Port consolidation speeds ahead to increase leverage against alliances

Dive Brief:

  • In Hong Kong, three port terminal operators entered into an agreement to increase leverage as as shipping line consolidations demand price breaks, The Journal of Commerce reported Tuesday. 
  • Meanwhile, Singapore is offering equity to alliances committing to use upgraded port facilities in an effort to lure business to the nation's terminals.
  • Elsewhere, five major terminal operators and one European port authority filed to create "The Global Ports Group Agreement" in order to increase leverage and efficiencies, American Shipper reports. The agreement would come into force late January, pending regulatory clearance. 

Dive Insight:

With shipping lines consolidating at a frenzied pace, shippers and port operators are concerned greater capacity and market share will lead lines to abuse their leverage.

A less publicized result of the wave of consolidation is the adjustment of routes, as seen by 2M, which now has access to a stronger U.S.-Asia-West Coast line. With rerouting comes different porting needs, a loss port owners feel keenly. As a result, ports have started their own wave of consolidation to ensure loss from competition is not felt at a regional level.

Agreements to jointly manage operations — like what was negotiated in Hong Kong ports or the Port of New York and New Jersey — or collectively bargain, as in the case of The Global Ports Group Agreement, seek to protect volumes and prices.

Then there's the shareholder model (exemplified by Singapore), which seeks to take advantage of the alliance model by offering stake in terminals in exchange for volumes. Such models would push ports to operate on a more hub-like basis, like airports, where lines route traffic through specific locations due to financial benefits.

The ports most likely to suffer will be the small regional ports, at least in the U.S., which are already rushing to complete drayage projects so as to receive post-Panamax vessels, and must now consider a shifting client landscape. The Port of Charleston is reportedly looking for a partner, potentially in Savanna, and two Miami terminals are also currently seeking an alliance, hoping to weather the storm. 

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Filed Under: Freight
Top image credit: Roderick Elme