Rotterdam terminals profit as volumes shrink in downturn

THE collapse in box volumes in Rotterdam has led Hong Kong's Hutchison Port Holdings; Singapore's PSA; Dubai's DP World and Denmark's AP Moeller-Maersk to scale back or cancel expansion projects, improve efficiency and cut costs, reports London's Financial Times.

But despite the downturn, terminal operators can, and do, remain profitable despite assumptions that they might brought down by high fixed costs.

APM Terminals CEO Kim Fejfer pointed to a line of idle RTGs in the Rotterdam terminal as an example of how operators cut costs. "If the terminal is less utilised, your whole operation becomes more efficient, so unit costs go down," he said.

According to Neil Davidson, ports analyst at London-based Drewry Shipping Consultants, terminal operators' profit margins have remained steady during the downturn.

Mr Fejfer adds: "Your margins can go up because your utilisation goes down."

Container volumes are expected to fall by 10 per cent year on year because of a fall in traffic from worst-affected ports along the Pearl River Delta as well as other parts of China and South Korea. This year sets itself against the previous worst year of 1982, when volumes actually grew 4.6 per cent, said the newspaper.

Containerships are now taking on heavy lift cargo to fill the gap. At the port's APM Terminals, lifeboats, large parts for industrial pumps and other odd-shaped cargo awaiting loading show what new and unexpected things containerships can carry.

Such items - too big for containers - would have been rejected two years ago, said terminal AMP Terminals director Hans van Kerkhof, but new revenue is seldom turned away in the downturn.

Said the Mr Fejfer: "They asked for high berth productivity, high service levels, high flexibility and maybe price was still important, but less so. Now, the demands from container lines are much more focused on low price and far less on flexibility."

Some of the worst-hit ports have been where a decline in volumes have coincided with the opening of expansion projects planned during the boom, which has encouraged cash-strapped container lines to lean even more heavily on terminal operators to push prices down.

"There has been a downward pressure on tariffs and volumes at the same time," said Mr Fejfer, adding that other ports are facing similar pressures.

But the Dutch port has the advantage of handling mostly origin-destination traffic, goods going to areas in the port's hinterland that could not conveniently use another harbour.

Yet many ports in developing regions such as Africa and South America - where DP World has a high volume of business continue to show growth.

"At least in the developing world growth is not negative," says Mohammad Sharaf, DP World's chief executive. "It has slowed down but there is still growth."

But Singapore, which mostly handles transshipments, is suffering, said Drewry's Neil Davidson, because shipping lines can more easily swap between transshipment ports or change their routes to cut out transshipment.

Singapore-based PSA and APM Terminals, many of whose terminals are used by Maersk Line, both have significant proportions of transshipment. DP World and Hutchison have higher proportions of origin-destination cargo.

"Terminal operators who have a greater exposure to transshipments will be under greater pressure to soften their prices," said Mr Davidson.

(Source: www.schednet.com)