The 2018 Port Landscape
Ton van den Bosch,
Maritime Infrastructure Practice,
Ince & Co
No one can deny that the last few years have held some twists and turns for the global ports industry. The challenge of operating in an industry—not to mention a wider global economy—still recovering from one of the most
persistent downturns in recent memory has had a palpable effect on terminal operations and development across the world.
But a sunnier global economic outlook, combined with potentially transformative changes taking place in Asia, mean that the coming years may be even more impactful than the last—and operators will have to take measured steps to ensure that they can adapt to new operating realities. These changes are mainly expected to be macroeconomic, but technological innovation will also play a part. The year 2018 will see continued R&D in the use of emerging technologies in the ports world, including automation and blockchain. Although there is no expectation that any of these technologies will be game changing this year, a clearer picture will begin to emerge of commercial applications for ports and their benefits to the industry. This means that port operators will have to lay down a strategy for technological uptake within their hubs—or risk being left behind.
For emerging markets, an ongoing eastward reorientation of global trade—triggered by China’s Belt and Road Initiative—is likely to throw up an array of challenges that will demand navigating in a way that ensures profitability and commercial sustainability. The Belt and Road will be transformational for the shipping industry, and the impact is already being felt on East-West trade routes. Measured at around $150 billion a year, covering roads, railways, pipelines and more, it is clear that the Chinese government is making good on its promises to improve infrastructure across the developing world. Further, it is estimated that China has invested $20 billion alone in ports and terminals in the past 15 months.
For the West, there is a risk of focusing too much on geopolitical ambitions at the expense of understanding the economic and commercial transformations that are about to take place. Consolidation of port ownership is likely to be an abiding trend in the coming years. Indeed, recent figures from Drewry Maritime Research already bear that out. Their findings show that following the merger between COSCO and China Shipping in 2015 and subsequent acquisitions and investment, the combined entity is poised to become the biggest container terminal operator by capacity by 2020. Success in this changing market will not be a matter of happenstance. It is crucial that operators lay down a strategy for where their fortunes lie in the Belt and Road era, in terms of where threats to their business may arise and in how they can ensure a competitive edge. These considerations are complicated by the fact that calls by some vessels may be guided by Chinese policy considerations instead of solely by commercial rationale.
Securing financing to kick-start modernization will also be a crucial issue to contend with—and particularly in emerging and frontier markets where risks and uncertainties can preclude a bank’s involvement. Further, it may reasonably be argued that Chinese companies currently hold an advantage in securing funding from Chinese banks.
These factors are creating a truly unprecedented complexity in operations for ports. Despite the challenges, it is important to remember that, at its heart, Belt and Road will support increased trade and hold the potential for real commercial opportunities. The port operators who succeed in the coming years are likely to be those who look at these challenges and dive in—head on—in a proactive, forward-looking way.