Starter's orders
Is it time to reinvigorate those stalled port expansion plans, or should operators wait for more certain economic statistics?
To follow the former puts millions of dollars of investment at risk if the bounceback is not as good as hoped. Taking the latter path could put projects in jeopardy as they are overtaken by braver ports and terminals that set their expansion plans in motion sooner.
On one side of the fence sit the consultants, warning that if new growth projects aren’t restarted soon the industry will face a debilitating capacity crunch as soon as 2012. On the other side, sit economists who are still preaching about the real possibility of a double dip recession.
In October, one respected New York University professor put the risk of the US entering a double dip recession at 35%-40%. Nouriel Roubini, chairman of New York-based Roubini Global Economics LLC, said: “Since second quarter growth in US was only 1.7% and everything’s going to be weaker in the second half of the year, by the fourth quarter economic growth in the US could be as low as 1%. The growth rate is so low it’s going to feel like a recession even if technically this is not a recession.”
Restarting an expansion project – no doubt at great expense – just as a second wave of belt tightening hits could be commercial suicide. It will be interesting to see which operators will be the first to put their necks back on the line.
Of course, not all projects are worth re-igniting. Some Mediterranean projects have already missed their comeback opportunities, while a macro view of projects in South America confirms that not every mooted project will bring in its projected throughput. Of course, the same could be said about the mass of African projects.
But while it’s easier to justify expansions in developing countries – the scope for market share being that much greater – operators considering reviving projects in developed countries will need to look carefully at the figures.
Some development projects have ploughed ahead despite the downturn - the UK’s London Gateway is a case in point – and only time will tell if these undeterred operators will be hailed as heroes or tarred as foolhardy if the market collapses again.
Images for this article - click to enlarge
Unless otherwise stated, all images copyright © Mercator Media 2012. This does not exclude the owner's assertion of copyright over the material.
