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Capacity excess, cargo deficit

Monday, 08 October 2018 | 16:00

Globally there are far too many ports competing for the same clients and not earning enough revenue to cover the infrastructure demands of ever-larger ships, writes Ben Hackett.

This excess in port capacity has caused cargo handling rates to be flat or even decline.

Too much carrier capacity in the face of demand that is growing less than supply has had the obvious effect of reduced revenue and negative return on investment when ports are in competition for the same client base.

Everyone thought that this year was going to bring riches as the three big alliances managed to bring some of their capacity under control, but this belief proved to be short-lived, as usual.

Looking at the financial results of the major container carriers is enough to make anyone’s stomach churn. How long can they continue to survive or be subsidised by national owners. There is little sanity in decision-making; there seems only to be a thirst to be the biggest in the industry at any cost.

Many have been mesmerised by China’s Belt & Road Initiative. But what was originally seen as a major impetus for global infrastructure growth is increasingly being acknowledged as a bold political gambit by China to control large swaths of infrastructure and raw materials on a global basis. Port investments by COSCO are there to ensure a smooth movement of goods imported and exported from China. Their investments are only logical with that in mind.

If we look at the North European ports, we can see the folly of too much infrastructure investment in the face of carriers’ shift to more direct calls in the Baltic. This has led to market share strategies that aim to increase volumes at the expense of neighbouring ports.

Look at Antwerp’s rapid growth and the recent announcement by The Alliance that its Bremerhaven cargo from North America will be moved to Hamburg. This amounts to around 500,000 teu. HHLA is smiling.

Where will it all end? Expect at least one or two more failures akin to HMM among the carriers and the folding or merging of some terminals soon.
Source: Port Strategy

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