International Association of Maritime Economists (IAME) 2010 Conference, Lisbon, Portugal The Corporate Geography of Global Terminal Operators Paper no Theo Notteboom ITMMA - University of Antwerp and Antwerp Maritime Academy, Belgium Jean-Paul Rodrigue Department of Global Studies & Geography, Hofstra University, New York, USA

The Corporate Geography of Global Terminal Operators 1) An Overview of Global Terminal Operators 2) Typology and Market Strategies 3) Consolidation and Scale Increase 4) The Spatial Expansion of Terminal Operators 5) How “Global” are Global Terminal Operators? 6) Vertical Integration Strategies in the Hinterland Container yard, Port of Yantian (HPH), China

Changing Role and Function of Transport Terminals ConventionalContainer Small terminal surfaceLarge terminal surface Direct transshipment possibleIndirect transshipment (modal separation in time and space) Limited mechanization and automationAdvanced mechanization and automation Improvisation in terminal operationsOrganization and planning Capital and managerial intensiveness Labor Intensiveness

Top 12 Global Port Operators in Equity-Based Throughput, 2007

Container Terminal Surface of the World's Major Port Holdings, 2009 N = 405

Number of Terminals and Total Hectares Controlled by the Ten Largest Port Holdings, 2009

Depth and Surface Characteristics

Typology of Global Port Operators StevedoresMaritime Shipping Companies Financial Holdings Horizontal integrationVertical integrationPortfolio diversification Port operations is the core business; Investment in container terminals for expansion and diversification. Maritime shipping is the main business; Investment in container terminals as a support function. Financial assets management is the main business; Investment in container terminals for valuation and revenue generation. Expansion through direct investment. Expansion through direct investment or through parent companies. Expansion through acquisitions, mergers and reorganization of assets. PSA (Public), HHLA (Public), Eurogate (Private), HPH (Private), ICTSI (Private), SSA (Private). COSCO (Public), MSC (Private), APL (Private), Hanjin (Private), Evergreen (Private). DPW (Sovereign Wealth Fund), Ports America (AIG; Fund), RREEF (Deutsche Bank; Fund), Macquarie Infrastructure (Fund), Morgan Stanley Infrastructure (Fund). APM T (Private)

Factors behind the Interest of Equity Firms in Transport Terminals Asset (Intrinsic value) Globalization made terminal assets more valuable. Terminals occupy premium locations (waterfront) that cannot be substituted. Traffic growth linked with valuation. Same amount of land generates a higher income. Terminals as fairly liquid assets. Source of income (Operational value) Income (rent) linked with traffic volume. Constant revenue stream with limited, or predictable, seasonality. Traffic growth expectations result in income growth expectations. Diversification (Risk mitigation value) Sectorial and geographical asset diversification. Terminals at different locations help mitigate risks linked with a specific regional or national market.

Consolidation and Scale Increases: Major Port Terminal Acquisitions since 2005 DateTransactionPrice compared to EBITDA 2005 DP World takes over CSX World Terminals 14 times Early 2006 PSA acquires a 20% stake in HPH17 times Mid 2006 DP World acquires P&O Ports19 times Mid 2006 Goldman Sachs Consortium acquires ABP 14.5 times End 2006 AIG acquires P&O Ports North America24 times Early 2007 Ontario Teachers’ Pension Fund acquires OOIL Terminals 23.5 times Mid 2007 RREEF acquires Maher Terminals25 times EBITDA = Earnings Before Interest, Taxes, Depreciation and Amortization

The Strategies of Port Operators Financial Assets Large financial assets and the capacity to tap global financial markets. Terminals as equity generating returns. Managerial Expertise Experience in the management of containerized operations. IT and compliance with a variety of procedures. Gateway Access Establishing hinterland access. Creation of a “stronghold”. Provides a stable flow of containerized shipments. Development of related inland logistics activities. Leverage Negotiate with maritime shippers and inland freight transport companies favorable conditions. Some are subsidiaries of maritime shipping companies. Traffic Capture Capture and maintain traffic for their terminals. Global Perspective Comprehensive view of the state of the industry. Anticipate developments and opportunities.

Inter-firm Relationships in the Three Main Container Ports of the Rhine-Scheldt Delta, 2010 DP World PSA HUTCHISON PORT HOLDINGS APM Terminals (AP Moller G roup) ANTWERP Antwerp Gateway PSA (Antwerp/ Zeebrugge) MSC Home terminal CHZ APM Terminal ZEEBRUGGE ROTTERDAM Rotterdam World Gateway (Maasvlakte 2) Operational by 2013 ECT APM Terminal Maasvlakte CMA-CGM MSC NYK Terminal 1 (Maasvlakte 2) Operational by 2014 Minority Shareholding Waal- and Eemhaven Delta Terminal Euromax phase 1 Majority shareholding ZIM Line DP World Delwaidedock North Sea Terminal Europe Terminal Deurganck Terminal New World Alliance CYKH Alliance Antwerp International Terminal (AIT) Shipping Line (Global) Terminal Operator Terminal Shanghai International Port Group (SIPG) Albert II-dock north (under construction) Cosco Pacific 100% 20% 50% 100% 50% 60% 30% 10% 100% 50% 100% 42.5% 10% 20% 10% 35% 100% 65% 75% 25% PORT Financial Holding Partnerships of multiple stakeholders

