Party poopers

So Southampton has thrown its hat into the ring of the increasingly fuzzy area of UK container terminal development.And this plan sounds like a good one – an escalation of capacity up to around the 3.7m teu mark per annum in conjunction with existing port areas close to the existing terminal and which can be developed at an economic cost compared with entirely new port development. Plus, it seems the development will be able to be achieved on a timescale competitive with that open to Hutchison at its Felixstowe South development. The scheme seems a winner.

It also comes at a time when question marks hang over some of the big new containerport development schemes, the approved schemes of Felixstowe South and Bathside Bay in the Hutchison stable, and the “minded to approve” London Gateway project. Profile costs for these schemes are shown in the table, costs which only reflect infrastructure costs directly associated with the terminal development including dredging works

Profile Costs for proposed new UK containerport developments London Gateway £750 million Bathside Bay £400 million Felixstowe South £300 million

These costs do not incorporate equipment costs and the very thorny costs of interfacing road and rail system development. They ramp up very significantly when these are added on. And even more so in the case of London Gateway when the substantial cost of the proposed Business Park development is added.

It is understandable, then, that with container trade in the UK forecast to grow on a single digit basis that the bush telegraph is suggesting that there might be some hesitation on the part of the developers of these schemes to press ahead with them – indeed that they might not clear internal hurdles regarding acceptable rates of return. This seems quite feasible when you appreciate that both Hutchison and DP World/P&O Ports, the developer of London Gateway, have other options around the world that perhaps offer greater security as regards achieving sensible returns on their investment.

Further, at a very practical level in the case of London Gateway how an earth can a facility costing around twice as much as rival schemes be brought to market and compete on an even footing? The official line coming out of DP World is that it is still pressing ahead with the project but does any one with a calculator believe that?

Associated British Ports, developer of the new Southampton project and a partner with DP World/P&O Ports at Southampton Container Terminals, says that as yet DP World is not involved with the new expansion scheme. Longer term, though, this seems to fly in the face of logic – can it afford not be involved and then compete against this project with the hugely higher cost London Gateway project? This industry voice is not alone in thinking London Gateway will never happen and DP World will get in on the new Southampton “party”.

Last but not least, what does this “let market forces decide” approach fostered by government tell us? Ironically what it perhaps says is that government is naive in thinking the various developers will compete with each other and go-ahead with high cost competing schemes and that the man in the street will benefit accordingly from this wave of new capacity. It says,perhaps, market forces are deciding but in a more or less reverse way from that anticipated by government – no surprise there, perhaps.