Risk-Taking Container Terminal Operator Spotlighted

Posted by George Backwell
Tuesday, April 22, 2014
Image credit DMER

International Container Terminal Services Inc. (ICTSI) is considered one of the biggest risk takers amongst global container terminal operators. Drewry Maritime Equity Research (DMER) believes that the company is now showing signs of better risk management that will assist in its long term sustainability.

The differential in expected container volume growth rates between the developed and emerging markets has led operators to focus attention on emerging market opportunities and seek to rebalance their portfolios.

One of the key perceived negatives for ICTSI in the past has been the geopolitical risks associated in some of its investments in economies such as Pakistan, Syria and more recently in Iraq that can provide robust returns. Additionally risks associated with many startups present another big challenge.

However, DMER believes the company is now following a better risk management strategy, where it is taking many steps to reduce or diversify risks. The major steps taken by ICTSI in the recent past are:
 

  1. The company has been partnering with experienced global players in its terminal start-ups. It recently sold partial interests in the terminals being developed in Colombia and Nigeria to PSA and CMA CGM, respectively. Partnering with CMA CGM can also ensure commercial gains for the Nigerian development.
  2. ICTSI has shown interest in investing in less-risky markets. It has bid for the third container terminal at Melbourne and reportedly shown interest for the development and operations of the fourth container terminal at the JN port in Mumbai. It is important however to highlight here that the company still remains an emerging-market play.
  3. By selling partial stakes in assets, the company is reducing risks, yet maintaining exposure to those assets. ICTSI sold 25% of its interest (of 100%) in the Nigerian development and half of its interest (of 92%) in the Colombian development.

Despite these recent moves, DMER expects ICTSI to retain its expansionist philosophy for the next few years at least. Backing this up, the company’s Chairman, Enrique K. Razon, Jr., has recently said that the company intends to quadruple its portfolio to 100 terminals in the next 25 years.

DMER believes that a large component of the risk management strategy adopted by ICTSI can be termed as portfolio management, which is not new among container terminal operators. The most fitting example in DMER’s coverage universe is that of DP World, which in the recent past has sold its terminal interests in Hong Kong and Vostochny (Russia’s Far East) and is focusing on developments at Jebel Ali and London Gateway.

The company has reportedly shown interests in new terminal investments in Bangladesh and India. APM Terminals, part of the A.P. Moller-Maersk group, also recently sold its 24% interest in the APM terminal Zeebrugge and at the same time is expanding in faster-growing geographies such as Russia (through its investment in Global Ports Investments). The company has a number of planned investments in Africa, a region which is expected to experience strongest growth in container volumes in times to come.

Global terminal operators owning partial stakes in assets is also fairly common trend in the industry. Large global operators such as HPH, DP World and APM Terminals have considerable differentials between total throughput and equity throughput handled. For 2012, HPH, DP World and APM Terminals handled 74.3m, 54.5m and 59.7m teu, respectively, while their equity throughput stood at only 44.8, 33.4 and 33.7m teu, respectively. Drewry defines equity throughput as throughput adjusted for percentage stake held at a terminal.

For example if an operator has 30% stake in a terminal, only 30% of the volumes handled by that terminal will be considered for arriving at the total equity throughput of the operator. Partnering with shipping lines in terminal investments is also prevalent among mature operators. Apart from group-level relations of many terminal operators with shipping lines, large independent global operators have common ownership with shipping lines at various terminal assets.

Africa a key ICTSI market

Africa is one of the key markets that ICTSI is targeting. In line with this strategy, the company recently announced the formation of a joint venture (with 60% interest) to develop and operate a river multipurpose terminal (with a container terminal) along the banks of the Congo River in Matadi, Democratic Republic of Congo. In the first phase, the JV plans to develop a 120,000 teu capacity terminal to be ready in 18-24 months.

Drewry believe that the location of the proposed development is reasonably strategic as it can feed the Kinshasa market (capital city) with consumer goods.

Among the most recent development the company has announced to develop first phase capacity of 300,000teu at Port of Umm Qasr in Iraq. On full development the facility is expected to have 600 meters of quay with 900,000teu of capacity.

Drewery's View
ICTSI will perhaps remain as one of the most aggressive amongst global container terminal operators in times to come. It is one of the players targeting highest ROI’s from its investments. However what is heartening to see is company’s practical approach towards reducing/diversifying some of the risks.

Source: Drewry Maritime Equity Research (http://dmer.drewry.co.uk/)

 

Maritime Reporter July 2014 Digital Edition
FREE Maritime Reporter Subscription
Latest Maritime News    rss feeds

 
 
Maritime Careers / Shipboard Positions Maritime Contracts Maritime Standards Naval Architecture Offshore Oil Pipelines Pod Propulsion Salvage Ship Electronics Ship Simulators
rss | archive | history | articles | privacy | terms and conditions | contributors | top maritime news | about us | copyright | maritime magazines
maritime security news | shipbuilding news | maritime industry | shipping news | maritime reporting | workboats news | ship design | maritime business

Time taken: 0.0985 sec (10 req/sec)