Despite huge amounts of money being spent on mergers and acquisitions in the port sector, a new report from Drewry Shipping Consutants said additional container capacity is needed.
“The last 18 months have seen an unprecedented and extraordinary level of M&A activity in the sector. Never before have so many major deals been seen in such a short space of time, and never at such high valuations. In North America alone, 10 major deals with a total value of over $ 8 billion were transacted,” said Neil Davidson, research director for the London-based consultant.
But Drewry added that its report “suggests strongly that a substantial amount of additional capacity enhancements need to be confirmed very soon if a serious terminal capacity shortage is to be avoided. Congestion and delays to shipping are likely to increase in severity unless further capacity can be brought on stream within the next five years, over and above that already confirmed.”
“The situation facing the container shipping industry remains serious, with a deteriorating balance between supply and demand in the container terminal sector in prospect unless more new capacity enhancement projects are rapidly brought on stream,” Davidson said.
“The report demonstrates that the substantial known and confirmed investment programs being undertaken by the leading global terminal operators and other industry players aren’t enough to prevent an increase in utilization levels to a critical point,” he said.
The pressure on ports to increase productivity is at an all time high in a trade environment that seeks to send ever increasing volumes of cargo into ports that are facing severe physical restraints.
“People are trying to push more volume through existing facilities that often have limitations because of land or environmental issues,” says Catherine Tiersten, principal in Transtech Partners, a NJ-based consultant group.
As increasing cargo volumes pour into U.S. ports, goods must be moved from the terminal facilities rapidly in order to avoid threatened backups and soaring costs. As everyone knows, productivity depends upon moving containers out of a terminal so that costly backups won’t occur, but in conventionally-structured terminal facilities that goal is no longer attainable.
A case in point is the “West Coast container terminals” that Gary Ferrulli took to task last month. Gary revealed that those terminals record approximately 24 lifts per hour, a rate far below the 35-40 lifts per hour maintained in ports worldwide. He used the word “bottleneck” repeatedly and stated that these bottlenecks were caused by low productivity. Inefficient cargo movement out of those congested terminals have caused the reduction in the ports’ lifts-per-hour rates, and low productivity is the result. As though the causes of these backups are outside the terminals rather than within the terminals, consumers and taxpayers, naturally, will be expected to pay billions for “infrastructure upgrades” in order to overcome the problems caused by unresponsive maritime authorities.