Get to the cargo interests
COMMENT: While this year's Marine Money week in New York did not feature any specific sessions on port financing, it did serve as an important reminder of cargo in the shipping mix, in which ports play a pivotal role, writes Barry Parker.
More than once, the discussions turned to the efficiency of supply chains in the context of commodity prices - and hence margins on sales - being lower for longer. The message for shipowners attending was that they too need to bring efficiencies to their links in the chains; their future livelihoods depend on it.
But industry dynamics are just that: ever-changing. One of the keynote speakers, in discussing certain segments of the tanker markets, pointed to the liner industry’s successes in consolidation through mergers or commercial arrangements. For shipowners, bigger companies mean more clout as a borrower or issuer of stock, a reality celebrated by the speaker. It also means that carriers gain more pricing power, as they move along the industrial spectrum from fragmented markets towards oligopoly.
The port community in my hometown, and elsewhere around the US, has worked with logisticians to create infrastructures that can streamline cargo movements, bringing those coveted efficiencies into play.
In the context of ports, this new reality of greater market power in the hands of fewer, consolidated carriers does bear watching. Taking the approach of logisticians, intimately understanding the needs of cargo interests is a way to counter the carriers who are eager to “strut their stuff”. Players in purely commoditised industries, such as bulk shipping, compete mainly on price. But ports need not fall into the commoditisation trap, a spiral that can only swirl downwards.
Reaching beyond the carriers to the underlying movers of cargo, and understanding how the ports can bring efficiencies to not only their own operations but also to the entire supply chains, is a way to increase port values as the carriers attempt to chip away at any surpluses in the system. This may be rail to dock links, or perhaps distribution facilities customised for a specific group of customers, driven by what the cargo interests - not the carriers - are asking for.
Yes, cargo is indeed king, in spite of what the carriers may say.
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