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 by6.1 % 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 leads to Decline in infrastructure spending leads to decreased growth…decreased growth…In Indonesia, the decline in total infrastructure spending following the 1997 Asian crisis was accompanied by declining growthIndonesia 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 $

bill

ion


World Bank response : Infrastructure Infrastructure Recovery and Assets (INFRA)Recovery and Assets (INFRA) Counter-cyclical public spending in infrastructure is Counter-cyclical public spending in infrastructure is

an effective tool to create jobs and provide the an effective tool to create jobs and provide the foundation for economic recovery and sustained foundation 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 ??


The Impact of the Financial Crisis 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 investors there 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


The Impact of the Financial CrisisMaritime 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


The Impact of the Financial CrisisMaritime 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

Business

Transcript of May 2009 IAPH WB: state of the port sector