Advanced Port Economics Seminar, University of Antwerp, Institute of Transport and Maritime Management, December 17 2012
Ports, Inland Ports and Logistics Zones: Governance Issues
Jean-Paul Rodrigue
ProfessorDept. of Global Studies & GeographyHofstra UniversityNew York, USA
1- Terminals and Governance2- The Financing of Intermodal Terminals3- Global Terminal Operators4- Challenges to Terminal governance
Terminals and Governance
Technical and Policy ChangesTransport Terminal Governance
Intermodal Transportation: Emerging Paradoxes
Geographical and functional diffusion of containerization.Massive investments.
Rationalisation (corridors and sites).
New standards, practices and technologies.Increasing returns.
Revolution
Growth Maturity
Incremental changes.Decreasing returns.
Evolution
Consolidation (maritime, rail and trucking). Emergence of large operators.
DeregulationPPP. Supply chain control. Added-value-capture.
Governance
Foreland / Hinterland: An Ongoing Integration Through Containerization
Maritime Shipping• Economies of scale• Setting of maritime networks• Port terminals
Inland Transportation• Rail and fluvial shuttles• Intermodal terminals• Corridors (landbridges)
Intermodal Logistics• Continuity and capacity• Inland ports / logistics zones
Shift in Public Transport Policy Perspective
Conventional EmergingIndependent Modes Intermodal SystemsLocal Economies Regional / Global EconomiesIndependent Jurisdictions (“turf wars”) Coalitions / ConsensusPublicly Funded Public / Private partnershipsUsers (public subsidy) Customers (revenue generation)Build (infrastructure provision) Manage (optimization of existing
resources)Plan (regulations; political signals) Market (deregulations; price signals)
Commodity Chains and Added Value
Commodity chain
Ad
ded
valu
e
Low
High
Manufacturing
R&D Fabrication
DistributionDesign
Branding Marketing
Sales / Service
Concept Logistics
Why Governance of Intermodal Terminals Matters?
■ “The exercise of authority and institutional resources to manage activities in society and the economy. It concerns the public as well as the private sectors, but tends to apply differently depending if public or private interests are at stake.”
■ Terminal assets:• Capital intensive.• Consume land use.• Have externalities (noise, emissions).• Have many stakeholders (port authority,
terminal operators, rail operators, trucking companies, etc.).
Transport Terminal Governance
Ownership (Mostly public)• Focused on
compliance and revenue generation.
• Challenge of rent seeking behavior.
Operations (Increasingly private)• Usage of
concessions.• High
productivity levels.
• Generation of externalities.
PPP
The Main Activities of Landlord Port Authorities
Traffic Management Vessel traffic management (fast turnaround, security, reliability).Management of inbound and outbound inland traffic.Partnership with barge, rail and truck operators for inland distribution.
Area Management Develop transport infrastructures.Provide space for port related activities (expansion or reconversion).Rationalize the land use.
Customer Management Attract new customers.Retain existing customers (satisfaction).Find new added value activities.
Stakeholder Management Influence regulation.Relations with local, regional and national public agencies.
Public and Private Roles in Port Management
Ownership
Port admin.
Nautical management
Port infrastructure
Super-structure
Cargo handling
Pilotage Towage & Mooring
Dredging
Public service port
Tool port
Landlord port
Corporatized port
Public Responsibility
Private service port
Private Responsibility
Freight Cluster Governance
Scale and scope Recognition of the city as a hub / terminal. Multimodal and intermodal. Across jurisdictions.
Actors Recognition of the stakes of various private and public actors. Different forms of ownership and jurisdiction.
Decision taking Consensus and ad hoc. Public-private partnerships. “Coopetition”.
Policy Able to influence and articulate incentives (zoning, public investments, regulations).
Information technologies
Freight community system; coordination and integration of information systems.
Labor Foster training and research needs.
Main Governance Models for Inland Ports
Model Characteristics Implications
Single Ownership A public or a private actor entirely responsible for development and operations.Single vision and conformity to a specific role.
Potential lack of flexibility in view to changes (single mandate).Potential conflicts with surrounding communities.
Public – Private Partnership
Help combine public planning of infrastructures with private operational expertise.Public (local) interests represented.
Tendency to prioritize public interests over private interests.
Landlord Model Public ownership and private operations (a form of PPP).Long term concession agreements.
