Hong Kong's Hutchison Port Holdings and Australia's newest port operator, International Container Terminal Services (ICTSI), are expected to hold talks about jointly operating on the east coast to compete with incumbents Patrick and DP World Australia.
"There is some sense in having the discussions," one person close to the port operators said, reported The Australian Financial Review.
Philippines-based ICTSI was awarded the rights to operate Melbourne's third container terminal at Webb Dock earlier this month.
ICTSI is believed to have offered a substantially larger amount of money to the government than its rivals for the contract to build and operate the port, edging out three competitors, including Hutchison.
Matt Crowe, transport analyst at Commonwealth Bank, said he expected Hutchison and ICTSI to form an east coast alliance at some point. "I'm sure they'll give each other a phone call."
Other analysts have speculated that Hutchison may acquire ICTSI once it understands what terms the Philippines group offered the Victorian ¬government to secure its contract.
Analysts say ICTSI will find it tough to compete against Patrick, DP World and Hutchison (which operates terminals in Brisbane and Sydney) on its own.
Operating only one port will prevent ICTSI from offering special services at other ports to compensate for any delays customers may experience at its Webb Dock terminal.
ICTSI will also have to compete against automated ports in Brisbane and Sydney.
Fully automated ports are not necessarily the most efficient, according to Crowe, who points out the Port of Melbourne – which does not have automated terminals – is the most efficient port in Australia. Automation does, however, provide a "solution" to difficult industrial relations environments, Crowe said.
Patrick's owner, Asciano, is in the process of automating its Port Botany terminal, while DP World chief executive Paul Scurrah this week confirmed the group is considering automating its Sydney operations.
Port operators also face the prospect of higher rents as more ports are privatised. Chris Scougall, Commonwealth Bank's managing director of transport, said the Port of Melbourne is likely to be the next to be sold, but does not expect further privatisations from Queensland or NSW until after state elections.
The "stunning" US$1.62 billion recently paid by Hastings Funds Management and China Merchants for the Port of Newcastle underscored pension funds' demand for assets with defensive revenue streams, whether they are container ports or bulk ports, Crowe said.
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