When political upheavals erupted across North Africa and the Middle East last February, it was just the beginning of a tumultuous time at the Suez Canal Container Terminal. Its key markets convulsed, and the rapidly growing hub located near the northern mouth of one of the world’s most important shipping arteries was forced to close at the height of the Egyptian revolution, sending carriers to alternative hubs to transship their Asian containers to ports across the Mediterranean and Black Sea.
All told, SCCT lost more than 350,000 20-foot equivalent units of business because of the Arab Spring. Later, boxes bound for war-torn Libya piled up in the container yard, “screwing up productivity big time,” said Robert Hambleton, SCCT’s chief commercial officer.
Eight months after the Arab Spring, the APM Terminals-operated SCCT is back to business as usual — and more — refocusing on boosting its capacity and chasing a larger slice of the booming Mediterranean transshipment market. “We handled more boxes than ever in May and June,” Hambleton said. But it hasn’t been an easy transition keeping up with a rapidly changing political and commercial environment. CEO Klaus Holm Laursen has met with three Egyptian transport ministers this year alone.
Sidebar: Global Warming Chills Suez.
In its seven years leading up to 2011, SCCT leveraged its prime location to grow rapidly in a region stocked with developed transshipment ports. It bucked global trends during the recession, by boosting traffic 11 percent year-over-year, to 2.7 million TEUs, a number that grew again last year to 2.9 million.
Now the terminal is close to completing a $1 billion expansion program that has lifted annual capacity to 5.1 million TEUs and needs to add just a few more cranes to the current 18 to reach the targeted 6 million TEUs.
The SCCT expansion, mirrored at rival terminals across the Mediterranean, is driven by the search for further economies of scale to match carriers’ constant demands for ever-lower unit costs. SCCT already handles some 30 boxes an hour, close to north European levels, Hambleton said. And the terminal isn’t hooked on traffic from sister company Maersk Line, the biggest operator in the Asia-Europe trade, which dominates SCCT’s throughput.
Third-party business accounts for approximately 65 percent of its traffic, compared with 46 percent across APM’s global network.
Transshipment accounts for about 90 percent of traffic, with direct shipments into Egypt making up the remaining 10 percent. SCCT trails the Port of Alexandria, which has a 40 share of the Egyptian market, but it is determined to boost its local content. “It may be 10 percent now, but if we ignore the Egyptian market, we do so at our peril,” Laursen said. “We want to be a major contributor to the Egyptian economy.”
For now, SCCT is focusing on protecting and boosting market share in an increasingly competitive industry that has changed significantly since SCCT opened in 2004.
Gioia Tauro, the biggest Mediterranean transshipment hub and once a top five European container port handling nearly 3 million TEUs, is reeling from Maersk’s decision this year to pull its Asia-Europe services from the Italian port’s Medcenter terminal in which APM Terminals has a 33 percent stake.
Gioia Tauro, the second-ranked Mediterranean port last year after Valencia, Spain, risks being surpassed by SCCT by year’s end. “We’ve got hundreds of thousands of boxes per year from Gioia Tauro,” Hambleton said.
Meanwhile, Greece’s largest port, the once-sleepy Piraeus, is challenging for the top spot after China’s Cosco Pacific paid some $5 billion in 2008 for a 35-year concession to operate two container berths.
Fourth-ranked Malta is a growing threat, especially after Yildirim, the ambitious Turkish group that acquired a 20 percent in CMA CGM for $500 million last year, paid approximately $285 million in May for the French carrier’s 50 percent stake in the island’s transshipment terminal.
But SCCT’s most immediate threat comes from Piraeus. Cosco’s dogged determination to move into the port in the face of months of rolling strikes and protests by Greek dockworkers underscores its belief in the port’s potential as a major transshipment hub and gateway for Chinese exports to the Mediterranean, the Black Sea and southeast Europe.
Piraeus is thought to have handled approximately 1.5 million TEUs in the first nine months of the year, justifying Cosco’s decision to boost annual capacity to 3.7 million TEUs.
Complicating the rivalry is Cosco’s 20 percent shareholding in SCCT, and the fact it recently switched an Asia-Europe service from the Egyptian terminal to Piraeus.
There’s no doubt about the region’s potential, with growth rates likely to outpace those of the more mature northwest European port range. Still, Hambleton is cautious. “Eighty to 90 percent of our customers say ‘we don’t know’ ” about the future of the Black Sea region; “we have to flexible.”
SCCT operates in a region where politics often trumps logistics logic. Odessa has the potential to be a major gateway for Russia’s surging container trade, but souring Russian-Ukrainian relations have stalled its progress, and Asian imports are being transshipped via feeder services out of northern Europe. “So St. Petersburg is a competitor to us,” Hambleton said.
As carriers increasingly consolidate their Asia-Europe services, they will reduce port calls at smaller ports such as Damietta, the state-owned Egyptian container hub 30 miles from SCCT that is struggling to raise a modest $200 million to expand. Taranto, Italy, 50 percent of which is owned by Hutchison Port Holdings, and the Turkish port of Mersin, the regional hub of Singapore’s PSA, also risk being squeezed.
SCCT’s trawl for new business to drive down its unit handling costs could see it luring Spanish traffic from Valencia, the top Mediterranean port with annual volume of some 4 million TEUs. “It’s not beyond the bounds … ours is a volume game,” Hambleton said.
And it’s not beyond the bounds that SCCT builds a sizable business transshipping containers from Asia to the U.S. East Coast. With a 51-foot draft, SCCT is ideal for the new generation of 13,000- to 14,000-TEU ships entering the Asia-Europe trade that need high utilization levels to hit their unit cost targets. Transporting Asian boxes to SCCT for onward shipment to the United States would help fill empty slots. And SCCT already has established a presence in the trade with Maersk and APL running services between the U.S. and the Suez Canal.
Contact Bruce Barnard at firstname.lastname@example.org.