Managerial flexibility between the owner, the site manager and the operators.Most of the risk assumed by private operators.
The Financing of Intermodal Terminals
Private Participation and Public DivesturePrivatization and Financing Models
Public / Private Partnerships
Main Causes of Public Divesture in the Transport Sector
Fiscal Problems
(we’re broke)
High Operating
Costs (we have few incentives)
Cross-subsidies(profits are
spent elsewhere)
Equalization (everyone must have their fair share)
Lifespan of Main Transport Assets
Car
Container
Con-tainer-ship
Jet plane
Highway
Bridge
Airport
Railway
Port
0 20 40 60 80 100 120 140 160
Average Lifespan
Years
Risk Transfer and Private Sector Involvement in Public-Private Partnerships
Design - Build
Degree of Private Sector Involvement
Deg
ree
of P
rivat
e Se
ctor
Ris
k
Operation & Maintenance
Build-Finance
Design-Build-Finance-Maintain
D-B-F-M-Operate
Concession
PrivatizationPP
P M
odel
s
Conditions for Port Privatization
Bidding process Open and transparent bidding process.
Infrastructures Capacity and quality of port infrastructure as well as for hinterland access.
Regulations Safety and labor conditions.Retrenchment and retraining of labor.
Port authority Landlord model with clear role.
Customs Efficient and transparent procedures.
Privatization and Financing Models
Sale or concession agreement
Divesture part of a political agenda (budget relief).Public sector is forced to sell or lease some of its infrastructures.Infrastructure is transferred on a freehold basis.Requirement; used for its initial purpose.Long term lease (50 – 75 years).Requirement that the concessionaire maintains, upgrade and build infrastructure and equipment.
Concession for new project
Tap new sources of capital outside conventional public funding.Fiscal restraints.Experiment with privatization.Getting the latest technical and managerial expertise for the infrastructure project.
Management contract
Ownership remains public.Management given to a private operator.Through a bidding process.Popular in the terminal operation business (maritime and rail).Efficiency improvements.
Value Propositions behind the Interest of Equity Firms in Transport Terminals
Diversification(Risk mitigation
value)
Source of income(Operational
value)
Asset (Intrinsic value)
Terminals occupy premium locations (waterfront).Globalization made terminal assets more valuable.Traffic growth linked with valuation.Same amount of land generates a higher income.Terminals as fairly liquid assets.
Income (rent) linked with the traffic volume.Constant revenue stream with limited, or predictable, seasonality.Traffic growth expectations result in income growth expectations.
Sectoral and geographical asset diversification.Mitigate risks linked with a specific regional or national market.
Port and Maritime Industry Finance
BrokersFinancial Markets
Investors
Commercial Banks
Mortgage Banks
Merchant Banks
Finance Houses
Leasing Companies
Money Markets
Capital Markets
Equity Markets
Private Placement
Corporations
Private Investors
Investments Managers
• Insurance Companies• Pension Funds• Banks• Trust Funds• Finance Houses
Shipping Companies
Port Operators
Earnings
The Prediction of Future Outcomes
Predictability
Uncertainty
Time
Forecasting Scenarios Speculations
5 years
10 years
New Project
Global Terminal Operators
Global Port Terminal PortfoliosPort Operator StrategiesAdded Value Strategies
Control of Global Container Terminals
1996 2003 20100
100
200
300
400
500
600
700
800
900
Public Sector
Private Sector
Global Opera-tors
Million
TEU
Typology of Global Port Operators
Stevedores Maritime Shipping Companies
Financial Holdings
Horizontal integration Vertical integration Portfolio diversification
Port operations is the core business; Investment in container terminals for expansion and diversification.
Maritime shipping is the main business; Investment in container terminals as a support function.
Financial assets management is the main business; Investment in container terminals for valuation and revenue generation.
Expansion through direct investment.
Expansion through direct investment or through parent companies.
Expansion through acquisitions, mergers and reorganization of assets.
PSA (Public), HHLA (Public), Eurogate (Private), HPH (Private), ICTSI (Private), SSA (Private).
APM (Private), COSCO (Public), MSC (Private), APL (Private), Hanjin (Private), Evergreen (Private).
