According to research by Drewry, six of 27 concessions it reviewed over the past three years had expired. The UK-based maritime research group attributed this to what it referred to as “market forces having shifted the risk/reward balance for Port Authorities towards retendering concessions”. But the research also revealed that the situation did not apply in all regions of the world and that close to 80% of concessions were extended and/or renewed.

With an increasing number of concessions agreed in the 1990s and 2000s nearing their initial terms, it will be interesting to see if this trend continues. Drewry pointed to there having been “considerable variations in the risk between concessions awarded in emerging and developed markets and that while political and economic risks in emerging markets remained high, other risks such as labour reform and infrastructure, were now much lower”.

“Port authorities should decide well in advance of a concession expiring as to whether to extend, renew or retender the terminal concession,” said Drewry. “A formal public tender is an expensive and time-consuming process and there is no guarantee it will result in the best outcome overall. The received wisdom suggests that port authorities are better off following the ‘if it ain’t broke, don’t fix it’ philosophy – meaning that they should look to renew or extend with the incumbent if they are performing adequately.”

Drewry added: “However, recent market dynamics should make them [port authorities] pause to at least consider whether a new competitive tender could result in a better outcome.”

Overall, the research group does not believe that retendering a port terminal concession in a mature market, with competing terminals either within the same port complex or serving the same hinterland, is likely to achieve significant gains for the port authority. It advises these port authorities to renew and extend wherever possible given the expenses involved in running a public tender and the risks associated with taking onboard a new terminal operating company.

Drewry’s advice for port authorities in less mature markets, however, is somewhat different. It thinks with these markets often offering much stronger growth potential, retendering concessions could “achieve significant gains and, importantly, rebalance the risk and reward compared to the original concession”. Drewry said: “This is especially the case for those terminals with no direct competition in the same port.”

Some ports in which container terminal concessions have been allowed to expire and have been retendered include Beirut in Lebanon and Dar es Salaam in Tanzania.