Terminal transformation – disruption, digitalization & supply chain dynamics

Ahead of TOC Asia in Singapore this month, the TOC research team assesses the 2018 landscape for shipping, ports and terminals and looks at how smart technologies will continue to challenge and change the game

TOC Asia, 24 – 25 April, Singapore - inconjunction with Singapore Maritime Week

9 April  2018

In our April 2017 Future Ports editorial , the TOC research team looked at key challenges and opportunities for global port and terminal operators resulting from a combination of:

Weak global trade growth and threat of rising protectionist policies

Mega vessels, alliances and consolidation in liner shipping

Automation and digitalization across consumer, industrial and logistics sectors

Based on presentations and debate at recent TOC events, plus research and interviews with key industry analysts and executives, we suggested that:

Ownership and investment boundaries between carriers and terminal groups could become increasingly blurred, particularly where strategic hubs are concerned, as each party looked to lock in capacity and reduce vulnerability in the mega-vessel and alliance era.

Terminal operators would turn more attention to shippers and inland logistics operations to diversify their revenue and service offerings, become more firmly embedded in supply chains, and counter-balance the risks associated with a smaller number of much larger shipping interests

Automation, digitisation and other smart technologies could hold the key, on the one hand to help terminals shed light into ‘what’s in the box’ and provide more services within the cargo chain and, on the other, to provide intelligence to operations and unlock efficiency gains that have not been possible previously.

Fast forward a year and the industry gears up to meet at TOC Asia in Singapore, the first of 3 international TOC gatherings this year - followed by Rotterdam and then Panama. What happened in the past 12 months and what are the key issues on the table for the year ahead?

World trade is on the rise - but so are disruptive trade tensions

The good news is that the global economy and world trade performed better than expected in 2017 and the momentum has continued – so far –  into 2018, with positive impact on volumes for shipping and, especially, ports and terminals. In its 13 March 2018 Interim Economic Outlook the OECD revised its forecast upwards from November 2017, saying that growth prospects have improved in both advanced and emerging market economies. It now predicts that after growing 3.7% in 2017, the global economy will expand by around 4% in both 2018 and 2019, with trade and investment growing even faster.

World trade saw a significant rebound in 2017, growing 5.2%, and this translated directly into shipping and port volumes. In the last quarter of 2017, industry analyst Alphaliner raised its global container throughput growth outlook to over 6% for the full year and 4.8% for 2018, noting that this would reverse the downward trend that has seen the so-called TEU-to-GDP multiplier drop to below 1.0 in the previous two years.

Alphaliner Executive Consultant Tan Hua Joo will review latest container trade, shipping and port indicators at the TOC Asia 2018 Container Supply Chain conference

At Port of Singapore, home to TOC Asia, operator PSA International saw volumes increase 9% YoY to hit 33.35 million TEU. PSA also recorded strong10.4% growth for its terminals outside Singapore, which reached 40.89m TEU. Announcing the 2017 results this March, PSA International Group Chairman Fock Siew Wah cited a “resurgent global economy that appeared resistant to isolationist rhetoric and the ubiquitous consolidation of shipping alliances which hub their shipping services in many PSA terminals” as two significant factors.

“Against the positive [economic] background, an escalation of trade tensions is a serious risk,” noted the OECD in its latest outlook – and unfortunately, recent weeks have seen escalation aplenty as the US and China impose a rapidly growing list of tit-for-tat tariffs.  

“Protectionism and shipping do not go hand in hand,” observed Bloomberg Intelligence Asia Pacific Transportation Analyst Rahul Kapoor in a March TV interview . “Increasing protectionism has the potential to undermine trade growth and that has very negative repercussions for global shipping demand. What this means is we have to meaningfully lower the long-term demand curve for shipping. Ripple effects are likely to be felt across segments if tariffs encompass a much broader basket of goods,” stated Mr Kapoor.

In the modern world of globalised production and value chains a full-on trade war would present “severe risk of disruption of component supply lines, with knock-on effects on manufacturing, output, costs and employment,” noted the World Economic Forum in a March editorial

The impact of new trade tariffs on supply chain operations, shipping and ports will be explored by Bloomberg Intelligence’s Rahul Kapoor and fellow panellists at TOC Asia 2018

Shipping: fragile recovery, more mega-ships ahead  

Current trade-restrictive measures represent a “worrying trend for shipping” and may have “lasting consequences” if a largescale trade war emerges, warned BIMCO’s Chief Shipping Analyst Peter Sand in late March. The shipowner association had previously tipped 2018 as a year of ‘balanced fleet and demand growth’ for container shipping on the back of a strong 2017 buoyed by resurgent trade growth.

After a lull, containership fleet expansion resumed with a bang this January with the addition over 250,000 TEU of new capacity, reports BIMCO, including five new ultra-large 20,000TEU+ vessels. And with twenty new orders for 22,000TEU ships placed in September 2017 alone, there is no shortage of mega-ships coming down the pipeline over the coming few years. Maintaining a sensible balance between fleet capacity and demand could therefore be a very precarious affair in the near term and analysts predict more cost cutting exercises, slow steaming and a big push to realise economies of scale from big ships as freight rates remain volatile and profitability elusive.

