Inward investment

For a number of Mediterranean terminals the transhipment idea appears to be wearing a bit thin. As RHDHV’s David Bull points out, the ports put in a lot of investment back in the heady, pre-crisis days “when it seemed that transhipment cargo would just carry on growing forever”. According to him, some of the projects now seem a bit overblown and consequently, even in places where volumes are stable, the bottom line is not looking as good as it did. “There are several transhipment terminals around the Med which aren’t reaching their potential,” he says.

Secondly, Tanger Med, sitting just across the water, promises to outpace all the others put together, even Algeciras, Europe’s fourth biggest port. The Moroccan facility handled around 3m teu in 2016, but this could rise to over 8m teu in 2018 once Tanger-Med II is complete. It is also considerably more cost effective than many on the European bank and this has created problems: for example, volumes at Gioia Tauro, Italy, have dropped by almost 1m teu between 2007 and 2017 to 2.8m teu. The port recently admitted that despite a recent fillip brought about by cost reductions, competing against Morocco’s cheaper labour and taxes is still hard going.

The latest Spanish stevedore strikes haven’t helped. They have also thrown an interesting light onto the dynamics: Valencia and Barcelona, which have a large percentage of domestic cargo, came off more lightly than transhipment hub Algeciras which permanently lost some of its Maersk business.

For Santiago Mila, chair of the International Association of Ports and Harbors and deputy director of Barcelona, it’s a question of economic importance.

The Med ports, he says, need to help pull southern Europe out of the doldrums “by offering an efficient alternative to Europe’s northern range ports”. He adds, like it or not, overreliance on those will always tilt industrial competition away from the south.

He urges a look at the map: “Even when it comes to going as far as central Europe, Asian ships could save four of five days by using a Mediterranean port.” However, getting the point across has been a long process and he’s pragmatic: “In reality, the Mediterranean ports have never had more than 25% of the Asia-Europe trade” says Mr Mila. “Now, I am not saying we can reverse the positions, but we should be able have a larger piece of that cake. If we are prepared to work at it.”

‘Working at it’ means developing a broader picture. In his view, many of the Med region’s ports have, understandably, “been fixed on their own neighbourhood”. He adds that it’s down to the ports to change this parochial view and get ambitious: “We need to think beyond the local area and create connections.”

Looking further

Barcelona has been doing just that, to good effect. Ten years ago an intermodal terminal gave the country’s automotive industry a slick, efficient component supply and doubled the international cargo moved from the Zaragoza region. More recently, a number of fast-paced fashion companies have arisen in Spain, with cargo “coming in Wednesday morning, getting into the shops in Madrid and Portugal on Friday, ready for the weekend,” he explains.

But while the largest cargo streams demand attention, there’s a plethora of mid-sized industries that likewise need support. This isn’t so easy, and Mr Mila admits he spends “a lot of effort in knocking on doors to find out what these businesses really need… and then creating a number of tailor-made services”.

Shaving logistics costs is a large element. Mr Mila points out that because parts are now sourced globally, transportation, “often adds up to 30% of the total cost of building a new car”.

Despite this he’s clear, “our mission isn’t to make the port bigger than our neighbours’. It’s to add value to the economy”.

However, many remain sceptical about the southern promise. “It’s the old dream,” says Dirk Visser of Dynamar, saying that in his view, Rotterdam and the northern ports have maintained their position because of their commitment to their hinterland, and the efficiency of privatised elements like the rail links which, he says, go a long way to smoothing out the flow. As a result “a box will make it to Munich and back via Rotterdam again before it’s got through from the south”. Moreover, he points out that it’s not so easy to turn a port from a transhipment hub to a gateway “as they’re located where they are because it suits that type of business… and you can’t just pick them up and pull them to a new position on the map”.

Despite this, Mr Visser is aware that a few ports are refocusing with some success: Gioia Tauro, for example.

Italian drive

This Italian transhipment hub has realised it isn’t going to make it back to pre-crisis levels, prompting a rethink of its business model, says Daniel Testi of operator Contship. It’s looking at a move into gateway cargo and other valued-added services, backed up by an industrial park, special economic zone, and last but not least, Contship is providing around E20m of investment for a new rail gateway. He explains that this won’t replace the original business, but rather “will leverage transhipment volumes and sea connectivity”, the combination being more attractive than either alone.

Contship’s overall strategy, he says, is to “look beyond the port gates” by running its own trains and trucks and offering customs clearance services, inland depots and other value-added services. Signs are this seems to be working: its La Spezia terminal has just seen a jump of 15% for the first quarter of 2017 and the group’s riding a surge of southern Europe rail moves with a 20% year-on-year gain in the same period.

According to Mr Testi, this is just the kind of integrated offer that will allow the Italian ports to gain traction, adding it’s not so good for shippers to have all their eggs in one, northern European basket; a southern route plays an important part in spreading and managing the inherent risk.

However, Mr Visser points out that players like Eurogate and HHLA have a firm investment strategy linking German seaports and southern Europe and are willing to raise their game. He adds that if there’s a threat of serious competition “don’t think that the north will just stand still and watch it happen”.

CHINA’S EYES MED POTENTIAL

China has grasped the potential of Mediterranean ports in a way that might both encourage and slightly unnerve champions of the Med’s “southern alternative”.

COSCO expanded its interest in Piraeus last year to a controlling share and this year it announced it will increase volumes at Greece’s biggest port around 35% by 2018. There is to be a 12ha logistics centre and an upgrading of the rail connection northward “making Piraeus into a gateway for central and eastern Europe,” explains Dragan Pavlićević of Xi’an Jiaotong-Liverpool University. From here, it could link up with routes to northern Europe or even Moscow. Mr Pavlićević points out that since the state-owned company has interests in a number of Chinese ports it will be able to control the entire shipping process, yielding a cost advantage in a market that’s thin on margins.

Piraeus is far from alone. COSCO has steadily been pushing into other regions along the Med, there’s Vado in Italy and even a rumoured deal with Algeciras’ third terminal. Most significantly, it also recently extended its reach in the Med’s west in one swoop with a 51% buy of Noatum Port Holdings, (TPIH Iberia keeping a 49% share) giving it a controlling stake in the Port of Valencia which is central to the Spanish economy as well as the container terminal in the port of Bilbao – an important gateway for the Iberian Peninsula and southwest France.

Is there anything that might make the Chinese giant hesitate? “China… won’t be put off by worker unrest or local economics,” says Mr Pavlićević. “The Greek crisis actually helped give them an opportunity that wouldn’t have existed 15 years ago.” But, he adds, China is now looking at strategic decisions around cargo transits and therefore is less likely to engage in port deals that can’t be integrated within broader economic agenda, including efficient access to the wider European market.

Again, connectivity is the watchword: COSCO’s interest in Noatum has been underscored by the links provided by both Conterail Madrid and the NRT Zaragoza rail terminal, an intermodal hub that’s central to the regional industry.