Drewry says win-win shipping alliance terminal operations hard to find

CONTAINER terminal alliances at major ports present hurdles on the path to success, says Drewry senior ports and terminals analyst Neil Davidson, reported American Shipper

28 April 2019 - 19:00

CONTAINER terminal alliances at major ports present hurdles on the path to success, says Drewry senior ports and terminals analyst Neil Davidson, reported American Shipper.

Mr Davidson said containerships are homogenous and terminals are not, so 'like-for-like sharing of assets doesn't necessarily prove to be the case in the terminal industry in the same way that it does for liner shipping'.

He said terminal alliances can't work on an ad hoc basis. 'You have to have certainty and predictability of what ships and services will call where.'

The sharing of yard equipment is another challenge and is dependent on proximity and whether the terminals have a common mode of operation, he said.

He noted that it's hard to find a win-win with terminal alliances as the more likely outcome is that one operator is happy while the other is not. Mr Davidson said that since all terminals in a particular port will most likely endure the same peaks and troughs, terminal mergers and acquisitions may prove a better solution.

With regards to the 'key ingredients' for successful terminal alliances, Mr Davidson said a big plus is if the terminals are physically adjacent, with contiguous berthing lines.

Another key to success is if the terminals are similar in nature (size, draft, crane capability and yard equipment), he said, adding that it's also better if the number of operators in the potential alliance is low.

'In general, the more parties that are involved, the harder it will be to find a workable terminal alliance,' Mr Davidson said. 'In fact, the ideal number really is just two operators. More parties mean more interests, greater complexity and additional challenges in finding a workable solution.'

It also helps if average terminal utilisation is high and there's a regulatory environment that is supportive of terminal alliances, he explained.

'Alliances and mergers between port authorities/port companies have been much more prevalent and successful,' Mr Davidson said.

He said that to date, only three ports have announced plans to form terminal alliances: Miami, Colombo and Hong Kong.

The Sri Lanka Ports Authority signed a memorandum of understanding in 2018 covering three terminals at the port of Colombo, in which the Sri Lanka Ports Authority.

'The intention is for the terminals to work together to coordinate operations and reduce waiting times for container vessels by allocating them to whichever terminal is available,' Mr Davidson said.

'Anecdotal evidence suggests that the alliance remains under development, although some progress has been made. For example, the three terminals are working closely together now to reduce inter-terminal truck transfers of containers.'

In January four terminal operators at the port of Hong Kong - Hong Kong International Terminals Ltd, Modern Terminals Ltd, COSCO-HIT Terminals (Hong Kong) Ltd and Asia Container Terminals Ltd - announced their intent to establish the Hong Kong Seaport Alliance (HKSPA) to boost the competitiveness of the port of Hong Kong, having lost ground to nearby container ports over the last several years.

However, the Hong Kong Shippers' Council slammed its formation given 'the four terminal operators account for over 95 per cent of container terminal business in Hong Kong,' the council said in a January 9 press release. 'The council is extremely worried about overwhelming market position of the alliance.'

The following day, the Hong Kong Competition Commission issued a statement saying it was launching a probe into the proposed alliance.

The HKSPA issued a statement at the end of March saying it had finalised its berth and yard planning strategies and its joint operating agreement was expected to be 'progressively implemented' from April 1.

'The 23 berths of the members of HKSPA will be divided into three terminal zones to provide greater efficiency to shipping alliances and individual carriers. Under the new arrangement, a number of efficiency enhancements will be introduced,' HKSPA said.

'Among them, inter-terminal trucking will be significantly reduced, and in many cases eliminated, which will be an important step in bringing cost savings to customers.'


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