Can Containers Deliver? - Ireland's great freight deficit
June 2006
Table of contents
Part 1...... i IBEC Introduction – Trade, Containers and Ireland’s Capacity deficit challenge...... i 1. The freight container as a globalizing innovation ...... i 2. Ireland’s Trade –Globalisation with Localisation...... ii 3. Transhipment patterns...... iv 4. Modal shift and traffic...... iv 5. Capacity shortfalls, freight forecasts and investment needs...... v 6. Conclusion ...... viii Part 2...... 1 Development of Container capacity in the UK – Implications for Ireland...... 1 Summary & Conclusions...... 1 1. Introduction & Background...... 4 2. Forecast UK Container Growth up to 2020...... 8 3. Forecast of Unitised Traffic for Ireland to 2015...... 16 Introduction...... 16 Current Economic Context for the the Republic...... 16 Medium-term Economic Context for the Republic to 2015 ...... 17 The Performance of the Northern Ireland Economy ...... 19 Linking External Trade for the Republic and the North ...... 20 Forecasts for the Republic and Northern Ireland ...... 21 4. UK Ports Policy Review...... 23 5. The present situation: a port by port analysis ...... 24 6. Proposed Container Port Developments...... 29 7. The Northern Ireland Market ...... 32 8. Inland Transport Links Across the UK...... 34 Logistics for the British Isles...... 40 9. Port developments in Continental Europe...... 41 New Developments ...... 42 10. Consequences for Irish Ports...... 44 Forecast trade growth for Irish Ports...... 45 Planned future port development in Ireland ...... 46 Inland transport linkages ...... 46 The relationship between UK and Irish ports ...... 47 APPENDIX 1 ...... 48 APPENDIX 2 ...... 49
GLOSSARY:
The following technical terms are used extensively throughout the report:
TEU: Twenty foot equivalent unit. Containers come in various lengths- the most common being the 40' unit. A measurement base of 20' was adopted early in the development of containerised trade and is now the accepted international unit of measurement.
Units ( also unitised trade): Freight conveyed in containers or hauled on standard trailers.
Lo-Lo: Lift on Lift off. Refers to movement of freight in containers. Most economical mode over longer distances.
Ro-Ro: Roll on Roll off. Refers to movement of unitised freight on trailers. Trailers can be 'accompanied' on the ship by drivers or 'unaccompanied'. Unaccompanied places greater space demands on Ro-Ro facilities, compared to accompanied. Most economic for shorter distances but being more expensive than Lo-Lo is used for time-sensitive deliveries.
HRO: Harbour Revision order - a key stage in the planning process for UK port facilities where the relevant Government Minister formally approves a development proposal.
Part 1 IBEC Introduction – Trade, Containers and Ireland’s Capacity deficit challenge
This is the second in a series of reports published by IBEC, in association with consultants, Strategic Transport Solutions (STS) dealing with trade and economic policy issues for the Irish seaports industry. This report is concerned with developments in containerised trade and has a particular focus on the trends in landside handling capacity for freight containers in the UK and in Ireland, both North and South
Prior to considering the issues raised by STS in their report (which follows in Part 2), it is appropriate to review the role of freight container in terms of its impact on shipping, on the ports industry and, indeed, on worldwide trade.
1. The freight container as a globalising innovation The freight container is an unlikely contender for the accolade of most significant innovation of the 20th century. In a world where innovation is almost invariably linked to advanced physics or exotic chemistry, an invention shaped around a large, ugly steel box is almost defiantly low-tech. But those who advance the cause of the container are not confined to advocates in the shipping and freight industries.
William Buamol, Director of the Berkeley Centre for Innovation Studies - and author of The free market innovation machine - views the modern shipping container as a close second to the internet in terms of its everyday impact. This, he says, is linked to its role in revolutionising the global freight industry ‘making, he says, products from every corner of the world commonplace and accessible everywhere’
Baumol links the freight container to the rise of outsourcing and to the transformation of the world’s port cities.
Another authority, Marc Levinson1, goes much further, seeing containerisation as the basis for the phenomenon of the transnational supply chain, which itself is an intrinsic part of the globalisation of trade.
Levison’s work is concerned with elaborating the profound changes in the shipping and seaports industries which containerisation brought about - mainly on account of the revolutionary impact of this mid 20th century technology in drastically reducing dockside loading time. Containerisation also brought better utilisation of cargo space on vessels, so shipping costs fell drastically in response to its introduction. The drive for greater shipping efficiencies was maintained for decades, up to the present day, with the introduction of larger ships and more efficient terminals, maintaining downward pressure on costs.
Less immediately apparent is the impact of containerisation on the structure of the ports industry. The financing of facilities for mass-handling and storage of containers entailed large-scale investment and significant risk - but the rewards for innovative ports were
1 Levinson M ‘The Box – how the shipping container made the world smaller and the world economy bigger’ Princeton 2006.
i
enormous. There was also a major downside as trade simply bypassed a number of major port cities which, like New York, failed to adopt to the new technology.
Due to economies of scale, with the passage of time, investment was concentrated in fewer facilities, with ultimate success determined by the willingness of shipping lines to use a particular terminal. Inevitably, not every investment was successful, with developments in, for example, Baltimore, San Diego and San Francisco failing to deliver for investors.
2. Ireland’s Trade –Globalisation with Localisation. Arguably, from the early Seventies, containerisation had a profound impact on the Irish economy – albeit in an unexpected direction. The changes wrought by this revolution in shipping in many ways facilitated the industrial modernisation of the economy.
In retrospect, Ireland’s achievement can be interpreted in terms of playing the global supply chain system to our own advantage. Instead of submissively adopting, we actively managed this new approach. As a result, many supply chains converged on Ireland, in an import- export process with significant value-added at the point of convergence.
In many ways this was an accident of history – the Republic set out to attract largely American foreign direct investment (FDI) companies that were essentially supply chain consolidators. In addition, as Americans, these companies were early adopters in respect of the new rapid transhipment techniques.
Ireland embarked on this process at the precise moment when the revolution in shipping made global supply chains economically feasible.
Our exposure to globalisation has become a defining characteristic of the Irish economy and is the subject of a recent paper from2 the Institute for International Integration studies at Trinity College Dublin.
This paper provides a useful summary of recent Irish trade trends and confirms the positive impact of trade on economic performance. At a macro level, the report indicates that merchandise exports (i.e. excluding services) accounted for 68% of Irish GDP in the period 2001-2003.
The report also observes that trade exceeds €1Bn with only twenty one countries. These comprise the major industrialised economies and, significantly, the emerging Asian economies of China, Hong Kong, South Korea, Malaysia, Singapore and Taiwan. An important observation is that China is the only country against which Ireland recorded a bilateral trade deficit during this period.
Ireland’s strong continental EU trade orientation is also highlighted, representing about 65% of trade in both directions.
The report also emphasises the continuing importance of the UK market (Britain and Northern Ireland) for important sectors of the Irish economy. This has particular relevance in the context of trade policy. For example, the UK, while accounting for only 22% of Irish exports overall, accounts for 47% of exports from Irish-owned manufacturers – a sector dominated by the food and drinks industry. As a result, the UK accounts for 53% of Ireland’s agrifood exports.
2 Lane & Ruane ‘Globalisation and the Irish economy’ IIIS Occasional Paper 1 2006 Trinity College Dublin.2
ii
The broad pattern in terms of Ireland’s export trade and the particular impact of the UK is revealed in the charts which follow.
Manufacturers-Export destinations %
90 80 70 60 50 FDI manufacturers 40 Irish 30 20 10 0 UK Other EU US Other
Export destination by merchandise sector %
100
80
60 US
40 Other EU UK 20
0 Agrifood Chemicals Engineering & IT
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Export share by sector %
60
50
40 Food & drink 30 Chemicals 20 Electronics
10
0 Irish owned FDI
3. Transhipment patterns. Having established the context, IBEC’s purpose in embarking on a study on container terminal capacity may be clearer. In summary, not only is our economy highly trade dependent but, from an historic perspective, the introduction of containerisation, was a factor in attracting foreign direct investment (FDI), a major turning point for the Irish economy. On this basis - and looking to the future competitive posture of the economy - it is vital that sufficient capacity is provided to accommodate future growth in container traffic.
In terms of the geographic orientation of trade, the Republic’s €1Billion plus ‘club’ of trading partners includes emerging Far Eastern economies that, in turn, host some of the world’s biggest and most efficient container terminals, including Hong Kong, Shanghai and Singapore. The physical link with these trading partners is provided almost exclusively by containerised traffic.
The UK fits into the picture in two ways. While our overall trade orientation is increasingly directed towards the Continental EU, the UK remains particularly important among locally- owned (as opposed to FDI) manufacturers, a sector dominated by the food and drinks industry. In addition – and this is an issue covered in detail in the STS report – much of Ireland’s containerised trade with the rest of the world is transshipped through UK container terminals of Liverpool, Felixstowe and Tilbury. The contention is that international transshipment traffic through these ports, while still significant, has been in decline – a trend explained by UK capacity shortfalls. However, as capacity expands with new investment, a resurgence in transshipment through UK facilities is expected. Thus, while in the last decade or so, Irish transshipment trade has moved towards the Continental ports of Rotterdam, Zeebrugge and Antwerp, the pendulum is expected to move back to ports on the eastern side of the North Sea.
The deciding factor will be the extent to which the global shipping lines will favour UK ports as resurgent competitors, drawing trade away from continental operators.
4. Modal shift and traffic This emerging scenario will have implications in terms of a modal shift that could favour road – and possibly rail - over coastwise traffic. Ultimately, this will be determined by the relative cost of competing modes.
In this context IBEC, in a separate report, has commented critically on the UK investment record on corridors that are part of the EU Trans European Networks (TENS). In the context of growing landbridge traffic, the performance of critical transport infrastructure in mainland UK will assume greater significance for business located in both parts of this island.
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The Governments will need to take account of this reality in framing future investment priorities.
5. Capacity shortfalls, freight forecasts and investment needs.
In terms of port facilities, investment requirements need to be based on a realistic assessment of both current needs and future freight trends.
IBEC’s analysis of the current capacity and throughput3 position for these islands plus the Netherlands (as our primary transhipment location) is summarised in the charts that follow:
TEU throughput '000 per €Bn GDP 2004
Average
Netherlands
GB
N. Ireland
Ireland
0.0 5.0 10.0 15.0 20.0
This first chart shows throughput performance as a function of GDP for the respective economies. It clearly illustrates the pre-eminent position of Rotterdam as a principal hub port for the whole of NW Europe – throughput is enormous relative to the scale of the Netherlands economy.
The figures also suggest that container volumes achieved by the Republic ports are some 20 percent lower per unit of GDP than the equivalent figures for both Northern Ireland and Britain. This could suggest that ‘contestable’ Irish trade is being captured by ports in Northern Ireland.
The second chart below examines TEU storage capacity as a function of GDP for the same group of economies.
3 The charts are drawn from the following Table. For TEU capacity and throughput details see STS report. GDP € Mn TEU k Area KSM K TEU/GDP KSM/GDP Ireland 160 572 512 3.6 3.2 N. Ireland 35 156 220 4.5 6.3 GB 1,733 7400 5,500 4.3 3.2 Netherlands 471 8300 4,900 17.6 10.4 Total 2,399 16,428 11,132 6.8 4.6
v
Container Terminal gross area per €Bn GDP 2004
Average
Netherlands
GB
N. Ireland
Ireland
0 2 4 6 8 10 12
From this we can draw a further set of conclusions:
Capacity in the Netherlands is constrained for the throughput it generates – which illustrates the urgency of the need for capacity additions at Rotterdam. The STS report documents planned developments by the port, with the support of the Dutch Government, that will secure the future of Rotterdam in terms of its capacity requirements.
Northern Ireland is well endowed currently in terms of available TEU capacity, again relative to the scale of the Northern economy. On this basis, Belfast in particular is well positioned to exploit market growth in the Republic.
The corollary flowing from this is that Britain and the Republic have under-provided which, as STS suggest, represents a major constraint on growth prospects for the two economies.
Where Britain and Ireland differ is in relation to long-term capacity planning. Again, STS have documented progress in Britain, where a range of planning approvals are expected to yield, a doubling of container handling capacity over the next five to ten years.
The position for the Republic is far less certain; under the Government’s current review, the port companies have submitted plans that include proposals for large scale expansions in container handling facilities in Dublin, Cork and elsewhere.
The Dublin Port proposal for a 21-hectare extension, submitted as long ago as 1998, is still awaiting Ministerial consent – an intolerable situation, given current capacity bottlenecks. The risk of damage to national economic performance and competitiveness is magnified by the consideration that trade volumes are forecast to grow strongly in coming years. This issue is addressed in detail in the next section.
As in numerous other reports, STS comment on the rapid rate of growth in unitised trade in recent years. The major question is the extent to which this high rate of growth is maintained over the medium to long-term. It is important in this context to emphasise the divergence between the STS forecast and the forecast that informed the Government’s 2005 Ports policy statement.
STS are predicting for the Republic that unitised traffic (LoLo and RoRo modes combined) will grow by 79% up to 2015. The Government figure is for a more conservative 35% growth.
IBEC finds the STS forecast to be the more convincing, as it is based on authoritative and reasonably conservative estimates of GDP growth from the independent ESRI and the Department of Finance. In addition, most recent freight figures for Quarter 1 2006 provide
vi
evidence that strong growth is being maintained, with unitised trade up by 7% on an annualised basis. This is line with average growth rates in the period since 2002.
Significantly also, a recent Intertrade Ireland report, on a common spatial strategy for both sides of the Border, sets a long-term target of 5% GDP growth for the two economies which, it must be emphasised, is well in excess of the GDP basis for the STS forecast.
