Most ports are subject to demand fluctuations. Particularly in the bulk port industry, seasonality, fluctuation in agricultural output, world market demand etc. make it hard to service demand when a peak hits. Building more assets (storage, elevators, berths) seems like the obvious answer. In reality, most port operators would be worse off financially if they tailored their capacity to peaks – having to wear the cost of their assets in off-peak.
If increasing the asset base is not the answer, how else can bottlenecks be addressed? The answer is: price differentiation. Guessing the ‘right’ price points (i.e. peak, off-peak) is risky, as getting it wrong will scare away customers or leave value on the table. The most efficient way of determining the right price is through a market based (auction-like) mechanism.
Tradeslot is currently operating Port Capacity Auctions at 9 large ports – and is creating consistent benefits:
- Transparency of the process (shippers know the port operator is not playing ‘favourites’)
- Fair market price (the port operator sets a lower limit and any premium is market driven, set by the customers themselves)
- Reduction of phantom demand (as highly desirable time slots come at a premium and will not be hoarded lightly)
- Speed of process (the self-serve function of the auction means minimal involvement of port operator resources)
If your port is looking to create better return-on-assets and address demand fluctuation, please contact the team at Tradeslot. We are looking forward to sharing our many years of experience in this field with you.