Big is not always beautiful

There is usually a belief by port executives that their port is a ‘natural’ to make this transition and that it will open the doors to new trade volume. But is this generally the case?

Every instance is different, but as a general rule making such a transition is now an inherently more complex business than it was a decade or even five years ago.

There are a raft of influential factors to take into account nowadays. Firstly, the consolidation of the liner sector which effectively reduces the customer base.

Secondly, larger vessel deployment has brought with it greater emphasis on transhipment by many lines, including taking equity stakes in key hubs, which reduces the potential for port promotion to the premier port league. Lines want to feed volume via these cargo hungry hubs and reduce multi-port itineraries where there is insufficient cargo inducement.

Thirdly, the volume of cargo considered to be acceptable to induce a direct port call – and thereby achieve main port status – is now considerably larger than just five years ago. And it is by no means satisfactory to induce one line, there has to be sufficient volume to induce multiple direct calls to get anywhere near achieving a satisfactory return on investment.

Fourthly, preparing for the largest vessel types is an inherently more expensive exercise given the recent dramatic increases in vessel size. It now involves a quantum leap in investment terms which increases the business risk.

Fifthly, the current climate where lines are under financial pressure and are looking to cut costs is by no means ideal to embark upon a ‘promotion exercise.’

Sixthly, many regions of the world are under negative economic pressures. Without a positive economic climate is it realistic to embark upon such a major change of status? It could jeopardise what is seen today as a viable business and the worker job security and so on that goes with this?

Last but by no means least, there is the reality that if a sound business seeks to aspire to a higher status then there are usually ways and means, particularly with private sector input, to leverage such a move without the risks associated with seeking to join the premier league of ports. Big is not always beautiful.