A $2 Trillion Reckoning Looms as Ports Become Pawns in Geopolitics

Global ports responsible for handling 80% of the world’s $25 trillion in annual merchandise trade⁠ are having to undergo costly and painstaking conversions to digital technologies, automation, and green energy, with a price tag estimated at €200 billion ($216 billion) a year in new investment, for a total of €2 trillion over the next decade.

By Bloomberg News

For centuries, control of the world’s biggest shipping centers helped expand empires, spark and settle wars, ease poverty, and build middle classes while giving international companies access to cheap workers and cash-flush consumers in distant markets.

Along the way, maritime ports evolved from trading posts and naval bases into economies within economies that supercharged globalization, becoming vital junctions for energy flows, hubs for infrastructure like rail lines and power stations, and clusters for industrial production, warehousing, and distribution.

Now, both old and new gateways for seaborne commerce—responsible for handling 80% of the world’s $25 trillion in annual merchandise trade—are economic fortresses in the great-power struggles of a multipolar world.

Meantime, they’re having to undergo costly and painstaking conversions to digital technologies, automation, and green energy, with a price tag estimated at €200 billion ($216 billion) a year in new investment, for a total of €2 trillion over the next decade.

“It’s now much clearer that ports are geopolitical assets and that emphasis hasn’t always been there,” said Peter de Langen, the owner and principal consultant of Ports & Logistics Advisory, based in Malaga, Spain.

A closer inspection of eight of the world’s most dynamic ports helps crystallize the complicated geo-economic strategies at play—the commercial ambitions for manufacturing prowess, the jockeying for influence in volatile regions, and the race to mitigate risks stemming from climate change or scarce labor.

Shenzhen Retools for Auto Exports

On the path to prosperity, Chinese President Xi Jinping once said a nation “must first build ports.”

China’s status as the factory-to-the-world wouldn’t be possible without its parallel role as a maritime juggernaut. Of the world’s 10 biggest container ports, seven are in China and none are in Europe or the Americas, according to the latest ranking from Lloyd’s List.

Lately, China’s rapid ascent to become the world’s biggest car exporter has unsettled rivals that worry about a new wave of job losses at the hands of an advanced manufacturing megapower. The port of Shenzhen will only add to their anxiety.

Shenzhen Yantian Port began car exports from a new terminal called Xiaomo in January 2023, with 20,000 cars shipped in the first year. This past January, the BYD Explorer 1⁠—the first cargo ship made by a Chinese shipbuilder specifically for exporting Chinese cars⁠—called into port to pick up vehicles bound for Europe.

The ship was built for China’s biggest electric vehicle maker BYD Co., which dominates the domestic market and is boosting exports and overseas investments. In February, Shenzhen announced a plan to expand its automaking capacity, including supporting the construction of the second phase of an industrial park that BYD calls home, tailoring production for overseas markets, and establishing second-hand car export businesses.

The second voyage of the BYD ship was to South America, docking in Brazil in late May. The third left Xiaomo port in early July, heading for Europe again and taking total exports so far this year from this one port to more than 30,000 vehicles.

But that’s just a start. BYD has another seven car-carrying ships on order and in July announced a 6.5 billion yuan ($900 million) investment into phase 3 of the industrial park.

As for the port, which is owned by the city, it’s just 25 kilometers (15.5 miles) from BYD’s headquarters and one of its main production sites. The new factory will be even closer, meaning it will take just 5 minutes for a new car to get from plant to port.

The aim is for as many as 100,000 cars to be shipped from Xiaomo this year, with that rising to a million vehicles a year by 2030, according to the city’s government.

“The combination of a private firm, an industrial zone, and a state-owned port all coordinating so closely is a textbook example of China Inc. in action,” said Jacob Gunter, lead analyst at the Mercator Institute for China Studies in Berlin who last year wrote on how China’s Belt and Road Initiative is shaping global trade and ports.

