TOC Europe discusses how container terminal operators could respond to a new era of slower growth and less attractive business fundamentals Hamburg 15.06.2016 – The container terminal industry may well have to learn to live with higher risks and lower returns, maritime industry professionals were told on Day 1 of the TOC Europe Conference & Exhibition, taking place this week at the Hamburg Messe, Hamburg, Germany. Speaking in the TOC Container Supply Chain (CSC) conference, Neil Davidson, Senior Analyst – Ports & Terminals, at Drewry Maritime Advisors, illustrated how the aftermath of the 2008-09 financial crisis has been followed by several years of readjustment in global trade flows. The results have proved deeply challenging to container terminal owners and operators, as well as their shipping line clients. An era of strong demand growth has been transformed into one of weaker demand growth. Meanwhile, the exponential growth in vessel size, along with much bigger and more complex liner alliances, has seen falling returns for terminal operators. The creation of the new alliances has only served to raise the volatility of port market shares, which is feeding into a period of uncertainty about market direction and demand growth. This makes for a highly uncertain landscape against which terminal businesses have to plan future investments. Mr. Davidson posited some possible solutions for terminal owners out of this impasse, including more alliances - or even more mergers and acquisitions. Further joint ventures between terminal operators and shipping lines could also be possible. Alternatively terminal operators could just learn to live with higher risks and lower returns, or pull back further from making new investments. Although such an environment might also see some investors exit the industry. One Belt, One Road Of course, one particular route to investment in container supply chain infrastructure is being pursued by China’s government, through its “One Belt One Road” (OBOR) transport network. During the CSC conference Professor Hercules Haralambides, President of Haralambides & Associates and a veteran transport consultant told delegates that OBOR should be understood in the context of the country’s strategic geopolitical objectives rather than simply providing the infrastructure for its exports. Professor Haralambides said that while “the century of Eurasia is coming”, the OBOR policy was part of wider strategy to solidify its presence at key nodes in global supply chains. “There are investments in the Australian port of Darwin, as well as the Nicaragua canal, which despite financing difficulties is still on the table, and so I see the OBOR becoming a global ‘around-the-world’ policy that will sit in competition with the transpacific trade partnership (TTP),” he said. He added that Chinese authorities conceived OBOR as “a US$1 trillion idea which they believe will have an economic multiplier of 2.5”. Both Professor Haralambides and fellow speaker Olaf Merk, Administrator of Ports and Shipping at the OECD’s International Transport Forum, emphasised that the traditional GDP-trade growth multiplier of 1:2.5 had declined to a little over 1:1 since the onset of the recession in 2009. Professor Haralambides said that the two European ports the Chinese authorities are focusing on the most are Piraeus, in Greece, where Chinese terminal operator Cosco Pacific now has the concession to manage container operations, and the Italian gateway of Venice. Venice is an important location, he continued, because it has good rail connections with North Europe as well as proximity to logistics parks around the industrial centre of Turin. In Piraeus, the fact that Cosco Pacific has taken control of the port means that the Ocean Alliance will call there. “You should also look at Port Said – the Chinese are taking a great interest in East Port Said because they see Suez as an alternative to Panama,” he added. “The picture is that the Mediterranean and Suez are becoming more important vis-à-vis serving the US east coast, which could possibly be done better from there than via Panama. “This is not just about transport investment, but should also be seen in the context of geopolitics and strategic objectives,” he said. Mr. Merk added that Chinese port investments were inherently linked with the country’s wider policy, regardless of the actual organisation making the investments. “It is important to realise that a lot of the Chinese terminal operators are acting as an arm of the Chinese government, so it really is a case of geopolitics acting in concert with supply chain,” Mr. Merk commented. Celebrating its 40th anniversary TOC Europe 2016 continues on Wednesday and Thursday at the Hamburg Messe, Hamburg, Germany.