Marine terminal sales hot topic at TOC Americas
Even as 2007 looms as an unpredictable year for the U.S. economy and its associated trade activity, the financial worth of marine terminals was a dominant source of discussion on the opening day of the Terminal Operators Conference Americas in Acapulco, Mexico Tuesday.
The conference, which has brought more than 300 delegates from Latin America, North America and Europe, began amidst the recent purchase of four U.S. terminals by a Canadian teachers' pension fund, the not-soon-forgotten DP World controversy and the swirling interest of private equity firms in terminals all over the world.
'The question is, how will the terminal operator industry react to a seller's market,' said James Brennan, a partner in Norbridge, a transportation and logistics consultant group. 'Will they react like container shipping lines airlines, where every peak leads to capacity increases, followed by oversupply and a trough of two years? Or will they take cues from the rail industry, who have seen the benefits of an oligopoly.'
Brennan also had some advice for terminal operators that will likely make shippers and truckers none too happy.
'Ten to 15 percent of revenue for terminal operators comes from detention and adding capacity,' Brennan said. 'It's quite a windfall. Reduced free time has increased revenue, but it hasn't changed dwell time. The take out of this is terminals aren't charging enough to change behavior.'
Aside from the underlying theme of acquisition, the conference focused on port demand and capacity for 2007. One of the inherent constraints on growth is a looming trucker shortage for port drayage activities.
Two separate panelists on the shipper side said that increased truck rates are the only way to cure the imminent shortage, especially port drayage drivers.
'If we don't commit to three turns a day, drivers will increase their rates,' said Rosa Hakala, a former logistics executive with Home Depot who is now senior vice president of the retail sector for Agility, the new moniker for Kuwait-based PWC Logistics.
Gary Ferrulli, manager of imports for KB Toys, agreed.
'The trucker shortage has a solution,' he said. 'While no one likes increased costs, we have to be realistic.'
Then, Curtis Whalen, executive director of the American Trucking Association's Intermodal Motor Carriers Conference, said that drivers in Los Angeles and Long Beach are particularly beleaguered because they aren't earning more money, yet are having to work nights and Saturdays under those ports' PierPass program.
'With PierPass, (the terminal operators and longshoremen union) covered their costs,' Whalen said. 'What they told the truckers is you'll get more shifts, but that hasn't occurred.'
He pointed to a study conducted this summer by PierPass that found that 33 percent of drivers were earning more money since PierPass began.
'That means 67 percent are not,' Whalen said. 'I bristle when I hear that PierPass was a great success. It may be a success for all of you, but it certainly isn't for truckers. When you set up an equation where every player but the trucker gets covered, there's something wrong with that.'