Global and national port trends 2030
Infrastructure Talks with Yuriy Gubankov, Anastas Kokkin, Egor Grebennikov, and other experts
Deloitte presented the Global Port Trends 2030 report that explores the port industry's key trends and provides forecast to 2030. The report's objective is to provide an outlook of the port landscape for the next decade based on the analysis of different trends and developments identified in the market.
Experts who work with leading ports around the world have worked together on preparing this report using data for 2019 and early 2020. This report was developed right before the outbreak of COVID-19 hit the world economy at full force, thus making the future of maritime industry (as well as other sectors) more uncertain. However, we believe that the resulting findings will still offer useful and relevant insights in the long-term perspective. At the time of preparing this report, there was a clear trend that cargo traffic in ports around the world is confidently winning back its lost positions. We hope this document provides an anchor for the port industry leaders to steady the decision making in the coming decade.
Dmytro Pavlenko, Leader of Infrastructure Industry Group at Deloitte Ukraine, presented the key trends outlined in the Deloitte’s global report and explored examples of trends in different ports around the globe. In addition, Dmytro, together with the Center for Transport Strategies (CTS) portal’s colleagues, spoke with the leading Ukrainian businesspersons and port industry experts, who shared their insights on the global trends and own observations based on the local industry specifics.
The time of change
The traditional port world is changing, demographical, technological, and sustainability drivers are affecting the daily business and shaping several important trends. As a port authority, port operator, policy developer or organization active in the port value chain, it is important to know which changes will most likely occur and what the outcome will be for the maritime sector.
It is expected that trade routes, the competitive position of stakeholders, ecosystems, and the cargo distribution will be different as we know it today. It is important for the industry’s stakeholders to consider these trends and to prepare with appropriate policies and strategies.
Whereas other insights often rely on scenario forecasting, we opted for a more exhaustive overview of drivers, trends, and possible outcomes. This approach was especially selected since the port industry’s diverse nature does not allow to be categorized. It is an absolute certainty that a time for change has come for an entire port industry.
Trend 1: Increased focus on spatial strategy
Growing complexity of port operations leads to a diversification and intensification of land use, for which new synergies between port and city must be found.
Case example: The port of Amsterdam, 2nd largest port of the Netherlands, is faced with a strong pressure of urban growth. The management is proactively looking at strategies for maximization of port value for both the community and the businesses whilst balancing the need for more mixed land use near the city border.
The port industry in 2030:
- Successful ports will be the ones that increase their spatial productivity.
- Unsuccessful ports will have lost their reason to exist and be swallowed by their respective city.
- Future ports will build ecosystems on top of synergies between successful existing clusters in both city and port.
- The ports will be even larger drivers of innovation and revenue for their cities.
Yuriy Gubankov, Doctor of Economics, owner and president of stevedoring company Brooklyn-Kiev, president of the Association of Stevedores of Odesa Commercial Sea Port (OCSP):
The Global Port Trends 2030 report represents a clearly structured, systematic and extensive analysis of the development prospects in three main directions related to the forecast of demographic change, technological development, and environmental sustainability.
The report offers a detailed description of the port’s role as one of the main links in the entire transport chain, from the manufacturer to the end consumer, and its role in the city's life.
Egor Grebennikov, TIS:
The development of most European ports within the city borders is limited by urban development. The same applies to Ukraine. The only exception is the Yuzhny Port, as it was originally designed back in the Soviet period for transporting and handling hazardous chemical and bulk cargo. It has the potential for unlimited growth, including the port-based facilities, railway infrastructure, intermodal services, and logistics parks.
Aleksandr Smirnov, General Director of Portinvest:
It will be a long time before we see in Ukraine the trend towards relocation of ports outside the cities. Besides, it will be difficult to implement due to the lack of required investments.