DPW (Sovereign Wealth Fund), Ports America (AIG; Fund), RREEF (Deutsche Bank; Fund), Macquarie Infrastructure (Fund), Morgan Stanley Infrastructure (Fund).
Vertical and Horizontal Integration in Port Development
Commodity Chain
Port Holding
HorizontalIntegration
Intermediate hub
InlandPortPort
PortRail / BargeDistribution Center
Inland Modes and Terminals
Distribution Centers
Maritime Shipping
Port Terminal Operations
Terminal
Maritime Services
Inland Services
Port Services
VerticalIntegration
Top Twelve Global Container Terminal Operators in Equity-Based Throughput
PSA
Hutchison Port Holdings
DPW
APM Terminals
SPIG
COSCO
MSC
China Merchants
Ports America
Modern Terminals
SSA Marine
Evergreen
0 10 20 30 40 50 60
51.3
36.0
32.6
31.6
19.5
13.6
9.9
8.9
8.1
8.0
7.5
7.0
Million TEUs (2010)
Number of Terminals and Total Hectares Controlled by the Twelve Largest Port Holdings
Hutchison Port Holdings
Port of Singapore Authority
Dubai Ports World
APM Terminals
Eurogate
Ports America
SSA Marine
Shanghai International Port Group
Cosco Pacific
Hanjin
ICTSI
CMA-CGM
0 500 1,000 1,500 2,000 2,500 3,000 3,500 4,000
3,248
2,604
2,347
2,038
1,646
1,270
939
734
686
559
466
412
Hectares (2010)
Terminals
47
38
50
42
9
11
20
10
14
13
16
14
Container Terminal Surface of the World's Major Port Holdings, 2010
Container Terminals of the Four Major Port Holdings, 2010
Portfolio by Equity-Based Capacity of Main Global Terminal Operators, 2010
APMT HPH
DPW PSA
Regional Share in the Terminal Portfolio of the Twelve Largest Global Terminal Operators (Hectares, 2010)
Hutchison Port Holdings
Port of Singapore Authority
Dubai Ports World
APM Terminals
Eurogate
Ports America
SSA Marine
Shanghai International Port Group
Cosco Pacific
Hanjin
ICTSI
CMA-CGM
0%20%
40%60%
80%100%
AfricaAustraliaNorth AmericaSouth America / CaribbeanPacific AsiaSouth Asia / Middle EastMediterraneanEurope Atlantic
Inter-firm Relationships in the Three Main Container Ports of the Rhine-Scheldt Delta, 2010
DP World
PSAHUTCHISON PORT HOLDINGS
APM Terminals(AP Moller Group)
ANTWERP
Antwerp Gateway (3)
PSA HNN
MSC Home terminal
CHZ
APM Terminal
ZEEBRUGGE
ROTTERDAM
Rotterdam World Gateway(Maasvlakte 2)
Operational by 2013
ECT
APM Terminal Maasvlakte CMA-CGM (2)
MSC
NYK
Terminal 1(Maasvlakte 2)
Operational by 2014
Minority Shareholding (4)
Waal- and Eemhaven
Delta Terminal
Euromax phase 1
Majorityshareholding
ZIM Line (1)
DP World Delwaidedock
North Sea Terminal
Europe Terminal
Deurganck Terminal
New World Alliance
CYKH Alliance
Antwerp International Terminal (AIT) Shipping Line
(Global) Terminal Operator
Terminal
Shanghai International Port
Group (SIPG)
Albert II-dock north (under construction)
Cosco Pacific
100%
20%
50%
100%
100%
50%
50%
50%
60%
30%
10%
100%
100%
100%
50%50%
100%
42.5%10%
20%
10%
35%
100%
65%
75%
25%
PORT
Financial Holding
Inter-firm Relationships in the Three Main Container Ports of North America, 2010
LONG BEACH
LOS ANGELES
NEW YORK
APM Terminals Port Elizabeth
Port Newark Container Terminal
Maher Terminal
Global Terminal and Container Services
New York Container Terminal
APM Terminals(AP Moller Group)
Maher Terminals
Ports America
100%
100%
Global Container Terminals
100%
Pacific Container Terminal
Total Terminals International
California United Terminals
Pier G Berth
Long Beach Container Terminal
Terminal A
Terminal C60
Global Gateway South
APM Terminals Pier 400
Evergreen Terminal
TraPac Los Angeles Berth 136
Yusen Terminals
West Basin Container Terminal
Stevedoring Services of America
Ontario Teachers' Pension Plan
100%
Cosco Pacific 51% 49%
100%
Hanjin
AIG Highstar Capital
Deutsche Bank RREEF
Macquarie Infrastructure
60% 40%
50%
Hyundai
100%
100%
K-Lines 100%
OOIL 100%
MSC 50%
APL
Evergreen 50% 50%
Yangming
100%
40% 60%
Mitsui OSK 100%
NYK 100%
100%
Shipping Line Terminal Operator Terminal PORT Financial Holding
100%
ZHUHAI
Inter-firm Relationships in the Main Container Ports of the Pearl River Delta, 2010