–James Mayger in Beijing

India Aims for Slice of the Export Pie

A few hours north of India’s financial capital of Mumbai, a fleet of ships is set to start dredging an otherwise pristine coastline. With the blessing of New Delhi, they’ll soon start reclaiming land for what’s to be India’s largest, deepest, and most expensive port to date.

The port at Vadhvan will be a behemoth, with nine one-kilometer-long container terminals, with special berths for wheeled and liquid cargo and one for the coast guard. Projected for completion toward the end of the decade, the $9 billion port will have capacity to handle some 23 million container units, making it one of the 10 largest ports in the world, according to the project’s backers.

That scale matches the ambition of newly reelected Prime Minister Narendra Modi’s bold⁠—and fledgling⁠—goal to turn India into a manufacturing and exporting powerhouse.

“You can only drive initiatives such as ‘Make in India’ so much without mega ports,” said Gagan Seksaria, director of global investments at Red Sea Gateway Terminal International, a Saudi terminal operator, referring to the Indian government initiative to develop homegrown manufacturing. “As a port investor and operator, we will be watching this development with keen interest.”

Vadhvan will have a natural depth of 20 meters (66 feet)⁠—necessary to receive some of the world’s biggest ships. Currently, some of the largest container ships have been forced to skip India because none of its existing ports are as deep. They instead dock at Colombo, Dubai or Singapore, and transfer cargo to smaller ships bound for India.

The result has been higher logistics costs for Indian shippers⁠—by as much as $100 to $200 per container, according to Unmesh Wagh, chairman of the Jawaharlal Nehru Port Authority, or JNPA, the majority shareholder of Vadhvan.

Vadhvan will be a starting point for the so-called India-Middle East-Europe Corridor, a planned economic link that’s aimed at developing new trade routes between the regions. Wagh said the JNPA has undertaken a first step in developing the corridor by working with port operators in the Middle East.

The massive port hasn’t been without opposition. Sixteen fishing villages fear their livelihood will be impacted. But the approval of the project by India’s cabinet in June marked the clearing of a major hurdle.

“We need this infrastructure,” said Shailesh Garg, director of Drewry India, a maritime research and consulting firm. “Without this, it will be very difficult to position ourselves as an alternative to China.”

–P R Sanjai in Mumbai and Dan Strumpf in New Delhi

Chinese and US Ports Bristle in Poland

At Poland’s Gdynia port, officials at International Container Terminal Services Inc.’s Baltic Container Terminal (BCT) were recently trained to recognize and fight acts of sabotage.

That’s because the facility is part of a designated NATO gateway and since Russia’s February 2022 invasion of Ukraine, the US military and NATO have been using it to load and unload Abrams tanks, Bradley fighting vehicles and howitzers for drills in Poland, as well as weapons bound for Ukraine.

Not far away is a quay controlled by Hutchison Port Holdings, a unit of Hong Kong-based CK Hutchison Holdings. For US and Polish authorities, that Chinese presence has become increasingly uncomfortable as the Beijing-Moscow relationship strengthens.

Hutchison’s Gdynia Container Terminal sits on almost 20 hectares (49 acres) with more than 600 meters of docks, adjacent to BCT and also Poland’s naval port, where NATO frigates are being built. Only a 270-meter-wide canal divides the Chinese facility and BCT, while a metal fence separates it from a publicly accessible berthing area.

“The critical importance of the infrastructure that supports global trade has never been more apparent,” said Nicole Gorton-Caratelli, a trade expert with Bloomberg Economics

China’s proximity to a US Army outpost and key port in eastern Europe have been obliquely raised by US representatives in Poland. US Ambassador Mark Brzezinski said in a letter to the Polish parliament last year that, “given the war on Poland’s eastern border, this is the perfect time to secure Polish critical infrastructure and protect the nation from certain countries making high-risk/non-transparent investments in, or purchases of, critical infrastructure.”

