As a drumbeat for worldwide trade prospects there is nothing quite so heartening as the noise of power shovels and dredges now working round-the-clock along the 80km Panama Canal that joins the Pacific and Atlantic Oceans. That non-stop cacophony amounts to a €3.6bn bet on continued growth in international maritime transportation. And it’s all music to the ears of a vast shipping infrastructure that has been completely at sea these past 12 months.

While other construction projects have stalled as the global economy has faltered, Panama’s Canal Authority has persisted in deepening its existing channel and blasting access to a new set of larger locks. When completed in 2014, the canal expansion will allow all but the world’s eight largest container ships (all built for Denmark’s Maersk) direct water access between the factories of Asia and the densely populated cities of America’s Eastern Seaboard. With super-sized vessels presently too large squeeze through the Panama Canal, 70% of Asian cargo is currently offloaded at ports on the West Coast and moved by rail or truck across North America.

But quite what volume of shipping traffic will be diverted come 2014 is hard to predict, says Christopher Koch, the CEO of the World Shipping Council, whose membership accounts for 60% of the value of global seaborne trade, or more than €2.7tn worth of goods annually. Much will hinge on the total cost of the cargo’s transportation from origin to its destination, including the Panama Canal fees; nevertheless, Koch rates the canal expansion as “the most anticipated development” and one “that will affect the deployment of vessels and therefore the ports that they call”. Already, he notes, the promise of 2014 has “led US East and Gulf Coast ports to expand capacity and has caused US West Coast ports and US railroads to be mindful of the more competitive Panama Canal transits”.

Excessive capacity is a touchy issue right now for the world’s megaports and their shipping clients as they count the cost of a 25% drop in global trade in 2009. Just two years ago, all the talk was about economies of scale: the bigger the floating warehouse, the lower the unit cost of transporting its cargo. Shipping giants raced to build ever-larger vessels; ports frantically dug out harbours and extended quays to accommodate the new sea monsters. Forecasters at the time signalled 2010 as the year that supply might actually catch up with the marketplace.

Today the picture looks very different. Competition for shrinking business has driven cargo revenue well below what it costs to send a ship across the ocean and some of the €30bn worth of vessels estimated to be on the order books in 2007 are finally expected to hit the waters this year, exacerbating the carrier glut. London-based Business Monitor International characterises the current situation as timebomb, with further industry consolidation and possible bankruptcies looming, and says the only major port hub likely to show any year-on-year growth in 2009 is the UAE’s Jebel Ali in Dubai.  

Not that other ports are holding back investment. Knowing the economy has to rebound at some point, particularly on the back of expected trade growth in China, India and Indonesia, few major hubs appear to have curtailed development plans conceived during boom-times. And the confidence is not misplaced: 90% of the world’s goods still go through their highly computerised conveyor systems, a percentage that might actually increase should air freight fall out of favour with an increasingly climate-conscious business world.

Playing the environmental card may be a shrewd move. Larger vessels mean per mile/per cargo volume carbon efficiency has actually improved as much as 75% in 30 years, says Koch. Efforts are also currently underway to engineer better hull and propeller designs, implement waste heat recovery, and reduce onboard power usage to minimise emissions. Moreover, the industry is studying opportunities to switch to lower carbon energy sources such as liquid natural gas and biofuels.

“Because they are stewards of the coastal environment, US and other Western Hemisphere seaports and their business partners are investing billions of dollars annually to significantly reduce environmental impacts on their communities and natural resources,” says Kurt Nagle, CEO of the American Association of Port Authorities, a body that represents seaports in the US, Canada, Latin America and the Caribbean. “They are also working with their communities to reduce their carbon footprint and greenhouse gas emissions from the goods movement supply chain.”

