Building Economic Capacity through Maritime Infrastructure Development – The APM Terminals Perspective

By David Skov, Country Manager, APM Terminals Nigeria

 

Introduction

The sea has been a means of access to international trade for Nigeria since 1485, when Europeans first sailed into Lagos and traded for goods from what was then the Benin Empire. Today, total world trade carried by vessels across the sea represents the overwhelming majority of the more than $19 trillion in global exports of goods by volume

More than half of all seaborne trade by value moves in containers, with emerging economies of Asia, Latin America, the Middle East and Africa accounting for most of current shipping market expansion.

Modern ports are the fundamental links in global supply chain management.As stated by the UNCTAD Maritime Review, trade contributes to economic growth, and is the most important factor for poverty alleviation in emerging economies.

Over the past 20 years, container vessels have grown from 6,000TEU to 19,000TEU capacity and are still growing. At present, the largestships calling the Nigerian port has a capacity of 4,500TEU while the Lome hub hosts vessels with capacities as high as 8,000TEU. The port infrastructure plays an important role in the size of the vessels that callits port; not too long ago, vessels with 1,700TEU capacity were common in the Nigerian ports;this has changed with the infrastructure development in the sector, and with more investments, larger vessels will call the Nigerian ports which will significantly enhance the productive capacity of Nigeria and improve the prosperity of Nigerians by increasing choice at a lower cost.

This means that only ports and terminals with sufficient depth, quay front and equipment can accommodate these new larger vessels. This also means that ports with better access roads will be able to facilitate faster, the trade requirements of the future.

The growth of the containerization of global trade and the response by the shipping lines is a major opportunity and challenge for us in the port management business, and a primary driver of continuous investment in infrastructure.

High population and wealth growth in these emerging market areas over the next four decades will lead to significant changes in global national population distribution, and the demand for consumer products and infrastructure.

Without access to international markets and products, the rapidly expanding populations of the developing world such as Nigeria’s will be denied a unique and essential opportunity for economic and social development.

Our commitment to lifting global trade is reflected in APM Terminals’ continuous investment in the infrastructure which will be required to meet the demands of projected population and economic growth over the next four decades in key emerging market.

Shipping companies have reacted to these growth forecasts by designing and investing in increasingly larger vessels, transforming the composition of the global containership fleet.

The port industry, however, does not have the luxury of being able to simply react to changes in the market environment; we must be able to anticipate and deliver the terminal capacity and productivity that our customers will require.

Our challenge is that, because of the discrepancy in lead times for construction, (a vessel construction schedule may be calculated in months, but a new container terminal design and development schedule must be calculated in years) our decisions must be made much further in advance, as long as a decade in some instances.

Beyond the sheer scale required for handling large vessels with deeper quayside depth, there are also very specific equipment and staging requirements which the new era of port design and operation must take into account.

A bold move to concession Nigerian seaports was made in 2006.

When APM Terminals won the concession to operate Apapa Container Terminal, we were faced with daunting challenges.

The yard, buildings and equipment were in disrepair, with approximately 4,000 people actually living in the terminal area, making an already poor safety environment even worse. There was significant vessel congestion, and unacceptably long container dwell times. A dysfunctional stacking system made it difficult to locate containers within the yard, and productivity in general was low.

As an organisation with safety as our number one priority, the first step we took was to ensure that the Apapa Container Terminal was a safe place for all to conduct their business. We cleared the debris, removed unauthorized structures within the terminal, fenced the perimeter of the facility for appropriate access control, and implemented internationally recognized safety and security measures.

Since 2006, we invested about $350 million US dollar in yard expansion, increased the berth depth from 10.5 to 13.5 meters, purchased container handling equipment and linked the rail tracks with the National Rail Network.

APM Terminals has also established a world-class training center and crane simulation facility for our employees in Nigeria, and also serving to train crane operators from across the APM Terminals Global Network. Our investments in information technology have seen significant improvement in invoicing and tracking of accounts payable, improving cash flow and financial performance.

With this investment in infrastructure and human capital, we are pleased to say that APM Terminals Apapa is one of the most modern and efficient terminals in Africa and a key transportation hub.

 

The Economic Impact

Ports play an important part in societies as trade enablers, employers and centers of technology and know-how. They are even more critical in developing countries, where they can facilitate economic growth and promote social development and prosperity. Efficient terminals such as APM Terminals Apapa promote economic development through higher cargo capacity and increased productivity.

Trade produces a positive impact on many areas of development across the society. It provides easier access to goods and services, technologies and knowledge. It stimulates entrepreneurship, creates jobs and fosters vital learning processes. It attracts private capital, and increases foreign exchange earnings. Most importantly, access to global trade helps to generate the resources needed to achieve sustainable development and to alleviate poverty.

The infrastructure investments made at APM Terminals Apapa in preparedness to receive larger vessels, have made it a more competitive port to call, which in turn increases employment opportunities and economic growth at the port.

Competitiveness of ports is usually measured by the Liner Shipping Connectivity Index (LSCI) which describes the ability to move a cargo from one place to another with due cost, due time and due services. Thus, when shipping lines decide to open up a new service, make extra calls to a port, or employ larger or more vessels to a service, it has an impact on a country’s liner shipping connectivity.

In China for example, foreign trade played a crucial role in its re-emergence as a global economic super power and since China’s World Trade Organisation (WTO) membership in 2001; imports and exports have each increased by around 600%

Their international trade and industrialization strategy relies heavily on container transport as an access vector to global markets. As such, container transport has been an important driver of trade and economic growth in China.

Through a focused investment strategy, China succeeded in obtaining some of the best transport infrastructure in the world; and today, some of the world’s leading container ports, such as Hong Kong and Shanghai, are located in China, including six of the ten biggest and most efficient container ports worldwide.

Before APM Terminals took over the Apapa Port, Nigeria’s liner shipping connectivity index was constant and low but has grown 76% from 13 to 23 in 2014 compared to China’s LSCI of 156 in the same year.

Thus, when container terminals invest in more capacity and higher productivity, it induces shipping lines to respond with more services, more port calls per service, bigger vessels, which in turn increase liner shipping connectivity.

An increase in liner shipping connectivity increases imports and reduces trade costs according to a study conducted by the Maersk group, which estimated econometric models for global bilateral trade and trade costs. In line with this study, the higher LSCI has made Nigeria more competitive for trade.

 

The Future

APM Terminals’ investment strategy emphasizes economically emerging and developing markets, where the need for investment in port and inland transportation infrastructure is particularly acute.

Many types of cargo which previously moved as loose or “break-bulk” shipments such as refrigerated produce, frozen foods, grain, logs and lumber are now being containerized to take advantage of efficiencies and economies of scale.

This means that the need for modern container ports and cranes will continue to grow in areas now relying on geared vessels, and expansion of existing facilities will be required to accommodate larger vessels and increased container volumes.

Emerging and high-growth markets which are currently served by existing port facilities in major cities will be compelled in many cases to develop new Greenfield ports in outlying areas with better access, in much the same way as airports have been steadily pushed farther and farther out of urban centres to accommodate space and volume requirements.

In summary, it is imperative that Nigeria continues to build the necessary maritime infrastructure required to be able to handle the growth in international trade coming our way.



Copyright Ships & Ports Ltd. Permission to use quotations from this article is granted subject to appropriate credit given to www.shipsandports.com.ng as the source.

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