May 2009 IAPH WB: state of the port sector

State of the Port Sector 2009State of the Port Sector 2009 11
The global outlook for
ports and the
maritime sector
- IAPH 2009 -
Michel Donner - Port and Maritime Transport Specialist
C. Bert Kruk - Port Consultant
The World Bank

Contents
 Safe, clean and affordable transport
 Trade decline
 Ports decline
 Private capital flow to developing countries
 World Bank response
 Impact of the crisis on port projects
 Future of port infrastructure financing
 Impact on maritime transport
 Maritime transport industry losses
 Positive ripples ?

“Safe, Clean, and Affordable Transport
for Development”
 The World Bank Transport Business Strategy 2008-
2012
 The strategy addresses
• Safe Transport (for Health and for Safety)
• Clean Transport (for Air Quality and Climate), and
• Affordable Transport (for Businesses and Individuals)

Global trade volumes to decline byGlobal trade volumes to decline by
6.1 % in 2009 and recover in 20106.1 % in 2009 and recover in 2010
(Source:(Source: World Bank, DEC Prospects Group)
-10
-5
0
5
10
15
20
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
High-income countries
Developing countries
Annual percent change in the volume of exports of goods and services

Trade decline, ports decline
 Number of overseas clothing factories actively
serving the US market decreased from 22,000 in July
2008 to just 6,000 in October 2008
 Furnitures imports are down 50% from one year ago
 Some examples of declines in container throughput
of selected ports (February 2009 compared to the
same month in 2008)
• Hong Kong: 20.6%
• Los Angeles: 32.6%
• Saint Petersburg: 27.3%
• Rotterdam 19%, and
• Singapore: 19.8%

Decline in infrastructure spending leadsDecline in infrastructure spending leads
to decreased growth…to decreased growth…
In Indonesia, the decline in total infrastructure spending
following the 1997 Asian crisis was accompanied by declining
growth
Indonesia Total Infrastructure Investment
(% of GDP)
Indonesia Average GDP Growth
Source: World Bank
7
6
5
4
3
2
1
0
1997 1998 1999 2000
%
7
6
5
4
3
2
1
0
1988-1997 1998-2007
%
8

Private capital flows to developing
countries are now significantly lower
than the peak of 2007
0
200
400
600
800
1000
1200
2007 2008 2009 (P)
in$billion

World Bank response : InfrastructureInfrastructure
Recovery and Assets (INFRA)Recovery and Assets (INFRA)
 Counter-cyclical public spending in infrastructure isCounter-cyclical public spending in infrastructure is
an effective tool to create jobs and provide thean effective tool to create jobs and provide the
foundation for economic recovery and sustainedfoundation for economic recovery and sustained
growthgrowth
 Stabilize and maintain existing infrastructure assets
 Ensure delivery of ongoing projects that remain
government priority
 Continue to support PPPs in infrastructure
 Be sure to be ready to handle the recovery when it
comes

The Impact of the Financial Crisis
New port projects and concessions
Investment Banks back in 2006
 Goldman Sachs purchased 49% of terminal operator Stevedoring
Services of America (SSA)
 American International Group (AIG) bought the US terminals of
Dubai World Ports
 What Now ??
 Infrastructure Funds/Pension Funds were seeking long-term returns
and once saw transport infrastructure as secure and stable
 Will they keep this view ??

New port projects and concessions
Quotations of the maritime press
 Hutchison : “all investments for new projects in 2009 are frozen”
 DP World : “DPW is reviewing its expansion strategy, cutting costs
and freezing recruitment”. “DPW will defer half of its planned
expansion”
 APM Terminals : “Port projects will return to realistic levels and
APMT has taken a time out to review the portfolio”
 ICTSI : “ICTSI is not looking for expansion except for programs that
were decided on before”
 COSCO Pacific : “New port investments are too risky in the current
market”
 Eurogate : “Eurogate has suspended non-essential investments”
 Gioia Tauro : “Our objective is to get through the slump somehow
and then to see when the hurricane is past how we have come out,”

Future of port infrastructure financing
Extracts from the World Bank Transport Forum April 2009 debates
involving port authorities, private sector, IFC, financial experts and
other experts
 While port congestion is easing in developed countries, there are
still ports in developing countries that suffer heavily from
congestion
 Port projects must stay on the stimulus policies for development,
so they will be ready to handle the upturning growth
 Port projects will mostly remain modest in size and time-frame
 Expectations and ambitions must adjust to “what can actually be
financed”
 Unrealistic and complicated concession terms and processes too
often delay needed projects
 Governments should facilitate more agile and simplified
environmental approval procedures

Future of port infrastructure financing
(contd)
 Projects will be expected to generate cash flows early on in
their lifetime
 Projects with less than 25% equity investment by the project
proponent might not even be looked at
 Investors will need to show more commitments to convince
lenders
 The existing portfolios of projects need to be combed, staged
and reduced
 Even IFIs as lenders of last resort need to rationalize their
portfolios
 This does not mean a return to 100% public. Public financing is
also suffering and waning, in line with fiscal revenue
 Evolution of PPPs : there are still private equity investorsthere are still private equity investors
around looking for good projectsaround looking for good projects
 Let some white elephants die or sleep
 However it is preferable to scale back than to stop

Maritime transport
 It takes 3 to 5 years to design, build and launch
a set of 9-10 sisterships
 Who in 2005 has predicted today’s crisis ?
 More ships, less cargo
 Earnings in free fall due to combined volumes
and freight rates drops
 Free fall of charter rates, but no customers
 Lay up vessels, Scrap vessels

Maritime transport (Contd)
 Lay off workers (shipping and ports)
 Slow steaming, the Cape route, the Somalia piracy
situation
 Risk on shipyards
 Idle vessels used as storage for empty containers or
unsold cars
 Will the survivors of the shipping industry
still be able to carry the trade volumes
produced in the post-crisis ?

Volumes and monetary losses of major
shipping lines in Q1 2009
Rank Company Q1 09 loss (*) Volumes loss (**)
1 Maersk 555 15
4 Evergreen 83
5 Hapag 302 15
6 Cosco 30
7 APL 245 27
12 Hanjin 191 26
(*) Million USD
(**)
Percentage compared
to Q1 2008

Positive ripples?
 Singapore, Shanghai, Hong Kong, Shenzhen and Los Angeles /
Long Beach saw a 29% volume rebound in March 09 compared to
February 09
 Analysts attributed this momentary rebound to the end of the
traditional Lunar New Year slack. And the April figures for
Singapore went 5% down
 Santos handled 4.89% more cargo in Q1 09, compared to Q1 08
 South Africa’s 0.8m TEUs capacity Ngqura terminal to go live in
October
 Benin is going forward with the 0.5m TEUs capacity Cotonou
South Wharf project
 Brazil is bravely pursuing major dredging works in most of its
container ports (in spite of some setbacks) but port concessioning and
environmental processes remain complex and slow
 It is the aged vessels (less fuel efficient and more polluting) which
are being scrapped first

Positive ripples? (contd)
Baltic Dry Index: A nascent recovery ?
0
2500
5000
7500
10000
12500
Apr Jul Oct 09

Thank you very much for your
attention

May 2009 IAPH WB: state of the port sector

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