Should such initiatives fail to convince the doubters then both sides may end up losing. An alarming assessment released in December 2009 by the Munich office of the World Wildlife Fund, German insurer Allianz and the UK’s University of East Anglia, stated a rise in the sea level of just 0.5m by 2050 could put at risk more than €19tn worth of assets in the world’s largest coastal cities. Ports would be swept away, and with them vital trade links. By holding back permits we could all miss the boat completely.

EUROPE

ROTTERDAM defies the downturn … and the North Sea
by Trevor Huggins

Determined to defend its position as Europe’s largest port, Rotterdam has come up with a novel answer to the problem of future development in the continent’s most densely populated major country. Make the Netherlands bigger.

So, despite the global downturn, the Port of Rotterdam Authority is pressing ahead with an ambitious €1.1bn expansion into the North Sea, dredging up 240 million cubic metres of sand from the seabed to create a new spur of land. Known as Maasvlakte 2, the project will extend the Port of Rotterdam area by 20% when the spur is joined to the rest of it by road and rail links. Under phase one of the plan, the first container terminal, built and operated by Rotterdam World Gateway (RWG) consortium, is due to open in 2013, with the second, operated by APM Terminals, following a year later.

The rationale behind Rotterdam’s expansion is simple: the maximum container capacity in the existing Maasvlakte is expected to be reached some time between 2012 and 2014, while more deep-water facilities are needed for the cargo ships of the future. The new 20m-deep draft harbour planned at Maasvlakte 2 is designed to meet that need, while other areas of the new 1,000ha development should further expand Rotterdam’s industrial base, notably in petrochemicals. The existing port is already home to five oil refineries and more than 40 chemical and petrochemical companies, while the Dutch headquarters of consumer product multinational Unilever are nearby.

Given its longstanding lack of capacity, expanding the port was a no-brainer. However, today’s port has certainly been hit by the economic downturn and in particular by the falling demand for steel, with throughput for ore and coal plummeting by nearly 50% last year from 2008 levels. Dry bulk for the chemical industries and agribusiness were down 13% and 22% respectively, while oil imports, which account for much of the liquid bulk, fell 6%.

Overall, the volume of goods passing through Rotterdam in 2009 fell 8.5% to 385 million tonnes. But that wasn’t the only bad news last year. The tentacles of emirate investment company Dubai World’s debt crisis reached the Dutch port, when one of its subsidiaries, DP World, was revealed as the largest shareholder in RWG, builder and operator of the first terminal. However, the Port of Rotterdam Authority is playing down the potential impact of both Dubai World and the wider global financial crisis on Maasvlakte 2. “Our clients, RWG and APMT, ... have assured me that the current decline in container transshipment volumes has not unsettled them in the least,” wrote project director Ronald Paul in a recent newsletter. “Our shared conviction is that we are doing this for the long term.”

HAMBURG
still ready to spend in tough times
by Trevor Huggins

Germany’s largest port is preparing cut harbour fees, spend on improvements, and build a brand-new terminal as it looks to the future after a year of misery.

“In 2009, the crisis reached our port in a very concrete way,” says Wolfgang Hurtienne, managing director of Hamburg Port Authority. “For example, in the container sector we reckon there was a fall of 28%–29%, which was really hard.”

Hamburg was particularly hit by a fall in trade with both China and Russia, the volume of handled goods for the latter – its biggest European customer – crashing by more than 50%. Competition for Hamburg’s feeder traffic also increased as the cost of shipping fell, making alternative routes to the Baltic more economically viable than using the Hamburg/Kiel Canal.

“We saw that Hamburg had to find instruments that would make it more attractive for customers to either stay here or, in the case of the feeder traffic, to come back,” says Hurtienne. The result was a remarkable decision to cut port fees by up to 50% in 2010, while terminal handling operators have also been reviewing their charges in a bid to arrest the fall in volumes. “It cannot be the only step to be taken, in terms of adapting to the market, but it is an important one,” Hurtienne adds. ”And the response has been positive.”

