Splash Extra

Ports reassess priorities

Gone are the days of assured global throughput growth. Ports are now focused on supply chain resilience

As with every business sector, ports have had to have a rethink about their post-Covid future. After decades of sustained throughput growth on the back of globalisation, some of the biggest port names are suddenly anxious about the growing talk of a less mobile society and the reshoring of industry nearer to home soil, let alone the prospect of the worst recession since the Great Depression.

In a recent policy brief, the United Nations Conference on Trade and Development (UNCTAD) highlighted the severity of the current downturn in world trade thanks to the Covid-19 crisis with it suggested that global trade will be down by 27% in value terms in the second quarter of 2020.

The financial viability of some ports might decrease

Jan Hoffmann, chief of trade logistics at UNCTAD, says that in response to the crisis, governments and port authorities have pushed through reforms designed to keep trade flowing while still protecting populations and port workers and most of these reforms are positive not only today but may also help revive economies by facilitating trade in years to come.

“As governments and regional organisations have enhanced international cooperation and invested in further trade facilitation reforms during the Covid-19 crisis, the progress achieved should also help revive international trade. It will be important to assess what worked and what didn’t, so that we can lock-in the progress made during lockdown,” Hoffmann says.

Dust yet to settle

Isabelle Ryckbost, secretary general of European Sea Ports Organisation, reckons it is still too early to see the full impact of the pandemic on ports.

“We will have to wait on Q2 and Q3. We must allow the dust to settle before making real long term conclusions in terms of port investment needs,” Ryckbost says.

According to Ryckbost, the crucial and critical role ports have been playing during the Covid crisis in the supply of goods and essential material has come to the forefront, and more than ever it has become clear that ports are strategic assets and are worth investing in.

“What is clear is that the whole greening, decarbonisation and digitalisation agenda remains. To remain state of the art, ports will have to invest. These investments and their cost remain, even if the financial viability of ports might decrease to some extent as a consequence of the economic crisis,” Ryckbost says, adding that health might become a new driver for port investment.

Splash columnist Kris Kosmala, a partner at supply chain advisory Click & Connect, does not foresee priority changes in terms of investments in port development but has plenty to say on the issue of health.

“Those are aiming 20-50 years ahead and even a year long disturbance won’t play role in deciding on something that will produce benefits for decades. In operations, the core port priorities are safety, efficiency, security and speed. While the pandemic will not change those priorities, it will definitely change policies and procedures that underlay achieving those priorities,” Kosmala predicts.

Kosmala expects greater shore workforce health-oriented procedures to be enforced around infection detection and work position separation, amended equipment handling procedures, and more insistent change from human-to-human interactions to contactless interactions at ports for safety.

“For security, expect the addition of new protocols for ship crew infection handling, vessel quarantine, detention and release, as well as an additional extension of biohazard detection and handling procedures,” Kosmala says.

Heterogeneous landscape must change

Earlier this month, a coalition of 10 maritime groups, led by the International Association of Ports and Harbors (IAPH), urged the shipping industry to accelerate the adoption of digital port systems in order to deal with the impacts of the Covid-19 pandemic.

“The Covid-19 crisis has painfully demonstrated the heterogeneous landscape that currently exists across ports worldwide,” the coalition stated.

The coalition has listed a number of priorities including the need for harmonisation of data standards to facilitate sharing of port and berth-related master data, and the promotion of best practices and standardisation on how port communities can apply emerging technologies such as artificial intelligence, analytics, internet of things, digital twins, autonomous systems and blockchain.

The Covid-19 crisis has painfully demonstrated the heterogeneous landscape that currently exists across ports worldwide

Above all, the coalition called for inter-governmental collaboration as the acceleration of digitalisation will require change management at local, regional, and national levels. National trade facilitation committees implemented under the World Trade Organization’s Trade Facilitation Agreement could be an excellent instrument for member states and port authorities to drive the change, the coalition suggested.

Shorter supply chains

In an open letter discussing supply chain resilience recently sent out by Tan Chong Meng, group CEO of Singapore port operator PSA, the executive conceded the pandemic will likely set back the global terminal operator’s business by two to three years.

Tan also foresees that producers and manufacturers might focus more on regionalisation to shorten supply chains, manage inventory differently and reach markets more quickly, which could accelerate the move of production from China to regional manufacturing zones.

“The game changers could be intermodal seamlessness and efficiency between sea, rail, barge, truck and air, aided by digital continuity and control across transportation modes,” Tan wrote.

A spokesperson for another global terminal operator, APM Terminals, tells Splash Extra: “The Covid-19 pandemic is changing the way we think of and operate global supply chains.”

The spokesperson says his company will invest less in new terminals and focus on securing future growth of current assets in the post-pandemic period.

“It’s all about continuing automation, developing new products for customers and keeping up a high utilisation rate,” he adds.

The era of sprawling, rapid port investments across the world – as seen in the first decade of the century – had already slowed. Covid-19 serves to refocus where investments will go next.

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