To increase control over the Chinese facility in Gdynia, Poland is considering classifying the port as “critical infrastructure,” which would oblige the owners to be transparent in their operations and cooperate with the government on security issues. Relevant legislation is being prepared.

–Agnieszka Barteczko in Warsaw

Antwerp Aims to Become Europe’s Green Corridor

At the sprawling Port of Antwerp Bruges, a kilometer-long concrete wall that holds back North Sea storm surges is adorned with graffiti showing marine life interacting with land animals—a monument to the economic fragility posed by climate change.

On one side of the 10-foot wall is the tidal Scheldt River. On the other is northwest Europe’s third-largest oil refinery run by TotalEnergies SE, a major source of the building blocks of a consumption-led economy: petrochemicals used to make food wrappers, plastic bottles and other kinds of packaging materials.

With a skyline of old smokestacks and new wind turbines across twice the square mileage of Manhattan, Antwerp’s port and the 1,400 heavy-industrial companies around it are spending billions of euros to shift away from using fossil fuels.

At a container yard run by Dubai-based DP World, the investment plan totals €200 million ($218 million) from 2020 through 2026 and will convert from old petrol-powered “straddle carriers” operated by drivers who move containers to new automated stacking machines that run on electric power.

“Customers today are demanding to know where they can secure a full green corridor,” says Nawaf Abdulla, the CEO of DP World Antwerp.

The factories surrounding Antwerp’s quays including Germany’s BASF SE and Minnesota-based 3M Co. are connected by pipelines that flow with natural gas, steam, ethylene and hydrogen chloride. Now, Antwerp is trying to position itself to be the leading importer of green hydrogen, and is cutting deals like a €250 million partnership with Namibia.

The Belgian government recently named Fluxys as the main operator to develop and manage a hydrogen transmission grid with the recently merged Antwerp and Bruges port as an important entry point in the European Union.

“We face a tremendous challenge,” says Didier Van Osselaer, Antwerp’s sustainable transition manager. “The scale here includes more than 1,000 kilometers of pipeline beneath the ground of the port itself and the outbound and inbound pipelines that connect the port to the rest of the world⁠—so this is also a very big enabler for our transition.”

After Russia’s invasion of Ukraine exposed Europe’s over-reliance on fossil fuels from a geopolitical rival, it’s a shift that can’t come soon enough.

–Brendan Murray in Antwerp

Singapore’s New Port to Be ‘Critical Engine’ of Economy

Singapore sits amid one of the world’s most critical trade routes, with a third of global shipping containers and a quarter of the planet’s oil trade passing through the Strait of Malacca.

Its strategic location, business-friendly policies, efficient port and stable government have made it the world’s busiest trans-shipment hub⁠—the maritime version of a central rail station where goods produced in the region are offloaded and re-routed on bigger ships that travel the globe.

To stay on top, the port of Singapore is preparing to move a whole lot more cargo with a lot fewer people. And to do that, it’s turning to robots.

Eventually, the operation will move to a new site on the west side of the island city-state, spending S$20 billion ($15 billion) to create what Singapore says will be the world’s largest fully automated terminal.

The new port “will be a critical engine driving the Singapore economy,” then-Prime Minister Lee Hsien Loong said when he opened the first stage of the development late in 2022. “It will reinforce our status as an international maritime center and enable many related industries to flourish.”

The site will be capable of moving 20 million 20-foot equivalent container units, or TEUs, a year by 2027 and 65 million by the 2040s. At that point, it’ll be finished with 66 berths on more than 3,000 acres of land. That’s almost double the capacity of the current port, which moved a record 38.8 million TEUs last year.

On a recent visit, officials showed a video simulation of the automated port⁠—with operations resembling a giant, largely autonomous Amazon fulfillment center.

The port already has more than 200 “automated guided vehicles” operating continuously to move containers around the port, according to a spokesperson. It also has commissioned two completely automated quay cranes, which will gradually replace the manual cranes that lift containers on and off ships.