In addition to the discounts, Hamburg Port Authority is also ploughing €1bn into a series of port improvement projects over the next four to five years, ranging from the railway system to quay walls, the dredging of canals, roadworks and terminal development. Looking further into the future, though, the showcase project at Hamburg is set to be the redevelopment of the Central Terminal Steinwerder; the port authority is currently reviewing proposals put forward by 20 different national and international companies as to how best to develop the site, with the final layout due to be decided later this year.

“I think it will be a mixture of several uses: cargo handling, because this is a deep-water location for seagoing vessels and that’s an advantage we should use; and there could also be logistics, like distribution centres,” says Hurtienne. “These discussions are a good opportunity to define the demands of the port area of tomorrow.”

Change is even underway at Hamburg’s former port area, with a waterfront residential and office development called HafenCity rising from disused warehousing. Intended to expand the centre of Hamburg by 40% when it is completed by 2025, it will eventually be home to 12,000 people and provide 40,000 jobs.

Clearly, the local authorities are willing to spend in the hope of keeping Hamburg’s place among shipping’s elite, despite the fall in trade. For Hurtienne, the moves reflect, “a clear decision that we want Hamburg to stay as one of the leading international ports and that we are willing to invest in difficult times. Because things will get better... and it’s important we prepare our port for that”.

THE BALTIC REGION
goes back to the future
by Scott Berman

Maritime ports in the Baltic Sea region are facing plenty of logistical, infrastructure and environmental challenges as pressure builds to move heavy cargo operations out of inner city port areas. And that’s even without tough economic climate taking its toll.

Maritime ports in the region carried 0.4% less cargo in 2008, with only liquid bulk, mostly oil, and international container shipments seeing growth, both by 5%, according to the regional industry group Baltic Ports Organization (BPO). It’s quite a change from recent years: annual increases in Baltic container traffic averaged 15% between 2004 and 2007, with growth higher to the east, says BPO secretary general, Bogdan Oldakowski. In terms of overall cargo, it has been “very positive” for the past 10–15 years, with Russia the biggest engine for growth, says Antti Saurama, a researcher at Finland’s University of Turku’s Centre for Maritime Studies.

Even in the downturn, cargo handling in ports in Lithuania, Russia, Latvia, Sweden and Germany was up during 2008. And in a BPO/University of Turku poll of 51 ports in the Baltic region, released last September, 71% of respondents said their ports hit bottom in terms of cargo turnover declines during the first three quarters of 2009, saw signs of an uptick in the last quarter, and most expect to see growth in 2010. Many also reported efficiency initiatives and personnel cuts, with about a third of the ports holding off on new development and investments. It’s a tough call, given that increases in Baltic Sea traffic are expected – a doubling of 1990 levels by 2020, according to one projection.

Those boom-time trends and the future outlook have fuelled what Oldakowski calls “huge investments” in capacity in recent years. Much infrastructure work has continued at ports in and near the Baltic, including a new, €680m cargo port outside Helsinki; €145m worth of reclamation and new terminal construction at Copenhagen-Malmö Port; a €15m, three-year deepening project at Oslo; and projects to reclaim land, increase capacity and provide new handling options at Rostock in Germany, Århus in Denmark, and smaller ports on the Gulf of Bothnia, among others. There is also a new container and ro-ro port at Norvikudden, near Nynäshamn, Sweden – a €181m, public and privately financed facility expected to open in 2011.

Russia, meanwhile, is eager to wean itself off dependence on foreign ports, and is greatly boosting the capacity of Ust-Luga  near St Petersburg – worrying news for Latvian, Lithuanian and Estonian ports, which have handled much of Russia’s export-import cargo to date. Oil is a key commodity to be handled at Ust-Luga, with more Russian oil tankers overall expected to ply the Baltic in the coming years, carrying 40% more crude oil by 2015 by some estimates. Potential oil spills have raised some concerns around the region.

