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 ...
The final instalment in our series on the potential for consolidation in the port industry looks at two of the most established points in global trade.
On the one hand, the possible pairing of two giants of 21st century container flows; on the other, the reawakening of a maritime giant that has lain dormant – relative to the dynamics of global trade today, at least – for number of decades. Both however, lay claim to being true international maritime hubs in the provision of services such as law, insurance and finance.
Singapore & Tanjung Pelepas
It is hard to think of any port as ideally located for today’s global container trades than Singapore. It sits at the key turning point of the Asia-Europe trades, at the beginning of the transpacific and at the centre of what is now the world’s largest container trade by volumes, intra-Asia – the number of its service connections is simply unparalleled.
Its operator, PSA, has been able to invest in a global network of container terminals – either though greenfield construction or straightforward acquisitions – on the back of the war chest generated in its home port. To its great credit, PSA has also invested in some of the most state-of-the-art technology, and boasts some of the highest handling rates in the world.
However, if imitation is the sincerest form of flattery, it was only a matter of time before a nearby competitor emerged looking to emulate its success. That came in the form of the port of Tanjung Pelepas (PTP). Located just across the Straits of Johor in Malaysia, it opened for business in 1999 and has become a top 20 global container port. PTP handled 7.7m teu in 2012 – having grown to roughly the same size as Los Angeles in 13 years.
Partly, this growth has come from PSA’s refusal to offer Maersk a dedicated terminal when PTP was in its genesis. The world’ s largest carrier had long sought its own space at the world’s most important transhipment port, and when PTP offered it a 30% stake, Maersk departed Singapore – in the process ruining PSA’s IPO aspirations – and set up base in PTP instead.
It is probably fair to say there is little love lost between the two ports, and it is difficult to see the politics of any merger working, but if they could put the multitude of differences aside the potential for jointly developing a global port powerhouse is considerable.
Singapore has developed highly ambitious plans to increase annual handling capacity to an almost unimaginable 60m teu within a decade; while PTP’s concentration on developing a free-trade zone is beginning to attract light manufacturing and other non-port activities that will ultimately diversify its cargo base away from transhipment and increase the proportion of more reliable gateway cargo. It would also reduce the chances of the Maersk situation reoccurring – it is ironic that subsequently PSA has developed a dedicated terminal for Mediterranean Shipping Co.
London Gateway & Tilbury
Given the unsettled nature of the UK’s port scene since the recent launch of the country’s newest deepwater port, London Gateway, this is an entirely speculative suggestion, especially since Gateway’s first liner services have been won from nearby Tilbury, one of the country’s most established ports (Queen Elizabeth I launched the naval defence against the Spanish Armada in the 16th century from its docks).
The intense rivalry that appears to be developing between the two ports may at some later stage be interpreted by shipping historians more as the birth pangs of the UK’s newest port complex. Without wishing to delve into the details of the moves of both the SAECS and three Hamburg Sud services from Tilbury to London Gateway, it is clear that the trend in all deepsea trades is towards larger vessels. At some point, the tide-restricted river berths of Tilbury were sooner or later going to struggle to service these bigger ships, especially when a more round-the-clock option exists jut 10 miles downriver.
And whatever the status of the north-south services that it has so far attracted to its quayside, London Gateway was purpose-built to handle the ultra-large container vessels being deployed on the Asia-Europe trade; its stated mission is to act as the entrepôt for the UK’s largest consumer market: London and its UK south-east hinterland.
But in fact, there is considerably more potential for the site, especially taken in combination with the facilities at Tilbury. With its melting pot of cultures and role as global business hub, London is arguably the one city in Europe developing into anything that will resemble the megacity of tomorrow. It is early days yet, but acting as gateway to that provides base volumes and the beginning of a critical mass that would allow it to hunt transhipment cargo – in the same way that Rotterdam has managed by acting as a gateway for the industrialised Rhine heartlands of Germany.
Indeed, The Loadstar is aware of one logistics company that has suggested to a major Asian hi-tech consumer goods manufacturer that London Gateway would make an ideal base from which to distribute its goods across Europe.
At the same time, we have reported that Tilbury is now focusing its attention on a shortsea container terminal, located behind its locks, with new 45ft spreaders specially acquired to service intra-European shortsea and midsea trades.
And consider the following thought experiment: when Marks & Spencer became the launch customer of London Gateway’s logistics park – set to be the largest in Europe – M&S’s Emile Naus told The Loadstar that the facility would act as a distribution hub for its European stores, as well as London and the south-east. He outlined a supply chain in which containers unloaded from Asia were de-stuffed at London Gateway and reloaded into trucks and driven, via the Channel Tunnel, across Europe.
Surely, it would be more economically and environmentally efficient to reload those goods onto 45ft containers and shunt them to Tilbury, where there could potentially be a growing network of shortsea services from which to access the continent.
Back in the 1990s, the UK was home to significant transhipment volumes, when Felixstowe had spare capacity and there were continuing problems in French ports. With the right planning, it might yet once again become a pre-eminent box hub.