DP World is optimistic about future of ports industry in Asia
RECENTLY, I was approached by major global multinational logistics company DP World. It specialises in cargo logistics, port terminal operations, maritime services and free trade zones. It also owns P&O Ferries, which operates from the UK to adjacent European ports, most notably on the Dover-to-Calais route.
A representative asked me if I would like to ask CEO and managing director, Asia-Pacific, for DP World, Glen Hilton, about his views on the sectors that the group operates in. I did, and started by asking for DP World’s side of the bitter dispute it is engaged in with seafarers unions over the summary sacking of P&O Ferries’ entire workforce. That move earned it opprobrium from all sides, including the British government.
Apparently, that topic was off limits. However, Hilton’s responses to a range of questions on the more central aspects of the company’s operations were enlightening. So, in DP World’s view, what is the outlook of the ports industry in Asia? Does DP World expect continued growth in this space in the way there has been over the past couple of decades, or does it expect a levelling off at some point?
According to Hilton, DP World is confident about the future of the ports industry in Asia. “Within the first quarter of 2023, we at DP World witnessed a 1.4 per cent year-on-year growth on a reported basis and 3.7 per cent growth on a like-for-like basis in terms of gross container volume.
Strong performance
This growth was driven in part by strong performance in Asia-Pacific, where we operate at 18 ports and terminals across several markets, including Australia, China, Hong Kong, Indonesia, the Philippines, South Korea, Thailand and Vietnam.
“Despite geopolitical uncertainties, high inflation and currency fluctuations, Asia-Pacific still makes up 20 per cent of global trade, and we anticipate growing demand and business expansion into new markets to boost export volumes, especially in the second half of 2023.
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”With high-export markets such as Vietnam and Thailand seeing increased investment in manufacturing, we also anticipate an increase in intra-regional trade activity, fuelling continued growth for Asian ports. We have also seen industry players consolidating and harmonising their logistics operations horizontally to expand offerings, operate more efficiently, and capitalise on this projected growth.
“We expect much of this consolidation to happen in Asia, resulting in a greater need for providers who can offer end-to-end logistics solutions to remove inefficiencies in the supply chain and accelerate trade growth. With this shift in customer expectations, DP World’s focus has been to invest in growing our range of products and services to cover every link of the integrated supply chain. In ports and terminals, we have invested more than the overall industry in the past few years.
“For example, here in the region, our recent strategic partnership with the Indonesia Investment Authority and government-owned port operator Pelindo will double capacity at the Belawan New Container Terminal to 1.4 million twenty-foot equivalent units.”
Hilton also pointed out that, “looking beyond ports and terminals”, DP World invested more than US$10 billion in the global logistics sector between 2012 and 2023, making it one of the top five overseas logistics investors during this period alongside Amazon and AP Moller Maersk.
Key challenges
What are the main challenges facing the container ports industry? Hilton replied: “Global trade has evolved, complicated by challenges wrought by Covid-19, geopolitics and economic instability. We have also seen how inefficacies and disruptions to global supply chains affect us all, increasing the price of goods and destabilising society. Given these shifts, the key challenges are ensuring that Asian ports continue to optimise capacity, drive new efficiencies to achieve sustainable growth, and future-proof operations in a rapidly evolving environment.
“Facilitating two-thirds of global trade, ports in Asia have the ability to deal with enormous volumes of cargo, which they have achieved, in part, by adopting more efficient terminal operations. This points to a huge, continued opportunity for digital adoption in the region, and its role in driving efficiency to help port operators better serve their customers.”
As an example, Hilton referred to his company’s “revolutionary automated and renewably powered container storage system”, Boxbay, developed in a joint venture with Germany-based SMS Group. He said: “A pilot scheme has been developed at our flagship Jebel Ali Port in the UAE, but the first commercial use of which will be in our Pusan Newport Company (PNC) terminal in South Korea. The storage system will automate the container stacking process and remove the need for reshuffling, saving 350,000 unproductive moves every year and improving overall truck servicing time by 20 per cent.”
No company operating in transport and logistics can avoid environmental, social and governance (ESG) issues. Hilton noted: “According to our latest ESG report, we have successfully reduced our direct carbon emissions by 5 per cent in 2022. We have also made notable progress in other ESG areas, such as our US$8.7 million investment in global education projects, and the establishment of a three-year partnership with WaterAid to deliver comprehensive water, sanitation and hygiene infrastructure. By collaborating with like-minded partners and promoting sustainable growth in our corporate strategy, we are taking steps to ensure that we are on track to decarbonising our operations worldwide, to achieve net-zero emissions by 2050.”
Finally, on marine services, where are the main growth areas likely to be, and in what sectors? Hilton replied: “In our Trade in Transition 2023 Global Report, we reported pockets of growth in certain sectors across the world – including automotive, consumer goods, food and beverage, energy, and health and pharmaceuticals. Notably for Asia-Pacific, automotive and health and pharmaceuticals are two sectors that will see continued trade growth, and we therefore expect these to drive demand for marine services as well.”
Overall, Hilton made it clear that DP World was still very much in growth mode. It is also clear that the digital transformation of the ports and logistics sectors and continued technological advances are going to require very significant investment. What that means for the smaller players in these industries is an interesting question for another time.
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