Affinity Research Says Timing Not Good For ‘Novaporte’

First the good news: the Port of Sydney has been noticed! Granted, UK-based Affinity Research LLP thinks Novaporte is in North Sydney, but close enough.

The bad news? Fotios Katsoulas, an analyst specializing in shipping data, has his doubts about the viability of the project, at least in the short term. In a phone interview on Wednesday, Katsoulas, who is based in London, said:

[T]here has been a lot of discussion of new projects but at the moment everybody’s a bit skeptical about financing…because the market is not doing great and the exposure…they would have would be for long term. And at the moment…there’s a lot of competition from other ports as well, so basically the timing is not the best for the project.

Container ship Barzan on maiden voyage to Hamburg.

The United Arab Shipping Company’s MV Barzan, one of the world’s first 18,800 TEU container ships, on maiden voyage to Hamburg in 2015. (Photo by Hummelhummel, CC BY-SA 3.0, via Wikimedia Commons.)

Katsoulas wrote about Novaporte in Affinity’s Macro Topics report for 19 December 2016, under the headline, “Containers: Terminals in N. America Facing Overcapacity.” After explaining the terms of the Ports America deal, announced last month, he stated:

However, of greater importance is the fact that the developers will only start building after having established sufficient customer volume commitments. As the market has been facing terminal overcapacity, this approach looks rather unusual. The current environment is not in favour of projects like this, with ocean carriers hardly inclined to commit that high volumes in advance to any port, and above all to a port that does not even exist yet.

Katsoulas told me that his analysis is based on shipping data, which shows that while imports from Europe to North America (which account for about 17% of all North American imports) were up 4% as of September 2016, exports from North America to Europe were down 1% over the same period. The gap between the two is a problem for liner operators. (Two-thirds of North American imports come from Asia, and those were up by less than 1% as of September 2016.)

As the Katsoulas explained in Affinity’s December report:

The goodwill displayed by all parties involved in this project is there to be seen, but the announcement of this project is not enough to stop concerns over the project’s viability. A business case for such a large new container terminal in Nova Scotia appears to be a difficult project at the moment, with similar projects in the region having failed to move forward for years. As an example, the competing project to develop a ULCS-ready container port in Port Hawkesbury has been running for about a decade without any tangible progress to report, even if the developers have secured backing from a major US terminal operator.

In the meantime, the only established container port in the region, Halifax, gears up for another terminal expansion, which would make it fully-ULCS ready. Since the most recent investment projects and upgrades, Halifax has been well capable of handling larger deep-draft container ships. It is a fair point that Halifax, at least under its current design, cannot handle next-generation jumbo vessels of 18 k+ Teu, but the port has had no issues with standard ULCS of up to 14 k Teu so far. Bearing in mind the smaller size of the overall Atlantic market, compared to the first-tier trade lanes such as Asia – Europe and Asia – USWC, it looks rather impossible that the trade will urgently need a purpose-built green field jumbo terminal in the short term. Therefore, the market is sceptical with regards to the volume commitment being sufficient to kick-start the construction of ‘Novaporte’ at this time. Without it, the future of the project remains uncertain.

Affinity Research is a subsidiary of Affinity (Shipping) LLP, an “independent ship broker.” A shipbroker, according to the website of the shipbroking giant Clarksons, is:

A person/company who on behalf of shipowner/shipper negotiates a deal for the transportation of cargo at an agreed price. Shipbrokers also act on behalf of shipping companies in negotiating the purchasing and selling of ships, both second-hand tonnage and newbuilding contracts.

I hear the port proponents clamoring that we’re not talking short-term, we’re looking ahead to the inevitable arrival of the 18k+ ships to which I say: in that case, why could you not give CBRM councilors more time to consider the deal with SHIP?


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