What can we conclude on the basis of the STS forecast? The consultants key assumption in framing their forecast is that Lo-Lo will grow at half the rate of Ro-Ro, which they acknowledge is an arbitrary assumption. Historic trends would suggest a ratio closer to 75%. On this basis, IBEC’s conclusion is that throughput of containers will reach 1.9 million TEU by 2015, compared to 1.25 million today.
How will this greatly expanded throughput be accommodated? The major container ports in Ireland have submitted their plans to Government and the respective capacity additions are included in Table 6.1. in the STS report. The figure below is derived from this and shows current throughput plus the incremental throughput represented by proposed investments at the various ports. Ultimately if all the proposed facilities are brought on stream, throughput capacity will grow to 2.5m TEU.
TEU Capacity today and incremented by project
Bremore 2.5
Dublin 2.25
Cork 1.65
Belfast 1.35
Current 1.25
0 0.5 1 1.5 2 2.5
This leads to the important conclusion that all the new facilities proposed at Dublin, Cork and Belfast are needed if we are to be assured of sufficient capacity to meet market growth. Compared with expansion of existing facilities, prospects for delivering the new facility at Bremore are more uncertain, based on the consideration that the ‘greenfield’ model of port provision is largely untried in Ireland, at least in recent times.
Notwithstanding this, inclusion of Bremore in the overall capacity prediction results in a 100% expansion of Lo-Lo capacity compared with today’s levels. Interestingly, unlike the position on this island, the freight industry in Britain can look forward to at least a 100% capacity expansion with a very high degree of certainty and within a timeframe of only five years. (see STS Report Summary, page 1).
An important issue for the shipping industry, internationally, relates to the locations that can support investment in new terminal facilities. A concern for IBEC, in this context, is that Government policy is not placing sufficient emphasis on the landside implications of the move towards bigger ships with deeper drafts.
The suggestion is that these vessels will call to fewer ports, which has obvious implications in terms of the locations that can deliver a return on large-scale investments. This has been one of the most significant factors driving greater concentration in the container terminal
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industry, worldwide, and has resulted in significant rationalisation. The market and investment forces that resulted, for example, in the $6.8Bn takeover of P&O Ports by DP World are expected to exert a growing influence on regional markets such as the UK and Ireland.
6. Conclusion If we were to draw an overall conclusion from the STS analysis, it would be that, in response to global market pressures, container handing facilities on these islands will need to become bigger and more efficient in coming years. Significantly, the degree of interdependence between British and Irish terminals will also grow. Market forces, combined with physical attributes - particularly the ability to cater for larger vessels - will also drive a process of consolidation in terms of port facilities. Ultimately, there can be little doubt that a reduced number of facilities on the Island will compete for container traffic.
The ports and infrastructure strategy adopted by the Governments, North and South, needs to take account of this emerging scenario. Failure to do so will result in increased congestion in key ports. Freight costs will rise, in parallel with falling efficiencies, which will damage competitivess and reduce Ireland’s attractiveness as an investment location. If sustained, capacity shortfalls have the potential to weaken manufacturing, the most trade-dependent sector and ultimately our entire industrial base.
As a consequence, decades of sustained effort to promote industrial development could be undermined by a combination of political expediency and benign neglect.
Acknowledgements IBEC acknowledges, with thanks, the contributions of a number of individuals and companies towards the preparation of this report. Our thanks particularly to the members of the STS consultancy team, Mary Gallagher, Peter Iles and Robin Cowan. Tom Ferris prepared the independent freight forecast, that forms a key part of the report, and we are very grateful to him for this important contribution. We also gratefully acknowledge the involvement of key executives from the ports of Dublin and Cork, and from Dublin Ferry Terminals Ltd and Marine Terminals Ltd, who assisted in the drafting of the final report. These companies also provided generous financial support for the project, which we greatly appreciate.
Comments on the report, or on the issues raised, are very much welcomed by IBEC and should be addressed to:
Reg McCabe Director Transport and Logistics Council IBEC 84-86 Lr Baggot St Dublin 2
Tel: + 353 1 6051527 Email: [email protected]
June 2006
viii Development of Container Capacity in the UK – Implications for Ireland
Part 2
STS Consultants Report to IBEC Development of Container capacity in the UK – Implications for Ireland
Summary & Conclusions
The UK is embarking upon a major expansion of container port capacity, with the following developments already approved or very likely:
Harwich Bathside Bay 1.7m TEU Felixstowe South 1.6m TEU London Gateway 3.5m TEU Total 6.8m TEU
In addition Bristol, Liverpool, Tilbury, Hunterston (Glasgow) and the Tees all have further smaller schemes they wish to develop.
The consequence is that UK container port capacity will at least double over the next five years, assuming London Gateway receives approval. This in turn means that UK port managers will actively chase trans-shipment cargoes, if only to increase revenue to service much higher level of debt. Transhipment refers to onward consignment of deep sea traffic originating from outside Europe. Given that the UK originally had 20% of the NW European trans-shipment market - but is now down to 8% because of lack of port capacity - this aspiration to increase market share is very likely to be realised. The primary target trans-shipment markets will be Ireland, Iberia and the Mediterranean.
With so much new capacity for big ships being introduced in both the UK and Continental NW Europe, cargo will increasingly move on the largest possible ships, resulting in a re- enforcement of the trend for the island of Ireland to be served by trans-shipment. Simply put, these large ships are too big for Irish ports and the cargo interchange is too small. Even Le Havre is struggling to remain a principal port of call.
What does this mean for Irish ports? The forecasts for the Republic and Northern Ireland discussed in Chapter 3 suggest that these economies will enjoy an average annual growth in GDP of 4% and 2.3% respectively up to 2015. If these forecasts are realised - and given the fairly close historic linkage between GDP and unitised freight growth- the Irish ports will have to cater for an additional 1.2m units (Ro-Ro and Lo-Lo) by 2014. (See Table 3.7) This represents an increase of 50% on the 2005 unitised volumes. To cater for such increases in unitised traffic, significant increases in capacity will be required in terms of ports, ships and roads.
If the Irish economy continues to outperform most of the rest of Europe (including the UK), then Irish trade will grow faster than the European average and unit growth will outstrip tonnage growth, since new technology is invariably more of a “cube cargo” than a tonnage cargo (i.e. a new television is significantly lighter than an old one). This means that, in TEU terms, Ireland should expect a faster annual rate of growth than that projected in the UK.
1
Development of Container Capacity in the UK – Implications for Ireland
Economies of scale will dictate that the largest possible feeder ships are used, so the 1,000 TEU feeder ship will become the norm, rather than the exception and within ten years a 2,000 TEU feeder ship will probably be working on the Irish Sea.
This poses questions as to which Irish ports can handle such ships and it will also increase pressure to improve all elements of port productivity.
As a consequence, the stakeholders in the process have serious options to evaluate - expanding Dublin Port, developing the new port of Bremore and moving container handling facilities downstream from Cork’s Tivoli terminal. Belfast will need to proceed with additional container capacity and possibly additional capacity will be required at Warrenpoint or Greenore.
The provision of additional unitised capacity is on the agenda outlined by the Marine Minister in his policy statement of January 2005. Since then, the Minister has commissioned consultants to “refine the criteria to be used for project evaluation …. (and).. to draw up a uniform template for the evaluation of proposals”.4
The Government’s ports policy assumes a growth in unitised traffic of 35% between 2003 and 2014. If the data from this study are used, then the comparable forecast is a growth of 79%.
Whichever forecast is used or realised, long lead times and the need to anticipate demand require that timely decisions about the location of additional unitised port capacity are made and that these are followed by early implementation.
It is worth noting that any trans-shipment traffic channelled through the UK will most likely be shipped from the UK port and not overland via the landbridge route. The cost of landbridge (road/rail and the short Irish Sea crossing) is relatively high compared with the cost of direct shipment from a hub port.
An increase in feeder Lo-Lo traffic from UK container ports may not benefit the Intra- European container operators, since these companies tend to operate out of their own terminals on fixed schedules and from ports other than Felixstowe or Southampton. In addition the new port expansions are aimed at deep-sea operators rather then intra- European services. The beneficiaries are more likely to be the specialist feeder operators. It is also possible that the largest global operators will enter the transhipment market, giving Irish Ports new clients and new opportunities but also greater challenges, in that more services means more customers to be handled in a very limited space.
As noted, some consumer goods for the Island of Ireland are channelled through UK-based distribution centres. An increase in UK port capacity may increase this trend,with UK distribution centres and UK/Ireland based logistics companies increasingly competing with those located in the Netherlands. These cargoes are moved by Ro-Ro ferry from the UK distribution centre to Ireland and it is expected that this trade will continue to grow. This will in part sustain further growth in the Irish Sea market and will necessitate continuing investment in Ro-Ro facilities.
Rail freight movements through the Channel Tunnel have been in decline since 2000; there are currently three container trains per day each way through the Channel Tunnel and developing more UK container port capacity will not assist any revival of this mode. At time of writing, Eurotunnel’s shares have been suspended, but the company’s current price point at about €250 per unit through the Tunnel effectively mean that, on cost grounds, it is not a realistic route for Irish traffic.
4 Dept of Transport update on Seaport Capacity at www.transport.ie
2
Development of Container Capacity in the UK – Implications for Ireland
Not only do the main ports in both the UK and Continental Europe expect to see container traffic grow, but they also expect trans-shipment cargo to grow faster than traditional hinterland cargoes and anticipate increases in ship size. For ports on the Island of Ireland, this means that they must develop comparable and equivalent port capacity, not least because many expect the Irish economy to outperform that of the UK.
This means Ireland must be equipped to handle:
More containers Arriving in bigger ships Requiring more container capacity
3
Development of Container Capacity in the UK – Implications for Ireland
1. Introduction & Background
1.1 In response to the growth in the Irish economy, unitised freight traffic has increased significantly. The relatively small size of the market, however and its geographic location means that, in the case of Lo-Lo services to Continental European and global markets, Ireland relies on feeder services to/from trans-shipment ports in the UK and North-Western Europe (in particular Rotterdam, Antwerp and Le Havre) rather than on direct services. This is especially true in relation to the particularly fast growing Asian market which is increasingly becoming the main source of manufactured goods for Europe.
1.2 In this context, IBEC has commissioned a report to review the proposals for the development of Lo-Lo container terminal capacity in the UK and to assess the likely implications of these developments for Ireland.
1.3 This study is undertaken against a background of changing trade patterns to which Governments, ports and shipping operators are seeking to respond.
The growing role of the Far East as a manufacturing base is altering historical trading patterns between Ireland and the rest of the world. Asian sourcing is therefore becoming more important to the Irish consumer. Steadily growing Anglo-Irish trade may be partly driven by the increasing tendency of global manufacturers to see the island of Ireland as part of the market represented by the geographical term “the British Isles”. The consequence is that global trade with Ireland may be routed through a distribution hub in England. The UK Government is presently conducting a “Ports Policy Review” which is focused on container terminal capacity, particularly in relation to deep-sea service requirements. IBEC wishes to understand the thinking of the UK Dept. for Transport (DfT) on this issue. It is generally accepted in the UK that not only is there a shortage of deep-sea container terminal capacity, but that this shortage of capacity also has serious negative implications for the UK economy as a whole. Indeed this “national need” has been accepted by such environmental lobby groups as the RSPB (Royal Society for the Protection of Birds) and Friends of the Earth. Consequently a variety of schemes for port expansion have been proposed at Felixstowe, Harwich (Bathside Bay), London Gateway (Shellhaven) and Dibden Bay in Southampton. Liverpool, Teeside and Bristol also have aspirations to develop river terminals to cater for larger vessels and capture a share of this market. In addition the development of much larger container ships, usually calling at fewer ports, has increased the number of containers being trans-shipped. This has inspired proposals for trans-shipment facilities in such places as Orkney, Glasgow (Hunterston) and Shannon which would serve the entire North-west European market. Hunterston is also arguing a case for developing itself as a national flagship to become the main container port for Scotland. Finally, and arguably most importantly, growth in trade through UK ports will increase pressure upon the UK road and railway networks. This growing congestion across the UK has implications for Irish “Landbridge” traffic.
1.4 The study assesses such developments and identifies their implications for Ireland with regard to Lo-Lo services and port facilities. It makes recommendations on the further development of Ireland’s Lo-Lo capacity.
1.5 Table 1.1 below summarises the development of the Republic’s and Northern Ireland’s trade by category for the period 2000-2004.
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Development of Container Capacity in the UK – Implications for Ireland
Table 1.1. Tonnage of Goods classified by Category handled by All Irish Ports '000s Tonnes
2000 2001 2002 2003 2004 Growth 00-04 ROI Ports Ro-Ro 8,947 9,253 9,449 9,857 10,570 18% Lo-Lo 6,262 5,731 5,919 6,574 7,022 12% Liquid Bulk 14,008 14,247 13,154 12,966 13,315 -5% Dry Bulk 14,463 14,832 14,775 15,024 14,828 3% Break Bulk & 1,593 1,732 1,622 1,743 1,984 25% other TOTAL ROI 45,273 45,795 44,919 46,164 47,719 5%
NI Ports Ro-Ro 9,992 9,231 9,788 9,874 10,742 8% Lo-Lo 1,451 1,419 1,477 1,595 1,744 20% Liquid & Dry Bulks 8,238 8,810 8,743 9,105 9,399 14% Other 1,755 1,707 1,356 1,400 1,507 -14% TOTAL NI 21,435 21,167 21,363 21,974 23,392 9%
Total all ports 66,708 66,962 66,282 68,138 71,111 7%
Source: Statistics of Port Traffic published by the CSO, the Dept of Enterprise, Trade & Investment, & the Dept for Transport UK. At the time of writing, tonnages by mode for 2005 were not available.
