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Hutchison Ports navigates new market dynamics

30 September 2020: Ruth Tsim, Group CFO of Hutchison Ports, talks to ICAEW Insights about COVID, technology, the environment, freight flows and the movement of the vaccine by sea.

Have the events of 2020 impacted on your investment decisions? Have you revised your plans in the light of COVID?

The events of 2020 have presented us, and the rest of the world, with unprecedented challenges. We have all had to cope with the changes in market dynamics and make adjustments in our ways of conducting business as well as evaluating investment projects. Nevertheless, we remain confident about the strength of a rebound in global demand and this is only temporary.

In terms of investment, we have not slowed down at all due to the pandemic because port projects carry a long-term investment horizon and take years to negotiate and finalise. We are not deterred by a single event. On the contrary, we have been pursuing potential projects, for instance on 27 August we announced a port investment of US$730m to build and operate a brand-new container terminal in Abu Qir, Egypt. In May, our terminal in Stockholm, Sweden, also a brand-new one, commenced operations just three years after signing the agreement.

What technologies are the game-changers for a port operator like you? Is the beauty of these technologies not only that they deliver efficiency but also data upon which investment decisions are made?

The application of the latest technologies in our operations has been the cornerstone of our success. We are committed to investing in AI and other technological solutions to enhance our terminal operations, such as the introduction of remote-controlled equipment, autonomous trucking and the proof-of-concept for blockchain solutions, where we are working with a number of companies across the supply chain. 

As you will appreciate, we are in the volume business and we look into data for a wide spectrum of our business decisions including investments and operations. For example, our proprietary operating system – nGen (stands for Next Generation) collects the data of the containers and ships coming to our facility, puts together plans using algorithms and AI for the optimal and most productive use of our terminal. These plans will then be used in the execution of our shipside and landside operations. 

By “standardising” our systems and data, we have established a code of processes and best practices that seamlessly unifies our network. 

In early 2017, we started a five-year implementation roadmap to increase the system coverage from 55% of our total throughput today using nGen to 70% by 2022.

What green initiatives are on your agenda and what do they mean in accounting terms?

Given the growing global awareness of the impact our actions are having on the environment and a rapidly changing maritime sector placing greater focus on reducing carbon emissions, Hutchison Ports’ Group Environmental Committee (GEC) was officially established in July 2019. The GEC is tasked with the responsibility of setting up and implementing environmental policy and strategy across the group to ensure we have a long-term sustainable business.

Some of our business units have already made significant progress towards implementing initiatives which improved local environments and the GEC will align all of the Group’s port operations and move towards a common goal. 

Many of our business units regularly conduct environmental awareness campaigns to engage staff on environmental practices and promote environmental initiatives such as waste management, nature protection and conservation as well as our annual Go Green events.

To answer your question whether it pays to go green? We believe so. In 2007, we started a long-term electrification programme of our Rubber-tyred Gantry Cranes (RTGCs) across the network to replace existing old diesel-powered RTGCs with fully electric or hybrid RTGCs. We have been able to reduce 51% on fuel consumption, not to mention a huge reduction in CO2 and SO2 emissions. 

We are looking to reduce carbon emissions by investing in Liquefied Natural Gas (LNG) and electric tractors to replace diesel fuel tractors while experimenting the provision of shore power to allow vessels to switch to onshore electric power when berthed.

Given your presence across Asia Pacific, Europe, the Middle East and the Americas, what are your observations on any shift in global freight flows, any change in the types of freight and volumes? Are the numbers for particularly 2020 distorted?

We have noticed trends where import or export-focused terminals have declined slightly more than transhipment-focused terminals partly caused by lockdown measures that were implemented by most regions. While intra-Asia and transpacific trades seem less affected by the pandemic. in fact with a few South East Asian countries registered double-digital growth to the US in the first four months of 2020 YOY. Capacity has been actively managed by carriers so to keep it roughly in line with container trade.

What is your capacity to accommodate time and temperature-sensitive freight, given that there will be huge demand for a COVID vaccine when it comes? How do you account for these extreme circumstances in your planning?

We have noticed a growing trend in transporting pharmaceutical cargo via ocean freight which is cheaper (vs. airfreight) and provides better security. Across the Hutchison Ports network, efforts have been made to address the issue of availability of refrigerated containers, particularly in hinterland locations. 

The top three locations where Hutchison Ports handles the most reefer [refrigerated] containers in recent years are Hong Kong, Spain and Pakistan, while the Netherlands, Spain and the United Kingdom offer the most reefer storage in the Hutchison Ports network. For example, Hutchison Ports BEST in the Port of Barcelona, Spain, has increased its storage and connection capacity for refrigerated containers by 70% from 1,600 to 2,750 connection points, making it one of the leading reefer terminals in the Mediterranean. The terminal also offers a range of cold chain cargo services for the pharmaceutical and food product industries.