Cranes labour rhythmically beside the Thames, plucking steel containers from huge ships and plumping them down on the windswept quay of Britain’s youngest port.
A little more than a year ago the UK’s first port in more than two decades opened on the bank of the river Thames in Essex to great fanfare. Construction of Europe’s largest logistics park was under way in the hinterland, with Marks and Spencer planning a £200m warehouse after being secured as the first tenant. The £1.5bn London Gateway port would ensure the capital’s consumer needs were serviced by the new breed of supersized container ships calling directly from Asia.
The new port has already won many accolades. In February it made history when it welcomed the largest ship to ever sail the Thames. And the port has secured some services, including French container giant CMA CGM’s west Africa route.
But one year after it opened, London Gateway is yet to secure an Asia-Europe shipping line, Marks and Spencer has pulled out and the sense of pomp is more muted.
Charles Meaby, a London Gateway director, insists it is only early days and the services will roll in eventually. “It’s not like surgery, you don’t get a scalpel out and just get going . . . We’re at that transition point — when you’re changing what you’re doing it doesn’t happen overnight.”
But this is less a mark of failure and more a sign of resurgence in UK ports. The industry has added at least 2.6m 20ft container capacity since 2011 and a further 1.75m is on the way, bringing the total to more than 12m, according to Drewry Shipping Consultants, a 57 per cent capacity jump.
London Gateway was conceived before the financial crisis when UK container traffic was bumping up against capacity constraints. The maritime sector contributes roughly £14bn annually to the UK economy, according to the department for transport.
However, it opened amid a multibillion pound flurry of investment as UK ports scaled up to accommodate the new breed of supersized container ships that stretch the length of four football pitches and carry up to 19,000 20ft steel containers. A decade ago, the average container ship was half that size.
“UK ports have been doing a damn good job, they’ve been investing the nuts out of themselves,” said Nick Gazzard, a logistics expert.
Peel Ports, the UK ports giant, will open a £300m deepwater container terminal in Liverpool this year, ABP has spent £150m expanding Southampton, and the UK’s largest container port Felixstowe is in the middle of a £400m development, taking total outlay on UK container capacity to more than £2bn.
The expansion has been all the more challenging due to the lack of support from the UK government, which leaves it up to the private sector to provide all the infrastructure. “The government isn’t paying for breakwaters, dredging, any heavy infrastructure, whereas in Belgium, the Netherlands, the government views it as building a road,” said Neil Davidson, ports analyst at Drewry.
This wave of port investment, coupled with slow traffic growth, which has still not recovered its pre-crisis peak, means that where there was once congestion, there is now a dogfight for traffic. UK ports have an annual 20ft container capacity of 10.35m, with a further 4m potentially on the way, although 8.3m containers were moved in 2013 according to the most recent Department for Transport figures.
“It’s a mature market and in mature markets when you open new terminals you have to win business from existing players,” Mr Davidson said.
“As we know the biggest volume in the UK is to and from Asia and at this stage they haven’t won any Asia services. The pressure will increasingly come to bear.”
While the larger container ports are engaged in fierce competition, the smaller players are dying out as they are unable to accommodate the deep-sea giants. The Thames Port has lost all its deep-sea services, and London Gateway has snatched much of its traffic from its Thames neighbour, Tilbury.
“There’s the increasing problem of capacity obsolescence. As ships get bigger, capacity becomes useless,” Mr Davidson said.
The overhaul of UK container ports has also been fuelled by radically shifting supply chains, which companies have restructured at a time of unprecedented competition driven by the rise of ecommerce and overcapacity that saw insolvencies surge to a record high in the logistics sector last year.
Large container ports engaged in fierce competition are investing heavily to woo these companies. Ports have extended millions of square feet of warehousing into their hinterlands so that retailers can unload goods from the ships, unpack, process, repack and distribute them directly from the port.
“Ecommerce has completely changed the distribution model,” said Clemence Cheng, chief executive of Hutchinson Ports UK, which owns Felixstowe, the UK’s largest container port.
Mr Meaby insists it is only a matter of time before London Gateway seduces one of the lucrative Asia-Europe shipping lines to join the multiple services from Africa and Europe it has already secured. “Their ability to gain market share will be a function of getting port-centric logistics up and running,” Mr Gazzard said.
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