Dragon on an ac­qui­si­tion spree

Chi­nese op­er­a­tors take ad­van­tage of im­proved global con­tainer port de­mand growth prospects

Maritime Gateway - - Contents -

Chi­nese op­er­a­tors take ad­van­tage of im­proved global con­tainer port de­mand growth prospects.

The out­look for global con­tainer port de­mand growth is now more op­ti­mistic and Chi­nese players are on the ac­qui­si­tion trail in an ag­gres­sive and highly con­fi­dent man­ner. Ma­jor M&A deals are chang­ing the land­scape, with more to come, ac­cord­ing to the Global Con­tainer Ter­mi­nal Op­er­a­tors An­nual Re­port 2017, now in its 15th year of pub­li­ca­tion by global ship­ping con­sul­tancy Drewry.

Drewry’s con­tainer port de­mand fore­cast is more pos­i­tive than in last year’s re­port, ex­hibit­ing a 4 per cent CAGR and adding a fur­ther

152 mil­lion teu of port through­put to the global to­tal by 2021. This is a con­se­quence of im­proved port through­put growth rates in the sec­ond half of 2016 and into 2017, and a more pos­i­tive gen­eral global eco­nomic out­look.

That said, there re­main nu­mer­ous risks and un­cer­tain­ties at present, in­clud­ing ten­sions in the Mid­dle

East and Korean penin­sula, the pro­tec­tion­ist and un­pre­dictable stance of the US ad­min­is­tra­tion, and the im­pact of Brexit. This is per­haps one rea­son why the global con­tainer port ca­pac­ity is pro­jected to in­crease by a CAGR of 2.7 per cent, based on con­firmed ad­di­tions only. This is markedly lower than the fore­cast de­mand, and hence, av­er­age util­i­sa­tion lev­els are ex­pected to rise.

Neil David­son, Drewry’s se­nior an­a­lyst for ports and ter­mi­nals said: “While there are cer­tainly some en­cour­ag­ing signs for the de­mand growth out­look, the risk pro­file for ter­mi­nal op­er­a­tors has in­creased and most of the tra­di­tional global/ in­ter­na­tional players re­main cau­tious. The ex­cep­tion to this are the Chi­nese port com­pa­nies who are pur­su­ing expansion and in­vest­ment both at home and over­seas in an un­prece­dent­edly ag­gres­sive man­ner.”

M&A ac­tiv­ity in the port sec­tor is at a high level. About $3.1 bil­lion worth of deals have been struck so far in 2017, driven by Chi­nese com­pa­nies such as Cosco Ship­ping Ports and China Mer­chants Ports. In the last year, more than half of the ac­qui­si­tions by global/in­ter­na­tional ter­mi­nal op­er­a­tors have been made by Chi­nese players. The val­u­a­tion of port and ter­mi­nal busi­nesses range be­tween 13x and 26x EV/EBITDA. Chi­nese com­pa­nies are typ­i­cally pre­pared to pay a pre­mium.

Cosco Ship­ping Ports has moved up Drewry’s op­er­a­tor league ta­ble as a re­sult of the merger of Cosco and China Ship­ping, and will move fur­ther up in the com­ing years due to the ac­qui­si­tion of Noa­tum and OOCL’S ter­mi­nals. The China Cosco Ship­ping group is pro­jected to add the most ca­pac­ity of any of the global/ in­ter­na­tional ter­mi­nal op­er­a­tors over the next five years.

“The Chi­nese players are more com­fort­able with risk than the es­tab­lished in­ter­na­tional op­er­a­tors right now, and have a geo-po­lit­i­cal strat­egy rather than a purely fi­nan­cial one. They are snap­ping up as­sets and op­por­tu­ni­ties and have the ap­petite and fi­nan­cial clout to take many more in the com­ing years,” added David­son.

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