SCDigest editorial staff

The News: Port/terminal operator Pensinsular & Oriental Steam Navigation Company attracts high value in bidding war for takeover of the world’s fourth largest terminal operator by container volume.

The Impact: Port/terminal values surge as most see continued aggressive growth of global trade; most see little impact on transportation costs; “privatization” of global ports continues; terminal operators and shipping lines continue to “bulk up.”

The  Story: The globalization of the supply chain shows up in many places, the latest being in the world of finance, where there is a strong bidding war for terminal operator Pensinsular & Oriental Steam Navigation Company.

P&O, headquartered in the U.K. but with terminal operations across the globe, is being pursued by both Dubai Ports World and PSA International of Singapore. Dubai Ports had recently offered about $5.86 billion for P&O, a bid recently trumped by P&A by about 7%.

As the Wall Street Journal notes, “The bidding has led to some concern that retailers and other big shippers might see costs rise as operators raise rates to find acquisitions. But many shipping experts say the business will remain under competitive pressure as ports try to draw traffic.”

P&O operates 29 terminals in 19 countries, with operations of some kind in over 100 ports. The bidders not only see value in the assets -  given the rapid growth in container movements is likely to continue -  but hope to have larger global networks for use in packaging rates and gaining more leverage with the shipping lines. The shipping lines are also consolidating, and using their clout to beat down terminal handling rates.

Research by Drewry Shipping Consultants predicts that container volumes worldwide will grow at annual rate of 8.9% from 2005 to 2010. However, those growth rates vary by region, from 11% growth in the Far East (China) to only 5.8% annual growth at U.S. ports.

Though U.S. ports are mostly government owned, with private ownership of individual terminal operations, an increasing number of countries worldwide are privatizing the ports themselves. China, for example, has allowed many of its ports to be at least partly owned by outside corporations.

Should shippers and importers care about the mergers an acquisitions occurring among the ocean shipping and port/terminal operators? What do you see as the impact? Let us know your thoughts.