Global economics impact terminal operations and finances

Two years of strong performance driven by the Covid -19 consumer boom, combined with the near collapse of the logistics supply chain, drove up terminal volumes and increased income from demurrage as they were not able to clear boxes out powered income growth. Then came the shift in consumer demand as expenditure shifted more towards the service sector.

Rising interest rates and inflation make life more costly and by late 2022 cargo volumes to Europe and North America began to decline, turning into a serious rout by early 2023 that is only slowly improving. Northern Europe has the additional pain of the shut down of services to Russian ports.

Container terminal operator volumes in the northern hemisphere are being negatively affected from this decline in demand for containerised cargo in 2023. Intra-Asia trade is bearing up. Hamburg, Rotterdam and Antwerp have been particularly hit by the combination of lower volumes and sharp reductions in earnings from demurrage as the supply chain sorted itself out. Hamburg’s HHLA reported that “In the first three months of the year Group revenue reduced by 5.6 per cent year-on-year and operating result (EBIT) fell significantly by 57.3 per cent. At the same time, profit after tax and minority interests dropped by 87.7 per cent, compared with the same period last year”, not an encouraging result.

International Container Terminal Services Inc. (ICTSSI), with much less exposure in Europe has reported revenue from port operations in Q2 2023, increasing 10 per cent compared to the first six months of 2022. Throughput grew nine per cent to the envy of the other international operators.

Reports from across the globe indicate that demurrage revenue is back to pre-Covid levels and vessel congestion is only a memory (perhaps not at the Panama Canal, but that is another story). The return of positive volume growth however will be a slow affair until inflation, interest rates and the uncertainty of the Ukraine war reduce.

This leaves the industry with a difficult 2024. Carriers are managing their overcapacity by dropping sailings and temporarily parking their ships, including some of he new 24,000 TEU class in places such as Singapore. Terminals are increasing their focus on finding ways to increase cost savings by further automation and optimisation of operations in order to increase productivity.