When completed, the larger, automated port will be able to deal with even bigger ships, helping prevent the long queues that recently clogged the waters around the island.

–James Mayger in Singapore

Los Angeles Green Goals Up in the Air

The San Pedro Bay ports in Southern California have a bold plan to decarbonize—as long as politicians don’t get in the way.

The neighboring docks in Los Angeles and Long Beach are converting forklifts, tractors, and cranes to zero emissions by 2030. And with the help of a state mandate that will phase out diesel-powered semis, the 23,000 or so short-haul drayage trucks are supposedly going to be all-electric or hydrogen-powered by 2035.

The Port of LA says it has already invested about $300 million in decarbonization using federal, state, and local grants, as well as its own funds. There’s more on the way, including $500 million for a grid upgrade that should be completed by 2029.

The Port of Long Beach and its partners have so far invested about $800 million, according to Renee Moilanen, the port’s director of environmental planning. The ports are seeking another $2 billion in grants related to the 2030 decarbonization goal.

Critics say there’s no way the cleaner fleet will be ready, citing the $500,000-plus cost for new zero-emission trucks and the lack of charging infrastructure.

Another limitation is the grid itself. The ports already face occasional brownouts, and there’s serious doubt that charging capacity will arrive in time.

There are signs of progress. This summer, Yusen Terminals at the Port of LA took delivery of the first five EV top handlers, giving it the country’s largest fleet of the giant forklift-like machines that can stack containers six high.

Yusen’s CEO Alan McCorkle was about to order some new diesel-powered top handlers when Taylor Machine Works Inc. told him their new EV version could do two shifts on a single charge.

After McCorkle submitted the order, someone asked: “How are we going to plug things in?” They bought a propane generator just in case but haven’t had to use it. Three more of the EVs were ordered and more chargers are in the works.

Yusen is also experimenting with hydrogen to operate a six-story, rubber-tired gantry crane. The pilot was developed by Japan’s Mitsui E&S Co. Ltd. with their US-based subsidiary PACECO Corp., which is planning to use some of the $20 billion in federal money for port infrastructure authorized during Joe Biden’s presidency to revamp domestic production of port cranes.

The funds are part of a defensive shift to mitigate US cybersecurity “threats and vulnerabilities” to the supply chain, including from the more than 200 ship-to-shore cranes that are made in China and can be serviced and programmed remotely.

But funding now hinges on the US election in November. As former President Donald Trump accepted the Republican party’s nomination in July, he pledged to end electric vehicle mandates on day one.

–Laura Curtis in Los Angeles

China Doubles Down on Boosting Trade With South America

Looming from the once-quiet fishing village of Chancay in Peru is a $1.3 billion port set to be inaugurated in November that will reshape commerce between South America and Asia⁠—and add yet more fuel to economic tensions between the US and China.

The new Chinese-owned port in Chancay will be the first on South America’s Pacific coast to dock large, fully-loaded ships with as many as 24,000 containers that can travel directly to and from Asia. The key is its ocean depth of nearly 60 feet.

For Peru, Chancay—located near its capital⁠—will slash travel times to Asia for top perishable food exports like blueberries, grapes, asparagus, and avocados that now mostly go to closer markets like the US, Mexico and Europe. For South America and China, it will shorten travel times for cargo coming and going to Asia by at least 10 days.

“Since there are no direct routes from countries of the Pacific coast to Asia, the problem is that our agribusiness industry does not reach Asia with all the power it could,” Carlos Tejada, Chancay’s adjunct general manager, said in an interview.

The port, operated and majority-owned by China’s Cosco Shipping, is expected to handle up to 700,000 containers in its first year of operations. Cosco has plans to boost its investment to $3.5 billion to fund an expansion if it attracts enough demand.

