Global economic downturn, demand upturn and the changing face of terminal network investment
Since 2003, Drewry Shipping Consultants has published an annual report analyzing the container terminal industry, focusing on key issues and in particular the activities and strategies of global and international container terminal operators. This year’s report has highlighted a number of interesting new developments and trends.
After the extraordinary challenges posed by the economic downturn of 2009 in which virtually all terminal operators saw their volumes substantially affected, most of the global container terminal operators saw a return to healthy volume growth in 2010. Average terminal utilization levels were generally up, and operators increased their absolute levels of EBITDA compared with 2009 – although it is highly significant to note that even in 2009, EBITDA margins in percentage terms were largely maintained, a remarkable achievement. In absolute terms, HPH was the most profitable global container terminal operator with an EBITDA of over US$2 billion, up from $1.8 billion in 2009. PSA achieved an EBITDA of around $1.3 billion while DP World achieved an increased EBITDA of $1.24 billion, compared with $1.1 billion the previous year. ICTSI, PSA, HPH, DP World and HHLA all achieved an EBITDA margin in excess of 40% in 2010. APM Terminals, meanwhile, increased its margin to just over 20%, continuing a steady upward trend.
The main international terminal operators broadly maintained their positions in 2010, with those having significant interests in Chinese ports achieving particularly high growth. Singapore’s PSA was the leading global container terminal operator in 2010, with an equity-adjusted throughput of 51.3 million TEU, around 14% higher than in 2009. Hutchison Ports is placed in second position, on 36 million TEU, followed by DP World on 32.6 million TEU and APM Terminals on 31.6 million TEU. China’s COSCO Group is ranked fifth with 13.6 million TEU, some way behind the other top five members. PSA’s position at the top of the equity league table is strengthened significantly by its 20% shareholding in Hutchison Ports whereby in the Drewry analysis, PSA is credited with 20% of HPH’s equity TEU and HPH is debited this amount. If this approach is not taken – i.e. no adjustment for PSA’s stake in HPH – the PSA and HPH figures are actually 42.3 million and 45 million TEU respectively.
Demand growth will soon outstrip capacity expansion
While there are still threats to global economic recovery posed by the Eurozone crisis and US debt negotiations, the consensus is that global economic growth will be sustained for several years to come.
Drewry has incorporated this more positive outlook into its forecasting and projects that global container port throughput will grow by an average of around 7.5% a year over the next six years, rising to around 840 million TEU in 2016. This would be a near- 300 million TEU increase on 2010 levels, equivalent to an uplift of 55% – a very substantial increase that shows the effect of mere single-digit annual growth now that the industry has grown to such a large scale.
Significantly, the effects of the downturn are still to be seen in relatively low forecast capacity increases for many operators and for the industry as a whole, although global operators are now reactivating many terminal investments deferred during the financial crisis. Nevertheless, the current indications are that in the next five years demand growth will significantly outstrip capacity expansion, leading to rapidly rising utilization levels in many ports and regions of the world.
The regions of the world where this is likely to be most pronounced are the Far East and South East Asia, where average utilization levels could exceed 90% by 2016 unless more capacity expansion projects are brought forward soon. Latin America and the Middle East will also see similar pressures, along with Africa to a lesser extent. In mature markets such as North America and North Europe the pressure is less because demand growth is not expected to be as strong. Surprisingly, despite current severe congestion in ports in India in particular, average utilization levels in South Asia could fall by 2016 because there are a number of very large expansion projects in the pipeline. However, it remains to be seen whether they are all built to the scale and on the timing their developers say they will be.
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