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Terminal operators' profits squeezed by lower volume, excess capacity

ALL but loss-proof container terminal operators are now struggling with shrinking revenue and throughput growth as well as excess capacity, reports IHS Media. 

Adding to their woes, container shipping lines are pushing for a reduction in terminal handling charges, which could dent their usually healthy profits they have enjoyed for decades.



Operators are said to be concerned over business prospects in the short-to-medium term, while fears of overexposure to world regions where there is a high probability of overcapacity cloud the longer term.



DP World posted a 1.4 per cent decline in throughout in the first half compared to the same period last year, although net income grew by 4.3 per cent and it did not announce any significant reduction in projected capital expenditure for the remainder of the year.



APM Terminals' throughput grew 0.2 per cent in the second quarter year on year, while second quarter profit fell 30 per cent - after 41 per cent first quarter drop. 



Comments by CEO Soren Skou at the time of the group's half-year results announcement suggest it is suffering from lower rates paid by its biggest customer, Maersk Line.



"Increasingly, we see more opportunities for procurement from the carrier side, both because the carriers are consolidating, but also because there is too much excess capacity on the terminal side now. 



And therefore, we do believe that terminal cost will become deflationary," said Mr Skou.



Throughput and revenues dropped by seven per cent and six per cent in the first half of the year at Hutchison Port Holdings Trust after the company, which owns container terminals in Hong Kong and mainland China, reported a one per cent decline in volumes.



Container throughput growth at the top 30 ports globally rose 0.2 per cent year on year in the first half, its lowest level since 2009. 



However, there are some bright spots, while first-half volume growth at China's main ports was only one to two per cent, Hong Kong-listed Cosco Shipping Ports achieved year-on-year growth of 3.5 per cent in the first seven months of 2016.



A longer-term look at global capacity indicates container terminal overcapacity in many key world regions. With planned container port capacity of 383.8 million TEU by 2030 and projected volumes of 290 million TEU, China will have a capacity excess of 93.8 million TEU by 2030, according to a study released earlier this year by Organisation of Economic Co-operation and Development's International Transport Forum.



Planned capacity of 238.2 million TEU and 137.6 million TEU will create excess capacity of 88.8 million TEU and 87.6 million TEU in western Europe and the Middle East, respectively, by 2030. 
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