DP World on lookout for acquisitions in the US
Exclusive: The port operator currently operates 78 marine and inland terminals in 40 countries
DP World, among the world's five largest port operators, is ready to make acquisitions in the United States, where it previously sold port assets to insurer American International Group, and the company is on the lookout for a “good deal”, its chairman said.
The company does not own any terminals in the US after selling hubs in New York, Newark, Baltimore, Philadelphia, Tampa and New Orleans over security concerns raised in a politically motivated uproar in Washington in 2006 aimed at undermining the George W Bush administration. The company is believed to have received over $1 billion (Dh3.67bn) for the assets.
More than a decade after the sale, there are now no political obstacles should DP World wish to invest in America again, Sultan bin Sulayem said.
“As far as ports [are concerned], we looked at it many times but the cost of operations doesn’t justify the investment in the states. Even though we were invited and we had no problem,” Mr bin Sulayem told The National in Davos at the World Economic Forum. “If we find a good deal, we will [acquire a port]. We looked at it a few times,” he said.
DP World, which currently operates a logistics park in the US, is able to facilitate the movement of goods to the US market via its facilities in Canada, Peru and the Dominican Republic, Mr bin Sulayem said.
“We benefit indirectly [from growth in US trade] but it is a strong economy performing very well and actually [Donald] Trump has done a good job.”
People “get confused” by the US President’s approach which is antagonistic on free trade and globalisation, he said.
“With Trump as a businessman, I don’t look at what he says, I look at what he does, the end result. Today [the US] is one of the strongest economies in the world, unemployment is hardly there, the stock market is good. The market is perfect,” Mr bin Sulayem said.
The president’s ultimate aim, Mr bin Sulayem said, is to facilitate more trade and negotiate a deal with China that is fair for both sides.
The US and China have been locked in a trade war for much of the past year, swapping tit-for-tat tariffs on each other’s goods and undermining confidence in the global economic outlook. Talks to reach a solution are ongoing. Should a deal not be reached my March 1, the US will raise tariffs on $200bn of Chinese imports to 25 per cent from 10 per cent.
“This deal with China will not take a long time, they will not keep fighting each other on tariffs. I think they will come to a deal,” said Mr bin Sulayem, pointing to how the US, Canada and Mexico were able to renegotiate their own trade deal fairly rapidly last year.
Another concern for the trade outlook is China’s rate of growth, which last year was at its slowest in almost 30 years.
Overall, this is a good thing, he said. China’s economy, the world's second largest, which has recorded nearly four decades of consecutive growth, had overheated, making operating costs including rising labour costs unsustainable.
The dynamics of global trade go beyond top-line economic growth data, Mr bin Sulayem said. China is already responding to the evolving landscape. Manufacturing is now moving to Myanmar, Cambodia and Vietnam, where the labour is cheaper.
“I believe China will produce for the world out of China,” he said.
China’s Belt and Road initiative will continue to support growth long-term, providing more economic routes for its products.
DP World is also evolving as a company, beyond only a traditional operator of ports and terminals.
“Things that happen outside the gate [of our ports] can undermine our effort,” he said. “I want to be involved to see how these supply chains are behaving and which is the most efficient way [to run them].”
The company, which also operates dry docks, logistics parks and free zones, is the largest investor in Virgin Hyperloop One, the futuristic transportation company that plans to build a transportation system with pods traveling at high speeds.
“We have an advantage. We create cargo. A shipping line doesn’t want a port, they want cargo,” he said. “For example in India, we are the largest operator with five ports – it is just as quick to handle a container from the ship to the yard as in London but when you leave the gate in India it is a different matter.”
The company has also invested in train services to be able to better connect goods to consumers. It also acquired a large logistics company, Continental, last year.
“If anyone wants to replicate what we have in India it will take them 30 years,” he said.
Going forward, DP World is particularly focused on Africa as one of the fastest growing regions, South America – particularly the Pacific coast, which “is of great interest” – and South-East Asia, including Indonesia and Malaysia.
What happens to UK trade after Brexit doesn’t worry him too much.
“We consider Brexit is happening. Actually business has increased at our port [in London]. With the deep water port at London Gateway, now actually we bring products from Latin America and re-export to Europe,” he said. “The only problem with Brexit is indecisiveness. This is disrupting and clouding the visibility for banks and insurance companies.”
Updated: January 24, 2019 01:53 PM