Vladimir Shemaiev, Head of Strategic Planning and Development at Ukrainian Sea Ports Authority (USPA):
Approximation to the port-landlord model to ensure the development and management of ports as well as the quality of infrastructure and services. The establishment of USPA in 2013 by separating strategic port infrastructure facilities into a stand-alone enterprise marked the beginning of the transition of port industry management system to the port-landlord model widely used abroad. Its purpose is simple and clear: the state, represented by the port administration, develops strategic infrastructure and sets the rules of the game, and business entities provide services on a competitive basis. The first pilot concession agreements with USPA acting for the Ministry of Infrastructure, as well as the future adoption by the Cabinet of Ministers of the procedure for compensation of private investments in the strategic port facilities, will help in attracting experienced investors to the development of state owned assets. The aim is to define the seaport area boundaries and enhance efficiency of the state-owned berths operated by enterprises.
Yuriy Vaskov, former Deputy Minister of Infrastructure of Ukraine and former Head of Ukrainian Sea Ports Authority (USPA):
The development of port areas is important and should be implemented further. At the same time, the increased port area alone will not have a sufficient effect, since domestic ports will continue catering mainly to raw materials. To ensure the development of new production and logistics chains as well as to unlock substantial value, it is necessary to stimulate the production and development in port areas. In most successful ports across the world this is achieved by giving the port areas the status of special (free) economic zones and offering effective tools that simplify the process of setting up and doing business.
Trend 2: Increased protectionism
Protectionism, driven by growing inequalities and the shift in power balance, may result in the reshoring of industries, negatively affecting trade and increasing process complexity.
- The 2019 trade wars between China and the US directly affected throughput in the major import and export ports, as well as lowering the trade tariffs on major container routes.
- Brexit is forcing UK ports to reconsider the infrastructure in place in terms of cargo flows, throughput capacity, and resilience to external disruptions.
The port industry in 2030:
- Current dominant western ports will be negatively affected most by the trend in reshoring of industries.
- Smaller ports may benefit from the increase in nearshoring, if they can accommodate the higher frequency of sailing.
- Ports that will invest in the improvement of their inland supply chains, in order to prepare for this increased complexity, will improve their competitive position.
Anastas Kokkin, General Director of SC Container Terminal Odessa (“CTO”):
Almost all of the trends outlined in the Deloitte’s report will, to various extent, affect the Ukrainian port industry, taking into account the regional specifics and special aspects of the domestic market.
For example, the current overall containerization of cargo flows handled by Ukrainian ports, which is one of the lowest in Europe, will be a very important driver in the medium and long-term perspective that will have a positive impact on the Ukrainian container market. As an example, we can look at the export of agricultural products from Ukraine, representing a high-potential and consistently growing export sector. This segment has a huge potential both for an overall growth and a gradual significant increase in the transshipment of containerized agricultural cargo as compared to other technologies used.
With a well-planned state maritime policy, as well as the determination of an effective strategy for further development of the port industry, the forthcoming containerization of cargo flows will be of great importance. It can and should play an important role in achieving a balance between an excess capacity of port facilities and projected demand of a very promising and, at the same time, sensitive to various changes, Ukrainian market.
Trend 3: Tilt in Asia
Due to more technological driven production processes, the search for low-cost labor, and a growing Asian middle-class, trade routes, demand of ships and port locations are changing.
Case example: With the ‘Made in China’ plan, China wants to make the transformation to an innovative and smart society and to be less dependent on the West. Central to this development spurt is the application of Artificial Intelligence (AI).
The port industry in 2030:
- Changes in regional growth of demand and supply will drive the intensity of Asian port activity.
- The focus of transportation is expected to be more on raw materials and semifabricates than on finalized products.
- Ports will increasingly cater to smaller ships and shorter routes due to local production processes.
The shift to Asian countries predicted by Deloitte will not result in lower volumes of ore and grain transportation by sea from Ukraine to the ports of Southeast Asia, as they already require large shiploads.
