Financial Analysis of Automated Container Terminal Capacity from the Perspective of Terminal Operating Company

Abstract

This study examines the financially feasibility of the proper terminal capacity by each berth size of the automatic container terminal (ACT) from the perspective of Terminal Operating Company (TOC). ACT is a highly productive and eco-friendly port facility, but it requires a lot of capital investment. Thus, the investment of ACT should consider the TOC’s operating profit preservation to determine the proper terminal capacity. In this study, we attempt to conduct financial analysis using the net present value method and estimate breakeven handling volume of five berth sizes (nine, five, four, three, and two berths). In particular, as the aim of this study is to propose a capacity model of ACT, the model must be able to adapt to a variety of situations reflecting the number of berths and financial discount rate. The case study focused on the new port of Busan, introducing ACT. As a result, the breakeven terminal capacity changes from 560,421 TEU of the 9-berth model to 633,102 TEU of the 2-berth model, applying a 4.5% standard discount ratio. In a sensitivity test considering the change in discount rate and the size of the berth at the same time, the net present value (NPV) has a positive value at the level of at least 550,000 TEU (nine berths and 3.5% discount rate) and up to 650,000 TEU (two berths and 5.5% discount rate). The method of optimizing financial efficiency by analyzing the appropriate loading capacity will be an important support tool in decision-making by providing the analysis results and reasonable information obtained during the analysis process to the TOC, the main stakeholder in the adoption of ACT.

Economic Analysis for Investment of Public Sector’s Automated Container Terminal: Korean Case Study

“…Moreover, UNCTAD presents that performance analysis is carried out to determine the effect of different levels of port capacity on the level of service provided to port's customers [15]. Park and An state that the proper port service is defined as the level of service at which port service users are satisfied or do not move to other alternative ports due to service dissatisfaction [3]. Therefore, in the view of the public sector, the proper terminal capacity means that the terminal can actually handle regardless of the service level, and the terminal capacity from a public interest point of view that simultaneously considers enhancing port competitiveness and minimizing total cost.…”

“…The construction of ACT requires much capital investment for all related stakeholders, including the government, port authority (PA), and TOC [3,20]. Total investment costs (TIC t ) are defined as an estimate of the expected cost of the project based on appropriate assumptions about the construction cost of the project, the economic efficiency of the ACT based on marketability, and future funding costs, including interest rates.…”

“…In the era of continuous low growth after the global economic crisis and COVID-19, the port development strategy should be flexibly adjusted in cooperation with the government and the private sector, and the port development strategy should adopt the concept of the proper terminal capacity. Park and An argue that an automated container terminal (hereinafter ACT) is a representative terminal operating facility that realizes the fourth industrial revolution [3]. According to Bundesministeriums für Bildung und Forschung (BMBF) report (2016), next-generation automated container hubs will use high-end technologies such as the fifth-generation network technology (5G) and automated guided vehicles (AGVs) [4].…”

“…According to Bundesministeriums für Bildung und Forschung (BMBF) report (2016), next-generation automated container hubs will use high-end technologies such as the fifth-generation network technology (5G) and automated guided vehicles (AGVs) [4]. Nowadays, 12 are semi-automated, and 11 are fully automated of the 23 automated container terminals worldwide [3,5]. ACT has brought significant benefits to the hubs.…”

“…In this study, we introduce the proper terminal capacity to test the economic analysis of ACT. The proper terminal capacity is a different concept from the maximum terminal capacity that maximizes the profits of terminal operating companies (TOC) [3] and is the terminal capacity from the viewpoint of the public interest, which simultaneously considers enhancing port competitiveness and minimizing total cost. From the perspective of the public sector, if the terminal capacity is low, the investment cost for port development increases, while if the terminal capacity is high, the port competitiveness decreases due to an increase in the logistics cost burden.…”