1.6 Total Lo-Lo traffic grew by 14% over the period 2000 to 2004 when measured in tonnes. This is faster than the 12.5% growth recorded in total Ro-Ro traffic over the same period. It should be noted that Ro-Ro traffic grew faster through the Republic’s ports while Lo-Lo grew faster through the Northern Ireland ports.
1.7 The growth in the number of units moved through all Irish ports over the same period is set out in Table 1.2 below
Table 1.2. Unitised Volumes Through All Irish Ports, 2001-05 Units
Ports/Mode 2001 2002 2003 2004 2005 Growth 01-05 Ro-Ro NI Ports 729,158 743,440 755,604 778,511 818,500 12% RoI Ports 673,697 693,261 722,073 770,600 816,700 21% TOTAL 1,402,855 1,436,701 1,477,677 1,549,111 1,635,200 17%
Lo-Lo NI Ports 126,037 127,351 137,490 148,289 156,000 24% RoI Ports 428,538 453,489 498,137 530,490 571,792 33% TOTAL 554,575 580,840 635,627 678,779 727,792 31%
TOTAL ALL PORTS 1,957,430 2,017,541 2,113,304 2,227,890 2,362,992 21%
Sources: Data for 2001-04 are from the CSO & Dept of Enterprise Trade & Investment, NI. Data from 2005 are estimates received from the port authorities and have not yet been published.
1.8 The contrast between volumes in tonnes and units is important. Measuring tonnage in the case of unitised trade is not as helpful as measuring units because unitised ports
5
Development of Container Capacity in the UK – Implications for Ireland
physically handle container units, not tonnes of cargo. Container traffic has been growing at almost 6% per annum, well above the rate of growth in Ro-Ro units. The rising tonnage per Ro-Ro unit carried over the period, however, does suggest an improving unit utilisation by the trailer operators.
1.9 The pie chart below shows the relative size of the main North West European national container markets. Dutch and German ports score heavily in terms of economies of scale in that the Netherlands has one dominant port (Rotterdam), whilst Germany has two (Hamburg and Bremen). The single most significant benefit of this concentrated port infrastructure is that capital infrastructure costs like dredging and major land reclamation can be defrayed against much larger cargo tonnages than can be done in Ireland or the UK. In contrast whilst the UK market is almost the same size of the Dutch market, the business is spread between Felixstowe, Southampton, Tilbury, Thamesport and Liverpool, with London Gateway seeking to join the fray.
1.10 It is also worth noting that, although the Dutch and UK container port markets are of a similar size, the Dutch traffic has a much higher proportion of trans-shipment cargo than that of the UK. If, as a result of the provision of additional port capacity, the UK chases more trans-shipment business, then it is likely to take second place from the Netherlands. Germany is the largest country for container traffic, but splits its business between Hamburg and Bremen. Germany also benefits from being the logical trans-shipment hub for the Baltic and Scandinavia, although here again Hamburg and Rotterdam compete for this traffic. This is pertinent since the UK share of trans-shipment cargoes has fallen from 20% of the N.W. European market to about 8%, primarily as a result of lack of port capacity. This point is examined later in greater detail.
1.11 From the above it can be seen that the Irish market is quite small, as indeed is the French market. The relative size of the leading container ports in NW Europe is set out in Table 1.3. below. The data show the dominance of Rotterdam, Hamburg and Antwerp. Antwerp is significant in that it acts as a port for France as well as Belgium, Luxembourg and Germany.
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Development of Container Capacity in the UK – Implications for Ireland
1.12 Putting Irish ports into perspective, Dublin handled about 355,000 units in 2005, against Belfast at 133,000 units and with Cork’s throughput at just over 100,000.
Table 1.3. Lo-Lo Units handled by Principal European Ports in 2004 000’s units
P o rt T h ro u g h p u t 2 0 0 4 0 0 0 's R o tte rd a m 8 ,2 8 1 D u n k e rq u e 1 ,7 4 7 L e H a v re 2 ,1 3 1 A n tw e rp 6 ,0 6 3 Z e e b ru g g e 1 ,1 9 6 F e lix s to w e 2 ,7 1 7
Source: STS Note: Rotterdam volumes include Ro-Ro
Finally it is to be noted that, generally, ports in both the Republic of Ireland and the UK are financed commercially i.e. without State aid. This involves a significant implicit risk on the part of the port operators who compete strongly for business in a market where the customers (shipping lines) have no long term commitment to any port
7
Development of Container Capacity in the UK – Implications for Ireland
2. Forecast UK Container Growth up to 2020
2.1 As part of its UK ports policy review the Dept for Transport (DfT) commissioned a forecast of the likely growth in container trade through the UK ports sector. This forecast produced very similar conclusions to the three studies completed for the Public Enquiries in Dibden Bay, London Gateway and Felixstowe.
2.2 Between 1993 and 2003 the UK Lo-Lo market grew by about 80% in terms of unit throughput and the Ro-Ro market grew by about 130% over the same period. Whilst there is evidence that the Ro-Ro rate of growth has slowed down a little recently the pace of Lo-Lo growth has increased. This is driven by a surge in trade with Asia, particularly with China.
2.3 It is difficult to be sure how strongly the Asian boom will continue to drive Lo-Lo growth. The Deep Sea Dry Bulk market, which had been buoyant due to demand from China for increased raw materials, has declined sharply since September 2005 and many see this as a sign that the rapid pace of growth in the Asian economies is slowing down, although further growth albeit at a slower rate is still expected. This is supported by comments from some of the Port Authorities that TEU imports from the Far East are slowing after record growth in 2005. The unofficial comment we received on the market was “steady but lower growth for the foreseeable future.”
2.4 The model used by the DfT is built around the following inputs: Rate of demand growth
Quay productivity Increases in ship size Consequential redundancy/cascading of quays
There was a strong view in the UK that there was limited scope for significant development in quay and terminal productivity through upgrading and improving existing facilities. This was on the grounds that UK ports are generally reasonably efficient in terms of units moved per crane, units per metre of quay, etc. This situation was summarised as follows in the London Gateway enquiry.
“On this basis, it is estimated that UK deep sea container port capacity can be increased from just over 6 million TEU per annum at the end of 2001 to a practical upper limit of 7.2 million TEU per annum. The expansion to 7.2 million TEU per annum capacity is achievable by not only optimising facilities at Southampton, Felixstowe and Liverpool but also by building a second riverside berth at Tilbury and the construction of a Trinity III terminal extension at Felixstowe. This expansion to 7.2 million TEU per annum is forecast to be possible within three to five years…..
The increase to 7.2 million TEU per annum capacity would result in UK deep sea ports achieving a high level of quayline efficiency measured against world standards. Although certain ports in the world can achieve higher levels of efficiency, there are strong reasons why that could not be expected realistically in the UK. The factors which drive very high quayline efficiency in areas such as south-east Asia include extremely limited availability of land compared with very high land costs, exceptionally strong cargo growth, capping of tariffs by governments, and a large proportion of freight being made up by transhipment. These are conditions which do not exist and will not be replicated in the UK.”
2.5 Notwithstanding the comments in paragraph 2.4 above, a shipping line executive at a recent conference in London made it clear that UK terminals may still have improvements to make compared to “benchmark” terminals around the world, particularly in terms of speed of ship turn- around. Certainly, commercial competition from Rotterdam and Dunkerque for trans-shipment traffics should still provide an
8
Development of Container Capacity in the UK – Implications for Ireland
incentive for securing some further efficiencies in the new UK port developments as they come on stream.
2.6 This raises questions about which productivity levels should be set by European ports as a benchmark. Container terminal productivity can be measured by the following
Gross moves per crane per hour Container moves per metre of quay per annum Average number of containers moved per square metre of terminal per annum Average waiting time per road vehicle to collect from or deliver a container unit to the terminal
This is a complex issue since each of the above points measures a different aspect of a container port’s efficiency. The shipping line will be most interested in a fast port turn-around, probably measured by crane productivity, while the logistics operator may be most concerned about time taken by road vehicles to collect or deliver containers. Ultimately a terminal has to be efficient in all areas.
2.7 There is an expectation that ship size will increase, certainly to that of a 12,000 TEU ship. There is no clear indication, however, as to how much bigger Lo-Lo ships will become. Size of ship is an issue in some Asian ports where limits relating to draught are likely to be encountered. Generally all new berths being considered have a depth alongside of -15m CD (below Chart Datum)
2.8 The conclusion of the DfT study was there was an implied need in the UK for additional deep water container capacity of approximately 10,000 quay metres by 2030.
2.9 The shipping lines and existing major SE ports favoured the concentrated provision of this new capacity in the south-east of England. This market preference is based upon the fact that essentially all “mother ships” see Rotterdam and Hamburg/Bremen as their core ports of call. Ports in the S.E. of England can be treated as a “way-call” with minimal deviation, whereas ports further north or west involve a significant deviation time. There are, however, signs of growing regionalism in the UK with a view from South Western, Northern and Scottish politicians that yet again the South East is being over favoured in terms of Government Economic development policy. This may impact on proposed deep water expansion schemes at ports such as Bristol, Teesport, Hunterston and Liverpool. This is raising issues which are discussed in section 3 on UK ports policy.
2.10 The ports in the south-east of England are well located in relation to the main consumer markets of London/SE England and the East and West Midlands. These areas are all readily served by road vehicle from SE ports. The same argument, however, can also be made for Bristol (indeed the Bristol inland logistics case is arguably stronger than that of the south east) and also for the ports feeding onto the M62 corridor (i.e. Liverpool, the Humber and the Tees). Whilst these more “northern ports” are arguably remote from areas south of London, they are better located for the Liverpool/Manchester/ Leeds/ Sheffield axis, plus the NE of England and Scotland. A particular point to note is that the “logistics centre” of the UK is Milton Keynes which is readily accessible to most English container ports, although there is some evidence that this centre of gravity is moving north, due to rising land and labour costs in the south-east.
2.11 On the basis of the work done by the its consultants, the DfT’s forecast concludes that there would be relatively little growth in overall inland freight within the UK. Rather there would be a substitution of domestic production by goods imported through south-east ports. Of this traffic 73% would pass through the Thames/Kent/Haven area of England. Container volume was expected to double by 2020. As a consequence the international share of domestic road tonne/kilometres would rise from 15% at present to 24% by 2030.
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Development of Container Capacity in the UK – Implications for Ireland
2.12 The historical and forecast development of the deep-sea container market is set out below in chart 2.1. This is for UK based trade only and excludes trans-shipment cargo.
2.13 The interesting point to note from the Felixstowe South Inspector’s report 5 is that historically (1990 to 2003) container trade through all UK ports grew at an annual rate of about 5.7%, with the main deep-sea ports recording a higher rate of growth at about 6.9% p.a. Table 2.1 envisages continued growth, but at a reduced rate compared to historical levels.
Chart 2.1. Forecast for UK Deep-Sea Container Traffic
14000
12000
10000
s 8000 U E T
n Series1 o i l l i 6000 M
4000
2000
0 2003 2010 2020F 2020LG Year
Source: Felixstowe South Inspector’s report section 3.105 Note: 2020F refers to Felixstowe & 2020LG to London Gateway
2.14 The Felixstowe inspector’s report states “The principal focus of container trade growth in the EU has been trade with East Asia. Between 1990 and 2003, the volume of containers shipped between Northern Europe and North America increased by 85%, but the corresponding increase for Asian trade was 220%.” The report continues; “For transhipment business, UK ports compete in a market which includes not just UK competitors but also the North Sea continental ports of Rotterdam, Antwerp, Le Havre, Hamburg and Bremerhaven. Transhipment business is not directly tied to a specific port's hinterland, but can take place at any suitable location within the region……Between 1990 and 2003, North European container transhipment demand increased 3.6 fold to some 7.89m TEU. The UK's share of the market rose steadily from 10.9% in 1990 to 20.1% in 1999, but has fallen since to 8% in 2003.
2.15 The present and forecast growth in trans-shipment at major EU deep-sea ports is set out below in table 2.2.
5 Felixstowe South Reconfiguration: Inspector’s Report, DfT UK Feb 2006
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Development of Container Capacity in the UK – Implications for Ireland
Table 2.2 EU & UK deep-sea trans-shipment market m TEUs
EU Growth UK UK T/shipment T/shipment Share 2003 7.89 631 8% 2010 12.96 64% 1814 14% 2020 22.66 75% 3626 16%
Source: Felixstowe South Inspector’s Report 2006
2.16 This analysis suggests that Europe’s containerised trade, particularly with Asia, will grow strongly resulting in an increased level of trans-shipment through NW European ports. UK ports, given more capacity, will seek to recover their share of this trans- shipment market. The Felixstowe report suggests that the 16% share might be reached by 2011, so it was estimated that this would be about 14% in 2010.
2.17 The crucial point that has emerged through the port expansion planning process (Dibden Bay, Felixstowe South, Harwich Bathside Bay and London Gateway) is that UK container ports are essentially full. Certainly this can be seen at Felixstowe where container throughput did not grow at all between 2000 and 2004 despite this being a market that was then growing by more than 6% per annum. It can also be seen in the quite dramatic decline in trans-shipment trade through UK ports. This increasing national need for more container port capacity, with a better planning process to achieve it, has prompted the UK government to review its ports policy.
2.18 All the foregoing refers only to one segment of the unitised market – that of deep-sea container traffic. It is, however, relevant in the context of this study to consider the entire UK unitised market which is done below.