Trend 4: Increased use of technology
Due to the aging population, a shift towards more automation is expected, resulting in increased risks of cyber security, and the need for technological knowledge.
Case example: Automation of terminals is happening across the globe, from the Hamburg-Le Havre range to the major Middle East hubs, from Chinese mega-terminals to South African IOT pilots, 5G networks in Antwerp, smart port platforms in Rotterdam, unique track and trace in Vancouver, etc.
The port industry in 2030:
- Smart-ports that are secured well have a competitive advantage.
- Successful ports have invested in technological advancements and their security to keep data and operations safe.
- Successful ports collaborate to create supply chain synergies within their ecosystem and cluster.
- Increased transparency will result in stronger and more efficient clusters competing with each other.
The report also highlighted the trend towards further development of cargo transshipment technology as well as automation and robotization of all processes.
The Deloitte’s report accurately captures the global trends that will also affect the Ukrainian port industry, whether we like it or not. There is no way of stopping the evolution of logistics infrastructure as well as the port and industrial clusters. It is driven by the market and change in public mindset.
Trend 5: Growing opportunity in niche markets
Driven by protectionism and increased use of technology, overcapacity in the container market is expected to continue in the coming years, shifting the focus towards niche markets.
- The cruise market is booming in Asia, where ports are faced with a large increase in both domestic and international demand. This is putting pressure on other port activities where growth figures are lower.
- Investment in infrastructure related to local niches like offshore decommissioning (North Sea), renewables (Europe and UK) or certain types of local produced cargo (dry bulk markets) are becoming more common.
The port industry in 2030:
- It is expected that container cargo will remain very important in the global trade.
- Stronger growth in other cargo and passenger trades will result in increased private investor interest in these sectors.
- Ports will offer more diverse activities and more specialization.
As container lines and ports face fierce competition, they are looking for new areas of investment and income generation, moving from the port to land closer to the end consumers, exporters and importers. Next in line are rolling stock, mainline locomotives, dry ports, distribution centers in the country’s interior, and last mile delivery fleet.
Trend 6: Occurrence of new product chains
Due to the increased regulation – moral social license to operate and societal demand, it is expected that sustainability will become a more important competing value proposition. Shift from big, bigger, biggest to green, greener, greenest
- The port of Antwerp and Amsterdam are actively investing in hydrogen related infrastructure to greenify the current ecosystem.
- Multiple fossil fuel terminals, both inland and in ports are seeking funding and strategies for green projects like HVO plants, hydrogen and ammonia conversions, waste to chemicals and others.
The port industry in 2030:
- Large investments in renewable infrastructure will give ports a competitive advantage.
- Successful ports will accommodate green ecosystems to stay relevant.
- Sustainability is mainly focused on by European ports, and (to a lesser degree) by American ports.
In Ukraine, there is no strategy or policy aimed at reducing the environmental impact of the port activities and enterprises operating in ports, such as adopting technologies that significantly reduce or prevent emissions of dust, soot, gases, noise, etc., and most importantly, improving the working conditions of employees.
Trend 7: Use of alternative trade routes
Due to the global rise of temperature the Northern Sea Route and the Transpolar Passage could become viable alternatives for maritime freight.
- Baltic and Russian ports are expecting a growth in traffic and are therefore investing in additional capacity in the region.
The port industry in 2030:
- New ports will develop alongside the new trade routes leading to heightened economic and geopolitical interests.
- Regions located directly on these routes will experience the biggest gains in port development potential.
- Several developed regions will be negatively affected, such as Egypt, Singapore, more central EU ports and the South and Eastern EU members states.
Trend 8: Increased strategic investment programs
Due to the changing economic balance, world powers like China are taking the initiative to secure their position in the future’s global trade networks, affecting current trade patterns.
- Investment in the One Belt One Road project occur all across the Eurasian continent, stretching from the UK to Kenia to India.
The port industry in 2030:
- The Belt Road Initiative shapes opportunities for maritime trade routes, as developing countries are improving their infrastructure.
