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Sunday, March 29, 2015

Long-term thinking keeps ports positive

Posted to Far East Maritime (by on July 6, 2012

These days, no major port wants to have less than 50 feet of water. Anything with a capacity above 10,000 TEUs needs that sort of depth and much of the vessels on order are even bigger.

That is why there is such vigorous campaigning by ports on the Eastern Seaboard to obtain funding to deepen their channels and berths. With the widening of the Panama Canal in 2014, they all want to be the first port of call for fully laden container ships coming from China.

Deepening work is also underway at gateway ports in Europe, although most are blessed with relatively deep water. But there are also new port construction projects underway, such as DP World’s London Gateway, and the two terminals to be built at Rotterdam’s Maasvlakte 2 – Rotterdam World Gateway and the APM Terminals facility. Rotterdam World Gateway will also be run by majority shareholder DP World, and is being developed by a consortium comprising shipping lines APL, Hyundai, MOL and CMA CGM

The Maasvlakte terminals will add more than five million TEU capacity to the port of Rotterdam, while London Gateway will have a capacity of 3.5 million TEUs when it opens in the fourth quarter of next year.

With no end in sight to the sovereign debt crisis afflicting Europe and the widespread economic pain keeping consumers wallets in their pockets, it is hard to imagine the new capacity being filled any time soon.

But that is the whole point. Even though there is a serious European economic crisis at the moment, when it comes to building container ports, terminal operators always think long term. When times are good, the terminals process boxes as fast as possible, and when they are bad, there is time to add capacity and new equipment in preparation for when the good times roll around again.

It is common for governments to own the land on which port operators fund, build and operate terminals on long leases of up to 50 years and beyond. That length of time is important as the size of the investment in building a terminal is massive – it is estimated that the two Maasvlakte facilities will cost close to US$1 billion each. There needs to be a lot of containers flowing across the wharves to achieve any reasonable return on that kind of investment.

What the new terminals will do, counting the expansion of Euromax in the existing Maasvlakte, is account for 45 percent of all port capacity expansion in North Europe. That will allow Rotterdam to significantly increase its market share at a time when Asia-Europe trade is expected to return.

It is good old positive thinking backed by billion dollar investments, which helps reaffirm that this depressing down cycle won’t last forever.

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