APM Here for the Long TermWed, 11/01/2017 - 16:37
Amid the surprise results of the Brexit referendum and the US presidential elections in 2016, the global business community is understandably wary of any potential for political upheaval. With Mexico’s 2018 presidential elections around the corner, questions are being asked about the impact from a change in administration on various projects, including high-profile infrastructure developments.
José Rueda, Managing Director of APM Terminals, is not concerned. This despite a US$500 million investment in the first phase of Latin America’s first automated terminal TEC II at the port of Lazaro Cardenas on Mexico’s Pacific coast and the US$400 million development of the second phase due to start in 2021. He dismisses the possibility of the political context interfering in the company’s investment plans. “We have made a commitment to Mexico for at least the next 30 years and we plan to work with every government administration that is elected within that time,” he says. “The most important thing we can do to mitigate any impact is maintain open communication channels with authorities and adhere to all the requirements expected of us during our tendering process.”
APM has survived some stormy waters in the development of TEC II. In 2012, APM signed a contract with infrastructure giant ICA for the construction of the megaproject but ICA subsequently found itself in serious financial difficulties that forced it to pull out of the project. APM announced in January 2016 that it would go ahead with construction without ICA and the first shipment was received in February 2017. The setback, says Rueda, was unfortunate but unavoidable. “It was one of the most challenging problems we faced but ultimately we completed the project, albeit one year later than planned,” he says. To address problems, APM tries to preserve constant communication. “As a company working in 59 countries and operating in over 64 ports, problems arise.
Ultimately, we follow the same process of communication and negotiation and we have the background and experience to handle these problems.”
With the introduction of the Energy Reform in 2014, the government is now beginning to place greater emphasis on port infrastructure, meaning opportunities for more terminals. But Rueda does not necessarily believe the increase in terminals equates to price hikes but rather the opposite. “The industry will be driven by competition, driving prices down,” he says. “Terminals will be incentivized to strengthen operational and customer service as the main drivers of their growth.”
Another driver of this growth will be the need for logistics hubs deriving from the government’s creation of ZEEs. Opportunities, he says, will be based on the industries set up within the zones, so the government should evaluate whether incentives should be based on the automotive industry or agriculture for example, depending on saturation. Although Rueda does not expect APM to be considerably involved in the initiative in the near term, ultimately these zones will require strong logistics services to remain competitive. “In any case, APM has a direct rail connection operated by Kansas City Southern Mexico to the Cuautitlan Izcalli facility, located in the State of Mexico, in the heart of the country,” says Rueda. “This will be a leverage for growth.” Being the only facility in Mexico with the capabilities to receive Maersk’s Triple-E vessels that have a capacity of more than 18,000 TwentyFoot Equivalent Units (TEUs) gives APM Terminals another competitive advantage.
All these factors convince Rueda that APM’s ambitious TEC II facility will achieve its objective of becoming a logistics hub, not just for shipments from the Far East but also as the preferred terminal to send and receive deliveries across North and South America. For the moment, his priority is to ramp up the recently minted first phase. “We will analyze customer service levels and the requirements of final customers, and right now this is our priority,” he says. “The plan for phase two is already defined so now we have the freedom to focus on our existing facilities.”