HIGH returns from container terminals over the last 10-15 years are threatened by rising competition at a time when investment in terminal capacity is needed to cope with mega ships, says a Drewry Maritime Research report.
"In a low-growth demand environment, the deployment of bigger ships results in lower-frequency services and greater volume peaks. For terminal operators, costs are increasing while demand is static," said the London research house analysts.
The number of ports and terminals that can handle large ships is limited and alliances are likely to change in the near future due to carrier acquisitions, which could lead to increased volatility.
"The industry is seeing average and largest ship sizes increase in leaps and bounds - something that was largely absent in the period up to 2009," said Drewry.
"Cascading of vessels from one trade lane to another means that all ports are seeing substantial increases in vessel sizes.
Low growth, rising competition among ports and the concentration of liner bargaining power through mergers and alliances, has seen margins shrink.
While container port throughputs grew at a compound annual growth rate of 11 per cent between 2001 and the 2008/2009 financial crisis, since then growth has slowed to five per cent.
"In 2015, global container port growth was only around one per cent and in 2016 it is not likely to exceed 2.5 per cent," said Drewry.
"For reasons beyond terminal operators' control, costs are rising markedly while revenue is increasing much more slowly," said Drewry.
This will mean in future that terminal operators and shipping lines may cooperate more to mitigate the negative impact of larger ships and alliances, concluded the analyst.
Another alternative is that terminal operators may refuse to invest in new capacity because the returns were insufficient for their shareholders. "This is an extreme option that will in effect leave shipping lines with nowhere to berth their large ships," said Drewry.
"In a low-growth demand environment, the deployment of bigger ships results in lower-frequency services and greater volume peaks. For terminal operators, costs are increasing while demand is static," said the London research house analysts.
The number of ports and terminals that can handle large ships is limited and alliances are likely to change in the near future due to carrier acquisitions, which could lead to increased volatility.
"The industry is seeing average and largest ship sizes increase in leaps and bounds - something that was largely absent in the period up to 2009," said Drewry.
"Cascading of vessels from one trade lane to another means that all ports are seeing substantial increases in vessel sizes.
Low growth, rising competition among ports and the concentration of liner bargaining power through mergers and alliances, has seen margins shrink.
While container port throughputs grew at a compound annual growth rate of 11 per cent between 2001 and the 2008/2009 financial crisis, since then growth has slowed to five per cent.
"In 2015, global container port growth was only around one per cent and in 2016 it is not likely to exceed 2.5 per cent," said Drewry.
"For reasons beyond terminal operators' control, costs are rising markedly while revenue is increasing much more slowly," said Drewry.
This will mean in future that terminal operators and shipping lines may cooperate more to mitigate the negative impact of larger ships and alliances, concluded the analyst.
Another alternative is that terminal operators may refuse to invest in new capacity because the returns were insufficient for their shareholders. "This is an extreme option that will in effect leave shipping lines with nowhere to berth their large ships," said Drewry.
