THE GEOGRAPHY OF TRANSPORT SYSTEMS


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).

Source: Rodrigue, J-P and T. Notteboom (2009).

Typology of Global Port Operators

Global port operators have played a substantial role in the dynamics of container port terminals as they provide for the operation of terminal facilities as well as for the strategic planning of infrastructure investment. Both short term and long term time horizons are part of their concern as short term issues are linked with the capacity and quality of their services while long term issues concern market expansion. They come in three major categories:

  • Stevedores. Port terminal operators that expanded into new markets to replicate their expertise and to diversify their revenue. Port of Singapore Authority (PSA) is the largest global terminal operator coming from a stevedore background.
  • Maritime shipping companies. Invested in port terminal facilities to help support their core maritime shipping business. AP Moller (APM), a parent company of Maersk, is the largest global terminal operators coming from a maritime shipping background.
  • Financial holdings. Various financial interests ranging from investment banks, retirement funds to sovereign wealth funds attracted by the port terminal sector as an asset class and for revenue generation potential. The majority has an indirect management approach, acquiring an asset stake and leaving the existing operator take care of the operations. Others, will manage directly the terminal assets through a parent company. Dubai Ports World (DPW), a sovereign wealth fund owned by the Dubai government, is the largest global terminal operator coming from a financial holding background.

In the past decades the container terminal industry witnessed horizontal and vertical integration processes. This involves mergers and acquisitions of existing terminals or the construction of new terminal facilities (organic growth). The conventional actors that considered port operations as their core business, stevedores companies, have expanded into new locations. This process was concomitant with vertical integration strategies pursued by several maritime shipping companies that have invested in terminal operations directly or through parent companies. The financial sector follows a more hybrid approach as vertical or horizontal integration strategies depend on the asset class of the holding.

The economic rationale for mergers and acquisitions aims at achieving size, growth, economies of scale, market share and market power. Other motives for mergers and acquisitions in liner shipping relate to gaining access to markets and distribution networks, obtaining access to new technologies or diversification. Acquisitions typically feature some pitfalls, certainly in the highly international maritime industry: cultural differences, overestimated synergies and expense of acquisition. Still, acquisitions make sense in liner shipping as the maritime industry is mature and the barriers to entry are relatively high, due to investment volumes required and the development of a customer base.