2.19 In 2004 the UK ports market for unitised trade, by segment, was as shown in Table 2.3. below.
2.20 The main point to note in table 2.3 is that deep-sea traffic accounts for less than a quarter of total unitised traffic. Short-sea unitised traffic in various modes accounts for a fraction more than three-quarters of UK unitised trade and historically the Ro-Ro sector has grown faster than Lo-Lo.
Whilst it might be argued that the growing importance of trade with Asia will alter relative balances, the UK trade with the EU, particularly the new members like Poland and the Baltic States, is expanding. Therefore further growth in short-sea trade can be expected. Given that Anglo-Irish trade fits into this category, it is important to assess this particular segment.
Table 2.3 Relative importance of various sub markets 2004
Sector 000's Units Share Short Sea Containers 2134 18% Accompanied Trucks 3829 32% Unaccompanied Trailers 2686 23% Ro-Ro Containers 383 3% Deep-sea Containers 2636 22% Other 129 1% TOTAL 11797 100%
Source: UK Maritime statistics 2004
Note: Coastwise units are included in the above
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Development of Container Capacity in the UK – Implications for Ireland
2.21 A summary of recent forecasts for container and Ro-Ro traffic is set out below. As can be seen there is little difference between the forecasts. These forecasts are for UK trade only and exclude trans-shipment cargo, which is discussed later
Table 2.4 Summary of recent trade forecasts
Recent Lo-Lo Growth Forecasts 1999-2015 %p.a. Dibden Bay Enquiry MDST 119% 5% Felixstowe South/Bathside Bay OSC 112% 5% London Gateway Enquiry Drewry 105% 5% For RSPB/English Nature MDST 115% 5% Actual 1999-2004 6.3% (excl 3rd country transhipment)
Recent Ro-Ro Growth Forecasts 1999-2015
Dibden Bay Enquiry MDST 93% 4.2% London Gateway Enquiry Drewry 93% 4.2% Actual 1999-2004 4.9%
Source: Waterfront Partnership
2.22 Forecasting short-sea container growth, however, is not straight forward since the period 2000 to 2004 saw a serious decline in trans-shipment traffic through the UK. This is illustrated in Table 2.5 below.
Table 2.5. Development of UK Short-Sea Lo-Lo Traffic 000’s Units
Country 2001 2002 2003 2004 Change 01-04 Belgium 210 290 352 349 66% France 91 75 91 105 15% Germany 186 208 184 206 11% Ireland 93 94 84 78 -16% Italy 71 78 59 66 -7% Netherlands 408 455 473 492 21% Portugal 53 42 39 35 -34% Spain 143 128 132 117 -18% Scandinavia 176 149 134 138 -22%
Sub-total 1431 1519 1548 1586 11%
Others 332 280 254 314 -5%
TOTAL 1763 1799 1802 1900 8%
Source: UK Maritime Transport Statistics
2.23 At this stage it is perhaps worth reviewing how many trans-shipment containers are being considered. Table 2.6 below estimates the size of the UK trans-shipment market. It suggests that this might grow by about 1.2m TEUs between 2003 and 2010; this is equivalent to a 46% growth in the UK deep-sea market ;
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Development of Container Capacity in the UK – Implications for Ireland
Table 2.6 The UK Trans-shipment market 2000 to 2020 ‘000 TEUs ______
Market size ‘000 TEUs Market share 2000 1,145 20% in 1999 2003 631 8% 2010 1,841 14% 2020 3,626 16%
Source: Felixstowe South Inspector’s Report 2006
or to a growth of 63% in the short-sea container market compared to 2004 (see Table 2.3). A revival in trans-shipment at UK ports would therefore radically affect services out of the UK.
2.24 The UK has traditionally been strong in the trans-shipment of cargoes to Iberia, the Mediterranean and Ireland. Scandinavian and Baltic cargoes have traditionally been handled through German ports or Rotterdam and it is less likely that the Scandinavian market will switch to the UK, not least because most services to Scandinavia from the UK are Ro-Ro and are focused upon the Humber, not the south-east of England.
Table 2.7. Principal Lo- Lo services to/from Ireland
Irish Port Principal Principal Destinations Operators Belfast Southampton BG Freight Felixstowe Eucon Rotterdam Eurofeeder Antwerp Samskib Le Havre Warrenpoint Zeebrugge C2C Le Havre AC Holdings BV Rotterdam Drogheda Rotterdam Geest/Norfolk Line Denmark/Norway Lys Line Dublin Liverpool BG Freight, Coastal Felixstowe Eucon, Eurofeeders Rotterdam Express Container Line Antwerp Norfolk Line Le Havre Samskib Waterford Rotterdam Norfolk Line Zeebrugge C2C Le Havre Cork Rotterdam BG Freight Zeebrugge Eucon Antwerp Eurofeeder Mediterranean Ports Geest, Grimaldi Scandanavia APL/X-Press, Lys line
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Development of Container Capacity in the UK – Implications for Ireland
2.25 Trans-shipment from the south-east of England to Ireland is largely limited to two short sea container lines that specialise in this market, namely BG Freight and Eurofeeder container line, both linking Felixstowe to Dublin and Belfast. There is also a service from Southampton to both Irish ports provided by Eurofeeder and the Clydeport service also links Belfast to Southampton, albeit only fortnightly. (See Table 2.7. above) It is understood that feeder rates are very similar whether a UK or NW Continental port is used. The most significant “swing” factors for the deep-sea lines are the relative cost of trans-shipment between ports and logistical efficiency within a port. In theory therefore, provided UK ports are efficient and price competitive, they could attract more Irish trans-shipment trade.
2.26 There is also a specific point to be made in relation to Irish trade and trans-shipment cargoes through Liverpool which has historically always played a large role in Anglo- Irish traffics. As the port attracts new Middle Sea style services from carriers seeking to serve markets such as, for example, the Eastern Mediterranean and the ex Soviet Black Sea, this should lead to greater usage of Liverpool as a “natural” Irish transhipment port given the existing Lo-Lo services that already connect this port to Dublin.
2.27 A Land-bridging container service between Ireland and the Continent via an East coast UK port and thence by train to Liverpool or Holyhead is unlikely to happen. It is understood that feeder rates per unit between Ireland and Rotterdam are about €350, whereas container rates across the Irish Sea between Liverpool and Dublin/Belfast are closer to €220. The cost of rail carriage, however, between any SE port and Liverpool or Holyhead is about €250 per unit (including lifting charges), making the combined costs too high. Conceptually using the Channel Tunnel to link Ireland to the Continent might be feasible. Certainly Central Railways hopes to provide a direct rail link between Liverpool and the Continent for both containers and trailers moved “piggyback” on trains. But freight through the Channel Tunnel is actually declining at the moment, due to unattractive prices and service quality.
2.28 This picture of growing European container trade is reflected clearly in the figures for container traffic development through Irish ports. This is set out in Table 2.8 below.
2.29 Volumes through the Republic’s Ports grew by 32% over the five year period – an interesting contrast with the capacity-constrained UK ports.
2.30 The container trade through the ports of Northern Ireland has also prospered, albeit at a slightly slower rate of 24% over the same period, perhaps reflecting the relative strength of the economy in the Republic.
Table 2.8 Container traffic through all Irish Ports, 2001-2005 Units
2001 2002 2003 2004 2005
TOTAL 428,538 453,489 6% 498,137 10% 530,105 6% 571,792 8% Cork 72,004 73,528 2% 82,746 13% 93,114 13% 100,123 8% Drogheda 24,078 32,865 36% 31,338 -5% 24,817 -21% 24,386 -2% Dublin 264,519 274,203 4% 298,633 9% 325,058 9% 355,442 9% Shannon/Foynes 5,464 Waterford 67,937 72,893 7% 85,420 17% 87,116 2% 86,377 -1%
TOTAL 126,037 127,351 1% 137,490 8% 148,289 8% 156,000 5% Belfast 111,462 111,908 0% 127,778 14% 138,577 8% 133,000 -4% Warrenpoint 14,575 15,443 6% 9,712 -37% 9,712 0% 23,000 137%
TOTAL ALL PORTS 554,575 580,840 5% 635,627 9% 678,394 7% 727,792 7%
Sources: CSO, Dept of Enterprise, Trade & Investment for 2001-2004 & the port authorities for 2005 estimates
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Development of Container Capacity in the UK – Implications for Ireland
2.31 As is shown below, none of the above growth went across the Irish Sea – indeed some would argue that the all-Ireland/UK Lo-Lo market is in terminal decline. See Table 2.9 below. The table below is only up to 2004, since the UK DfT will not publish data for 2005 until September. However, the Port of Belfast has already reported its figures for 2005 (shown in table 2.8 above), with the comment that there was a further decline in domestic UK Lo-Lo trade partially offset by some growth in International Lo- Lo trade
Table 2.9 Irish Sea Lo-Lo Trade development 000’s units
2001 2002 2003 2004 UK Domestic GB Bristol 2 2 2 2 Clyde 15 10 15 15 Cardiff 15 12 14 15 Liverpool 80 72 78 57 Sub-total 112 96 109 89 NI Belfast 91 91 88 87 Sub-total 91 91 88 87
RoI/UK 93 94 84 78
2.32 The decline in the number of Lo-Lo movements between the UK and the Republic and Northern Ireland is consistent with the rapid fall in market share of UK port’s trans- shipment traffic. It is also consistent with the view that Lo-Lo mode has no long term future across the Irish Sea in competition with Ro-Ro. Unfortunately we have no way of clarifying how much trans-shipment traffic is included in table 2.9. The reality may be that the decline in Lo-Lo traffic is the mixed result of both problems.
2.34 In summary, the UK like the rest of Europe is facing a relatively fast growing container market but has essentially run out of space in its existing ports. Approval has, however, been given for the major expansion of container facilities in Felixstowe and Harwich with a final decision on London Gateway expected shortly. Hunterston, Liverpool and Bristol are all in the process of applying for the necessary HROs (Harbour Revision orders) that will allow them to develop their own deep sea/river terminals.
2.35 In parallel Irish container trade is developing rapidly but at the moment very little of this traffic is trans-shipped through British ports; most is channelled through NW Continental ports. It is appropriate to ask whether or not British ports will seek explicitly to re-capture this “lost” traffic as and when more capacity becomes available.
2.36 The British Government is also aware that its planning process has failed as far as the ports industry is concerned and has embarked upon its own Ports Policy Review which is due for release shortly.
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Development of Container Capacity in the UK – Implications for Ireland
3. Forecast of Unitised Traffic for Ireland to 2015 Introduction
3.1 This Chapter provides baseline forecasts for Unitised Traffic for the island of Ireland6 up to 2015. Essentially, the methodology correlates economic growth with traffic growth, which historically have shown linkages. The forecasts have been made using the most-up to date economic and port traffic data available. The main economic variables used are Gross National Product /Gross Domestic Product (GNP and GDP)7 and external trade (exports and imports). Changes in the levels of GNP/GDP provide a measure of the rate of growth in the overall level of activity in any economy. Such economic change, in turn, influences the level of activity in the transport sector. Of more direct interest to port and shipping operators are the trends in exports and imports.
3.2 The Republic’s success, as a small open economy, is dependent on its competitiveness on world markets. It constitutes around 1.8% of overall output in the Euro Area. Its openness is reflected both in the international mobility of its labour and capital, reflected by strong migratory flows and high levels of foreign direct investment. Its high level of external trade is signalled by a high share of combined exports and imports of goods to GDP which was just under 150% in 2004. In recent decades the Republic’s economy has been transformed and is increasingly based on the hi-tech and internationally traded services sectors. As regards imports into the Republic, the rate of change is dependent not just on consumer demand but also on the requirements of Irish exporting companies to import capital equipment and production materials to produce the goods and services that they then export. While clearly there are linkages between GNP/GDP and external trade, the specific rates of change in these economic variables differ over time.
3.3 The data in this forecast are presented in constant terms as they provide a better measure of the real changes in the key economic variables. It must be noted, however, that the “real” changes that are recorded in external trade (by using constant prices) are not the same as the changes in the tonnages of external trade. At best constant priced data for external trade only give a broad indication of the trend in external trade tonnage as they cannot be expected to capture the changes that occur in different types of traffic, the changing composition of transport by mode and by market and the impact of new transport technologies.
Current Economic Context for the the Republic
3.4 The Department of Finance expects the economy to grow relatively strongly in 20068. The domestic economy has been the main driver of activity in recent years while the contribution from net exports has been less than previously anticipated. Current data show, from a moderate rate of expansion in recent years, a strong pick-up in domestic demand with the pace of personal consumption continuing to accelerate. Investment continued to grow strongly, particularly in the areas of housing and machinery and equipment. Export growth, however, has been sluggish over the past year. This
6 For convenience, RoI is used as the acronym for the Republic of Ireland economy and NI as the acronym for the Northern Ireland economy. 7 Gross National Product includes “net factor income from the rest of the world”, whereas Gross Domestic Product excludes this item from the National Economic Accounts. There is a tradition for some countries to use GNP data, e.g. IRELAND, and for others to use GDP, e.g. UNITED KINGDOM. 3. See Reference 1
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Development of Container Capacity in the UK – Implications for Ireland
weakness in goods exports can partially be attributed to sector specific factors and, in particular, a poor performance in some parts of the manufacturing sector. The strength of the euro in the early part of the year may have affected performance, compounding competitiveness losses over recent years. Reflecting the import- intensive composition of domestic demand growth, import growth has been outstripping that of exports.
Medium-term Economic Context for the Republic to 2015
3.5 Basis of Economic Forecasts : This Section provides economic forecasts to 2015. This is done by: Firstly, starting with the Department of Finance projections for 2006 through to 2008, and Secondly, using forecasts, presented by the Economic and Social Research Institute for the period 2009 to 20159.
