Ports chief urges shareholder patience

Some shareholders in ports may have to be patient and accept lower returns while ports adjust to a new environment, says Ports of Auckland managing director Jens Madsen.

A surplus of container shipping could be compounded as capacity is forecast to grow faster than cargo traffic, Madsen told the fourth Intermodel Asia 2010 conference in Sydney last month.

This was a new global dynamic requiring a change in focus from everyone in the supply chain.

"We must all do things differently in the future - there is no going back to where things once were, new standards have been set.

"Shareholders will need to adjust: port managements must necessarily generate continuous improvement in productivity and unit costs, but in the interim, some shareholders may well have to be patient and accept lower returns."

Ports were businesses with a very long-term horizon and Ports of Auckland was blessed with a compatible shareholder in Auckland Regional Holdings, the investment arm of the Auckland Regional Council.

Madsen said that the new environment required a different approach to the management of ports' highly capital-intensive assets.

"Capital expenditure must be controlled," he said. "Looking forward, I believe that many ports will only be prepared to make major investments on the back of very firm, long-term customer commitments and contracts, not in a speculative fashion, which probably has been the case, to some extent, in the past."

Variable costs, including labour, would also come under increased scrutiny, with new, more flexible labour models needed for ports to remain competitive.

About 38 per cent of all of imports and 23 per cent of exports cross the port's wharves each year.

- NZPA