HONG KONG
Asia Container Terminals
DP World Hong Kong
Hong Kong International Terminals
COSCO-HIT Terminal
Moderns Terminals
Asia Port Services
SHENZHEN
Chiwan Container Terminal
Shekou Container Terminals
Da Chan Bay Terminal One
Yantian International Container Terminals
Zhuhai International Container Terminals
GUANGZHOU
Dongguan Container Terminal
Guangzhou South China Oceangate Container
Terminal
Nansha Container Terminal
Guangzhou Huangpu Xingang Terminal
Guangzhou Huangpu Xinsha Terminal
Nanhai International Container Terminals
HUTCHISON PORT HOLDINGS
PSA
DP World
Cosco Pacific39%APM Terminals(AP Moller Group)
20%
China Shipping Group
40%
50%
50%
50%
ModernTerminals China Merchants
Holdings International
49%
70%
49%
55%
66% 33%
67% 20%
100%
33%10%
10%
80%20%
Shipping Line Terminal Operator Terminal PORT Financial Holding
75%25%
65%
Guangzhou Port Group
Shenzhen Municipal Government
41%
60%
35%
Shenzhen Yantian Port Group
30%
The Strategies of Port Operators
Profitability Increase the profitability of terminal assets; (better equipment, information systems and management). Port management is very lucrative.
Financial Assets Large financial assets and the capacity to tap global financial markets. Terminals as equity generating returns.
Managerial Expertise Experience in the management of containerized operations. IT and compliance with a variety of procedures.
Gateway Access Establishing hinterland access. Creation of a “stronghold”. Provides a stable flow of containerized shipments. Development of related inland logistics activities.
Leverage Negotiate with maritime shippers and inland freight transport companies favorable conditions. Some are subdiaries of maritime shipping companies.
Traffic Capture Capture and maintain traffic for their terminals.
Global Perspective Comprehensive view of the state of the industry. Anticipate developments and opportunities.
Challenges to Terminal Governance
Changes in the Role of Port AuthoritiesSecurity of Global Supply ChainsA Volatile Global Trade Context
Governance Changes in Port Authorities: Competing over the Hinterland
Landlord
Regulator
Operator
• Planning and management of port area.
• Provision of infrastructures.
• Planning framework.
• Enforcement of rules and regulations.
• Cargo handling.• Nautical services
(pilotage, towage, dredging).
Landlord
Regulator
Operator
Terminal Operator(s)
Cluster Governance
• Service Efficiency• Logistical Integration
• Infrastructure and Growth
Management• Terminal-City
Integration
Conventional Port Authority Expanded Port Authority
Port Community System
Port Community
System
Freight Forwarder
CustomsShipping Agency
Port Authority
Inland Carrier
Ocean Carrier
Container Depot
Exporter Importer
Foreland Hinterland
Terminal Operator
Risks in Global Supply Chains
Supply Risks
Demand Risks
Operational Risks
Natural disasters
Extreme weather
Pandemic
Political instability
Trade restrictions
Terrorism
Corruption
Theft and illicit trade
Piracy
Demand shocks
Price volatility
Border delays
Currency fluctuations
Energy shortages
ICT disruptions
Infrastructure failures
Environmental Geopolitical Economic
Technological
Uncontrollable
Influenceable
Controllable
High (>30%)
Average (15-30%)
Low (<15%)
Probability Mitigation
FACTORS
RISKS
Thefts by Type of Cargo and Location, United States, 2010
3%6%9%
8%
4%
23%20%
10%
11%5%1%
Thefts (899 Incidents)
AlcoholAuto / PartsBuilding / IndustrialClothing / ShoesConsumer Care ProductsElectronicsFood / BeveragesHome / GardenMiscellaneousPharmaceuticalsTobacco
29%
7%
5%21%
25%
5%1%6%
Locations (497)
Truck StopsPublic Access ParkingRoasidesUnsecured Terminals / LotsSecured ParkingFictitious PickupDriver TheftOther
Maritime Security Initiatives Implemented by The United States or the European Union
Initiative Type Year Description
Automated Targeting System (ATS)
Cargo screening 1999 Weighted model applied to inbound cargo manifests to assign risk factors.
