Operations risk/return ratio increasingly skewed

That was the bleak message from Drewry’s port expert Neil Davidson in a presentation at TOC Europe.

“When we look at today and the future the risks are increasing and the returns are decreasing,” said Mr Davidson. “Capital expenditure and operating expenditure is increasing because of the demands of bigger ships and there is also rapid obsolescence of perfectly good existing terminal capacity – this comes at a cost.”

With the risk/return ratio increasingly imbalanced, terminal operators need to consider different options to maintain profitability, he said.

Among those options are alliances between terminal operators; more mergers and acquisitions between terminal operators; more joint ventures between terminal operators and shipping lines; more operational co-operation with carriers; and higher prices for terminal handling.

More extreme options offered by Mr Davidson included holding back from making investments, living with higher risk and lower returns, or bowing out of port and terminal investments entirely.