It is well and truly the era of the mega-ship - of the nearly 1.7 million TEU of capacity to be delivered by the end of 2017, 55 percent, or 920,000 TEU, will be distributed on 54 vessels of 14,000 to 21,000 TEU. These giant vessels will operate on the Asia-Europe trade within the new alliances, cascading capacity downstream while making fewer direct port calls and driving up transhipment volume that hub ports will struggle to handle. For lines, the potential productivity and unit cost savings from mega-vessels are clear….provided cargo volumes are assured. But, the increased scale of vessels and increased concentration of alliance cargo volumes (i.e. larger hub operations), creates considerable challenges. For ports and terminal operators the productivity upsides from the rush to “economies of scale” are less clear, especially when the gains are set against the capex costs. The continued subsidization and over-capacity of ship yards further clouds the picture – too many under-priced mega-vessels looking for owners; as does a transhipment model built around cross-subsidized lifts - if transhipment tariffs and gateway tariffs more accurately reflected the costs of provision, would the liner networks be organized in the same fashion?

1. Inc. Langdon Seah | Hyder Consulting | EC Harris
“Port Productivity in the Mega-ship Era”
TPM Asia Conference 2017
October 10-12, Shenzhen
Dr Jonathan Beard
11th October 2017

2. © Arcadis 2017
▪ Major shipping lines want high performance / high port productivity
- > 35 moves per crane per hour, 230-250 moves/ship hr @ berth for
larger vessels
- Reliable berth windows and turnaround time
▪ Major hub ports (& some gateway ports) must efficiently accommodate variety of vessels sizes
(e.g. from feeder / barges to mother vessels) - flexibility in operations
▪ Risk/reward: investment requirements are higher but in the absence of base-load
import/export (IE) cargo, incentives for largest vessels to call may be insufficient – challenge for
smaller transhipment hubs, less so for the major gateway terminals…and major TS hubs?
▪ Infrastructure and services:
- 18m water depth;
- long straight / contiguous quays (1,000m or longer) to
provide maximum flexibility
- adequate number of super post panama cranes: outreach
for ≥23 TEUs across
- land: adequate yard to support quay face operations & large
box exchanges (ideally 600-650m average yard depth /
m quay)
- inland connectivity: gate, road, rail, barge, etc. (for
gateway ports)
- capacity to accommodate all alliances partners
Source: World Maritime News; ICF; Arcadis
Port Planning & Performance for Mega-vessels & Alliances
Opportunities & challenges for major ports

3. © Arcadis 2017
And Then There Were Three
Safer Together - Economies of scale via larger vessels AND larger alliances
▪ New alliances to defray risk of introducing larger vessels
during weak demand conditions…
▪ …and secure enough numbers of vessels that are of same
magnitude of size to offer fixed or weekly schedule
▪ Recent M&A (CMA CGM–NOL; COSCO–CSCL; Hapag-
Lloyd – UASC; Maersk – Hamburg Sud) leave 3 main
alliances:
– Ocean Alliance
– The Alliance
– 2M
▪ Fully accommodating an alliance hub in the SE Asia
transhipment market (the world’s largest) may require 7-9
million TEU capacity…(or 3-4 mil TEU with split hub)
▪ To enter market, your capex requirements are up (build for
mega-vessels & capacity) but unit revenue is down (cargo
handling) – how will terminal operators maintain
margins…..especially potential new entrants?
Source: Alphaliner
FE-Europe Capacity
Share by Alliance
FE-N America
Capacity Share by
Alliance

4. © Arcadis 2017
Box Moves Get More Complicated with Alliances
Volumes per call increase….as does complexity
▪ Inter Terminal Transfers
(ITT) are becoming more
complex
▪ Challenge for ‘split
ports’…..and also ports
with different terminal
operators
▪ E.g. Busan (spilt)
compared with Hong
Kong or Jebel Ali; Hong
Kong (several operators)
compared with Jebel Ali
or Singapore
▪ Little upside if call size
barely increases
AverageCallSize(Moves
perCall),SEAsia
Call Size Increases
with Vessel Size…
….to a Point
Vessel Size,
SE Asia

5. © Arcadis 2017
6,000 moves per day?
Dependent on many factors, some outside the control of the port
▪ Requires 250 moves per hr (MPH) over three
shifts for 24 hrs on a consistent basis = 8
cranes, at 31-32 moves per hr
▪ Mega-vessels only 25% longer than 7,400-TEU
vessel but 200% more capacity, yet vessel
length limits ability to deploy significantly more
cranes
▪ 8 cranes / 400m or 1 / 50m: a high crane density
▪ And travelling distances increase by 40-50%
for mega vessels (13,000 TEUs+ vs Panamax)
due to their scale
▪ Crane MPH is reduced unless lines proactively
plan stowage accordingly
▪ Regardless of infrastructure & productivity,
6,000 moves is dependent on demand and
position of port in service: e.g. Singapore vs
Jebel Ali vs Gdansk (last port N Europe) – ratio
of call size can be as high as 1.0 vs 1.8 vs 3.5
for the same vessel
Source: Arcadis; Selected SE Asia Ports,
2016