On another environmental note, air and noise pollution concerns have helped fuel efforts by cities to move their ports’ heavy cargo operations out of city centres. Replacing them are new developments, and with them new tenants and tax ratables for ports and cities, depending on the arrangement, in Stockholm, Helsinki, Copenhagen and Malmo, among others.

ASIA

SINGAPORE aims to increase annual capacity
by Colin Brown

The new decade has begun the same way the old one did with Singapore retaining its coveted crown as the world’s busiest port.

Shanghai may lay claim to the top spot in terms of total weight of goods loaded and discharged, but Singapore still ranks higher in terms of the total volume of ships handled.

Other long-held bragging rights for the city-state include world’s busiest container port, world’s busiest transshipment port and the world’s busiest bunkering port (a measure of the amount of fuel supplied to ships for their own use). Even in recession, Singapore’s container throughput managed to reach almost 26 million twenty-foot equivalent units (TEUs); lay all those elongated metal boxes end-to-end and you could build a 3m-high wall right around the equator – four times over.

Not that Singapore is resting on its laurels. Even in the face of a double-digit fall-off in port business, its government did what it tends to do in crisis – commit to heavier investment in R&D and fast-track infrastructure improvements.

“We must keep our sights on the longer-term fundamentals and position ourselves for the recovery that will come at some point in the future,” declared transport ministry permanent secretary Choi Shing Kwok in a keynote address last March. “In

Singapore, our port operators are taking advantage of the slowdown to upgrade the skills of their port workers and to retrofit port equipment. The Maritime and Port Authority of Singapore is also pressing ahead with port development, as well as investments in systems and technologies to raise the efficiency and productivity of the port.”

Among the initiatives are WISEPORT, a scheme bringing wireless broadband to ships in Singapore port waters, and BunkerNet, an industry-wide web-based platform to facilitate communications among all parties of the bunker supply chain. “These projects do not just pump prime the economy, they build new strengths that will otherwise not be there later,” added Choi. “Similarly, we want our port operating entities to be well positioned for growth when it returns. Hence, Singapore is not letting up with the capacity expansion of Pasir Panjang Terminal. Works to add 16 berths with a total additional capacity of 14 million TEUs are proceeding without delay.”

Singapore is spending €1bn to expand its port in a bid to increase annual capacity by a jaw-dropping 50% within three years. Aware of the potential ecological impact, €10m has been set aside to mitigate the impact of the marine environment, including silt screens and the relocation of affected corrals. In addition, port operators have introduced electric cranes and are testing the use of hybrid engines.

Such bravura seems to be hard-wired into the Singapore DNA. For evidence look no further than downtown Singapore’s harbour and Singapore River. What was once the flood-prone site of the country’s original ports is now one edge of an enormous fresh water urban lake. By building a dam across the mouth of the Marina area, engineers created a collecting reservoir for the nation’s water supply that also doubles as a tidal and flood control barrage. It also provides the dramatic setting for a new water recreational area anchored by a futuristic casino complex, whose doors are due to be opened by casino resort company Las Vegas Sands in the coming weeks.

HONG KONG
begins fighting back
by Lucy Fitzgeorge-Parker

What a difference a decade makes. Ten years ago, Hong Kong was the world’s busiest container port, funnelling a flood of exports from south China’s manufacturing bases to the consumer markets of Europe and North America. Today, much of that traffic has drifted to China’s rapidly expanding mainland hubs of Shanghai and neighbouring Shenzhen, and pessimists are predicting that Hong Kong’s famous harbour could become a trading backwater within a generation.

Yet it would be a mistake to write Hong Kong off just yet. It may not have been able to match the recent growth rates of its newer rivals – with only a 28% rise in container throughput from 2002 to 2008, compared with more than 300% for Shenzhen – but its transparency and tax-free status are both still powerful draws, particularly for smaller corporates.