3.6 Department of Finance’s Economic Forecasts to 2008 : With growth continuing, the prospects for the Republic’s economy look good. The external environment appears to be broadly positive with international forecasting agencies projecting continued strong growth in the world economy over 2006 and 2007 and in particular a pick-up in the euro area. In the domestic economy underlying conditions remain supportive and activity will receive a boost from factors such as the maturing of the SSIA10 accounts. Against this essentially favourable background, GNP is expected to increase by about 4.7% on average and GDP by 4.9% over the 2006 to 2008 period. According to the EU Commission forecasts, the outlook for the international economy remains positive although risks to the outlook have increased in recent months. Oil prices are forecast to remain high in 2006 and, as global imbalances continue to grow, the risk of economic slow-down is increased.
3.7 The Commission’s forecasts for GDP growth in key economies are set out in the Appendix 1. These forecasts to the end of 2008 are based on EU Commission technical assumptions regarding key external variables and developments in our major trading partners. As a small open economy, the Republic is vulnerable to changes in the world economic outlook. A number of significant downside risks attach, in this context, to the international outlook including: the possibility of a sharp dollar correction, leading to an appreciation of the euro, given the large and growing global current account imbalances; the possibility of renewed upward pressure on oil prices; and The risk that the projected pick-up in growth in the euro area fails to materialise.
3.8 On the domestic front for the Republic’s economy there are also a number of downside risks. Given the loss of competitiveness in recent years, the economy is vulnerable to any further deterioration. In addition, the fact that the construction sector now accounts for a historically high share of economic activity and employment implies that the economy is vulnerable to any shock affecting this sector.
3.9 The Department of Finance projects an improvement in export growth to 4.0% in 2006. Together with the forecast acceleration in Ireland’s export markets in 2006 and a relatively favourable exchange rate, a further modest acceleration to 4.3% is
9 See Reference 2 10 The Special Savings Incentive Account (SSIA) Scheme was introduced by the Minister for Finance in the Finance Act 2001 with the objective of encouraging individuals to adopt a regular savings pattern. There is a 25% contribution from the Exchequer on the monthly amount saved on SSIAs over the five year qualifying period.
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Development of Container Capacity in the UK – Implications for Ireland
forecast for 2007 and 2008. This would represent a somewhat slower growth performance compared to that in recent years, reflecting the continued impact of earlier losses in competitiveness. Imports of goods and services are projects to grow by an average of 4.5% over 2006-2008.
3.10 In overall terms, GDP growth is projected by the Department of Finance to accelerate slightly to 4.8% in 2006 and to 5.0% in 2007, before easing back to 4.8% in 2008. Growth in GNP will be slightly below this in each year.
3.11 Table 3.1 below presents the 2005 –2008 forecasts. As previously outlined, there are a number of domestic and external risks attaching to this outlook.
Table 3.1. Macroeconomic Prospects for the Republic, 2005-2008
% Volume Change 2005 2006 2007 2008
GNP growth at constant market prices 4.8 4.6 4.8 4.6
GDP growth at constant market prices 4.6 4.8 5.0 4.8
Components of real GDP Private consumption expenditure 5.3 5.8 6.8 4.6 Government consumption expenditure 3.2 3.5 3.5 3.5 Gross domestic fixed capital formation 7.9 4.7 4.5 3.7 Exports of goods and services 2.0 4.0 4.3 4.3 Imports of goods and services 3.0 4.5 5.2 3.7
Source: RoI Department of Finance
3.12 Economic and Social Research Institute’s Economic Forecasts to 2015 The ESRI published its latest Medium-Term Review of the Irish economy in December 2005. This Review is published every second year, providing a comprehensive analysis of the prospects for the economy over a seven-year time horizon. Among the main findings of the current ESRI Medium Term Review are the following: Services are the activity of the future. The market services sector will play a gradually increasing role in raising output and employment. In the medium-term, less output and employment growth will come from the manufacturing sector with the market services sector continuing to grow in importance. While the economy has the potential to continue growing quite rapidly, there are significant dangers on the horizon. If there are no unpleasant surprises the economy could grow at just under 5 per cent a year to 2010. The US economy is, however, currently on an unsustainable growth path with ever-rising deficits. If and when the US economy switches to a more sustainable path, this could result in a slowdown in growth elsewhere, including Ireland. While this is unlikely to happen within the next two years, there is the risk thereafter, that the Republic could find itself experiencing a rate of growth below its long -term potential. The very high level of dependence on the building and construction sector leaves the economy vulnerable to shocks. The building and construction sector's need for an ever-increasing share of national resources has been a source of inflationary pressure. This has had adverse consequences for other economic sectors. As the economy evolves over the coming decade the building and construction sector is likely to fall in importance.
3.13 The ESRI listed three key priorities for policy in the medium term. They are:
Development policy needs to adjust to take account of the changing roles of manufacturing and services. Managing the exposure of the economy to external
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Development of Container Capacity in the UK – Implications for Ireland
shocks and also to sudden changes affecting building and construction. Tackling the infrastructural constraint on growth remains urgent. In the light of their analysis, the ESRI produced both high and low growth forecast for the Republic. For the purposes of this Paper, the ESRI’s high growth forecasts are being used. The numbers can easily be re-run if required with the low growth forecasts. The forecasts are set out in Table 3. 2. below. For reference, the average historic growth rates for 1992-2004 are also shown.
Table 3.2. Macroeconomic Prospects for RoI
% Volume Change 2005 2006 2007 2008
GNP growth at constant market prices 4.8 4.6 4.8 4.6
GDP growth at constant market prices 4.6 4.8 5.0 4.8
Components of real GDP Private consumption expenditure 5.3 5.8 6.8 4.6 Government consumption expenditure 3.2 3.5 3.5 3.5 Gross domestic fixed capital formation 7.9 4.7 4.5 3.7 Exports of goods and services 2.0 4.0 4.3 4.3 Imports of goods and services 3.0 4.5 5.2 3.7
Source: ESRI Medium-term Review
* High Growth Rates ** These forecasts are derived from Table 3.1 and from the data in this table, which, in turn, have been sourced from the ESRI Medium-term Review (see REFERENCE 2). The Performance of the Northern Ireland Economy
3.14 The data on the Republic’s external trade, dealt with in the previous sections, refers to trade between Ireland and the rest of the world. They say nothing about the routes and countries through which oI’s external trade flows. It merely refers to the final destinations (for exports) and original sources (for imports). To get an appreciation of trade flows it is necessary to bring Northern Ireland into the equation. This is done in the next two sections. Specifically, this section looks at the Northern Ireland economy and the next moves on to embrace trading activity.
The Northern Ireland economy is heavily dependent on UK Government – the so- called annual ‘subvention’ from taxpayers in Great Britain still amounts to around £ 3 bn sterling and is equivalent to almost 50% of the value of the external sales of manufacturing goods11. The UK’s relatively strong economic performance has benefited the North in recent years. In fact Northern Ireland has grown faster than many other regions of the UK. Invest Northern Ireland12 has pointed out that the North’s GDP had the largest increase between 1990 and 1999 of all UK
11 See Reference 3 12 Invest NI operates under an independent Board whose chairman is responsible to the Northern Ireland Minister for Enterprise, Trade and Investment. The Chief Executive is responsible to the Board for the management of Invest NI on a day-to-day basis – see Reference 4.
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Development of Container Capacity in the UK – Implications for Ireland
regions, growing 1% faster than the UK during the period. They further point out that that GDP has grown by 3% in 2004 and by over 3% in 2005.
3.14 The Department of Enterprise, Trade and Investment recently produced some medium term forecasts13. The North’s GDP is forecast to grow by 2.4% in 2006, stepping up to 2.9% in 2007. The increases are slightly above those forecast for the UK as a whole. As regards projections beyond 2007, the Department of Enterprise, Trade and Investment’s current economic bulletin (see Reference 3) produced data that allows UK forecasts to be used as a basis for making projections for the North’S economic growth.
3.15 Specifically the data relate to Gross Value Added (GDA), which is broadly equivalent to GDP and which links Northern Ireland with UK projections up to 2010. The projections show, in essence, that per capita GVA for the North is expected to remain close to the current level of the UK; at 80.4% of UK level in 2003 and up slightly to 81.1% of UK level in 2010. On this basis, the UK economic projections in the ESRI Medium-term Review are used as a reasonable proxy for Northern Ireland economic growth (see Reference 2). These GDP forecasts for the UK are reproduced in Table 3.3, together with exchange rate forecasts (£ per €). It should be noted that the derived 2.3% projected growth rate for the North is less than 60% of the Republic’s projected growth rate of 4%. This is a continuation of the trend whereby the Republic’s economic performance has been much faster than that of the North.
Table 3.3. Derived Forecasts for the NI Economy*
% Average Volume Change 2000-2005 2005-2010* 2010-2015 Average 2005-2015** GDP Growth at constant market prices 2.4 2.1 2.7 2.3
Exchange Rate (£per€) annual averages 0.65 0.70 0.74 0.72
Source: ESRI Medium-term Review
*These are the ESRI forecasts for the UK which are used a proxy for NI performance, in the light of analysis presented in the main text of this chapter
Linking External Trade for the Republic and the North
3.17 The previous sections have provided GDP forecasts for the Republic and Northern Ireland. This Section links unitised freight traffic14 to economic data in order to produce unitised trade forecasts. In effect the methodology uses historic linkages between GDP and freight to forecast what the freight levels might be by 2015. A twelve-year perspective has been taken, from 1992 to 2004, to give a historic trend for unitised freight. Table 3.4. shows that the total unitised freight to and from the island of Ireland’s ports more than doubled in the period from 1.1 billion units to over
13 See Reference 5 14 Unitised trade is an amalgamation of Lo-Lo and Ro-Ro units
20
Development of Container Capacity in the UK – Implications for Ireland
Table 3.4. Unitised freight to and from all Irish Ports, 1992 and 2004 000’s
NI ROI TOTAL
1992 Lo-Lo 165.6 215.8 381.4 2004 Lo-Lo 148.29 530.49 678.78 Av. Ann. % Change -0.10% 7.80% 4.90%
1992 Ro-Ro 498 216.8 714.8 2004 Ro-Ro 778.51 770.78 1549.29 Av.Ann. % Change 3.80% 11.15% 6.70%
1992 Total 663.6 432.6 1096.2 2004 Total 926.8 1301.27 2228.07 Av.Ann. % Change 2.80% 9.60% 6.10%
Sources: CSO (Dublin ) and NI Department of Enterprise, Trade and Investment.
2.2 billion units. the Republic's share of the total increased from 39% in 1992 to 58% in 2004. As well as faster growth rates through the Republic’s ports, the other significant feature is the faster growth in Ro-Ro and the slow-down in Lo-Lo growth. Overall Ro-Ro grew at an average rate of 6.7%, while Lo-Lo grew at 4.9%. In the case of Lo-Lo through Northern Ireland ports there was an actual decline (at an average decline of 0.1% per annum).
Forecasts for the Republic and Northern Ireland
3.18 The analysis from the foregoing shows the relatively close relationship between economic growth rates and the growth rates being achieved by unitised trade – see Table 3.5. In the case of Northern Ireland, an average 2.7% average growth rate for GDP is matched by a 2.8% a growth rate for unitised trade. In the case of the Republic, the unitised trade growth rate has been somewhat faster than GDP. Specifically, while the average growth rate for GDP was 7.3%, the average growth rate for unitised trade was 9.6%.
Table 3.5 Linking GDP to Unitised freight, 1992 –2004
Average Annual % Change NI RoI GDP 2.7% 7.3% Unitised Trade 2.8% 9.6%
Sources : Tables 3.2,3.3 and 3.4 ______
3.19 Given the fairly close linkage between GDP growth and unitised freight growth, Table 3.6 now presents forecasts to 2015 for GDP and unitised freight for both the Republic and Northern Ireland.
Table 3.6. Growth Forecasts to 2015 for GDP and Unitised freight RoI and NI, 2005 –2015
Average Annual % Change NI RoI GDP 2.3% 4.0% Unitised Trade 2.4% 5.2%
Source: Table 3.5
21
Development of Container Capacity in the UK – Implications for Ireland
3.20 The forecasts in the foregoing table suggest that the unitised trade in the year 2015 would be 2.3 million units for the Republic and 1.2 million units for Northern Ireland. Of the total of 3.5 million units forecast for 2015, 65% might go through the Republic’s ports and 35% through the North. The current shares are 58% through ports in the Irish Republic and 42% through the North. The final question arises as to what the split of the unitised trade might be as between Lo-Lo and Ro-Ro. There are no specific trends which would give a firm basis for the split. The best that can be done is to suggest that Lo-Lo will grow at half the rate of Ro-Ro in both the Republic and Northern Ireland. This would suggest the following figures, as set out in Table 3.7 which it must be emphasised are only illustrative.
Table 3.7. Unitised Trade : RoI and NI - 2005 to 2015 Units
2015 Average 2005* Projections Annual Growth NI Lo-Lo 156,000 175,000 1.2% NI Ro-Ro 818,487 1,060,000 2.6% ROI Lo-Lo 571,792 780,000 3.2% ROI Ro-Ro 816,707 1,525,000 6.4%
TOTAL 2,362,986 3,540,000 4.1%
* The 2005 data have been obtained from commercial port sources and have not yet been published by CSO or the Department of Enterprise, Trade and Investment.
