M&A radar: Port mergers whet the appetite for further deals
The exciting prospect arguably is how terminal operator mergers could lead to a wider port ...
Could the development of alliances between ports or terminal operators meet some of the operational challenges posed to the container supply chain by the arrival of increasingly larger ships and consolidated carrier alliances?
Neil Davidson, director of ports at Drewry Maritime Advisors, suggested to delegates at the recent TOC Container Supply Chain event in Rotterdam, that increased collaboration between terminal operators within a particular port, or between different port authorities may be one antidote to the “triple-whammy” of larger ships, larger alliances and the cascading effect of larger ships deployed on secondary trades.
“It is the terminal yards that are really feeling the pain of the peaks caused by large amount of boxes being exchanged in the single call of an ultra-large container vessel (ULCV) – that’s where the pressure is felt, and where we are seeing a terminal that was built 10 years ago with a quay length and yard size now not fit for purpose.
“The relationship between the quay and yard is changing, but you can’t always extend the yard, or you may not want to – land is expensive or may not be available – so there is much more obsolescence of terminals.
He said that while there had always been a certain amount of terminal obsolescence – “go to any well-established port and the older terminals are not fit for purpose and newer terminals are established more downstream” – but this process was happening much more quickly, with modern terminals being walked away from. He gave the recent decision by Mediterranean Shipping Co (MSC) to develop a new facility at Antwerp as an example.
“The existing MSC Home terminal behind the locks is a modern 5m teu facility, which, although very well equipped and efficient, is now considered not fit for purpose,” he said, adding that the physical fragmentation of terminals in ports, as well as their ownership, particularly where carrier themselves had a stake, also contributed the problem of increasing port congestion.
“We are seeing a lot more inter-terminal transfer of boxes between alliance members. The US west coast has been particularly problematic in this respect – the G6 traffic in Los Angeles-Long Beach is spread across five terminals, which means there is a huge issue in terminal fragmentation,” he said.
He described greater collaboration between carriers and terminals as a “no-brainer”, and pointed to the recent alliance between the port authorities of Tacoma and Seattle as an example. “I think there is going to be a need for greater co-operation between neighbouring authorities, but could there also be the development of terminal alliances?
“There is a spectrum of possibilities: on one hand, you could have neighbouring terminals talking about how they do things and helping learn; and on the other, you have full-scale mergers or takeovers of neighbouring terminals, and there is a whole scale of activity across this spectrum – although the further you get towards acquisition, the nearer you get to anti-trust regulation,” he added.
Joyce Bliek, director of containers at Rotterdam port authority, said a certain degree of co-operation was already underway: “The range of co-operation is shifting. You have always had terminals sharing labour and sometimes equipment, but it may be increasing.”
And Eryn Dinyovszky, general manager at Yilport Oslo, said the concession awarded to the Turkish operator in the Norwegian capital’s port was based on the failings of terminal fragmentation.
“In Oslo there were two terminals competing but the market wasn’t big enough and meant neither could afford the capital to optimise their operations, so terminal consolidation was felt to be the best way forward.
“There are other smaller ports in Norway looking at it as well, in terms of sharing equipment and labour costs. But the question of monopolistic tendencies does arise.”