Tariff war stirs up European tension

14 Mar 2013
Will investment funds move to Asia and Africa at the expense of Europe?

Will investment funds move to Asia and Africa at the expense of Europe?

The economics of austerity are impacting the ports and terminals of Europe. Cargo volumes are declining, both in the container and bulk trades. As with the rest of the shipping industry, we are seeing increased price competition as capacity goes up.

The addition of port capacity in Rotterdam, Le Havre, London (Tilbury), Wilhelmshaven and various Baltic ports is resulting in some steep price cutting to attract customers. Rotterdam, Hamburg, Bremerhaven and Wilhelmshaven all have their official port dues discounted. Wilhelmshaven, for example, had a 70% introductory discount on ship tariffs, which it reduced to 50% in January.

Despite this they are not attracting services, with only three Maersk Line services calling (APM Terminals own 30% of the JadeWeser terminal). In a fit of pique, Eurogate is suing the Wilhelmshaven port authority over the level of dues which are said to put the terminal at disadvantage to rivals in the neighbouring ports of Hamburg and Bremerhaven.

Since 2009 the Rotterdam Port Authority has been giving discounts and not passing on inflation, due to the economic crisis. In 2013, this will result in an 8.6% discount compared with port tariffs if inflation had been passed on over the past few years and no extra discount had been offered. As a result, shippers will jointly pay around €30m less to the Port Authority in 2013 with the tariff below 2008 levels.

Pressure on the ports also comes from the bulk sectors as earnings for the dry bulk vessels are down, due to excess capacity and weak demand. Tankers are in a similar position.

The likely outcome of the combination of reduced port revenue and lower terminal income is that we can expect to see a slowdown in infrastructure development projects as money becomes scarce. The question is, over the longer term, will investment funds move to Asia and Africa at the expense of Europe? In Africa countries continue to increase and upgrade their infrastructure as investments pour in in the face of congestion and draft restrictions with growing trade volumes and larger ships.  

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