3.21 By any standards, the considerable increases forecast for unitised trade, if realised, will require significant increases in capacity – in terms of shipping capacity, ports capacity and road capacity. In the case of ports capacity in the the Republic, it should be noted that in January 2005, the Marine Minister launched a Government Ports Policy Statement15. Among the items addressed in the Statement was a requirement for additional seaport capacity in the period up to 2014, with a particular emphasis on the growing unitised trade sector. It showed a 35% increase in the Republic’s unit load traffic between 2003 and 2014. The comparable increase, derived from the data in this Paper, is 79%, i.e., over twice the official increase forecast. In essence, these two sources now provide a LOW forecast and a HIGH forecast. What is very important is that, given long lead-in times and the need to have in-time capacity in place, a policy framework within which to identify, fund and develop any new capacity additions be put in place as soon as possible. The Marine Minister refers in his press statement to the need for urgent consultation with ports and private sector providers on capacity needs and plans and thereafter, identification of a small number of high quality projects aimed at providing the required capacity16.
15 See Reference 6 16 See Reference 6
22 Development of Container Capacity in the UK – Implications for Ireland
4. UK Ports Policy Review
4.1 The present UK ports policy is essentially one of “laissez faire.” The following issues have, however, caused the DfT to consider some modification to this stance: The growing shortage of port capacity for both containers and possibly Ro-Ro traffic. The length and expense of the planning process to be undertaken when new facilities are needed. Rising inland traffic congestion both on the roads and on the railways
4.2 The Ports Policy Review has already started and elements of its findings are expected to be released shortly along with the final publication of its forecasts for trade growth up to 2025.
4.3 At the recent Waterfront Conference in London, entitled “The Government’s Ports Policy”, it was clear that there is no national UK framework policy regarding Planning Gain Supplements issues as related to Port developments. Specific Road and rail access policy for ports are considered on an ad hoc basis but every case is evaluated against different criteria. Differing local planning requirements and interpretations have led to inconsistencies as to what is expected in diverse geographical locations around the country to be funded by the developing Port Authority and what investment is to be undertaken by local/national government.
4.4 England, Wales and Northern Ireland will all be part of this Ports Review but Scotland will have its own individual perspective. Scotland has a specific objective of reducing the amount of Scottish cargo using English ports.
4.5 Unlike their Continental neighbours, UK ports are currently expected to fund infrastructure improvements from internal resources. This is a significant issue as most competing European ports have their infrastructure part funded by the state.
4.6 The planning process in the UK is unusually long, drawn out and expensive. ABP spent over €50m on the Dibden Bay plannoing process, but to no avail. Hutchison Ports have stated that this is a barrier to investment in the UK.
4.7 Whilst Government is anxious to avoid increased expenditure at a time when the PSBR is under economic constraints, the UK Major Groups (UKMPG) and British Ports Association (BPA)are also keen that there should be a clear policy as to what ports should pay in terms of hinterland infrastructure development and as to how these criteria are fairly to be decided. Broadly speaking they welcome the “hands off” approach of Government to the Shipping Industry but believe that more support should be offered in terms of planning investment.
4.8 In paragraph 2.9 above, reference was made to the conflict between the requirement of the major shipping lines to have more capacity in ports in the SE of England and the wider aspirations of the regions outside the south-east to have a larger share in this business. This has to be addressed. The Government’s position is that “the market will decide” and no Government cash is available to any port. This raises wider economic issues, however, particularly in relation to growing traffic congestion in the south-east, major employment differentials between regions, housing and water shortages in the south-east, etc. In the context of a wider economic analysis the UK as a whole may, therefore, pay a price for too simplistic an approach.
4.9 This in turn feeds into comments from the nine RDAs (Regional Development Authorities) that, given the increasing volume of traffic generated by ports, there is a need for “joined up” thinking regarding transport policy and traffic congestion across the UK, given the increasing volume of traffic generated by the large ports. This in turn feeds into wider economic development policies and it is obviously hard to be certain quite how, when and to what degree of specificity the British Government could chose to address these factors.
23 Development of Container Capacity in the UK – Implications for Ireland
5. The present situation: a port by port analysis
5.1 The locations of the main Lo-Lo ports in the UK and the Republic of Ireland are shown on the above map. A summary of present capacities of the various UK ports is set out in Table 5.1 below.
Figure 5.1 The Principal Lo-Lo Ports in the UK and Ireland
Source Containerisation International
24
Development of Container Capacity in the UK – Implications for Ireland
Table 5.1 Capacity, Throughput & Principal Operators (2004) at the Main UK & Irish Container Ports
Port Quay Storage Throughput No. of Size of Main Line Operators Length Capacity 2004 Gantry Terminal Calling (metres) (TEUs) (TEUs) Cranes m2
Felixstowe 2793 66,968 2,717,000 28 1,948,000 All main consortia
Southampton 1350 36,000 1,441,012 11 765,000 All main consortia
London Tilbury 1450 9,300 566,000 8 385,000 All main consortia
Liverpool 900 18,500 616,000 6 540,690 ACL, AWS, Borchard, Coastal, CP Ships, Gracechurch, HLCL, Latvian, MSC, POL & ZIM
Thamesport 655 22,500 413,000 6 68,000 AWS, CMA, CGM, CP Ships, HLCL, EuroFeeders, NYK, Evergreen, OOCL, PNSC, PONL, Portlink & Safmarine Tees & Hartlepool 660 7,600 350,000 4 59,400 ESL, P&O Ferries, Rickmers-Linie, SCI, Spliethoff, APL, CMA, CGM, Concorde, Containerships, GNSL, Contaz Line, Jade Tees Line, K Line & Kursiu
Hull 330 314705* 3 178,000 CNCo, P&O Ferries, Unithai, Finnlines, Delphis, ESF, GNSL, Navibulgar, OOCL & PUBC
Immingham 150 10,300 320642* 2 1,475,414 DFDS Tor Line, CMA, CGM, DFDS, Lys, Feederlink, NCL, Samskip Bristol 1050 8,500 111,300 4 DAL, Grimaldi, Maersk, Sealand, Seawheel, WW, PONL & Safmarine
Belfast 400 5,000 229,861 4 200,000 BG Freight, Coastal, Eucon, EuroFeeders, MSC, Samskib
Warrenpoint 100 1,000 11,232 2 16,000 C2C AC Holdings BV
Drogheda 160 1,800 48,373 2 80,000 Geest/Norfolk Line Lys Line
Dublin 1200 20,000 540,779 8 300,000 BG Freight,Coastal, Eucon,
Eurofeeders, Norfolk Line Samskib & Express Container Line
Waterford 500 3,000 180,216 2 162,000 C2C Norfolk Line
Cork 320 2,900 155,546 2 112,000 BG Freight, Eucon, Eurofeeder, Geest Grimaldi
Source: STS ** Includes Ro-Ro Traffic
25 Development of Container Capacity in the UK – Implications for Ireland
5.3 Felixstowe is currently the largest container port in the UK. It is located on the North Sea north east of London at the mouth of Harwich Haven. In 2004 it handled over 2.7million TEUs.Felixstowe’s container trade is global and the port is used by all the major carriers and consortia. It has 2,793m of Quay capable of servicing deep sea vessels and can hold up to about 67,000TEUs at any one time. The port has been at full capacity since 1999. As it seeks to accommodate increased domestic containerised trade, Felixstowe has seen its transhipment traffic drop from 20% of throughput in 1999 to 8% in 2004. As a result of a lack of capacity the port has been rationalising its trades by off-loading its Ro-Ro and dry bulk traffics and concentrating upon Lo-Lo operations. In 2004 the “Trinity III” extension opened, giving the port an extra 270m of quay, plus some additional storage areas. This was insufficient, however, to meet the port’s needs. In February 2006 the port’s owners were granted permission to pursue the reconfiguration of Felixstowe South which represents a major boost in capacity. This is discussed in detail in the section on new developments in chapter 9.
5.4 Southampton is the second largest container port in the UK, located on the south coast. It has 1,350m of continuous quay capable of servicing deep sea vessels. It is particularly strong in trades with the Far East, although most of the principal carriers serving other markets use the port to some degree. Southampton can hold up to 36,000TEUs at any one time. The port is operated by Southampton Container Services (SCS) which is a joint venture between ABP and P&O Ports. It is almost at full capacity and its feasible expansion options are severely limited following the refusal of planning permission for the Dibden Bay development in 2004. In 2005 it lost about 5% of volume to competitors, partly due to operational problems experienced in 2004.
5.5 It is argued by some that the present facilities could be more intensively used and expanded by moving less lucrative cargoes elsewhere.
5.6 London Tilbury is located in the east of London on the river Thames and the riverside deepwater berths of Tilbury handle UK trade to Australia and New Zealand. The berths inside the docks specialise in short sea shipping. The port handled over 670,000 TEUs in 2004 and saw significant growth last year (2005). Tilbury has 1,450m of quay side with a holding capacity for 9,300 TEUs. Its capacity to exploit the expansion of deep-sea trade is constrained by the level of dredging that is required. Its short-sea trade is also under pressure as it has to compete with Ro-Ro freight ferries moving containers double stacked. That said, in 2005, Tilbury Cargo Services, the operator of the Riverside facilities increased its container volumes by 11% to slightly over 288,000 units (about 500,000 TEUs) and expects further growth in 2006 as a result of newly won traffic.
5.7 Thamesport is located on the Isle of Grain, to the south east of London. Construction was begun before the end of the National Dock Labour Scheme although the scheme was abolished before the facility opened. The port is currently the UK’s most technically advanced port with most of the freight handling processes being undertaken by automated machinery. The implementation of RFiD (Radio Frequency Identification) technology in 2003 further increased this productivity, enabling hauliers to achieve a container processing time of 10 minutes from arrival at the gate. This compares very favourably with non-automated ports that often require processing times of 6 hours and at twice the cost. It should be noted that hauliers need to be involved in the implementation of RFiD for it to be successful.
5.8 Liverpool is located in the north west of the UK, and handled 616,000 TEUs in 2004. It has deep water capacity at Seaforth and handles direct services to N America, the Mediterranean and Africa. Much of its trade, however, derives from daily Lo-Lo and Ro-Ro services to Dublin and Belfast. Historically the port has seen itself as occupying the most strategically advantageous position on the Irish Sea. Liverpool has 900m of quay with a holding capacity for 18,500TEUs. It also has a dedicated Ro- Ro terminal for Norse Merchant ferries in Birkenhead and for P&O in Liverpool docks.
26 Development of Container Capacity in the UK – Implications for Ireland
The port has ambitions to expand its container facilities with a new deep-water terminal in the river Mersey.
5.9 Tees and Hartlepool is the UK’s premier port in the North East of England. It is essentially a feeder port and regional port with regular services to the Continent. It handled over 350,000 TEUs in 2004. Teesport has a storage capacity for 7,600 TEUs with a quay length of 660m.
5.10 The port is relatively close to the Humber ports which are arguably better located for the M62 corridor in 2005 its largest container client, Geest, withdrew from the port to focus all “northern” traffic upon Hull. Interestingly whilst the line moved out of the Tees, the cargo did not, resulting in a major upturn in volumes for P&O NSF.
5.11 Immingham, on the Humber estuary, has one Lo-Lo berth with 150m of quay for container handling with a holding capacity for 10,300TEUs at any one time. It also has eight Ro-Ro berths, with two more under construction. It is the primary gateway for the UK’s trade with Scandinavia and has an array of direct Ro-Ro freight services to the Continent. Immingham is one of the busiest ports on the East Coast, being strategically promoted as the regional hub avoiding the congestion on the UK’s road and rail networks. In terms of total tonnage handled, Immingham and its sister port of Grimsby constitute the largest port in the UK.
5.12 Immingham is planning substantial development to serve the Ro-Ro and bulk trades, but has no current plans for new Lo-Lo facilities.
5.13 Hull is located just across the Humber estuary from Immingham. In 2004 Hull handled 341,705 TEUs. It has 300m of quay with a terminal size of 75,000 sq m. Hull is a feeder port serving the main Continental ports though a combination of Ro-Ro and Lo- Lo services. The present container terminal is generally regarded as full so an additional terminal is to be built.
5.14 Belfast is Northern Ireland’s main port. Unitised trade is handled through one dedicated container berth and a series of Ro-Ro terminals. Belfast can store up to 5,000TEUs at any one time and has 300m of dedicated container berths. It is both a Lo-Lo and passenger / Ro-Ro ferry port providing a range of short and long-sea ferry services to ports in Scotland and England. Belfast handles substantially more Ro-Ro cargo than Lo-Lo (over three times the number of units) Ro-Ro cargo than Lo-Lo, but nevertheless is looking to expand its Lo-Lo capability in the new VT3 terminal.
5.15 Bristol is located near the head of the Bristol Channel, is the main container port for the south west UK. It has 1,050m of continuous quay and can hold up to 8,500TEUs at any one time Historically, Bristol was seen as a port in decline but since its change of ownership has expanded rapidly. It has now been recognised that its strategic location in the south west of England offers haulage companies easier access to the main markets of London/SE England, the Midlands and South Wales than is available from ports in the south-east. In addition the port management has been very active in promoting the port and exploiting berth shortages elsewhere. It has plans to build a new river berth for container vessels.
5.16 Transhipment Traffic in the UK ports is increasingly moving to the major Continental ports. This had been driven in part by the pressure on capacity in the principal UK ports over the last 5 years. As the UK market has grown, the volume of domestically generated TEU traffic has increased. To cater for this increase the UK share of European transhipment traffic has been squeezed from 20% in 1999 to 8% (639,440TEU) in 2004. With the anticipated additional capacity due to come on stream in continental Europe, ahead of that proposed in the UK, this share could be expected to decline further in the short-term.
