Competition for ports and terminals is ongoing. According to the latest edition of the “Transport & Logistics Barometer” by the auditing and consulting firm PwC Germany, in collaboration with its global strategy consultancy Strategy&, maritime properties have emerged as highly sought-after takeover targets in recent years.
PwC estimates that shipping accounted for one in four deals in transport and logistics last year, including port infrastructure deals. The increasing trend in purchases and sales in port infrastructure has been observed since 2015, with the transaction volume totaling around $100 billion since then. 2022 marked a record year with 20 transactions recorded, amounting to a deal value of €15.3 billion.
What is driving this sharp increase in investments? Global actors recognise that ports are instruments of power and ensure economic independence. Maritime infrastructure facilitates participation in global trade, making ports and terminals vital access points to world commerce.
They are often strategically located where significant value creation already occurs or where infrastructure for onward transport of goods exists, whether via feeder or inland vessels or overland. Whoever controls these nodes can influence access to individual economies or economic regions. The pandemic period, in particular, highlighted the crucial role of functioning maritime infrastructure, as Burkhard D. Sommer, Deputy Head of the Maritime Competence Center at PwC Germany, explained.
Trade flows are shifting in favour of the Asian region, with China and India strategically driving investments in maritime assets. The largest number of transactions in this segment last year occurred in China, followed by India. However, in terms of transaction prices, individual transactions in Western countries lead the way, such as the MSC Group’s planned entry into the Hamburg port operator HHLA. The highest activity in infrastructure investments in new ports or port expansions is observed in the Middle East and Africa, where new container terminals are currently under construction, according to Sommer.
From 2015 to 2023, 74 deals were recorded in China (including Hong Kong) out of a total of 184 deals, with India following in second place. The United Arab Emirates in third; 8 transactions were announced in the country over the last couple of years, 4 of them in 2022 and another 4 last year. According to experts, the high number of investments in China is primarily due to the consolidation of port capacities, while in India, the main driver is domestic economic growth and the desire to enhance efficiency in importing and exporting goods.
PwC does stress that some European destinations remain attractive, as evidenced by MSC’s entry into the Hamburg port operator HHLA. However, overall, the importance of the Asian trading area is growing while Europe’s importance is diminishing. This is leading to changes in trade flows and adjustments to port infrastructure, as Sommer explains.
To prevent Europe from falling behind, there is an urgent need to expand both physical and digital port infrastructure. Europe must offer efficient infrastructure in both port areas and hinterlands. This requires investment in physical infrastructure and digital systems, such as cargo handling or optimised traffic and route control, to reduce transport time and costs. Sommer emphasises the significant need for investment in physical and digital infrastructure across many European countries.
There is a power struggle for Africa, with the leading global investors being the Chinese state-owned company COSCO and the Indian corporate empire Adani Group. While foreign investors’ participation in Chinese and Indian terminals is relatively low due to various restrictions, Europe is more open to foreign investments.
China already controls more than 20 ports in Europe, including Piraeus, Rotterdam, Antwerp, or Le Havre. However, it’s not only this disproportion that’s concerning, but also the fact that China is increasingly securing influence as an investor in Africa. China is currently involved in 61 port projects across 30 African countries. Meanwhile, European activity in the region is limited.
It’s evident that investments in Africa, particularly in port infrastructure, largely originate from Asia, while European companies have minimal involvement. This shift is noteworthy, considering Europe’s historical openness to investments from outside Europe. Recent years have seen a change in this approach as European countries recognise the critical importance of port infrastructure for their competitiveness and security of supply throughout the European economic area, concludes the expert.
Photo: Bharat S Raj, CC BY-SA 3.0, via Wikimedia Commons