The challenges facing the global container terminal sector

Authorship

Neil Davidson, senior analyst - ports & terminals, Drewry Maritime Research (Drewry Shipping Consultants Ltd), London, United Kingdom

Publication

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Drewry’s latest analysis of the global container terminal sector shows that it remains dynamic and profitable, but that numerous challenges are looming.

PSA International, Hutchison Ports, APM Terminals and DP World remain the four big international players in equity twenty-foot equivalent units (TEU) and portfolio terms but with significantly varying levels of activity. DP World and APM Terminals are highly active in terms of acquisitions, divestments and greenfield developments; Hutchison is moderately active and PSA less so. ICTSI and Terminal Investment Limited (TIL) are also particularly active in terms
of portfolio expansion. One thing is very clear – the focus of expanding global terminal operators, is on growth opportunities in emerging markets.

Major shipping lines meanwhile have been selling stakes in terminals to raise cash. The deals involving CMA CGM’s Terminal Link and MSC/TIL have been the most significant. Most carriers have seen little change in their terminal portfolios as a result, adopting a holding rather than expansion policy.

However, this is only one part of the story. There are a number of other significant players which are not yet classed by Drewry as global terminal operators, but they are growing fast and have a strong appetite for international expansion. These include Gulftainer, Bolloré, Yildirim, SAAM Ports and Ultramar for example and several large Chinese players, notably China Merchants Holdings International (CHMI) and Shanghai International Ports Group. These companies are challenging for inclusion in next year’s Drewry league tables.

The top 10 global terminal operators

Drewry has developed a unique set of criteria for determining whether an operator should be classed as a global player for the purposes of its annual league tables. This is a deliberately exclusive club which allows focus on the activities and strategies of particular players.

In Figure 1, unless stated otherwise figures include total annual throughput for all terminals in which shareholdings are held as at 31st December 2012, adjusted according to the extent of equity held in each terminal. Figures do not include stevedoring operations at common user terminals and also exclude barge/river terminals. COSCO Group includes COSCO Pacific and COSCO Container Line, while PSA and HPH figures have been adjusted to account for PSA's 20 percent shareholding in HPH. Hutchison figures include HPH Trust volume. Please note that some of the figures are estimated.

The big four global players (PSA International, Hutchison Ports, APM Terminals and DP World) had a combined share of the global market in 2012 of just over 26 percent. This was actually less than it was five years ago. Back then, they collectively held 29 percent. Several factors are behind this somewhat surprising statistic.

Firstly, container terminal ownership and operation remains an attractive business, so has attracted new players. The 2012 financial results of the existing main players showed another year of healthy profit margins and returns, and there are now plenty of other operators and investors fighting for a piece of the action. For example, outside of the top four players, the likes of COSCO Pacific, China Shipping Terminal Development and TIL have been growing rapidly.

Secondly, the big players are these days equally happy to dispose of mature assets as they are to acquire new ones. They have adopted a portfolio management approach which is in contrast to the early days of the international terminals industry when it was almost a case of acquiring any asset, any place. Hence in the last few years, the likes of DP World and PSA have sold assets (or stakes in assets) in locations such as Hong Kong, Australia and the UK.

Thirdly, several major shipping lines have been selling stakes in terminals – but usually retaining majority control. Buyers have tended to be financial or emerging players rather than the big four terminal operators – perhaps because it is minority rather than majority stakes that are up for grabs. It seems inevitable given the financial pressures being experienced by a number of carriers, that there will be more disposals soon.

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