Handling ever larger ships in today's ports is like trying to "squeeze buses into a parking lot designed for cars," says APM Terminals' CEO Kim Fejfer. To take up the challenge, operators need to invest in equipment and it is a burden that "has to be shared with our customers," he told Port Finance International.
Mr Fejfer gave PFI a phone interview on Thursday, after APM Terminals posted a $203 million profit for the third quarter of the year. Between July and September, the port operator handled 9.3 million TEUs, its highest quarterly throughput ever.
"There is a couple of factors," he explained. "First and foremost, the market has grown by almost 4%, so slightly better than in previous quarters. Then we have worked all year on improving productivity and efficiency and some of the efficiency gains that we have worked hard on have really come out in the last quarter. The last component is the portfolio. For a couple of years now, we have focused on investing in high growth markets and some of these investments in capacity are starting to show in our accounts."
Trends
"We expect the market to continue to grow," Mr Fejfer said. "We also see that the container shipping lines continue to have a tough game in terms of the balance between supply and demand. And we see that the vessels that are coming in are getting bigger and bigger."
"Ports are built a little bit like a parking lot that has the size to handle cars, while what we are receiving and handling now is more like buses. So we try to squeeze buses into a parking lot designed for cars."
"Of course we have to find ways to improve the productivity. That is what our customers demand, because it is getting more and more expensive, as vessel sizes increase, to lay at berth. We're trying to see how we can utilise our berths in an optimal way because bigger vessels claim more berth capacity. So a lot of this will require more equipment, more investment. And this burden that has been imposed on this industry has to be shared with our customers."
APM Terminals' CEO could not say whether the burden would weigh equally on port operators and their customers. He did admit, however, that it would have an impact on tariffs. "That is of course one way where it will show," he said. "But there is more to a relationship between the shipping lines and the port than a simple tariff," he insisted.
"The value that lies in the business between shipping lines and port operators is very much related to the network of the shipping lines. With the bigger vessels and with the rise in fuel costs that we have seen over the past years, the value of reliable service, high productivity and the availability of port capacity at the right locations are much more important than the simple tariff discussion," he said.
"At the end of the day, if the port is creating joint value, if we can find good solutions with the shipping lines, where we work together on this big issue, then hopefully both parties can win in the end."
Productivity
"An increase in productivity can be achieved in many different ways,"Mr Fejfer noted. "The dialogue between shipping lines and port operators in the planning is very important for productivity, and that’s a win-win situation. Also, improving safety performance, which we focus a lot on at APM Terminals, is driving a lot of efficiency in the business."
Headquartered in The Hague (Netherlands), APM Terminals is part of the Danish conglomerate A.P. Moller-Maersk, which also owns Maersk Line, the shipping company that operates the world's largest containerships, the 18,000 TEU Triple-E vessels. But more than 50% of its business comes from other shipping companies.
"We have a partnership approach with our customers," insists APM Terminals' CEO. "We meet at a strategic level several times a year with each of the customers and we go through the business, each port in the portfolio, discuss what is going well, what is not going well, and the opportunities where we can work together in the future."
Strategy
APM Terminals has focused more on emerging markets in recent years and it plans to sustain its momentum.
"We continue with our strategy, which is based on what we call 'earning the customer'. We want to invest our money in the locations where there is a customer need and that is obviously in the markets that grow the highest. It is our job to identify where the bottlenecks are and where therefore new capacity is needed."
In the port of Santos, Brasil Terminal Portuário (BTP), a joint venture between APM Terminals and Terminal Investment Limited (TIL), received its first commercial vessel call in August. Its official opening is scheduled for November 28th.
Mr Fejfer is confident that the greenfield project in Badagry (Nigeria) is advancing. "Getting the lands allocated and acquired is the imminent next step and we have good progress on that," he said. Construction is expected to start towards the end of 2014 or the beginning of 2015.
Located 55km west of Lagos, the Badagry complex is to include a free-trade zone and a port for container trade, bulk, liquid and general cargo, Ro-Ro, as well as support facilities for oil and gas exploration. With 7km of quay wall, it is to be the largest port in Africa. APMT will be the main funder, although it is also working with partners Macquarie, Terminal Investment Limited (TIL), and Nigerian companies Orlean Invest and Oando.