Industry growth will necessitate 60 additional container terminals per year, and APM Terminals is looking at opportunities in all different types of cargo, according to Chief Executive Officer Kim Fejfer.
While challenged by current market conditions, Kim Fejfer, the chief executive officer of APM Terminals, says his company is “in a strong position in a fundamentally attractive industry.”
Speaking during Maersk’s Capital Markets Day presentation last week, Fejfer said the company will continue to reduce cost and improve productivity, but at the same time needs to “take advantage of the current volatility in order for us to place investments and grow the portfolio in a disciplined manner.”
The day before the presentation, APM Terminals announced an agreement to acquire a majority stake in Spain’s Grup Maritim TCB, a Barcelona-based terminal operator with 11 terminals, many of which are in Spain, but also several in Latin America and Izmir, Turkey.
Over the last four to five years the port industry has grown by 2 percent to 6 percent annually.
While not as robust as before the 2008 financial crisis, this is still relatively good growth, according to Fejfer. Long term, the industry sees sustained need for terminals with world population climbing from around 7 billion today to 9 billion in 30 years, including a middle class that is expected to double to 4 billion.
The resulting need for movement of goods, food and energy is “staggering,” he said, as energy and food is likely to be produced far from population centers.
The need to handle additional goods is so great that APM Terminals has calculated that the additional demand that is needed every year that “corresponds to roughly 60 new container terminals,” said Fejfer.
Larger ships and alliances mean carriers are becoming more skilled in their negotiations, demanding productivity and speed, he said, “but if you are a professional, large scale port operator then you may also gain an advantage compared to the more local and smaller port operators.”
The terminal industry is still quite fragmented, he said, and there is not great appetite for global consolidation since many operators are still making good returns.
“Prices are still high when it comes to acquisitions,” said Henrik Pedersen, APM Terminals chief financial officer, who spoke at the same event.
Fejfer said the need for consolidation may be different in individual ports, giving the example of Los Angeles/Long Beach with 14 facilities.
“There’s quite a number of individual operators and with the bigger vessels and the segmentation of capacity…as well as the bigger alliances. This system creates a lot of inefficiency and waste,” like when truck drivers have to drop off equipment at one site and then pick up a container elsewhere.
“So there’s an opportunity to create value by going in, helping with consolidation, upgrading, modernizing some of these facilities,” he said.
Fejfer said the company’s long-term strategy, called Reach 2020, involves both accelerating investments in container ports, and also seeking investment opportunities in breakbulk and bulk terminals and other port-related activities.
So far in 2015, the company has secured several new projects in addition to the pending deal with TCB, which will still require approval from the relevant regulatory authorities.
These include a joint venture container terminal in Qingdao, China, a reefer terminal in Vado, Italy, a container terminal in Cartagena, Colombia, and a $1.5 billion joint venture in Ghana.
APMT CEO: Container terminals remains a ‘fundamentally attractive’ industry