Customs-Trade Partnership Against Terrorism (C-TPAT)
Certification 2001 Transferring some of the Customs responsibilities to importers and exporters to reinforce overall security levels. Benefits include reduced likelihood that containers of participating firms will be examined.
Container Security Initiative (CSI)
Cargo tracking and screening
2002 Increasing security related to ocean going containers by targeting and screening high risk containers bound for the US before they are loaded.
Megaports initiative Cargo tracking and screening
2003 Installation of radiation detection equipment in key foreign ports. Reducing the illicit trafficking of nuclear and other radiological materials.
24 hour rule Advance cargo information
2003 Implementing the cargo-related information at least 24 hours before a container is loaded aboard the vessel at the last foreign port.
Standards to Secure and Facilitate Global Trade (SAFE)
Certification 2005 Implementing C-TPAT and CSI security practices with foreign trade partners.
EU Authorized Economic Operator (AEO)
Certification 2008 Identifying reliable traders and providing them with trade facilitation measures.
Importer Security Filling and Additional Carrier Requirements (ISF, 10+2)
Advance cargo information
2009 Implementing the collection of cargo-related information by requiring information from both the importer (10 information elements) and the carrier (2 information elements) to be transmitted at least 24 hours before the goods are loaded.
EU Pre-arrival and Pre-departure
Advance cargo information
2009 Advance information on goods brought into, or exported from the Customs territory of the EU (perimeter).
100% scanning Cargo screening 2012? Non-intrusive inspection of 100% of all inbound cargo containers.
Global Maritime Piracy, 2008-2009
West Texas Intermediate, Monthly Nominal Spot Oil Price (1970-2012)
Jan
-70
Jan
-72
Jan
-74
Jan
-76
Jan
-78
Jan
-80
Jan
-82
Jan
-84
Jan
-86
Jan
-88
Jan
-90
Jan
-92
Jan
-94
Jan
-96
Jan
-98
Jan
-00
Jan
-02
Jan
-04
Jan
-06
Jan
-08
Jan
-10
Jan
-12
0
20
40
60
80
100
120
140
China: The Largest Bubble in History?
Iron OreCement
EggsPorkCoalSteelLead
CopperZinc
AluminumNickel
RiceChickensSoybeans
PopulationWheat
GDP (PPP)Oil
Cattle
0% 10% 20% 30% 40% 50% 60% 70%
54.4%53.6%53.6%
49.6%46.9%45.8%
42.1%39.5%38.2%
34.6%31.9%
30.2%25.2%24.9%
19.7%16.6%
13.6%10.4%
6.1%
1.9%2.1%
7.8%8.4%15.2%
4.8%13.7%
9.1%1.8%8.7%
10.1%0.9%11.3%
19.9%4.5%
4.9%19.7%
21.7%6.8%
Share of the World Commodity Consumption, China and United States, c2009/10
ChinaUnited States
Rebalancing in demand
Baltic Dry Index, Monthly Value, 1985-2012
Jan-
85
Jan-
87
Jan-
89
Jan-
91
Jan-
93
Jan-
95
Jan-
97
Jan-
99
Jan-
01
Jan-
03
Jan-
05
Jan-
07
Jan-
09
Jan-
110
2,000
4,000
6,000
8,000
10,000
12,000
Conclusion: Terminal Governance in a New Global Economic Setting
■ Terminal Operators and Port Authorities• New public / private partnerships.• Shifting balance of power (global vs. local).
■ Finding value to capture• New forms of distribution and integration
with transport terminals.■ Finding capital to finance• Governance as a risk mitigation strategy.
■ Governance of global freight distribution• Governance of foreland, hinterland and
supply chains.• Strategies and policies a reflection of the
scale and scope of global supply chains.