6. © Arcadis 2017
6
0
100
200
300
400
500
600
700
800
900
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
Market Share (by Capacity), LH Axis HHI (cumulative), RH Axis
Mega-vessels also help drive consolidation
Industry is fragmented, but for how long? Shift of power to the lines?
Notes: Herfindahl-Hirschman index (HHI) measure for market concentration widely used by EU Directorate General for Competition, U.S. Federal Maritime Commission
(FMC) and U.S. Department of Justice. Calculated by squaring market share of each firm competing in a market, and then summing the resulting numbers.
U.S. DoJ considers a market with HHI <1,000 to be a competitive; 1,000-1,800 to be a moderately concentrated marketplace; and > 1,800 to be a highly concentrated
marketplace. Mergers that increase the HHI by more than 100 points in concentrated markets generally raise antitrust concerns
▪ Top 5 operators still only
account for ~58% of
capacity
▪ Herfindahl-Hirschman index
(HHI) is 820 (up from 767) –
still below ‘trigger point’ of
1,000
▪ 960 post COSCO + OOCL;
Maersk + Hamburg Sud
▪ Much higher for certain
routes, where cabotage
restrictions limit competition
▪ Regulators will be
increasingly wary
Market Analysis top 20 Carriers
Source: Alphaliner; Arcadis

7. © Arcadis 2017
Ports of the Future: Doing the Same a Bit Better, or Paradigm Shift?
…and who is willing to pay?
▪ More of the same but a bit better (e.g. VICT,
Melbourne; Maasvlakte 2, Rotterdam)…
▪ …or a step change in design & operations?
▪ Who wants to be first mover?
▪ But what is the return on investment
and are customers willing to pay for
superior productivity?...
Source: APMT; GRID Logistics Inc;

8. © Arcadis 2017
Can Terminal Operators Maintain Margins? A Rebalancing?
What impact from mega-vessels, alliances, increased capex requirements and downward
pressure on terminal charges?
Source: Annual Reports; Arcadis Analysis
Notes: EBITDA / Revenue; recent PSA performance to be confirmed
-30%
-20%
-10%
0%
10%
20%
30%
Maersk
CMACGM
Hapag‐Lloyd
APL
Hanjin
COSCON
MOL
OOCL
KLine
NYK
2009 2010 2011 2012 2013 2014 2015 2016
0%
10%
20%
30%
40%
50%
60%
70%
APMT HHLA Eurogate DP World ICTSI HPH HPH Trust CMHI PSA
EBITDA Margin - CT Operators
EBITDA Margin - Lines

9. © Arcadis 2017
Wrap
▪ For lines, the potential productivity and unit cost savings from mega-vessels are
clear….provided cargo volumes are assured
▪ But, the increased scale of vessels and increased concentration of alliance
cargo volumes (i.e. larger hub operations), creates considerable challenges
▪ For ports and terminal operators the productivity upsides from the rush to
“economies of scale” are less clear, especially when the gains are set against
the capex costs
▪ The continued subsidization and over-capacity of ship yards further clouds the
picture – too many under-priced
mega-vessels looking for owners
(cf the airline industry)
▪ As does a transhipment model built
around cross-subsidized lifts – if
transhipment tariffs and gateway tariffs
more accurately reflected the costs of
provision, would the liner networks be
organized in the same fashion?

10. arcadis.com
T +852 2263 7300
M +852 6095 8434
E jonathan.beard@arcadis.com
Arcadis
38/F AIA Kowloon Tower
Landmark East
100 How Ming Street
Kwun Tong, Kowloon
Hong Kong
DR JONATHAN BEARD
Executive Director; Head of Transportation & Logistics, Asia;
Co-chair Belt Road Alliance
Thank you – Any Questions?

11. © Arcadis 2017
Our Global Reach
North America
∼6,800
United
Kingdom
∼3,600
Continental
Europe
∼5,200
Middle East
∼2,200
Asia
∼5,900
Australia
∼1,300
28,000 people │ 400+ offices │ 40+ countries │ 30,000+ projects
Australia
Abu Dhabi – UAE
Bahrain
Belgium
Brazil
Brunei
Canada
Chile
China
Czech Republic
Dubai – UAE
France
Germany
Hong Kong
India
Indonesia
Italy
Jordan
Kazakhstan
Korea
Macau
Malaysia
Mexico
Mozambique
Netherlands
Oman
Peru
Philippines
Poland
Qatar
Romania
Russia
Saudi Arabia
Serbia
Singapore
Slovakia
Spain
Switzerland
Taiwan
Thailand
United Kingdom
United States
Vietnam
Head Office
ARCADIS NV
‘Symphony’
Gustav Mahlerplein 97-103
1082 MS Amsterdam
P.O.Box 7895
1008 AB Amsterdam
The Netherlands
+31 (0)20 2011 011
info@arcadis.com
www.arcadis.com
Our global network enables us to seamlessly bring our knowledge and experience of
projects worldwide and apply that expertise to specific local needs and situations
Latin
America
∼3,600

12. © Arcadis 2017
Our Clients