Politics of ports

Investment in catering for direct containership calls in the UK has been lacking, explains Ben Hackett

The certainty of change in the container shipping environment is indisputable with the advent of the ultra large container ships (ULCS) and the preponderance of vessels above 10,000 teu. For the UK the question arises, does this island nation really need to be ready for these large ships and is there enough cargo to justify direct calls at UK ports as opposed to transhipment via the North Continent of Europe?

Readers may recall the furore created in early 2009 when the UK's Trinity House and Department for Transport announced that light dues would be increased. At the time interested parties such as Lord Berkeley in the House of Lords and the Port of Felixstowe warned of dire consequences should such an increase take place. It would force main line vessels to switch to the North Continental ports and thereby service the UK via feeders and for certain, larger container ships would no longer call at UK ports. All this despite the fact that transhipment costs were prohibitive versus direct calls.

The fear of course was generated by the Great Recession and the expectation that the volume of containers transiting UK ports would collapse in the face of economies of scale, as far as concerned vessel sizes, it was suggested that carriers would minimise the number of ports that their large vessels would call at.

In the event, the warnings were unfounded, the UK cargo volumes were actually less volatile than those on the Continent and the ships calling at UK ports continued to grow in size; transhipment was not really an option.

Capacity crunch

The truth of the matter, however, is that there is insufficient berth capacity in the UK to deal with the influx of the ultra large ships, with only four terminals capable of working these ships, according to Alphaliner. It would seem that there has not been enough investment in port infrastructure to anticipate the evolving world of container shipping with ever larger vessels and growing alliances, such as P3 and G6, that will put even more pressure on terminals.

The UK benefits from a number of ports on the west, south and east coasts, but many of them suffer from draft restrictions, terminal equipment not able to handle ultra large containerships and poor connectivity to the main consumption centres.

Again according to Alphaliner, by the end of 2015 there will be approximately 28 strings of the ULCS serving the trade between the Far East and Northern Europe. The evolution of the P3 partnership will most likely create increasing pressures on terminals to cater for these large ships, many of the strings likely to call at a UK port. The keyword is economies of scale as a means to reducing operating costs. To achieve this, carriers will focus their attention on the key countries and ports that will justify direct calls. The UK certainly counts as one of those countries.

Consumer climb 

Despite misgivings about the state of the UK economy, it has pulled a rabbit out of the hat. The country’s growth rate is one of the strongest in Europe in 2013 and looks to continue to improve. Consumers have returned in force and there is a general feeling of “things getting better”. The health of the economy has caught even the Bank of England by surprise and the IMF/World Bank have gone as far as to encourage the UK Government to relax austerity measures in light of the growth, rather than choking it off as has happened in most of the countries on the Continent, including Germany.

The UK has imported on average 2.8m teu per annum over the last six years and exported 1.4m over the same period. In both cases there has been relatively little variation with the exception of 2009. UK exports are back on the rise to levels not seen since before the Great Recession.

It is clear from data comparing the UK with North European performance that the volatility of UK trade was much lower than that of the whole region making it a much more stable market to serve.

The UK has an interchange of nearly 1m laden teu and an estimated further 300,000 empties per quarter. There can be no doubt that the carriers see UK ports as mainline ports of call as the cost of double handling containers in transhipment operations would raise costs beyond what can be expected of a direct call, even with higher UK terminal costs. 

Brownfield gateway

Despite the doom and gloom of 2009, global terminal company DP World decided to take the risk and invest in the development of a large brown field site on the Thames estuary. The blueprint to redevelop the old Shell Haven oil refinery site came with DP World's £3.9bn purchase of P&O in 2006. Work started in March 2010 and is reported to cost £1.5bn and the first vessel from the SAECS service docked in November. The development, London Gateway, is slated to be Europe’s largest logistics facility with state of the art technology operating within the terminal. The extent of the foresight has been to install gantry cranes with an outreach across 25 rows, two more than the largest ships today require. Perhaps DP World is thinking of the 24,000 teu ship?

With berth water depth of 17 metres and channel depth of 14.5 metres supplemented by a further 5-6 metres of tidal waters the new facilities stand out as a beacon of entrepreneurship that will benefit the growth of UK trade. With unfettered rail access directly to the terminal, all freight rail operators will have equal access to London Gateway, thereby ensuring further competitive pressures to keep inland haulage costs competitive.

In today’s environment of consumer and shipper resistance to price increases, keeping costs under control and finding ways to reduce them is of paramount importance to the carriers. The evolution of port centric logistics which minimises the transportation and handling of cargo between ports and points of final consumption is also forcing large importer and retailers to find the most cost effective solution for their distribution networks.

Of all the major ports in the UK, London Gateway has developed port centric logistics to the fullest. The new port will effectively combine a modern, state of the art terminal with warehousing and distribution facilities within the complex and road and rail connections directly to the major consumption centres. Certainly the competition between UK and European ports is hotting up, all to the benefit of the consumer.