Inter-firm Relationships in the Three Main Container Ports of North America, 2010 LONG BEACH LOS ANGELES NEW YORK APM Terminals Port Elizabeth Port Newark Container Terminal Maher Terminal Global Terminal and Container Services New York Container Terminal APM Terminals (AP Moller Group) Maher Terminals Ports America 100% Global Container Terminals 100% Pacific Container Terminal Total Terminals International California United Terminals Pier G Berth Long Beach Container Terminal Terminal A Terminal C60 Global Gateway South APM Terminals Pier 400 Evergreen Terminal TraPac Los Angeles Berth 136 Yusen Terminals West Basin Container Terminal Stevedoring Services of America Ontario Teachers' Pension Plan 100% Cosco Pacific 51% 49% 100% Hanjin AIG Highstar Capital Deutsche Bank RREEF Macquarie Infrastructure 60% 40% 50% Hyundai 100% K-Lines 100% OOIL 100% MSC 50% APL Evergreen 50% Yangming 100% 40% 60% Mitsui OSK 100% NYK 100% Shipping LineT erminal Operator Terminal PORT Financial Holding 100% Japanese, Taiwanese & Korean (Export-oriented strategy) “Financialized” Stevedores

ZHUHAI Inter-firm Relationships in the Main Container Ports of the Pearl River Delta, 2010 HONG KONG Asia Container Terminals DP World Hong Kong Hong Kong International Terminals COSCO-HIT Terminal Moderns Terminals Asia Port Services SHENZHEN Chiwan Container Terminal Shekou Container Terminals Da Chan Bay Terminal One Yantian International Container Terminals Zhuhai International Container Terminals GUANGZHOU Dongguan Container Terminal Guangzhou South China Oceangate Container Terminal Nansha Container Terminal Guangzhou Huangpu Xingang Terminal Guangzhou Huangpu Xinsha Terminal Nanhai International Container Terminals HUTCHISON PORT HOLDINGS PSA DP World Cosco Pacific 39% APM Terminals (AP Moller Group) 20% China Shipping Group 40% 50% Modern Terminals China Merchants Holdings International 49% 70% 49% 55% 66% 33% 67% 20% 100% 33% 10% 80% 20% Shipping LineT erminal Operator Terminal PORT Financial Holding 75% 25% 65% Guangzhou Port Group Shenzhen Municipal Government 41% 60% 35% Shenzhen Yantian Port Group 30% Joint Ventures (TO / Local Government)

Container Terminals of the World's Four Major Port Holdings, 2009 Importance of ‘home port’ (2009) PSA: Singapore = 44.2% of global non-equity based throughput. DP World: Dubai = 25.3% of global non-equity based throughput. HPH: Hong Kong = 16.5% of global non-equity based throughput.

Regional Share in the Terminal Portfolio of the Four Main Global Terminal Operators (Hectares, 2009)

Container Terminals of the World's Regional Port Holdings, 2009

Regional Share in the Terminal Portfolio of Some Regional Terminal Operators (Hectares, 2009)

Vertical and Horizontal Integration in Port Development Commodity Chain Port Holding Horizontal Integration Intermediate hub Inland Port Rail / Barge Distribution Center Inland Modes and Terminals Distribution Centers Maritime Shipping Port Terminal Operations Terminal Maritime Services Inland Services Port Services Vertical Integration

World’s Main Intermediate Hubs, 2008

Conclusion ■The “four sisters” (HPH, APM, PSA and DPW) Analogies with the oil industry (oligopoly). Strong multinational portfolio; each market is regional. Standardization of management practices. Multiplying effects to the functional and operational benefits brought by containerization. ■Two major and complementary roles Gateways: Linking global and regional freight distribution systems. Complex stake holding at the port and in the hinterland. Intermediary hubs: Connecting different systems of maritime circulation. Single GTOs played a preponderant role. Both account for terminal growth and profitability.

Conclusion ■Vertical integration, horizontal integration and portfolio diversification Maritime shipping companies: Secure traffic for their networks. Profitability of both seaside and landside operations. Stevedore companies: Expanded from their base port or region. Diversify and replicate their business model. Financial holdings: Valuation and revenue generation. Organic growth (new terminals) and M&A of existing facilities (and operators): Common strategies. GTO differ little from their manufacturing and retail counterparts in view of globalization.

Conclusion ■Future expectations Part of business cycles. Diminishing returns. Fast growth, mergers and acquisitions: Underlines that the industry may be close to achieve a level of maturity. Convergence towards a common business model? Shift in the corporate geography of GTOs: Then: Dynamics oriented towards expansion. Now: Rationalization, performance improvements and the search for niche markets (segmentation).