5.17 The UK is seeking to regain lost market share through the expansion of container facilities in Felixstowe, Bathside Bay (Harwich) and Shellhaven (London). Based on
27 Development of Container Capacity in the UK – Implications for Ireland
the first fruits of this expansion programme, the UK aims to increase its European transhipment share from 8% to 16% or higher by 2010. The proposed development at Hunterston would also seek to capitalise on this opportunity.
5.18 Without major new development in the UK’s port capacity, the UK transhipment market will continue to decline and there will be a growing dependence on transhipment into the UK from Continental feeder ports. This will increase costs for importers and will adversely affect the UK economy. The export market is unlikely to be affected to the same degree as the current trade imbalance is causing an increasingly large numbers of empty containers to be exported.
5.19 Currently the coastal transhipment market is dominated by the Ro-Ro sector accounting for 85% (DTI statistics 2004) of units moved.
28
Development of Container Capacity in the UK – Implications for Ireland
6. Proposed Container Port Developments
6.1 The known proposed new container terminal developments are listed below.
Table 6.1 Proposed container port developments in the UK & Ireland
Port Proposed max. Quay length Likelihood of capacity (TEUs) (metres) implementation
Felixstowe South 1,600,000 1350 Approved reconfiguration Hull 50,000 300 Confirmed but as a feeder facility Harwich 1,700,000 1400 Approved March 06 (Bathside Bay) London Gateway 3,500,000 up to 2300 "Minded to approve" Decision imminent Teesport 1,500,000 Likely but in a cut down form London Tilbury 750,000 600 Doubtful as competing with London Gateway Orkney 7,800,000 850 to 1350 Unlikely
Hunterston 1,000,000 600 to 12000 Possibly as a feeder port Bristol 600,000 Up to 1200 HRO sought
Liverpool Riverside 700m HRO sought
Belfast 100,000 Further development planned Dublin 600,000 920m Subject to planning approval Cork 300,000 500m Subject to funding Ringaskiddy Bremore/Drogheda 250,000 500m Seeking finance and a partner Source: STS
6.2 The Felixstowe South Reconfiguration: permission for this development was given by the UK Government early in 2006. It will expand Felixstowe’s handling capacity by a further 1.6 million TEUs in 2009 when it is expected to come on stream. The scheme involves the dredging of the channel to enable ships of up to 13,000 TEUs to be handled in the port. The old Landguard terminal will be completely re-built and drawn into the new port lay-out. Rail and handling facilities will also be upgraded during the redevelopment. The cost of this redevelopment will be approximately £300 million. This development is part of a wider scheme involving Harwich Bathside Bay that will double the port’s throughput.
6.3 Harwich Container Terminal (Bathside Bay) is located across the Haven from Felixstowe. This new development will have a maximum capacity of 1.7 million TEUs. It was approved in late March 2006. HCT is owned by Hutchison Ports UK Ltd and this development will be undertaken in conjunction with Felixstowe South. The
29 Development of Container Capacity in the UK – Implications for Ireland
Harwich development is also priced at about £300m (€435m) and includes the upgrading of the road and railway between Harwich and Colchester. The site is technically a “greenfield” site as no port facilities are presently in place.
6.4 Orkney International Container Terminal. The promoters of this project propose that Orkney is a strategically appropriate trans-shipment location for the creation of a hub to serve all of the north of Europe’s container trade. The facility would be developed with a minimum capacity of 1.1 million TEUs. The concept envisages very large mother ships of up to 18,000 TEUs capacity coming to Scapa Flow in Orkney. From this facility a series of feeder ships would move cargo onwards into the Baltic, the near Continent, Scandinavia and the UK and Ireland. This is the same idea as that proposed for the Shannon Estuary.
6.5 The overall size of the facility would be determined by whether it attracted Far East trade as well as the North Atlantic traffic. The site proposed for this development (Scapa Flow) is a sheltered harbour with access to water depths of 20m. As a pure trans-shipment facility in naturally deep water the capital cost of such a facility might be relatively low.
6.6 Given, however, that the Dutch look likely to proceed with Rptterdam Maasvalkte 2, the entire case for such a facility may be undermined as such large ships could still go to Rotterdam, making trans-shipment of cargo for Germany, the Netherlands, Belgium and even France unnecessary.
6.7 Hunterston is located on the Scottish west coast downstream from Glasgow. It is a naturally deep-water port like Scapa Flow and can therefore handle the largest conceivable container ships. If successful, the proposed facility would be able to handle approximately 1million TEUs. With Rotterdam and Dunkerque both being able to handle such ships, the case for Hunterston as a transhipment point looks weak. Scotland, however, wishes to have better direct links with Europe and all global markets without having to transit England and the concept has, accordingly, some political support.
6.8 It is possible that some development may happen at Hunterston, particularly if a large shipping line decides to use the facility. The current management is optimistic about the prospects for the terminal as a stand alone facility but the investment requirements are large and it is worth noting that Peel Holdings, the port owners, also own Liverpool which has its own plans for the development of a Deep Water River Terminal. Whilst Liverpool has its own existing traffics to protect, the question must be asked whether they are prepared to invest in both developments at the same time without considerable input from the Scottish Executive (SE) at Hunterston. The SE in turn, however, have made it clear that they wish to see improved rail and road linkages to the port, particularly giving better access to the north of England.
6.9 London Gateway (Shellhaven). This new development would be able to handle approximately 3.5million TEUs and has a proposed water depth of 16m. The site is the former oil refinery known as Shellhaven and if it were to proceed it would create one of the largest container port facilities in Europe with a logistics park offering about 950,000 square metres of ground space as well as a container terminal with 2.3km of quay with extensive backup land. The development is expected to create 14,535 direct job opportunities.
6.10 The port itself would be dredged so as to allow ships of 13,000TEU capacity to use the port. The development would be undertaken in phases with the first berths being built at the extreme east of the proposed quay area and additional berths being added as and when demand required. The first berths will actually be Ro-Ro berths for Cobelfret, but the balance of the facility will be for deep-sea Lo-Lo use.
6.11 The port development is being undertaken by P&O Ports alone, but the logistics park will be a joint venture between P&O and Shell.
30 Development of Container Capacity in the UK – Implications for Ireland
6.12 Teesport; PD Teesport currently has a proposal to develop a new container facility in the north east of England which would have a capacity of 1.5m TEUs per annum. If this expansion was undertaken, Teesport would be the premier container port in the north. This scheme, however, was dependant upon the Government turning down most of the port development projects in the south-east of England and so has effectively been dropped now that Felixstowe South, Harwich Bathside Bay and probably London Gateway are proceeding. There is likely to be some small scale development at the Tees but only in relation to feeder and short-sea operations.
6.13 Hull has seen a rapid growth in its container throughput and is now close to capacity. The terminal itself is operated by PD Ports although the port owner is ABP. ABP wishes to expand container capacity by a further 50,000TEUs a year. PD Ports is likely to be the operator. The new development will be focused upon feeder traffic, intra-European trades and trades using smaller vessels on niche routes.
6.14 London Tilbury is planning an expansion of 750,000TEUs in its existing Lo-Lo facilities. The depth alongside, however, of about 10.5m is unlikely to be increased because of the high costs of both the capital and maintenance dredging in this stretch of the Thames. An additional problem for Tilbury is that, with London Gateway likely to open just downstream, the environment might become too competitive. This is particularly relevant as, the port owners, Forth Ports plc, states in their Annual Report for 2005, that the company increasingly focusing upon property development rather than port operations.
6.15 Bristol plans to add an additional capacity of 1.5million TEUs and to increase the quay length to1,200m. This expansion would be a riverside facility and the port authority is presently seeking a HRO. If it were to go ahead it would establish Bristol as the major gateway for containerised trade in the South West of England in competition with ports in the South East.
6.16 We are cautious about this development in that it does not readily fit into the Government’s implied commitment to concentrate port development in the South East of England. In addition Bristol is a significant deviation for any ship coming via Ushant and heading for Rotterdam. The concept, however, does have support from the SWDA (South West Development Agency) and there are probably significant inland delivery cost savings compared to ports in the South East as it is closer to the Midlands and to London than Felixstowe.
6.17 Liverpool: in order to cater for the next generation of post panamax vessels, the Port of Liverpool is currently planning a new deep-sea container terminal with an investment currently estimated to be between £70 and £80 million. This would be located outside the current dock area in the River Mersey thus obviating the need for vessels to “lock” into Seaforth through the present lock system at Langton. A Harbour Revision Order is being sought to allow the Port to pursue this development. The port management states that the new terminal’s container capacity will be in the region of 500,000 TEUs per annum. Since the existing Seaforth operation handled 626,000 TEUs in 2005, this constitutes a new development of considerable scale and whilst some existing lines would presumably transfer to the new venture, Liverpool is obviously keen to continue the sustained container growth it has enjoyed over the last few years.
6.18 There will be 800m of quay length and the river will be dredged so as to provide a draft of 13.5m alongside. Crane capacity should be such as to ensure 20 moves per crane hour and units will be stored in an adjacent area of approximately 14 hectares.
6.19 Once the HRO, full board approval and planning permission have been secured, lead time to inception is estimated to be two years. Since Liverpool claims to be the major UK Gateway to Ireland and currently handles more than 40% of all freight crossing the Irish Sea, this new development should be of considerable interest to Irish merchants as highlighted in 2.27.
31
Development of Container Capacity in the UK – Implications for Ireland
7. The Northern Ireland Market
7.1 Northern Ireland’s ports are seen by the UK Government as part of the UK ports industry, albeit that the powers of ports in Northern Ireland are partly devolved to the Assembly in Belfast. Pending the re-call of the Assembly these powers are held by the Department for Regional Development (DRD). The proposed ports policy review will encompass the Northern Ireland Ports but not those in Scotland which is conducting its own policy review.
7.2 The principal ports in Northern Ireland are Trust Ports. They are nominally owned by the State but this ownership is passed in perpetuity to the five harbour trusts who operate the ports on behalf of the State. The five Trust Ports are Londonderry, Coleraine, Belfast, Warrenpoint and Carlingford Lough. The only private port in the North is Larne, which is owned by P&O (now part of Dubai Ports World).
7.3 The North’s main container port is Belfast. In 2005 it handled 133,000 units whilst Warrenpoint handled 23,000. In Belfast the primary container terminal is Victoria Terminal 3 (VT3) which is operated by Coastal Container Line. The terminal has three ship to shore gantry cranes plus three transtainers, 374m of quay and 8 hectares of terminal compound. Eurofeeder operates twice weekly from a separate facility in York Dock, using a single crane on 3.2 hectares of terminal.
7.4 Unlike Dublin, there is little evidence that Belfast is short of space. The VT3 shows relatively relaxed utilisation figures, whether by units per crane, units per metre of quay or units per hectare of terminal space, whilst Belfast itself has space for further expansion and development. However, Warrenpoint in particular, and also Larne and Londonderry have limited quay space.
7.5 For Ro-Ro cargoes the competitive position is much more open with each port handling the following unit numbers:
Table 7.1 Ro-Ro Cargo by Port in NI in 2004 Units
Port Laden Empty TOTAL Belfast 299,960 31,803 331,763 Larne 342,760 45,883 388,643 Warrenpoint 51,850 6,255 58,105 TOTAL 694,570 83,941 778,511
Source: Dept of Enterprise, Trade & Investment, NI.
7.6 Warrenpoint is seeking UK /EU financial aid to assist it in developing a new Ro-Ro berth. If it goes ahead, this development will also bring about some minor improvements to the Lo-Lo berth. The outcome of this is yet to be decided and whilst there are some temporary delays in the process, it is likely that the development will take place in time. Belfast Port is believed to be unhappy about any State/EU aid being awarded to a competitor, despite themselves being the beneficiary of such aid in the past. This new facility would allow significantly larger Ro-Ro ships into the port and also allow for some terminal land development. The impact of this, however, will be confined to allowing the Sea Truck service to double the size of ship operated on the run. It will have minimal impact on the deep-sea container market.
7.7 One problem which the principal Trust ports in Northern Ireland share is an unhappiness cause by their classification as Public Corporations by the UK Office of National Statistics. The main impact of this is to constrain severely their ability to
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Development of Container Capacity in the UK – Implications for Ireland
borrow money and to invest in additional facilities at each port. The Port of Belfast has been explicit about this in its most recent corporate plan and annual report. 17
17 Port of Belfast Corporate Plan 2006-2010 and Port of Belfast Annual Report 2004
33 Development of Container Capacity in the UK – Implications for Ireland
8. Inland Transport Links Across the UK
8.1 There is presently spare capacity on much of the UK’s railway network as can be shown below. Broadly speaking lines shown in red are at the limits of their capacity and railway lines shown on orange are drawing close to those limits.
Map 8.1 Railway Utilisation in 2004
Source: MDS Transmodal
8.2 As can be seen, however, in map 8.2 on the next page, this situation is set to change over the next decade.
34 Development of Container Capacity in the UK – Implications for Ireland
Map 8.2 Forecast Railway congestion in 2014
Source: MDS Transmodal
8.3 The problem of increasing railway congestion is clear, particularly for ports in the south-east of England. Any trans-shipment of container traffic to/from Ireland will , therefore, have to be by sea rather than using the UK as a land-bridge
8.4 Container transport by rail in the UK is viable only with State support, supplied through the CNRS Scheme (Company Neutral Revenue Support) which gives a grant to the train provider per container carried, with the grant tapering to zero for longer distances. Despite this financial support, most containers destined for the Midlands and the south of England move by road, on grounds of price and speed of delivery. Rail tends to become more competitive for longer distances, typically from the south east coast up to the M62 corridor and beyond. Felixstowe and Southampton see about 22% and 25% respectively of their inland traffic move by rail. The problem is that with container traffic growing faster than national GDP, this gives a steadily increasing demand for inland transport.
