Commodity trading companies are increasingly recognizing that in an era of increased data transparency, they must invest in infrastructure and supply chain assets to gain competitive advantage. As noted in a recent Bloomberg article:
“The most valuable commodity out there is information, and the most useful information is the proprietary, critical information that you obtain from your own supply chain… You have to have skin in the game. You have to have access to assets, whether it’s infrastructure, terminals, vessels or refineries.”
In the latter paragraphs of the article (which can be found here), Mercuria and Vitol both express an interest in investing in assets that will benefit from the adoption of MARPOL Annex VI global maritime emissions regulations that will be rolled out in 2020.
Mercator has identified a number of strategic opportunities for clients looking to leverage MARPOL regulations to their gain. We have similarly worked with clients concerned with minimizing exposure to potential downsides associated with these regulations.
PENSION and infrastructure funds continue to view the port sector as a safe investment bet, according to Mercator International partner Steve Rothberg. However, he says concerns are growing over high-risk investments being made to handle big ships.
Mr Rothberg highlighted that investment in bigger, wider and faster cranes, longer quays, deeper berths and the like to meet the requirements of ultra large containerships has not gone unnoticed by funding schemes, which have invested heavily in the port industry for over a decade on the back of healthy returns.
For more, read the Lloyd’s List article here.
According to the American Shipper, the three major Japanese container shipping lines reported an aggregate loss of about $691m in the fiscal year ending 31 March 2017. As is widely known, after having joined Hapag Lloyd and Yang Ming in the new THE Alliance in April of this year, the three Japanese carriers (“J3”) are currently pursuing a consolidation that would take effect in April of 2018. There are many questions and concerns about the implications of this planned liner shipping amalgamation for the various container terminal concessions in which subsidiaries of these three Japanese carriers have ownership stakes, such as the Yusen Terminal in the Port of Los Angeles. With the exact composition of the vessel deployments to be operated by the new joint venture of these three lines still unknown, it is unclear how specific liner services and corollary volumes will be distributed among their affiliated terminals, especially those in selected North American and Asian ports. For more information, click here.
Mercator has conducted a number of engagements in which strategic considerations about how carrier alliances might impact vessel networks and terminals called were of utmost importance. In formulating views on these matters, Mercator provides thoughtful and independent insights based on scientific analysis, as well as industry perspective gained from the aggregate experience of Mercator’s consulting team.
Dynamic market conditions continue to transform the logistics landscape and drive container carriers to invest in larger ships. And as the capacity of container ships grows, carriers find that they need to establish new alliances in order to fill these ships.
As market conditions evolve, new patterns of growth are emerging. The JOC recently reported that for the first time, the Port of Savannah is being called by more weekly trans-Pacific services than the Port of New York. (link)
In addition to understanding which ports are being called, it is imperative to understand the order in which ports are called on each service. Ports that are the first inbound port of call will attract intermodal cargoes above and beyond the levels dictated by local market demand. Similarly, last outbound ports of call will be most attractive to exporters. As Mercator predicted months ago, Charleston has attracted a new last outbound port of call on the trans-Pacific trade.
Mercator International has decades of experience in service network design, analysis, and forecasting. Our services are highly regarded and sought-after by port authorities, terminal operators, and beneficial cargo owners.
On April 19, Derik Andreoli, Director of Economic Research and Forecasting at Mercator International delivered a provocative presentation on oil prices and geopolitical risk to the Puget Sound Roundtable Council of Supply Chain Management Professionals. Mr. Andreoli delivered a similar oil price forecast back in January for the 2017 Logistics Management Magazine Annual Rate Outlook. At the time, he predicted that despite the fact that OPEC had announced oil production cuts on the order of 1.2 million barrels per day, “oil prices would remain in the $50 to $60 range over the first half of 2017.” He further asserted that there was a better chance of the market surprising to the downside than to the upside. With only a handful of weeks remaining in the first half, his January forecast remains squarely on target.
Tradepoint Atlantic has inked a 10-year deal with Host Terminals to manage most marine operations on the Sparrows Point facility in Baltimore, Maryland. Host Terminals has agreed to co-invest with Tradepoint Atlantic in $30 million in infrastructure improvements to the 3,100 acre facility.
The Tradepoint Atlantic Terminal is currently anchored by The Pasha Group, which began receiving and processing vehicle imports last year.
Mercator International was retained by Tradepoint Atlantic in late 2015 to conduct a market study and identify top tier and second tier opportunities. Mercator identified RoRo as the top priority, as Baltimore has a competitive advantage in RoRo traffic, and the Sparrows Point facility has ample acreage to accommodate a state-of-the art RoRo terminal.
Steve Rothberg, Partner at Mercator International, was among presenters at this year’s Pulse of the Port conference held today in the Port of Long Beach.
In his presentation, Mr. Rothberg spoke to current events in the sector, specifically about the unprecedented restructuring and consolidation in the ocean liner space. Mr. Rothberg provided a summary of the expected vessel service deployments into the San Pedro Bay port complex, to be initiated as of April 1st of this year. Additionally, Mr. Rothberg spoke to some of the impacts of the same on the gateway, including the impacts of greater volume peaks on marine terminal and local logistics infrastructure and service providers.
As reported by infrappworld.com, the Government of Colombia is about to cancel a US$861m PPP project for navigation improvements to the Magdalena River due to financing challenges. This contract had been earlier awarded to Odebrecht of Brazil, but the latter company is facing lawsuits across South America and failed to provide the initial funding required in the concession agreement. The project is of strategic importance to the country, as the River needs extensive dredging to be able to fulfill its potential for transporting cargoes between interior regions and the key ports of Barranquilla and Cartagena.
