Container terminal operator earnings have declined as slowing trade and escalating costs have brought margins under pressure. But an improving economic outlook and falling energy costs are expected to provide some reprieve through the second half of the year.
Widespread easing of port congestion reduced average container dwell times at terminals and led to a corresponding fall in storage revenues in 4Q22, according to the latest readings from Drewry’s Global Container Terminal Revenue Index which is published in the Ports and Terminals Insight. In their financial statements, both APMT and Westports confirmed that their storage income has dropped back to 2020 levels.
Meanwhile, costs continued to rise, according to Drewry’s Global Container Terminal Cost Index, due to continuing inflationary pressure particularly from escalating labour and energy costs. This together with softening revenues put pressure on operator margins, sending Drewry’s Global Container Terminal Earnings Index down 19% YoY and 21% QoQ in the final quarter of last year (see chart).
The index measures quarterly changes in industry earnings per teu, based on the financial results of selected global terminal operators. A similar approach is used to measure indexed trends in terminal operator revenue and operating costs and all three indexes are updated quarterly in Drewry’s Ports and Terminals Insight.
Looking ahead, while weakening container traffic will depress total revenues, the impact on per unit revenues will be partially offset by inflation-linked annual tariff increases. Additionally, if carriers continue to use blank sailings to manage trade-lane capacity then average terminal dwell times could settle at a level above pre-pandemic norms which would see some of the storage revenue gains maintained.
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