Terminal alliance challenges persist

Terminal alliance posibilities Drewry says there are opportunities for terminal alliances but it may be better to consider M&A. Credit: M&A

Terminal alliances may be set for a rise but they are slow to gain traction and face numerous challenges, Drewry has warned.

Terminals are not homogenous, so sharing of assets is not on a like-for-like basis, the consultancy firm’s latest Ports and Terminals Market Briefing has found. They cannot work on an ad-hoc basis as they need predictability and certainty of what ships and services call where, plus sharing yard equipment depends on how contiguous the terminals are and whether they have a common mode of operation.

Neil Davidson, senior analyst, ports & terminals at Drewry pointed out that while several port authority alliances and mergers have been successful, it is hard to find a balance of satisfaction with alliances and all terminals in any particular port will most likely experience the same “peaks and troughs”. He suggested terminal mergers and acquisitions is a better option to consider and these have been more successful.

Successful alliances are typically those with physically adjacent terminals with contiguous berthing lines, those similar in nature, with a low number of operators involved high average terminal utilisation and a supportive regulatory environment, he said. Miami, Colombo and Hong Kong are example of ports that are exploring the concept.

The briefing also highlighted that the global growth rate continues to decline in the ports and terminals sector, but there has been strong volume growth in North America and North Asia.

China-US trade talks and the interest rate outlook have cast a shadow on investor sentiments. The US Federal Reserve increased interest rates in Q4 2018 but changed path in January 2019 by announcing no further rise in 2019. Globally, net debt expanded 18% in the last year and share price performance slumped 6.8% in Q4 2018.

By Rebecca Jeffrey

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