During a recent webinar on the effects of the pandemic on port development and capacity, Eleanor Hadland, a senior port and terminal analyst at shipping consultancy Drewry, said there is evidence that a 'blueprint' is being won. of co-investment 'between capital funds and operators. traction.
This will become even more important as operators seek to recover from the economic uncertainty caused by the pandemic.
Drewry has predicted that port development could contract by 40% in 2020 and that capacity will increase a little less than half than on average in 2019.
The forecast for the sector was made towards the end of the second quarter of 2020, which Hadland described as "too early" to fully determine how the pandemic or associated global recession will affect ports and port development.
“Analysis since then leaves us to believe that expansions that are in the early planning stages are likely to be put on hold until prospects stabilize. Therefore, there is a risk that actual levels of development in the coming years will fall below projected levels, ”Hadland said.
Despite the economic impacts of the pandemic, opportunities exist for investors, particularly operators looking to play a bigger role in the development of brownfields, according to Drewry.
To do this, there are several important case studies in which operators participate in what is known as the 'co-investment model', where they collaborate with large funds.
An example is HMM's sale of 50% of its shares in the TTIA terminal in Algeciras to CMA CGM-DIF Capital Partners JV.
This asset transfer is not only a sign that CMA CGM is increasing transshipment capacity, it is also working with DIF Capital Partners for the first time, suggesting that the co-investment model 'is gaining popularity, indicating a change in the mergers and acquisitions (M&A) market.
The market, according to Hadland, is fundamentally different from previous years, in particular the boom before the financial crash of 2006-2007. At the time, the market was characterized by high competition for a limited number of investment opportunities, which drove the valuation higher.
Hadland said the market has stabilized and operators are beginning to show a greater appetite for acquiring industrial assets abandoned for development, as opposed to new "higher risk" projects.
Another example of bullish reversal is in Bangladesh, where Adani, DP World, PSA and Red Sea Gateway Terminal are pursuing entirely new projects in Chittagong, which Hadland said would provide "much-needed capacity" at the country's only deep-water port.
In addition, the Evergreen shipping line is one step closer to consolidating its operations in the new deep-draft semi-automatic port of Kaohsiung, Taiwan. This will be able to accommodate the last 23,000 TEU vessels that the carrier now has on order.
HMM has also signed an agreement with PSA to establish a dedicated terminal in Singapore.
There is more reason to be hopeful in trader stock prices, which rebounded in the second quarter of 2020, even if most have lost year after year.
Drewry said the valuation of traders' shares had on average plummeted 27% year-on-year, but Ankush Kathuria, Drewry's chief financial research analyst, said that with most of the world's economies returning to some sort of normalcy afterward. of the blockades, the sector has passed the worst.
Kathuria also suggested that the market has discounted most of the pandemic-induced future risk faced by traders.
"We believe that the opportunities for investors in the medium and long term are still open and the market will reward investors who have a long-term vision and more patience," Hadland said.
Source: Port Technology
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