Singapore company focuses on terminal operations and equipment modifications
in under-the-radar ports around the world.
By Eric Johnson
Cleaning out his office in recent weeks, Larry Lam came across a paper he had written 20 years before.
Printed on yellowed dot matrix paper, with the telltale perforated tractor feed holes lining each side, the words surprised Lam for their prescience.
They described the need to focus on regional and developing ports in a changing world of shipping. Twenty years later, it seems Lam, and the Singapore company he founded in 1988, Portek, have stuck to the script.
'We have always been focused on feeder ports and developing ports,' said Lam, the company's chairman, in a September interview with American Shipper
from his office near the Port of Singapore.
Portek has done so by providing a range of services targeting the specific needs of ports that don't garner the attention of most shippers and lines. Focusing on niche trades is something that falls out of fashion when the industry is booming and dollars are funneled into the major east/west trades.
But when demand recedes and the industry faces a period of regrouping, it's often the niche ports that provide stable business.
Portek, it should be noted, is a global company. It operates five small container terminals on three continents and manages port services at another two terminals. It provides port engineering services on an even broader basis. And the company is looking for opportunities to grow.
Portek started out 20 years ago as a port engineering and maintenance firm, doing crane repair, maintenance and modifications.
In 1999, the company sidestepped into port operations, managing two terminals in the Indonesian port of Jakarta. That move ' prompted by the port authority in Jakarta, which asked Portek to become the operator ' has led the company in a new direction that is increasingly becoming its focus.
In its fiscal year ended June 30, Portek handled nearly 800,000 TEUs at its five terminals, up from 560,000 TEUs in 2007.
'All our terminals have had good organic growth,' said Eugene Tan, Portek's manager of port operations and development. 'We're pretty entrepreneurial and flexible in our business. We really localize ourselves.'
That's important, given the range of countries within which Portek runs terminals. These aren't the Singapores and Rotterdams of the world, where major operators and major lines move huge volumes of boxes. They are under-the-radar regional ports that needed to be made more efficient to unlock their potential.
Take, for example, the Bejaia Mediterranean Terminal in Algeria. Using an Algerian contact within the company, Portek was able to enter into a joint venture with the local port authority to redevelop the terminal in Bejaia, a secondary port to the country's main ocean conduit, Algiers. Now it's a viable alternative to the more well-known Algiers, where Dubai Ports World is seeking a stake. Bejaia's throughput in the last fiscal year was 105,744 TEUs, up 14.8 percent on the previous year.
'Algeria is a closed economy,' Tan said. 'They were pretty resistant to a private company running a port.'
But that has changed in the past four years. From November 2004, when Portek landed the Bejaia deal, it converted an outdated conventional terminal into a fully operational dedicated container terminal in nine months. To date, it's Algeria's first and only dedicated container terminal.
'Not only are we port operators, but our engineering services allow us to source and retrofit and bring in all the equipment in advance,' Tan said.
Before the concession Bejaia was a general cargo terminal with no ship-to-shore handling equipment, meaning only ships with mounted cranes could use the port. Now vessel turnaround times have been cut by a factor of two or three, and there is no waiting time for arriving vessels. In Algiers, congestion can be severe, with ships waiting at anchor as many as 12 days, Tan said.
Portek has another terminal in the region, in the Maltese hub of Valletta. The company's arrangement in that terminal differs from Bejaia in that it has set up a joint venture not with the government, but with a local private Maltese conglomerate.
The Valletta terminal is multipurpose, with container, conventional and roll-on/roll-off berths.
'There's a lot of ro/ro traffic and a lot of short sea shipping activity in Malta,' Tan said.
Valletta emphasizes another of Portek's niches. The terminal has two quay cranes and four rubber-tired gantry cranes, all sourced by Portek. But if the terminal were to have ordered such equipment directly from manufacturers, the wait could have been long, or even indefinite.
'If you want new equipment, there's an 18-month waiting time,' Tan said. 'It's basically down to ZPMC (the powerful Shanghai crane manufacturer). So if you're a small port and you need two cranes and six RTGs, they may not even talk to you. Within three months, we were bringing in the RTGs to Valletta.'
Valletta's container volume is small, 66,755 TEUs, but grew 28 percent in the last year. With slowing Far East/Mediterranean traffic, it's unclear whether that growth is sustainable in the near future, but Portek said Malta is a key long-term asset as it sits smack dab in the middle of the Med.
'We are well-positioned in the Mediterranean,' Lam said. 'We'll be able to leverage on that and build a bigger network there.'
It all began in Jakarta, where Portek had initially been supplying terminal equipment.
'The concessionaire asked us to run the terminals as well,' Tan said.
