Container Terminal Operators Facing 'Perfect Storm'

Cash-strapped containers line pushing for lower terminal handling charges are putting future port investment at risk warns Drewry.

News ID: 70603

Date: 01 December 2016 - 12:19

In its new Ports and Terminals Insight report Drewry said that terminal operators faced a “perfect storm” of rising costs due to bigger ships, heightened business risks due to larger alliances, softening global demand growth, and pressure on handling charges from lines, MANA correspondent reported.

“Our modelling shows that terminal operators will have to live with between 10% and 20% higher opex and capex costs due to bigger ships,” said Neil Davidson, senior analyst for ports and terminals at Drewry. “Risk is also increasing due to larger alliances, but also because horse trading on port choices between alliance members means that decision making is not necessarily logical.”

Drewry said that the financial results of listed terminal operators revealed a weakness in organic earnings and growing levels of debt.

“Shipping lines need to be careful how they play the situation. If the returns from investing in and operating terminals fall too far, or the risks become too high (or both), then terminal operators may simply stop investing,” Davidson said.

The consultant believes that resisting downward pressure on handling charges will be difficult but not impossible for terminal operators, but depends much on local market conditions, and ever larger alliances and vessels.