Rivers/waterways in key South American countries are becoming increasingly important routes for cargo traffic flowing into hinterland markets. PPP-oriented projects are a viable structure for developing and maintaining channels and water depth. However, financing can be challenging without keen understanding of both the technical and commercial risks inherent in such projects.
Mercator has studied river-based cargo traffic flows on a number of different projects in various countries, including Brazil, Argentina, Colombia, Germany, the U.S., and Canada. We have studied Container On Barge (COB) opportunities, bulk commodities transport in barges, cargo route costing alternatives, and privatization of lock/dam infrastructure.
Agreements echo the Northwest Seaport Alliance of Seattle and Tacoma
According to American Shipper, The Georgia Ports Authority (GPA) and the Virginia Port Authority (VPA) said Monday they filed a cooperation agreement with the Federal Maritime Commission (FMC). The “East Coast Gateway Terminal Agreement” planned between the two port authorities “encourages voluntary cooperation in the areas of operational and supply chain efficiencies, safety, communications and customer service,” the port authorities said.
As ocean carriers continue the march towards consolidation, we are likely to see increased levels of collaboration among port authorities, as well as among terminal operators, serving these lines. The consolidation of the marine terminal assets of the Ports of Seattle and Tacoma into the Northwest Seaport Alliance joint venture in 2015 is an earlier example. Mercator International served as the chief strategic advisor to both the Port of Seattle and the Port of Tacoma in helping these ports design and navigate the complex consolidation process.
In Miami, POMTOC and South Florida Container Terminal are pursuing a similar path, by recently filing a discussion agreement with the FMC to cooperate in certain commercial and operational areas.
As reported by the Financial Times, a London-based arbitration panel has found in favor of DP World in a long-running dispute with the government of Djibouti over a port concession awarded to the company in 2006. The arbitration claim was initiated by the government of Djibouti in 2014, when it rescinded the concession agreement and accused DP World of bribing the head of Djibouti’s port authority, Abdourahman Boreh, in order to achieve unfair non-market terms. At the time, DP World rejected the allegations and said it would “vigorously defend” its position during the arbitration procedure.
The arbitration was conducted at the London Center for International Arbitration (LCIA). The 3-member panel ruled strongly in favor of DPW and called for the Government of Djibouti to pay the costs of the arbitration.
Mercator International was called upon by DP World to provide expert testimony to the Tribunal. Mercator analyzed the terms of a broad set of port concessions and compared them with the Djibouti concession, concluding that the Djibouti agreement was reasonable and consistent with market terms.
NASDAQ’s GlobeNewswire reports that Kalmar received a delivery order for 30 automated hybrid shuttle carriers from APMT for its terminal development project in Tangier, Morocco. This follows on the heels of APMT recently placing an order for 12 remote-operated STS cranes and 32 automated RMG cranes as part of an $828m investment it is making in its Tangier terminal operation, according to the JOC. The facility is envisioned to be fully automated, and will increase the Port’s capacity to more than 9 million TEUs.
Mercator International’s consultants have studied multiple automated terminals around the world and have helped develop technology selection and phasing strategies. We have dissected automation projects to identify opportunities for improvement, and have developed numerous operating and financial models to assess costs and benefits of equipment automation deployment.
As the JOC reports, resin exports from the United States are in the early stages of what promises to be a sustained period of rapid growth, catalyzed by the country’s increased production levels of oil and natural gas in recent years. This has already placed pressure on supply chains, introduced new dynamism and complexity for carriers faced with managing equipment, and increased volumes for selected ports (most notably the Ports of Houston and New Orleans).
Mercator International has analyzed resin storage capacity in the Houston metropolitan area for a major industrial real estate developer/investor, and have conducted analyses and forecasts of container equipment balancing requirements. We have also evaluated ocean carriage capacity requirements within the Transpacific trade (which is likely the primary benefactor of this resin boom) on numerous occasions, along with analyzing energy markets in connection with this trade development.
Derik Andreoli writes that between the recent agreement by OPEC to cut oil production by 1.16 million barrels per day (bpd) and the unprecedented agreement by a group of non-OPEC countries to cut an additional 560,000 barrels per day, the world oil market could soon face a contraction in oil production on the order of 1.72 million barrels per day.
Such a cut could cause oil prices to skyrocket—at least that’s what some prognosticate. Mr. Andreoli holds a contrarian view, contending that oil prices will most likely continue to average between $50 and $60 per barrel.
Mercator has advised Port Authorities on crude oil and refined product markets, analyzed and forecasted hydrocarbon trade volumes, and conducted market feasibility studies.
Organized by the U.S. Embassy and the American Chamber of Commerce and Industry of Panama, Steve Rothberg, a Founding Partner of Mercator International, attended the forum “Panama: Expanding Opportunities”, covering a wide range of business and economic topics that will take place as a consequence of the Panama Canal expansion.
Many consumers, shippers, carriers, ports, industries, and other organizations have relied on the efficient movement of goods through the Panama Canal for more than 100 years—a critical artery for international trade. The third set of locks doubles the Canal’s capacity and along with recent developments in ocean trade routes are expected to directly impact economies of scale, maritime trade, and the land-side infrastructure of key ports.
The tolls charged by the Panama Canal Authority, the location of production facilities with respect to consumption centers, vessel services, and specific economies will influence the ultimate impact from the third set of locks on global logistics. Once larger freighters start capitalizing on the benefits from the third set of locks, transportation will be less expensive for companies and for consumers of commodities and products relying on the expanded canal.
Mercator has advised the Panama Canal Authority on anticipating short- and long-term trade volume prospects for Pacific Panamanian Ports and other assignments.