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Box terminals still heading for overcapacity

A new report identifies ports are still adding capacity ahead of growth in demand, but the gap is falling as investors become more conservative.

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German consultancy DS Research has just announced the 5th edition of its market report “Container Terminal Project Pipeline”, which reviews forthcoming container terminal projects and analyses project completion rates by regional market.

 

The study identifies 350 expansion projects that aim to add 270M TEU additional container handling capacity up to year 2023. It forecasts that between 40% and 70% of the planned capacity will actually be built. “Developers are in general too optimistic regarding the expansion of existing facilities or the construction of greenfield sites. The scope and timing of projects is usually adjusted to market demand, resulting in projects getting downsized, postponed or cancelled,” DS Research noted.

 

“The purpose of project announcements is to attract interest from investors and potential customers. Therefore, what is announced usually exceeds what is actually built” said analyst Daniel Schaefer. “At the same time, we expect that about 2/3rd of the expansion projects included in our project pipeline will in fact get completed, with execution rates ranging from 40% for North Africa to about 70% for South East Asia and Oceania.”

 

Considered globally, box terminal supply has been getting ahead of demand for some years now. “Due to a number of reasons, container handling capacity has increased at a relatively constant level of 40 to 50M TEU per year, largely exceeding demand growth. Reportedly about 300 projects consisting of 185M TEU new capacity have been built during the last 4 years, whereas container throughput increased by only 63M TEU,” DS Research noted.

Global Container Throughput Growth 2009-'17 (Source DS Research)
Global Container Throughput Growth 2009-'17 (Source DS Research)

The consultancy expects a closer balance between supply and demand in the future, as terminal operators “tend to be more hesitant regarding new terminal investments” today. Over the next five years the gap between new capcity and demand growth is expected to close to 50M TEU, with container port demand increasing by 210M TEU (4.3% CARG) to 2023, and supply increasing by 260M TEU (3.4% CAGR) in the same period.

 

Speaking with WorldCargo News Daniel Schaefer said DS Research tracks projects individually over time, and notes those that generate media coverage but no actual progress. While there are quite a few of these, most of the pipeline, he said, is actually “very solid”.

 

The busiest development areas at the moment include the US East Coast, the Mediterranean Sea, the Suez Canal, the Persian Gulf and the Strait of Malacca – moving away from Northern Europe and the Panama Canal. However, the majority of the listed projects are small or medium sized – about 75% of all projects scheduled for completion until 2023 include a capacity expansion of below 1M TEU.

Planned Capacity Expansions until 2023 (source DS Research)
Planned Capacity Expansions until 2023 (source DS Research)

The focus on smaller projects means more are actually getting completed. ”Last years’ project pipeline consisted of 75.6M TEU of capacity scheduled for completion in 2017. Most projects were rated to be solid. Retrospectively, about 71% of capacity was completed 2017, whereas 22% were postponed to later years, and 7% were downsized or cancelled,” said Schaefer. This is a higher completion rate than previous years. “Regarding the surveys of 2014-2016: about 55-70% of the projects scheduled for completion during the same year were in fact executed."

Project Pipeline 2017 vs completion (source DS Research)
Project Pipeline 2017 vs completion (source DS Research)

As developments scale down, they are also getting more diverse. “We have seen a definite trend where many global concessions are being let on the basis as a multi-purpose terminal, that means containers plus dry bulk or breakbulk facilities,” added Schaefer “and an increasing interest of international operators in these kind of facilities as well as in inland services.“

 

The report is available from the DS Research website.

 

 

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