2018 a Year of Transformation for Port Operators

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2018 could be a defining year for global ports industry, according to the international law firm Ince & Co, which has advised port operators to expect a year of transformation.

The transformation will be driven by shifting economic trends, trade flows and global demographic patterns, in tandem with changes in port ownership and ongoing investment in modernization and expansion, the law firm said.

“Recent years have been marked by changing fortunes across the world’s ports,” Ton van den Bosch, head of Ince & Co’s global ports & maritime infrastructure practice, said.

“From Africa to Asia, Europe to the Americas, no operator can avoid the changing commercial realities of port operations. There is every prospect that 2018 is set to be a transformative year for these terminals and their ongoing development, with real commercial opportunities to be had for those operators who can navigate these waters successfully.”

A key driver of the shift for ports in Asia and Africa is China’s Belt and Road Initiative, Van den Bosch said.

It is estimated that China has invested USD 20 billion in ports and terminals alone in the past 12 months.

“If 2017 was the year when the West woke up to the Belt and Road, 2018 will be the year that its impact will begin to become apparent. Indeed, we can already see the macroeconomic effects of Belt and Road beginning to manifest,” said Van den Bosch.

“One of these is in the consolidation of ownership. By 2020, the combined entity of COSCO and China Shipping is set to become the biggest container terminal operator by capacity. This will see them climb from fourth and eighth in the global rankings; a dramatic rebalancing of the operation of global trade.”

“Smaller port operators may well be wondering what their place will be in this sector in the near future, given this pace of change. The most important thing to understand is that no-one is immune from these developments, but also that they offer commercial opportunities for operators who can take advantage of them.”

“The rapid growth, expansion and modernization of port facilities in emerging and frontier nations is a direct reflection of the opening up of new trade routes and the liberalization of consumer markets.

“If small operators can secure funding, they have the potential to compete effectively with newer operations funded by large global players. The most successful operations will be those with a strategy for the long-term and one that is built to reflect wider economic trends.”

One area that Ince & Co sees as being of particular commercial value to operators planning for 2018 and beyond is a shift towards gateway operations, rather than transhipment.

The firm points to changing trade flows in Asia and Africa creating captive markets ready to be tapped.

“When we look at countries like Congo or East Timor, we clearly see operators scrambling to establish gateway terminals to open up these markets to global trade,” Van den Bosch said.

“This is a pattern that is repeating all over the world: Belt and Road investment improves local infrastructure and transport links, and operators move in to build. Put bluntly, cargo volumes needing to reach localized geographies in these frontier markets have few other choices. Port operators that can lead this trend and get into these markets early will be able to build themselves as a lasting and indispensable presence to these nations.”

Nevertheless, the law firm expects financing to remain a challenge in the emerging markets in addition to issues such as compliance, anti-bribery and corruption.

But, fundamentally, the firm believes that the coming year will see an even greater pace and scale of investment in the global port industry.

“2018 will also see continued R&D in the use of emerging technologies in the ports world, including automation and blockchain. Although we don’t necessarily anticipate any of these breaking through as a true game-changer in the next 12 months, we do expect a clearer picture to emerge of the likely commercial applications and benefits of each of these technologies within port operations,” the firm concludes.

Image Courtesy: Pixabay

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