Import duties imposed by the Trump administration have caused well-documented disruptions to container services, but what is less often reported is the impact these taxes are having on U.S. ports and terminals.

In May 2024, the Biden administration imposed a 25% tariff on ship-to-shore (STS) cranes. More recently, former President Trump has floated the idea of a 100% tariff on all Chinese cargo handling equipment. With limited transparency in ongoing trade talks between the U.S. and China, it remains unclear whether those plans are still in motion.

As part of the Section 301 tariffs, additional charges are expected to be imposed in October on Chinese-built vessels. Annexes One through Four of Section 301 cover Chinese-built and -owned container ships, car carriers, and LNG vessels. Annex Five specifically targets cargo handling equipment, with initial proposals calling for a 100% tariff.

The goal of these measures is to revive the U.S. cargo handling equipment manufacturing sector. However, the port industry has responded with concern.

American Association of Port Authorities (AAPA) President and CEO, Cary Davis, told the U.S. Trade Representative: “Applying a new 100% tariff to Chinese STS cranes will not create a domestic crane manufacturing industry out of thin air… It will only increase costs for public port authorities.”

Port of Los Angeles CEO Gene Seroka added: “You don’t have a lot of choice when looking at shoreside cranes… the few that have stepped up since this discussion started taking place last summer showed costs that were two-and-a-half to three times more than what’s on the books today.”

As Washington attempts to reshape the ports and terminals industry to promote domestic manufacturing, the global port landscape is undergoing a fundamental transformation of its own.

Historically, terminal ownership evolved from local authorities to global terminal operators (GTOs). In recent years, there’s been a shift toward carrier-owned terminals.

The rise of GTOs like DP World, PSA International, and CK Hutchison began in the 1990s and early 2000s. Their growth was driven by double-digit expansion in container volumes, advancements in information technology, and most significantly, China’s accession to the WTO in 2001, according to Drewry Shipping Consultants’ senior port and terminals analyst Eirik Hooper.

The pandemic, and the record profits it delivered to liner shipping companies, gave carriers an opportunity to rethink long-term strategies. The most aggressive of these has been MSC, the world’s largest container line, which has completed four major acquisitions totaling around $30 billion in just four years.

MSC’s terminal investments are the largest among shipping lines, but others have followed suit. Hapag-Lloyd and CMA CGM, the fifth and third largest operators respectively, have also acquired significant stakes in terminal operations.

In its latest move, MSC is seeking to acquire CK Hutchison’s ports portfolio, a pioneering GTO whose global network took two decades to build.

“The first shock to the market came in the mid-2000s with DP World acquiring CSX World Terminals, followed by the acquisition of P&O Ports, and then PSA purchasing a 20% stake in Hutchison,” said Hooper.

He noted that deals of that scale were not seen again for nearly 20 years, as the 2010s saw institutional investors dominate mature markets. Since the pandemic, however, MSC and CMA CGM have been investing at a rate roughly three times the industry average, quickly climbing the GTO rankings.

MSC has focused on strategic growth markets, acquiring Brazil’s Wilson terminals and Bollore Africa Logistics, and securing a 20% stake in Hamburg’s HHLA.

Most recently, MSC’s subsidiary Terminal Investment Limited announced a $22.8 billion joint venture with investment firm BlackRock to acquire 43 terminals from CK Hutchison. The deal includes 199 berths and covers key terminals such as Cristobal and Balboa in Panama, excluding Hutchison’s Chinese operations.

Hooper noted that the CEO of the Panama Canal Authority has already voiced concerns, warning that growing market concentration in Panama’s ports could threaten competition.

Drewry estimates the Hutchison acquisition will make MSC the world’s largest terminal operator, with an 8.3% global market share.

This consolidation has raised red flags. Kun Cao, senior manager at consultancy Reddal, warned that the deal could give MSC significant operational advantages through vertical integration, allowing it to streamline operations and potentially access sensitive competitor data.

Reports indicate that antitrust authorities in China and Europe are already reviewing the transaction, with Panama now also scrutinizing the deal.

Cao stated: “MSC and its supporters argue the deal will not result in discriminatory practices. Critics stress that the scale of the consolidation could distort the competitive landscape.”

According to 2023 data, MSC would control 196 million TEU in annual terminal capacity. More importantly, it would hold carrier-owned capacity in key markets across both coasts of Panama and Mexico, as well as in the Americas, the UK, Netherlands, Spain, Egypt, Oman, Pakistan, Thailand, Malaysia, and Indonesia.

Drewry highlights that with the Hutchison acquisition, three of the world’s four largest container lines will be among the top five GTOs. Hooper argues this development should prompt all independent operators to reconsider how they can remain competitive against increasingly dominant carrier-port hybrids.

He concluded that the MSC-Hutchison deal should give “all other operators pause for thought” about how to adapt strategies to protect against what could be a major threat to their future viability.

Source: SeaNews