With the slogan “from Chancay to Shanghai,” Peru and Cosco are particularly interested in Brazil, a commodities giant that trades massively with China but doesn’t have direct access to the Pacific coast. Peru’s foreign minister, Javier González-Olaechea, said it would be a good idea for Brazil to build a highway or railway to Peru to facilitate its exports through Chancay.

“We are very pleased that, first of all, China and Brazil can talk, and Peru will grant all facilities,” González-Olaechea said. But Peru’s support stops short of funding the new infrastructure. Peru will host the Asia-Pacific Economic Cooperation summit later this year and has invited Brazil to participate so it can take a closer look at Chancay’s potential.

Chancay has become a lightning rod for US-China tensions in the region. US officials have criticized Peru for allowing a state-owned Chinese company to build a project of such magnitude; Peruvian officials counter that US firms aren’t willing to make such investments.

Tejada said there’s significant US involvement in Chancay, even though it’s operated by a Chinese state-owned company, noting an agreement with US Customs to install American scanners for the arrival of cargo at the port complex.

–Antonia Mufarech in Chancay

Somaliland Becomes a Crucial Chess Piece

Nestled on the Gulf of Aden, port officials working for a multinational logistics company from the United Arab Emirates load ships with camels and goats destined for Saudi Arabia. They’re just a couple of hundred miles south of bases occupied by Iran-backed Houthi militants in Yemen.

The $300 million investment by DP World on the coastline of Somaliland, a breakaway region of Somalia, boasts a functioning military base and airstrip for planes conducting covert missions.

“It’s a very strategic place and the UAE can monitor everything that is happening in the whole region and the Gulf of Aden,” says Bashir Goth, the head of Somaliland’s mission to the US.

The UAE isn’t alone in seeking to boost its influence in this chokepoint for roughly 12% of global trade flows. Russia, Turkey, China, Iran and a handful of European states have all sought access to the East African coastline with various degrees of success in recent years.

Officials from the US Department of Defense conducted nine separate missions to Berbera—a sleepy town positioned strategically below the Red Sea—between 2020 and 2022 as it scouted the remote outpost for a way to distance itself from China’s presence a few hundred miles to the north in Djibouti, where the US operates an air base.

There, China has asked the Djiboutian government not to allow American planes to fly too low over its naval base, according to regional diplomats. The UK, Turkey, and Taiwan⁠—friendly to Somaliland⁠—have also sent officials to the region.

“Berbera is becoming more strategic in light of new threats to global maritime trade in the Red Sea and the Gulf of Aden,” said Matt Bryden, director of Sahan Research, a think tank covering the Horn of Africa. Its commercial potential as a corridor for international trade with land-locked Ethiopia only adds to its importance.

This year’s Container Port Performance Index from the World Bank ranked Berbera in 106th place among 405 ports globally, eclipsing its competitors in Djibouti, Egypt, and Somalia.

But Somaliland’s stability is now at stake following an offer from Ethiopia to grant it formal recognition in exchange for port access and a naval base. The offer has irked Somalia, which claims sovereignty over the Republic of Somaliland. Somaliland declared independence from Somalia in 1991 but has failed in its quest to gain global recognition.

“The recognition of Somaliland would upend regional geopolitics and is strenuously opposed by Mogadishu and its allies,” Bryden said. “But an independent Somaliland may well offer better prospects for security in the Gulf of Aden than one harnessed to the faltering regime in Somalia.”

–Simon Marks in Nairobi

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In times of peace and prosperity, ports operated out of public view unless something went wrong — pandemic supply-chain congestion, a fuel spill, or longshoremen going on strike. Efficiencies driven by privatization were encouraged; environmental costs were often overlooked. All of that has now changed.

“A tiny little ragtag band of insurgents—the Houthis—are slugging it out with the US Navy for practically a year,” underscoring the vulnerability of the world’s sea lanes, said Isaac Kardon, senior fellow for Chinese studies at the Washington-based Carnegie Endowment for International Peace. “Protection and security are the watchwords now.”