Some shareholders in ports may well have to be patient and accept lower returns while ports adjust to a new environment, according to Ports of Auckland Ltd managing director Jens Madsen.A current surplus of container shipping could be compounded as contai
Some shareholders in ports may well have to be patient and accept lower returns while ports adjust to a new environment, according to Ports of Auckland Ltd managing director Jens Madsen.
A current surplus of container shipping could be compounded as container shipping capacity is forecast to grow faster than cargo traffic, Mr Madsen told the fourth Intermodel Asia 2010 conference in Sydney last month.
This was a new global dynamic requiring a change in focus from everyone in the supply chain.
"We must all do things differently in the future -- there is no going back to where things once were, new standards have been set.
"Shareholders will need to adjust: port managements must necessarily generate continuous improvement in productivity and unit costs, but in the interim, some shareholders may well have to be patient and accept lower returns."
Ports were businesses with a very long-term horizon and Ports of Auckland was blessed with a compatible shareholder in Auckland Regional Holdings, the investment arm of the Auckland Regional Council.
ARH was an inter-generational shareholder with a mandate to act in the best long-term interests of the Auckland region, while demanding adequate financial returns.
Mr Madsen said that the new environment required a different approach to the management of ports' highly capital-intensive assets.
"Capital expenditure must be controlled," Mr Madsen said.
"We are seeing an increased focus on optimising the use of existing assets and exploring ways of curtailing capex in the short-term."
"Looking forward, I believe that many ports will only be prepared to make major investments on the back of very firm, long-term customer commitments and contracts, not in a speculative fashion, which probably has been the case, to some extent, in the past."
Variable costs, including labour, would also come under increased and ongoing scrutiny, with new, more flexible labour models needed for ports to remain competitive.
The new dynamics also required fresh thinking and a focus on identifying new revenue streams that offer synergies with ports' core businesses.
Ports of Auckland is New Zealand's largest container, cruise and vehicle import port.
About 38 percent of all of New Zealand's imports and 23 percent of its exports cross the port's wharves each year.
