Market tilt towards the Med
There has been scepticism about the ability of Mediterranean ports to pull market share away from Northern Europe, but that attitude is changing, writes Stevie Knight.
Rotterdam and other major northern European ports might have economies of scale on their side, but their southern European brethren are making more of a mark in the regional port scene.
According to Francesco Parola of the University of Genoa, over the last ten years the industry has started to see a ‘rebalancing’ between the northern and the Mediterranean ports, such as Barcelona, Genoa and Trieste. “You can see how these ports are beginning to catch the cargo,” he says.
Jolke Helbing of OSC, RHDHV, is in agreement, remarking that the market is “shifting”. While so far, progress has been slow, it's showing signs of speeding up with the big battle for the GDP-rich hotspot in the centre of Europe intensifying, he says.
There's a large draw: in 2017, 15.5m (full) teu crossed from Asia to Europe with 7.6m going back in the other direction.
So, despite Europe's Med ports being known for their insularity and a tendency to concentrate on their own backyard, recent developments have opened up the region and resources have been pouring into rail links.
It's helping Spain's Barcelona to extend its reach. While the port's meteoric 32.7% gain last year was mostly transhipment (which grew 136.8%), aided by the strikes that lost main competitor Algeciras 8% of its traffic and Maersk's custom, there was a solid 8% increase in full container imports.
“Railway is our main ally,” says Laura Domingo, the port’s communications director. She adds that while the rise could not have taken place without the €4bn expansion completed four years ago, Barcelona sits within a rail network of dry ports that takes in Zaragoza, Madrid, Navarra, Tarragona and even Perpignan, allowing it to work its way into the cargo routes for southern and western France. It helps that at present it's the only Spanish facility running the European network's standard-gauge track.
In her view, the hinterland connectivity “has built sufficient critical mass”. She says: “Nowadays from Barcelona you can reach 400 million consumers in less than 48 hours,” adding it's “a key factor” in attracting the big trades – last year it added five new shipping services connecting it with India, the US, Brazil and Canada.
Still, China's influence cannot be avoided, even where it's not taking a direct stake. “China is the first commercial partner of the Port of Barcelona, with total traffic of 528,000 teu in 2017,” explains Ms Domingo, adding that Chinese imports represent 43% of total full containers.
Will Barcelona keep it up? China again might help bring tougher competition from rival Valencia, whose largest terminal has been bought by Cosco Shipping Ports via a €203.5m ($227.8m) deal that gives it a controlling stake in group owner Noatum Port Holdings.
However, it's rail that is shaping the pattern of play in more ways than one, especially when it comes to Far East cargo.
“The Chinese, we know, are looking for reliable entry points in the southern Med, via Piraeus, Trieste, Genoa, Marseille and so on... and these are mostly at the end of the European rail corridors, the Rhine-Alpine corridor, the Baltic-Adriatic and so on,” says Mr Parola.
It means that despite a stellar performance last year of 3.691m teu marking a 6.4% increase, Cosco's landfall in Piraeus may eventually be challenged merely because it was never envisaged as a gateway and rail connections are lacking.
To rectify this, the Chinese are involved in the Budapest-Belgrade link which promises a route from Piraeus via the Balkans to Hungary, a plan welcomed by Serbia which is hoping that this interest will help revitalise the region. However, Mr Parola says: “This corridor crosses mountains, the rail leg is longer, and it's underdeveloped economically... So although the Chinese are willing to invest and push cargo via this route, I think it's an expensive risk.”
It's a problematic scenario: while there's an apparent desire to see growth, it does come at a cost and a number of other world regions are finding that not all Chinese buy-ins yield adequate returns for the debt – or, for that matter, the presence.
On the other hand, both Mr Parola and Mr Helbing say the Adriatic route is gaining in popularity and Trieste remains a much better bet for Far Eastern cargo in general, OSC, RHDHV’s Mr Helbing adding that the port is already handling boxes for Austria, Hungary and southern Germany.
Trieste is definitely 'on the way up': it recorded volumes of 616,156 teu in 2017, up 26.66% on 2016. Once again, rail is making all the difference: last year container train traffic rose by 34.31%; the port's rail volumes have now overtaken Italy's traditional rail hub at La Spezia with more than 220 trains a week, a level of service worthy of Rotterdam, says Mr Parola.
Mr Helbing also believes that looking ahead to 2022 and 2024, other ports will likewise experience significant changes. “The key element here is the TEN-T Baltic-Adriatic rail corridor that runs right up to Gdansk. When that gets going the areas traditionally served by Hamburg and Antwerp will be reached by Livorno and La Spezia,” he says. Livorno is already putting in rail links with Bologna and hoping to put in place its own, 1m teu expansion project by 2023.
La Spezia Container Terminal (LSCT) itself, operated by Contship Italia, is also on a roll: it saw growth of 17.6% to 1.33m teu, up from 1.17m in 2016 and Contship has entered into a €200m box and rail expansion, increasing capacity to 2m teu. And rail, yet again, is the deciding factor: Contship's Hannibal intermodal operation has just launched a second daily link to Switzerland.
Interestingly, it is offering this as an alternative to the Alpine-Rhine corridor which closed unexpectedly last August due to an earthwork problem. Contship may be jumping on the bandwagon but it does have a point as the two-month rail freight standstill caused the entire supply chain to suffer massive losses, giving everyone pause for thought.
Also in Italy, the recently formed Ports of Genoa (which now embraces Genova, Prà, Savona and Vado Ligure) is handling over 2.6m teu and it's predicting more will come from the completion of the Rhine-Alpine corridor which has a €6bn, 37-kilometre tunnel under construction.
It looks, potentially, to be worth it: “The target is Switzerland and South Germany – keep in mind that the distance is below 200 kilometres from Genoa to the Swiss border,” says Mr Parola. Further, this route is to have brand-new high-speed cargo trains harmonised with other European standards. Instead of being limited to 500 metres long and 1,200t, these trains will be 750 metres and 2,000t with a 600 kilometres service range “dropping the unit price substantially”, he explains.
With all this in mind, Vado Ligure, run by APM Terminals, is seeing investment by Cosco (40%) and even the Port of Qingdao (9.9%). The Vado Container Terminal, which should start up in 2019 with an initial annual capacity of 600,000 teu, will have Italy's first automated rail-mounted gantry cranes. Certainly, the facility's 16-metre draft and 700-metre quay length makes it, along with PSA's nearby Prà Voltri terminal, one of the few northern Italian ports able to accommodate ultra-large box ships.
On this note, Mr Helbing points out: “We now have three key alliances that drive the industry... all focused on larger vessels and lower slot costs.” It is, says Mr Helbing, inherently more risky “as instead of 10 customers, there are now three so if one leaves, that's 30% or 40% of your customers gone”. That, along with the bigger ships, will probably push even more port differentiation in the Med.
PULLING TOGETHER FOR REGIONAL GOOD
Despite all the activity in southern European ports, OSC, RHDHV’s Jolke Helbing says: “I do think that we need to see cargo consolidation for the Med region to become really efficient... combining rail into deeper flows to gain economies of scale.”
It will mean sharing intermodal terminals in a central location – somewhere in the north of Italy he guesses “and from there, go on together by rail”. He adds “that means different ports will need to co-operate, but if they want to develop, they will have to get past their traditional ways of thinking”.
Furthermore, since some of the region's significant challenges, according to Barcelona, are digitalisation of ports, e-commerce and competitive logistics services (along with a carbon agenda), a unified approach and inland customs clearances may well bear fruit.
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