Chapter 4: Strategies For Ports

4.1 Cooperation Agreements between Market Players

4.2 Port service Providers

4.1 Cooperation Agreements between Market Players
In the past shipowners and ports used to compete with one another

The competitive struggle is now increasingly unfolding at the level of logistics

chains which includes;
✓ Vertical integration
✓ Horizontal alliances
✓ Mergers and
✓ Acquisitions
….

What is the reason behind integration or

cooperation agreements ?
Reasons for Integration or Cooperation
To enhance the players’ own competitive position
Increase their benefits in scale and scope. It affects
✓ Economies of scale – reduce cost
✓ Pricing
✓ Entry behavior
✓ Exit behavior

Increasing market share

 Vertical Integration
Vertical integration refers the cooperation among stages of the supply chain, such as
terminal services, hinterland transportation services, warehousing, distribution, etc.
Maersk Line and APM Terminals in exclusive deals
Maersk Line and APM Terminals have established a close partnership that gives
the container carrier control over strategically important key ports on the east-
west services between Asia and Europe, which is Maersk Line's biggest market.
The partnership is so comprehensive that the carrier has taken over the financial
risk at several of the ports, most recently in the ambitious expansion of the
Tangier Med port at the mouth of the Mediterranean.
Vertical Integration
ADVANTAGE DISADVANTAGES
❑ Increase market share ❑ Affects competition .. Creates incentive for
anticompetitive forces
❑ Improve efficiencies
❑ Coordination problem
❑ Cost reduction (transaction costs,
transportation cost … ❑ Affect corporate identity
❑ Economies of scale and scope
❑ Risk sharing
❑ Exchange of knowledge
Horizontal integration
Horizontal integration refers to cooperation between two or more companies
competing in the same sector or market.
Next to vertical consolidation, the maritime industry is dominated by horizontal
integration, either through mergers and acquisitions or strategic alliances.
Strategic alliance is common in container shipping
Strategic alliances imply a cooperative agreement, between two or more
companies for the common use and integration of certain company assets in
order to attain mutual goals set Prior.
Horizontal integration
A merger implies two or more companies joining together to become one single
enterprise.
In acquisition, one company buys another, controlling its assets. The company
acquiring the other firm(s) automatically becomes the owner of it.
◦ Example; Maersk’s purchase of SeaLand

Both mergers and acquisitions harm competition when not regulated.

Horizontal integration
ADVANTAGES DISADVANTAGE

Shared financial risks/Shared profits Loss of corporate independence

Top managerial collaboration Conflict at management level
Market coverage Lack of Flexibility
Reduced risk of empty containers
Economies of scale and scope
Reduced congestion in port) (bigger
vessels + shared)
Reduced pressure on terminals
4.2 Port service Providers
The primary port service providers are:
- The port terminal operators (that operate the port or one or more of its terminals)
- Stevedores
- Ship agents
- Custom brokers
- Pilotage and towage
- Government customs service providers

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Important players in port sector
Within the sphere of the port, these players play a prominent role:
• Port owners
• Shipping lines
• Terminal operators
• Cargo owners / Consolidators
• Terminal workers

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APM Terminals

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 The APM terminal in Rotterdam Europort

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Port Authorities

The port authority also named as “Port management” or “Port administration”

It is a public or private body which is responsible for the tasks or parts of the tasks of
construction, administration, and operation of ports.

Port authorities may be established on federal, provincial, or municipal level. Port

authority is responsible for;
✓ To invest in infrastructure
✓ To set financial objectives
✓ To regulate some port tariffs
✓ To inform on-going port activity
✓ To issue terminal licenses as landlord port
Port Authorities
The main role of port authorities is either to act as landlord for a private
terminal operator or to act itself as operator of terminal handling and storage.

Income is then generated either by charging rent for terminal infrastructure

from the terminal operator or by charging handling and storage fees directly
from shipping companies.

The port authority also sets environmental standards in the port area, for
instance, restrictions on greenhouse gas emissions through ship engines.
 Port Authorities
Other roles of the port authority are:
✓ Facilitator of hinterland transport by providing inland infrastructure, e.g. road connections to
terminals or rail tracks in the port area

✓ Port planner

✓ Port infrastructure investment controller, financier, and manager

✓ Promoter of port services

✓ Regulator of marine access, port performance, port safety & security

Terminal Operators
The port terminal operator’s main occupations are;
✓ Cargo loading and unloading from ship to shore, from shore to the hinterland transport modes and
vice versa

✓ Cargo storage and handling on the terminal area

✓ Provide fast reliable cargo throughput

✓ Generate their income through terminal handling charges

✓ Customers are shipping lines

Terminal Operators
The terminal area can be owned or leased by the terminal operator from the port
authority

Sea and landside access is usually provided by the port authority.

Private terminal operators may rent port infrastructure overtake the responsibility from
the port authority to invest in ship-to-shore cranes and yard handling equipment

Terminal operators may create integration with shipping lines

Types of Terminal Operators
1. Global terminal operators as worldwide businesses. Main
players in the container handling industry are;
✓ PSA International
✓APM Terminals
✓ DP World
✓ China Merchant Holdings International
Cont’d
2. Regional or local terminal operators with focus on one or several regional
ports or cargo niches. Examples are;
✓ Eurogate with more than ten terminals in Europe
✓ Buss Port Logistics with terminals in Central Europe and Turkey,
✓ Waalhaven Group with terminals in the Netherlands
✓HHLA with terminals solely in Hamburg; and