- The more historic trade routes may experience a substitution effect towards rail due to the BRI.
- Dominant container ports in the Western World may be affected by the BRI.
The trends in Ukrainian ports will not be fully realized and they will be different from the global trends. The reason is rather trivial: reckless and ineffective rotation of managers at all levels of the maritime industry management. We are not expecting to see any reforms to simplify the conditions of work for investors and market participants, including cargo owners and charterers, let alone the lack of will among government officials to enhance competitiveness of the port industry and its service users – cargo owners and charterers.
There is also no continuity in adjusting the strategies and plans of the ministry; some processes that started very actively are abandoned half way.
Trend 9: Increased strategizing for a new competitive advantage
The demand for more sustainability, as well as technological developments, give ports the opportunity to develop new competitive advantages, decreasing the importance of location.
- There are hundreds of examples of ports realigning their strategy for either digitization, renewables, growth in strong sectors or growth in new sectors. The type of strategy depends fully on the local ecosystem and expected demand evolutions in the region.
The port industry in 2030:
- Developed ports will use technology and sustainability as an advantage.
- Developing ports are expected to initially focus on other challenges, such as further developing and expanding the basic port infrastructure.
- Regional differences are expected to grow even further.
There is a number of specific challenges faced by the container port operators. First, it is a mandatory ongoing optimization of core production and documentation processes through the adoption of technologies and various forms of digitalization. Secondly, there is the need to improve efficiency of the production areas and manufacturing capacity, without which it will be impossible to achieve competitiveness in the market and cater to the needs of high-tech clients. In addition, sustainable development with a focus on maximizing environmental performance is still not on the agenda of the Ukrainian ports. This is where the Ukrainian ports lag far behind greener European rivals.
The strategy of SC Container Terminal Odessa factors in all of the aspects necessary to promote stable development, taking into account the key global trends and envisaging respective measures that are determined by the existing specifics and projected challenges in the Ukrainian market. In our case, the parent company HHLA (port of Hamburg, Germany), which is a leading European port and logistics holding, provides us with a considerable support in this area. For example, HHLA CTA, a high-tech container terminal located in the port of Hamburg, is the first certified climate-neutral container handling facility in the world. Its operations are mainly powered with green electricity. The processes that still emit CO₂ are either gradually switched to using electric power or tested for complete transition to electric power.
As regards Ukraine, there is a number of global issues that have to be addressed promptly. These include a critical, increasing wear and tear of the strategic infrastructure that in most cases is on the balance sheet of state-owned enterprises. Due to the absurd fiscal burden (income tax + dividends), more than 90% of profits and statutory charges are directed to the state budget. For that reason, and due to the over-regulated process of replacing fixed assets owned by the state, the average wear and tear of strategic infrastructure has already exceeded 90%. This situation makes pointless the development of port terminals and other stevedoring assets, which are inextricably linked to the state-owned strategic infrastructure.
In addition, the future of the majority of state-owned stevedore enterprises still remains unclear. The implementation of concession projects in the ports of Kherson and Olvia is in itself a positive aspect. However, this includes only two state-owned stevedores with profit-generating activities. What are the prospects for the rest of the enterprises, with half of them operating at a loss? Will they be privatized? Will there be concessionaires interested in other stevedoring assets? In my opinion, the state should have withdrawn from stevedoring activities in all Ukrainian ports long ago and instead focus on the development of strategic infrastructure and more favorable investment climate for private companies.
Trend 10: Increased collaboration
Driven by regulations, pressure on margins, and technological developments, both ports and carriers are expected to increase collaboration.
- The ports of Antwerp and Zeebrugge are entering the last phase of merger.
- The port of Gent and Zeeland Seaports merged into North Sea Ports, a unique cross border cooperation.
- The Italian ports merged together in 2017.
- Florida ports have frequently chosen to work together to the greater advantage of their state. They know that funding is more readily available for projects that bring new business to the state.
