constrained infrastructure.
   Terminals that have rail access will really see advantages as ships become larger because it will give them an alternative means of how to deal with that congestion, Jim Blaeser, vice president at AlixPartners told American Shipper.
   Looking ahead, the report said, “As carriers continue cleaning up their portfolios, we anticipate further consolidation of the patchwork of partnerships between carriers and terminals – especially in the Southern California, New York and SeaTac gateways.”
   In regards to investors, the report said the challenges are to understand the dynamics affecting a particular gateway and to objectively evaluate the port’s growth potential.
   “For most investors, the bottom line is that there’s still opportunity to create value in this market despite the changes that have reshaped the industry. But it won’t be easy, the report said. “It will require sharp analysis, difficult choices, and a commitment to rigorous, disciplined execution.”