Ports and terminals will continue to be challenged by the new world order of much bigger ships and bigger shipping groups, including the new generation of alliances

Meantime, ports and terminals will continue to be challenged by the new world order of much bigger ships and bigger shipping groups, including the new generation of alliances. Competition for alliance business will remain fierce, especially in transhipment operations, but at the same time big carriers will want to lock in strategic hub capacity to serve their mega-ships, including active port investment. A recent example is the November 2017 MoU between PSA and Cosco Shipping Ports, the terminal investment wing of Chinese state carrier China Cosco Shipping, ahead of the January opening of a new 1m TEU berth at the now-3m TEU Cosco-PSA Terminal.

Looking ahead, PSA’s massive 65m TEU Tuas mega port project epitomises the next generation of grand scale infrastructure investments to cater for mega-ships and compete in the global race for transhipment traffic. Tuas is just one of several big infrastructure projects planned along the Straits of Malacca that will create a hyper-competitive port environment in the coming years. A similar scenario is playing out at the other great arterial connections of the maritime world, while China’s OBOR ambitions continue to reshape the maritime and overland logistics landscape.

The outlook for regional port and terminal capacity will be explored at the Asia & Middle East Infrastructure Forum during the TOC Asia 2018 Container Supply Chain conference  

Harnessing smart technologies for business transformation

While investment in physical facilities remains the most fundamental requirement for port and terminal development, R&D and active adoption of automation, digitalization and other advanced technologies are gathering pace at an accelerated speed as we move into 2018. How effectively private and public sectors can come together to create a new (and secure) digital infrastructure will be a major focus of attention in 2018 and well beyond.

Aside from continued R&D into deployment of robotics, autonomous vehicles and vessels, drones and other automated technologies for cargo handling and marine operations, the last 12 months have also seen a marked upturn in interest around the role of blockchain technology in container logistics alongside Internet of Things (IoT) smart tracking devices and sensors, digital platforms, data analytics and artificial intelligence (AI).

This January, Maersk and IBM announced that they would jointly form a blockchain-based global trade platform with the intent of providing “more transparency and simplicity in the movement of goods across borders and zones” while Accenture has partnered with AB InBev, APL and Kuehne+Nagel on trials of its blockchain solution. IBM is also working with PSA and regional container carrier PIL on a blockchain-based supply chain platform to track and trace cargo movement from Chongqing, China – a huge electronics manufacturing base producing nearly 61 million laptops in 2017 – to Singapore.

PSA said involvement in the blockchain project “demonstrates our efforts to enhance physical and digital connectivity, as well as to improve efficiencies along the global supply chain.” In February, PSA also increased its shareholding in Crimson Logic, a specialist in digital trade facilitation and developer of the world’s first Single Window in 1989, with the goal of “co-creating the next-generation of B2B2G global platform solutions that can integrate processes, improve efficiencies and deliver added value to global shippers and other stakeholders within the supply chain.

”With the demands brought about by the acceleration of digital connectivity, e-commerce and changing consumption patterns, stakeholders across the global supply chain have voiced their growing discontent over fulfilment inefficiencies, lack of coordination and poor visibility - PSA

In his keynote address at TOC Asia on 24 April, PSA International Group CEO Tan Chong Meng will discuss “Global Supply Chain – The Next Wave”, giving a high-level perspective on the pressures and pitfalls facing the industry today, as well as the possibilities of tomorrow

The desire of port and terminal operators to extend their supply chain involvement beyond the “four walls of the facility”, including greater engagement with cargo owners and the landside logistics chain, has been discussed many times over the decades at TOC, as has shippers’ desire for greater visibility into their cargo’s location and condition, not least in ports. Now, as automation and digital technologies exponentially advance and converge, the traditional definitions, boundaries and relationships between shippers, shipping, logistics, ports and terminals will continue to be challenged, potentially giving way to entirely new business models and ecosystems in world trade and supply chain operations.

Looking to the future in Singapore

Bringing all the container supply chain stakeholders together, TOC Asia 2018 will continue the dialogue on how all parties navigate through today’s highly changeable and competitive market and adapt to the new dynamics of digitalization. The event takes place on 24-25 April 2017 at the Marina Bay Sands Singapore, as part of Singapore Maritime Week. 

Please leave us your thoughts and comments – we’ll use them to inform future TOC debate. If you’re interested in speaking, drop us a line to sam.light@toc-events.com or rachael@nextlevelinfo.com

TOC Asia

24 – 25 April 2018

Marina Bay Sands Singapore

www.tocevents-asia.com

Ends

About TOC Worldwide 

For 40 years, TOC Worldwide has provided the market-leading conference and exhibition forums for the global port and terminal industries and their customers. With a change of name to TOC Container Supply Chain, the TOC event portfolio is now evolving fast to attract a wider audience of container supply chain professionals. Taking place each year in the world’s four key shipping hubs – Europe, Middle East, Americas and Asia – each TOC is now a complete container supply chain event for its region, bringing together cargo owners, logistics providers, carriers, ports, terminals and other key members of the container supply chain to learn, debate, network and foster new business solutions. 

Notes to editors:

For further information regarding this release, please contact:

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