So now Portek runs Terminal 9 and Terminal 300 in Jakarta, which jointly had throughput of 437,361 TEUs in 2008.
'In T-300, we're doing nearly 300,000 TEUs on four hectares,' Tan said. 'It's pretty intense.'
In fact, the design capacity of the terminal was 280,000 TEUs, but Portek uses a near-dock yard to quickly shuttle away unloaded containers to clear yard space for the next ship. The company wants to import that idea to Bejaia, where it is also short on physical space.
Portek is also involved in another Indonesian terminal ' the Bantan terminal in Ciwandan, West Java, about 75 miles away from Jakarta, which handled 183,780 TEUs in 2008.
But its most recent expansions have come further south in Africa, in two ports in Gabon ' d'Owendo in the capital of Libreville, and Gentil.
Portek's arrangement in Gabon is again different. The company is not the terminal operator but instead is the port manager for the two ports, meaning it manages tug and marine services, as well as the administrative and maintenance functions. The port authority in Gabon contracts out the stevedoring to third parties.
Now Portek is looking to the Western Hemisphere, specifically Latin America. The company does engineering work in Latin American terminals, including Mexico and Panama. That's led it to search for business opportunities in that part of the world. One such opportunity may soon arise in Mexico, where the company has been lobbying the local government to allow it to handle port operations.
'We were doing equipment modifications at Manzanillo and saw an opportunity at the other port,' Tan said, without specifying the port.
Lam sees Latin America and Africa as key growth markets going forward.
'There are opportunities in both those regions,' he said.
That Portek is actively seeking new terminal operating opportunities is no surprise. The company derives 53 percent of its revenue from port operations (equipment modification, maintenance and lease financing takes up the bulk of the rest) and plans to grow that to 70 percent.
'We're targeting the Bejaia model for governments who want to keep central control of ports but also want to modernize,' Tan said.
It's been an interesting development considering that prior to 1999, the core of the business was re-engineering cranes. While it doesn't compete with or for major terminals on the port operations side, it has long provided engineering services to some of the biggest names in the business.
The company has moved or relocated 200 cranes, modified 70 and modernized another 150. It has worked with GE and Siemens to change crane drives.
Its diverse activities include everything from extending booms to widening spans on quay cranes. In Baltimore, Portek changed the span of a quay crane so it fit on the terminal's rail gauge. It also works in conjunction with insurance companies, like TT Club, to do survey and repair on damaged cranes.
The common thread among its business units is a focus on small- to medium-sized ports. It re-engineers cranes for ports that can't afford new units but need to accommodate larger ships and more cargo.
It helps finance and source cranes for under-the-radar ports in niche trades. And now it has jumped into the operation of those ports, most of which were previously operated by state-run entities and were therefore not as productive as they could be.
Portek has even started an IT division, developing terminal management, optical character recognition and GPS systems that it uses in-house in its terminals. The idea is to develop the systems, work out the kinks, and then sell the systems to other small- and medium-sized terminals.
The company is also positioning itself as a terminal consultant group, helping outside groups (like equity investors) who have taken stakes in terminals in recent years but have little operational knowledge of their investments.
Portek's model could be especially prescient over the next couple years, with global cargo volume expected to stagnate or decline. Smaller terminals might find themselves better able to cope with the downturn than bigger ones.
Put it this way: if you're expecting to see 5 million TEUs move through your facility and it drops to 4.5 million next year, that's 500,000 TEUs of lost revenue you've got to account for. But if your record volume is 200,000 TEUs and it drops the same percentage, a loss of 20,000 TEUs is a little easier to swallow.
Lam said he doesn't always understand what drives the major terminal operators to expand the way they do. He pointed to COSCO Pacific's recent concession to operate a container terminal in Athens, a bid the port said would be worth almost $7 billion over the 35-year concessions period.
'While it's going good, it's great, like it's turbocharged,' Lam said. 'But that's not our game. When the big boys are there, we're out. We're small and we could never go that way. We focus on knowledge and solutions. And we realize speed is of the essence.'
Another area where Portek could prosper is on the financial side. It has long helped ports finance equipment, but those services could be particularly key in a climate where banks are reticent to make loans.
'Banks may not want to lend directly to ports as easily,' Lam said. 'Portek could be a facilitator. The equipment could be the collateral.'
Lam said the inherent nature of shipping and trade will always lend itself to opportunities, even in dour economic times.
'There are always imbalances in the world,' he said. 'There's always surplus in one place and scarcity in another. We match the surplus with the scarcity.
'We are on both sides, so we stay integrated. We understand the problems of the terminal owners and so we approach things in a more holistic manner.'