Ton van den Bosch is the global head of terminals at Ince & Co LLP in Singapore and his many years of working with terminal operators, especially in Asia, has given him special insight into challenges facing TOs large and small.
AJOT: What impact will China’s Belt and Road Initiative (BRI) have on global terminal operators?
van den Bosch: China’s BRI is changing global trade routes, energy supply lines and it has a significant impact on investment in ports and terminals in Europe, Africa and here in Asia. Terminal operators such as, for example, APMT and Hutchison are competing with Chinese operators for greenfield developments in emerging and frontier markets in Asia and in Africa and are at the same time facing challenges to achieve a strong return on invested capital in ports and terminals.
China Merchants, COSCO and SIPG continue to report strong volume growth and these gigantic container terminal operators from China have made significant acquisitions in for example Belgium, Brazil, Greece, Spain and Sri Lanka. Chinese terminal operators now own around 10 percent of Europe’s container terminal capacity and many analysts expect COSCO to be the largest terminal operator (by capacity) within a year or two.
AJOT: Recent years have seen a tremendous consolidation of both ocean carriers and ocean carrier alliances - how does this influence terminal operators?
van den Bosch: The ongoing consolidation within the ocean freight industry is having a significant impact on supply chains. It allows for more efficient deployment of container mega vessels but terminal operators are also facing pressure from consolidated carriers and from the alliances to reduce handling costs. This will probably only intensify as some analysts believe that the wave of consolidation is not over yet since the shipping industry continues to be burdened by oversupply.
Another interesting development is the ongoing integration of the intermodal transportation, terminals and logistics business. This trend is in my view driven by many factors, including by the challenge to achieve acceptable returns in both the shipping and in the terminals business and, above all, by the desire to service the end-to-end supply chain. Examples of this trend include the acquisition by CMA CGM of an interest in Ceva Logistics and the acquisitions by DP World of Peruvian logistics provider Cosmos Agencia Maritima and of Unifeeder.
AJOT: Terminal operators often have cross-over ownership of terminals (evident in the equity TEU numbers), particularly in China. Why do terminal operators look for partners and is this a trend that will continue?
van den Bosch: Consolidation and joint ventures in the terminals business are in my view very logical responses to consolidation in the shipping business. Advantages of joint ventures in the terminals business include increased capacity, access to new markets and the sharing of costs and risks. Terminal operators are expected to continue to make significant capital investments to improve terminal infrastructure and to enhance operating efficiencies in order to handle ever larger vessels. Terminal operators are cooperating because they want to share costs, to explore potential synergies and to enhance services in different ports and markets.
Terminal operators are for example working together in individual terminals (for example, the joint venture between PSA and ICTSI for Puerto Aguadulce in Buenaventura in Colombia) or on a portfolio basis, for example CMA CGM and China Merchants jointly owning Terminal Link.
AJOT: In recent years, the terminals with the highest growth rates were often transshipment hubs like Singapore or Tanger-Med in Morocco. Do you see this trend continuing?
van den Bosch: Yes. In my view, the massive transshipment hubs will continue to grow and this is also a result of the ongoing consolidation of carriers and the further integration in the ocean alliances. I further believe that some gateway terminals in emerging and frontier markets in Africa and in Asia will do very well and that some smaller transshipment hubs will face challenges, both on tariffs and volume and because they will need to invest heavily in the upgrade of infrastructure and equipment to handle bigger calls.
AJOT: The digitalization and automation are now key pillars to terminal operations – does technology – and the price of technology – pose a barrier to smaller terminal operators?
van den Bosch: For smaller terminals, automation may not be crucial, for example because labor costs are low or because the terminals handle smaller vessels. In order to be able to compete as a transshipment hub or in markets with high labor costs, digitalization and automation is key but at the same time also extremely expensive and this may pose a barrier to smaller operators.
Smaller terminal operators will need to find the right balance, considering the design of the terminal, their customer base, the volume mix, the size of the vessels and what tariffs they can levy for their services.
An interesting technological development to watch is the emergence of blockchain technology in global supply chains, such as for example the TradeLens solution developed by IBM and Maersk and what impact this will have on terminal operators.