The port industry in 2030:
- Optimization of supply chains and increased transparency will shape new ways of collaboration.
- Ports that can create cluster synergies are expected to collaborate, driven by efficiency demand.
- Conventional players within the ecosystem, such as ship brokers and freight forwarders, will be affected.
- The port market will most likely exist of value-added companies that have successfully adapted their operational processes to this new transparent and connected environment.
It is wrong to ignore the fact that the developed ports will shift their focus on sustainable development and improvement in the near future, while the developing ports, such as Ukrainian, will focus on further development and expansion of the basic port infrastructure.
Ukraine will automatically join the EU programs that envisage shifting of road freight transport over 300 km to rail in the next five years for the environmental and other reasons. Ukraine has one of the most developed railroad networks in Europe, inherited from the USSR. It seems that the new management of UZ has assessed the growth potential of railway container transportation that can increase at least two-fold in the next two years provided that UZ offers competitive rail tariffs as compared to road freight transportation.
Improvement of cooperation within the port community. The port industry of Ukraine operates mainly in B2B segment; however, it covers a wide range of stakeholders, including local councils and authorities, port city residents, port business entities, etc. According to the strategy, USPA should strive to enhance dialogue with various stakeholders, including the port councils, which will contribute to the improvement of the counterparty’s satisfaction. At the same time, the adoption of international performance standards will help to reduce the number of marine and industrial accidents. The combination of marketing efforts with port operators and other port business entities in foreign markets will be aimed at attracting transit cargo flows and integrating Ukrainian ports in international supply chains.
It is also worth mentioning that currently the Ministry of Infrastructure is in the process of coordinating with the state authorities a draft of updated Port Development Strategy 2038 envisaged by the law on ports. The Strategy’s objective is to define the conceptual framework of the state policy for port industry planning and development aimed to improve services, create conditions to attract private investment and increase capacity utilization of the Ukrainian seaports, harmonize the development of port-adjacent infrastructure (railways, highways) and seaport capacity, increase participation of seaports in the international supply chains. According to the document’s authors, most of the trends outlined in the report are in one way or another reflected in the new draft.
Some of the trends highlighted in the report may be subject to further discussion and development.
For example, there is no trend towards possible merging of or close cooperation between Ukrainian ports. All Ukrainian ports still face a rather fierce competition for cargo flows.
The trend towards increased collaboration is a debatable point and very unlikely for the Ukrainian ports taking into consideration the current settings.
It is mainly attributed to significant changes in the cargo flow structure and sharp reduction in transit cargo volumes, which, in turn, seriously affects the load ratio and capacity utilization.
Another very important aspect that, in my opinion, was not taken into account in the port trends report, is that large shipping companies and cargo owners are actively investing and acquiring port facilities to ensure uninterrupted operation of the fleet as well as the receipt and shipment of own cargo. This explains a significant number of container terminals owned or operated by the largest container shipping companies, such as MAERSK, CMA CGM, CHS, COSCO and others.
These trends will continue to strengthen. In addition to the technological component, it involves pricing policy as a key element that allows for comprehensive control of all cost components in the overall transport chain.
In my opinion, in the coming decade we should expect for more vigorous development of container and intermodal transportation as well as transshipment operations, including inland waterways, with further development of river container terminals and other transshipment complexes.
Creation of a surplus product in ports will result in active development of dry ports and adjacent industrial parks that will be engaged in assembling and delivering equipment to the end consumer.
The maritime industry will develop over the coming years. The future of the global ports and shipping industry is still uncertain, but four important aspects are expected to change: trade routes, the competitive position of ports, ecosystems, and cargo distribution. Each affected by underlying trends.
This interview contains the respondent's direct speech without curtailments, changes, corrections or retouching; it reflects the respondent’s subjective opinion and may not coincide with the position of Deloitte. Deloitte is not responsible for the information provided.