Investments in ports foretell the future of global commerce – The Economist

D.car without river Cruise through five new anchorages at Tuas Mega Port, located on largely reclaimed land at the western edge of Singapore. An unmanned crane towers overhead, surrounded by camera-equipped drones. This berth is the first of 21 scheduled by 2027. When completed in 2040, the complex will be the largest container port on earth. PSA International, its Singapore owner.

trade winds blow east

Global Port Container Throughput, TEU*, Billion

Source: Drewry Maritime Research

Tuas is a vision of the future on two fronts. It shows how port operators around the world, facing obstacles to developing new facilities, from lack of space to environmental concerns, are deploying ingenious technologies to meet demand for their services. More fundamentally, the investment in the city-state, whose construction costs he estimates at $15 billion, is part of a wave of bigger bets by the broader logistics industry on the growing importance of Asia, especially Southeast Asia.of IMF expects the region’s five largest economies (Indonesia, Malaysia, Singapore, the Philippines and Thailand) to be the world’s fastest growing bloc in terms of trade volume from 2022-2027. Important nodes are redrawing at the same time.

Jean-Paul Rodriguet, a professor of transportation geography at Hofstra College on Long Island, said seaport expansion is becoming increasingly difficult around the world. Not enough space in the right place. Critics of development, especially environmentalists, do not. Last year, a major port expansion in Greece’s Piraeus was blocked by a court for failing to provide a fair assessment of its environmental impact. The one in Veracruz, Mexico was also shut down for environmental reasons.

One solution is to make existing logistics networks more efficient, rather than simply bigger. in April PSA have confirmed the purchase of BDP International, an American freight forwarder that specializes in supply chain management, was seeking an undisclosed amount (a former private equity owner was reportedly seeking $1.5 billion).last two years DP Emirati port operator World has acquired two supply chain experts. He bought the South African company Imperial Logistics for $890 million and his American company Syncreon for $1.2 billion.

Maasvlakte harbor, Rotterdam

Image: Jean-Paul Rodrigue

However, supply chain rationalization can only go so far. At some point, you will need new capacity. One of his ways of achieving it is by reclaiming land from the sea. This requires a feat of civil engineering and is expensive. Singapore’s Shipping and Ports Authority has spent about $1.8 billion to fill the sea with soil for the first phase of the new Tuas facility. The massive Maasvlakte expansion, which began its second phase in 2015, has so far come at the expense of the port of Rotterdam. The company is jointly owned by Dutch state and city governments and is valued at approximately €2.9 billion ($3.1 billion).

Many ports are too deep to carry out reclamation. So some are deciding to build upwards. Stacking more than 6 containers is impractical in a traditional setup. Also, even for tall stacks, you have to constantly shuffle the boxes to get the right container. Shuffling can take longer than actually moving the containers around the port to the ship, said Matthias Dobner, Chief Executive Officer of BoxBay. DP with the world SMS Group, an engineering company. BoxBay’s “high-bay” storage system places each container on a separate rack and allows automated cranes to pull the containers out individually. At Dubai’s Jebel Ali port DP World, this allows containers to be stacked 11 high.

Image of “High Bay” container system in operation

Video: Box Bay

If you can’t build or build, another option is to build elsewhere. This explains the growing popularity of inland ‘dry ports’. This means that goods are pre-contained and do not have to be stored for days at the port itself, and are ready to be loaded onto ships when they arrive at the pier. increase. Pioneer Partners, an investment firm located in the Mojave Desert, about 150 kilometers (90 miles) off the California coast, is building such facilities to ease traffic at the hopelessly inefficient ports of Los Angeles and Long Beach. secured land and permits for

2016 PSA has entered into a joint venture with a Chinese state-owned railway operator to operate a network of dry ports in China. The manufacturer loads goods onto trains at he one of 13 inland rail terminals for transport to the coast. Some of these terminals are quite far from any coastline. One of them, Urumqi in the Xinjiang Uighur Autonomous Region, is farther from the sea than any other city in the world, about 2,400 km from the Bay of Bengal. In 2022, the World Bank’s private arm, the International Finance Corporation, signed a contract with another Singaporean logistics company. YCHMore group, and T.&T. Vietnamese conglomerate Group will develop a $300 million inland container depot in Vinh Phuc in northern Vietnam. Known as Vietnam SuperPort, the project will begin operations in 2024 and provide a welcome relief to a country whose exports are growing much faster than inland logistics investment.

All dry port developments in Asia represent a second force reshaping the port business. For decades, Asian trade tended to be one-way. Containers laden with goods manufactured by cheap labor on the continent sailed to developed countries and returned mostly empty.In the late 1990s more than 70% of Asian exports accounted for more than 70% of the world’s exports. directed to other regions. A quarter century later, thanks in part to these trade flows and more complex supply chains, the Asian economy has become a large market. Today, nearly 60% of his Asian exports flow within the region.

The logistics industry PSA We are making a long-term bet with Tuas that this share will grow. Investments in logistics increased everywhere amid the e-commerce pandemic surge. In Asia they swelled. CBREReal estate consultancy forecasts that Asia (including China) will account for 90% of global online shopping growth from 2021 to 2026. This will require up to 130 million square meters of new logistics real estate.

A boom in investment in warehouses for storage and hubs for distribution and fulfillment is already underway in the region.last year GLPSingaporean investment firm specializing in logistics real estate has announced a $1.1 billion Vietnam-focused fund and a $3.7 billion Japan-focused fund. That his sixth China fund, worth $1 billion, closed in early November. India could get a boost as global manufacturers look to diversify production away from China. India’s richest tycoon Gautam Adani’s port business operates India’s largest port, Mundra, Gujarat, and his 12 ports and terminals across his seven states in India. The combined annual cargo volume of the two companies surged from 200 million tons three years ago to 300 million tons in 2022. Adani said he aims for 500 million tonnes by 2025.

Construction of Mundra Port in Gujarat

Video: NASA Landsat. Google Earth engine

Investments by shipping giants point in the same eastward direction. In October, global shipping rates plummeted as the effects of pandemic-era bottlenecks eased, while Mediterranean Shipping Company (MSC), the world’s largest Total Capacity announced five new intra-Asia services. 3 months ago MSC announced a $6 billion joint venture with the Ho Chi Minh City government to build a port in Ho Chi Minh City by 2027. Once completed, it will be the largest port in Vietnam. In August, MSC’s biggest rival AP Moller-Maersk completed his $3.6 billion acquisition. LF Logistics is a Hong Kong based company focused on intra-Asia trade. The deal brings 223 warehouses and 10,000 employees across the continent under the banner of the Danish shipping giant, with a clear focus on Asian consumers.

When maritime trade boomed in the last century, investments in logistics reflected changing global patterns of production and consumption. they also do. This time the future looks slimmer, smarter and more oriental.

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