Hong Kong’s other USPs are equally valuable. Unlike most major hubs, its container terminals are all privately owned and managed, which means competition between the five rival operators keeps costs down. Independent companies also run the midstream cargo transfer business, a cheaper alternative to the terminals that accounted for 28% of Hong Kong’s total throughput of 24.5 million TEUs in 2008.

The government does, however, provide unbeatable back up. Hong Kong’s pilots and vessel tracking system (VTS) – which monitors more than 220,000 ships a year and one of the world’s busiest shipping lanes, the Lamma Channel – are among the best in the world, thanks to heavy investment in training and technology. The Marine Department is also currently awaiting environmental sign-off to dredge the whole of the Kwai Tsing container basin and the approach channels, in preparation for the arrival of a new generation of 15,000–18,000 TEU mega-ships.

Other projects in the pipeline include the construction of a bridge linking Hong Kong to the western delta region via Macau and plans for a 10th container terminal. The latter was originally due to open in 2015, but in the wake of the financial crisis the date has been put back to 2018. Government officials insist, however, that they are still seeing strong demand and are pressing ahead with a feasibility study on a site on the southwest of Tsing Yi Island.

The established operators are lobbying the government for more space for the existing terminals. Hong Kong has the lowest container terminal yard area of any major port, with an average of just 14ha/400m berth compared with 30ha/berth in Rotterdam and Shanghai, yet expansion on the present site is near impossible, as the complex is now hemmed in by residential high-rises. Some industry insiders are now talking about moving the entire container network to a new site, possibly on the west of Lantau Island next to the airport.

MIDDLE EAST

DUBAI
in prime position
by Scott MacMillan

Despite Dubai’s recent debt crisis, the emirate is likely to remain the trading hub of the Middle East for some time, thanks to the fact that for nearly four decades, Dubai has quietly been building the smartest and most efficient port infrastructure in the region.

Dubai’s Jebel Ali claims to be the third largest transshipment hub in the world after Singapore and Hong Kong, with about half the goods coming through Jebel Ali destined for countries other than the UAE. Although mega-markets like India and China play a role in the re-export trade, transshipments are mainly bound for smaller ports in other cash-rich but port infrastructure-poor Gulf countries, such as Qatar.

Despite talk of a major rail network to connect Middle East destinations by land, other regional seaports will continue to thrive, which explains why Jordan is investing heavily in its Aqaba port, a jumping-off point for the Red Sea and Suez Canal. A €160m expansion project aimed at making Aqaba a gateway to the greater Levant is expected to raise the port’s annual capacity to two million TEUs.

Further north, Turkey’s Haydarpasa, located on the Asian side of the Bosphorus Strait on the Sea of Marmara, remains a vital trade hub as it provides a link to Mediterranean ports, such as Greece’s Piraeus, as well as Ukraine’s Sevastopol, which are both within 1,000km. Haydarpasa, however, remains smaller in terms of capacity than Turkey’s two larger ports at Izmir and Mersin, both on the Mediterranean coast.

But it is Dubai that will continue to see the greatest share of the region’s trading activity. Already the seventh-largest port for containerised vessels in the world, plans are under way to expand further, including the largest airport in the world – Maktoum International – and a logistics park. After a €1bn expansion project that will raise Jebel Ali’s capacity more than 50%, Dubai appears ready to become the world’s fifth-busiest port following Singapore, Shanghai, Hong Kong and Shenzhen.

When it was finished in 1979, it was said that Jebel Ali Port was one of only three man-made objects that could be seen from space, along with the Great Wall of China and the Hoover Dam; today, Dubai’s coastline of artificial islands has been added to that list. But as valuations of this reclaimed land plummet, Dubai’s centre of gravity is returning to the sea trade. Jebel Ali’s operator, DP World, remains one of the crown jewels of Dubai World, the troubled conglomerate behind the Palm Islands, while the Dubai government says the port and its mother company, which posted a profit in the first half of last year despite global economic turmoil, are bothexempt from restructuring plans.