Future port investment is being put at risk by container lines demands for a reduction in terminal handling costs, according to a recently launched Drewry study.

Rising costs due to bigger ships, greater business risks from larger liner alliances, softening global demand growth and pressure on terminal handling prices from cash-strapped carriers are creating the ‘perfect storm’ for terminal operators.

Neil Davidson, Drewry’s senior analyst for ports and terminals, said: “Shipping lines need to be careful how they play the situation. If the returns from investing in and operating terminals fall too far, or the risks become too high (or both), then terminal operators may simply stop investing.”

The financial results of listed port and terminal operators reveal a weakness in organic earnings amid escalating debt levels.

This means that stricter cost rationalisation and financial risk reduction will be necessary to retain investment interest, and therefore companies with growth plans are commanding a significant market premium amid diminishing profitability.

The market valuation of listed operators remains weak, underlining the cautious assessment of growth in the sector.

Read more at http://www.portstrategy.com/news101/port-operations/port-performance/drewry-lines-playing-poker-with-terminals