Container Terminal Operators Face Strong Competition

Global container terminal operators face "very strong" competition on costs in the face of slowing traffic growth and surplus capacity in key markets, the head of APM Terminals said.

The industry entered a "new normal" phase after the global financial crisis with container volume set to grow at significantly lower rates than the double digit increases of the past, according to Kim Fejfer, chief executive officer of the world's fourth largest terminal operator.

Average annual growth rates will slow to between 5 and 7 percent from 10-15 percent before the financial crisis in 2009 led to the first decline in traffic since the advent of containerization.

By The Numbers: Container Rate Benchmark.

Mature markets likely will grow around 2 percent annually, while emerging markets would grow at around 7 percent, Fejfer said.

Slowing growth has created a glut of capacity in key mature markets including New York/New Jersey, Los Angeles and Long Beach and Antwerp, Europe's second largest container hub.

"With overcapacity, you are squeezed by your customers and you see very strong cost competition," Fejfer told a press briefing in London.

Fejfer said APM Terminals was partially insulated from competition in northern Europe as there is a "huge" demand for deepwater capacity to handle the increasing number of container ships with capacities above 10,000 20-foot equivalent units.

There are 40 ships over 10,000 TEUs operating today and a further 150 will be delivered over the coming two years to "fundamentally" change the Asia-Europe trades.

APM Terminals facilities are in deep sea coastal ports including Rotterdam, Bremerhaven, Le Havre and Zeebrugge.

The company remains committed to its two key north European investments because they are in deep sea locations -- at Rotterdam's Maasvlakte 2 and the Jade Weser container terminal in the German port of Wilhelmshaven.

"Our view is there is need for deepwater terminals which makes our commitment fairly positive," Fejfer said. "For me Rotterdam will become the big winner … with Jade Weser."

By contrast, Antwerp and Hamburg, which are inland and involve extra sailing time by container ships, are not ideally placed for the large vessels that will dominate the Asia-Europe trade.

Rapid growth in emerging markets in Asia, Africa, Central and South America and Eastern Europe has caused bottlenecks in key ports including Santos, Mumbai, Saint Petersburg and terminals in Vietnam.

Fejfer said APM Terminals is interested in investing in Russia, especially in Saint Petersburg, which has recovered from the crisis faster than any other port in the world. Russia "is a very attractive place to do business in … especially in Saint Petersburg … we'd be very open to that," Fejfer said.

-- Contact Bruce Barnard at brucebarnard47@hotmail.com.