As we welcome in 2019, we share our thoughts on the key issues and trends likely to affect the container ports and terminals sector in the year ahead.
Demand: We will see a softening of the global container port demand growth rate, down from an estimated 4.7% in 2018 to just over 4% in 2019 (although 4% is still very respectable and adds over 30 million teu to the world total). However, the projection for 2019 is highly uncertain due to the US-China tariff wars, Brexit etc. So there is a big caveat.
Capacity: We can expect to see continued caution by investors and operators in terms of investment in new capacity because returns are not what they used to be. Even Chinese players may be affected if China’s economy slows markedly (see above). Greenfield expansion projects will be the area hardest hit. Nevertheless, a global capacity addition of over 25 million teu can be expected in 2019, representing a spend of ~US$ 7.5 billion.
Ships: The good news for the industry is that there will be no significant increase in maximum container ship size (maximum teu intake is going up but physical dimensions are not). However, cascading will still be very much at work across all trade routes, and each port will see increasing pressure on whichever berths are able to handle the biggest ships (and increased obsolescence of older berths).
IT: The opportunities offered by digitisation/automation/blockchain/smart ports/IoT/hyperloop (the list goes on) will continue to be vigorously explored by both terminal operators and port authorities. However, the big challenge remains: how to find the way through the minefield of options to focus on what will really work and what has the best potential.
Supply chain: Linked closely to the above, terminal operators and port authorities will continue to seek to expand their activities beyond the port gate into the wider supply chain, to try and diversify sources of revenue, tie in traffic and get closer to cargo owners. But it’s a crowded field, with the heavyweight liner shipping companies aiming to do the same thing. Remains to be seen if anyone can succeed at it.
Profit: Despite all the above challenges, the global container terminal industry will remain a very solid, profitable business. The 2019 industry throughput of over 800 million teu should generate EBITDA in excess of US$25 billion.