The bigger picture is important
“We can avoid reality but we cannot avoid the consequences of reality.” A famous saying that has more than a little relevance for any company that is approaching an investment in new port capacity without taking the step of independently validating the demand for such capacity via a comprehensive market study.
No apology is made for this being a favourite theme of this column – all too often we see examples of investments in new terminal capacity being made without proper market due diligence.
Take the case of the Gulf of Izmir, for example, where only recently it was announced that a port and investment and management company will build and operate a large green-field port North of Izmir offering up to 1.2m teu of new capacity. This is a most surprising development given the recent actual and planned build-up of container terminal capacity in this region.
The original privatisation of the Government TCDD-operated port of Izmir was cancelled following the withdrawal of Hutchison Ports from the concession after its award to the company in 2007. The Turkish Government is reputedly planning a second concession process for Izmir and has also a plan for a new port of Izmir to be built adjacent to the existing port.
In the meantime, steps have also been taken to refurbish the ship-to-shore gantries in operation in the original port as well as two new heavy duty mobiles introduced via the Turkey-based shipping and terminal operating group Arkas. Many believe that the proposed new port of Izmir will not get off the ground so while the plan is theoretically live it may not pose a threat to any planned new container terminal development in the area.
New terminals close to Izmir that have been put into operation and in development since 2007, do, however, throw into question the need for yet another facility. They comprise the following located 40 kilometres from Izmir in Nemrut Bay:
- 400,000 teu Nemrut Container Terminal – operator: Nemport Liman Isletmeler (in operation);
- 380,000 teu TCEEGE Container Terminal – operator TCEEGE, a joint venture between TCB Grup of Barcelona (10%) and local company Ege Gubre (in operation); and
- 1.5m teu APM Terminal Aliaga (in planning to open short term).
And following on from these developments, the Turkish Government has commenced work on the construction of the new port of Candarli also close to Izmir. This will offer up to nearly 1m teu of new container capacity.
Does this scenario underpin the need for detailed and comprehensive market analysis? Answer: Yes!