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Development of Container Capacity in the UK – Implications for Ireland
8.5 Map 8.2 shows that the UK faces a growing problem in relation to inland distribution by rail. The easy response is that the UK Government should pay for a more aggressive expansion of the railway network. Unfortunately this may not happen for two reasons:
Passenger demand for rail travel is also growing rapidly and the signs are that passenger schemes will continue to be accorded priority. HM Treasury is seeking to reduce the level of subsidy it gives to the railway industry which has, regrettably. seen its costs quadruple in real terms over the last decade; this is much faster than road, air and maritime transport. A consequence of the reducing financial support for the railways is that the CNRS scheme will not be expanded in line with market growth; indeed it may be actually reduced in cash terms.
8.6 The UK ports industry is aware of the problem and for this reason has been willing to sign 106 Agreements whereby a new or expanded container facility will also contribute towards the cost of improving the railway line so that more freight can be moved by rail. An example of this is that, to enable the Felixstowe South development to happen, the Port of Felixstowe is paying for the railway line between Felixstowe – Ipswich – Peterborough – Lincoln –Doncaster – Leeds to be upgraded so that it can carry significantly more container traffic. Similar commitments will be required from P&O/DPW in respect of London Gateway.
8.7 The situation for the roads is broadly similar. The three maps below illustrate the growing level of road congestion in England over the period 1995 to 2015. The maps were developed by the DfT in 1999 but they are still broadly accurate. Blue roads are free running; red roads are over stressed.
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Development of Container Capacity in the UK – Implications for Ireland
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Development of Container Capacity in the UK – Implications for Ireland
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Development of Container Capacity in the UK – Implications for Ireland
39 Development of Container Capacity in the UK – Implications for Ireland
Logistics for the British Isles
8.8 The increasing trends of sourcing goods in Asia, combined with the standardisation of products and the need to optimise economies of scale are causing some cargoes destined for the Island of Ireland to be sent to a central distribution centre in England, with Irish product being called off from this central depot. Such facilities are typically located in the area around Northampton, Corby and Milton Keynes.
8.9 The logic for this is that the combined markets of the UK and Ireland represent a largely homogeneous market of about 70 million people, buying fairly standard products using English as the means of communication.
8.10 These products will continue to be moved in Ro-Ro trailers crossing the Irish Sea and this represents a westbound Ro-Ro market sector that is likely to continue to grow at a rate consistent with the fast growing Irish economy. The improved UK container ports will support this logistics chain, although increasing road congestion in England is a matter of some concern (to both the the Republic and the UK)
8.11 There is, too, a specific concern about the UK’s lack of investment to date in the TENS (Trans-European Networks) transport links compared to other European nations. As IBEC has pointed out in a recent press release (4th April 06), which reflects the findings of a 2005 European Commission Report, this underinvestment, especially in Road Corridor 13 (Stranraer/Holyhead – Felixstowe) and Rail Corridor 26 (the main Rail Corridor linking Ireland to the Continent) impacts directly upon the ability of Irish merchants effectively to penetrate European markets. North Welsh and North Western UK merchants are also equally prejudiced by this issue since they share these same TENS corridors with their Irish colleagues so this is not a uniquely Irish concern.
8.12 As highlighted elsewhere in this report (4.7above) this is not only a consequence of the UK Treasury’s desire to keep tight centralised control of the PSBR in respect of Transport Infrastructure but also a reflection of the lack of centralised policy making in the UK over port and hinterland Development as a whole. This is now being addressed by the current UK Ports review.
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Development of Container Capacity in the UK – Implications for Ireland
9. Port developments in Continental Europe
9.1 As will be shown shortly, most containerised cargo moving to Ireland is trans-shipped through the near Continent. The relative sizes of Rotterdam and Antwerp compared even to Felixstowe is clear.
Table 9.1 Principal European Ports – Present capacity
Port Quay Storage Throughput Gantry Terminal Main line Length Capacity 2004 Cranes Size operators TEUs 000's 000's m2 Rotterdam 10,870 54,697 8,281 53 4,914 All main consortia Hamburg 9,448 164,600 7,003 61 5,414 All main consortia Bremen 3,900 50,000 3,448 23 2,265 All main consortia Dunkerque 1,590 10,000 1,747 5 150 All main consortia Le Havre 6,075 51,000 2,131 27 2,050 All main consortia Antwerp 14,354 199,488 6,063 62 7,432 All main consortia Zeebrugge 7,488 12,450 1,196 8 2,900 All main consortia Felixstowe 2,793 66,968 2,717 28 1,948 All main consortia
Source: STS Note: Rotterdam volumes include Ro-Ro units
9.2 Rotterdam. Table 9.1 highlights Rotterdam’s position as Europe’s premier container port handling over 8million TEUs in 2004 and served by 10,870m of quay in 10 terminals. The storage capacity at Rotterdam is over 54,697 TEUs capacity at any one time. In addition to its extensive Lo-Lo facilities, Rotterdam also accommodates Ro-Ro services. Rotterdam intends to retain its position as Europe’s premier container port upon the completion of Maasvalkte 2 (see section below). Rotterdam‘s trade within Europe is dominated by the UK and Ireland which together account for 63% of its European traffic. The Far East, however, is the most important trading partner overall accounting for 42% of the total trade compared with Europe’s share of 35%. With Rotterdam being the primary hub for Europe and expanding to offer a capacity of 24mTEUs with 20m of draught, its share of international trade is likely to grow in comparison to other European ports. This confirms that Rotterdam is the primary trans-shipment gateway to Ireland and will therefore be the main competitor to a resurgence of UK container ports.
9.3 Hamburg and Bremen / Bremerhaven are worthy of note since together they handle more cargo than Rotterdam and they are major trans-shipment ports for the Baltic and Scandinavia.
9.4 Dunkerque is located on the north east coast of France. It has 1,590m of quay with a storage capacity for 10,000 TEUs at any one time. Ro-ro facilities are also available. All of the unitised trade is handled in the west terminal, while conventional cargoes are handled in the east terminal. In terms of France’s unitised trade with the UK, Dunkerque is the second most important port after Calais.
9.5 Le Havre is located on the northern coast of France at the mouth of the Seine. It currently handles over 2million TEUs a year through its 6,075m of quay and has a storage capacity for 51,000 TEUs at any one time. The port of Le Havre plans to handle around 3million TEUs by the end of 2006, largely as a result of the opening of the Le Havre 2000 facility, which will be operated as a private sector terminal. The crane drivers in the port have recently come to an agreement with the private operators, allowing the port to open and plans are in place to enable the port to expand to cater for the next generation of container vessels. Depth alongside could be
41 Development of Container Capacity in the UK – Implications for Ireland
extended to 17m. Ro-ro services link Le Havre with Southampton and Portsmouth. The Ro-Ro terminals are being developed at the time of writing. (Spring 2006)
9.6 Antwerp is one of the largest container ports in Europe with 14,354m of quay and 9 unitised terminals. It can store up to 200,000TEUs at anyone time. It handled over 6m TEUs in 2004. Antwerp enjoys the strategic benefit of being the best located port in relation to the onward distribution to the principal markets of Northern Europe, although its location on the river Scheldt is less attractive than that of Rotterdam at the mouth of the Rhine. It is also served by an extensive network of motorways, railways and inland waterways. Expansion at Antwerp has been focused on maintaining its position as one of Europe’s premier Lo-Lo ports. Many of Antwerp’s container cranes have been designed to permit multipurpose use, enabling them to handle a wider range of cargoes than just containers. Some cranes are adapted for handling steel products, others for forest products.
9.7 Zeebrugge has over 7,488m of quay available to accommodate unitised traffic of which 2,905m is dedicated to Lo-Lo. The port has a storage capacity for 12,450 TEUs at any one time and handled over 1m TEUs in 2004. Zeebrugge is planning to expand its existing Ro-Ro and Lo-Lo handling capacity; this will permit it to attract the latest generation of Lo-Lo vessels with a capacity of 8,000 TEUs. It is also targeting the growing markets of paper, pulp and agricultural products. Zeebrugge is well connected to the markets of Northern Europe by road, rail and inland waterway.
New Developments 9.8 Bremen is increasing its container quay length from 3,900m to 5,000m as the CT IV project which brings four new berths into use in 2008. Hamburg is carrying out developments at four of its existing terminals to increase capacity and efficiency.
9.9 Maasvlakte 2 (Rotterdam) will add an additional 16million TEUs to Rotterdam’s existing capacity. It will have a draught of 20m enabling it to cope with all existing container ships as well as the next generation of ships. The first vessels will not call at Maasvlakte2 until 2012 at the earliest. This development will maintain Rotterdam’s position as Europe’s leading container port with a capacity of over 24m TEU per annum and arguably reflects the determination of the Netherlands to remain the gateway to Western Europe. There are, however, some concerns about both the direct infrastructural cost and the consequential costs in terms of increased inland road, rail and water congestion.
9.10 There are no other developments of this scale being planned in Europe at the moment.
9.11 Dunkerque has the potential to become a significant container port. It has a natural depth of water of 17m and extensive quay and storage areas. It is capable of competing with Zeebrugge as a gateway to Central Europe, with the added bonus of being well positioned for the French market. In theory a ship calling at Dunkerque can cut out a call to Le Havre and Rotterdam / Antwerp / Zeebrugge. At the end of 2004 A.P. Møller Terminals concluded a deal with the port to develop a major new container facility, serving not just the French market, but also the Belgian and German markets. The then Eurotunnel management offered an attractive deal so that containers could be moved into the south of England by rail through the Channel Tunnel. Møller was even to be allowed to employ its own labour. For whatever reason, however, the facility is still moribund and the opportunity lost. Nevertheless the base infrastructure is in place and a more creative management might yet achieve something with this port.
9.12 Perhaps the key point to note is that whilst Rotterdam proceeds with its major expansion programme and whilst Zeebrugge, Antwerp, Hamburg, Bremen and Dunkerque continue to have spare capacity or expansion plans, there is always likely to be competition between ports and terminals within ports for trans-shipment cargo.
42 Development of Container Capacity in the UK – Implications for Ireland
This suggests that, whilst UK ports may have aspirations to handle Irish trans- shipment business, their Continental competitors may have other intentions.
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Development of Container Capacity in the UK – Implications for Ireland
10. Consequences for Irish Ports
The present situation for Irish ports
10.1 Table 10.1 summarises the container traffic through the principal ports on the island of Ireland showing Dublin Port to be the major player.
Table 10.1 ROI & NI Lo-Lo trade 2001-05 Units
2001 2002 2003 2004 2005
TOTAL 428,538 453,489 498,137 530,105 571,792 Cork 72,004 73,528 82,746 93,114 100,123 Drogheda 24,078 32,865 31,338 24,817 24,386 Dublin 264,519 274,203 298,633 325,058 355,442 Shannon/Foynes 5,464 Waterford 67,937 72,893 85,420 87,116 86,377
TOTAL 126,037 127,351 137,490 148,289 156,000 Belfast 111,462 111,908 127,778 138,577 133,000 Warrenpoint 14,575 15,443 9,712 9,712 23,000
TOTAL ALL PORTS 554,575 580,840 635,627 678,394 727,792
Source: Data for 2001-04 from CSO Ireland, Dept of Enterprise & Trade, NI & Port Authorities & estimates from Port Authorities for 2005
10.2 Over the period 2001 to 2005 the Lo-Lo market has grown by 31%; this is significantly faster than the growth seen in UK ports. As a result of this continuing rapid growth, unfortunately, most container terminals in the Republic are already congested. This is reviewed below on a port by port basis.
10.3 Dublin is the largest Lo-Lo port with a fairly constant share of about 61% of the overall market. It has the attraction of the deepest water of the various ports on the east coast of Ireland, and as ship size increases this is making other container lines consider seriously about switching trade to that port. With 1,000TEU feeder ships now deployed on the Irish trades, other ports struggle to handle ships of such a size.
10.4 In addition, as Dublin is the focal point of the Irish consumer market, there is a further incentive to minimise land-side costs by operating ships to the heart of the market.
10.5 Dublin Port itself is rapidly running out of capacity and urgently needs to reclaim additional land (approx. 21 hectares) to cater for growth in its unitised cargoes. It is currently planning the transformation of existing quay space into an additional Lo-Lo terminal where approx 300,000 TEUs could be handled.
10.6 The Government in the Republic faces similar problems to those of the UK albeit not of the same scale, namely that the market wants to go to the more congested part of the country, creating the same downstream problems of traffic congestion and too strong an economic focus on the capital. Ireland also has similar problems in relation to planning when it comes to the development of large infrastructure such as ports.
10.7 Cork is the second container port in the Republic with about 18% of the Lo-Lo market. It enjoys an attractive niche serving the extensive industrial hinterland of the city and the South West generally. Over the period 2001 to 2005 its container volumes grew by 38% and its share of the total market has increased.
44 Development of Container Capacity in the UK – Implications for Ireland
10.8 The present Lo-Lo terminal, however, is constrained with regard to depth of water and capacity and with a growing market and pressure for larger ships, it is planning to re- locate to a new terminal downstream of Ringnaskiddy.
10.9 Drogheda has seen its Lo-Lo volumes peak in 2002 and they have declined slightly in the intervening period. Its market share has slipped from nearly 6% in 2001 to 4% in 2005.
10.10 The main problems facing the port are restrictions on the maximum size of ship that can be handled, plus congestion at the berths in the town of Drogheda. That said, it is arguably well located to serve the market from north Dublin right up to Belfast.
10.11 The port is actively planning the development of a substantial new facility at Bremore (north of Balbriggan) to resolve current constraints and the principal details are set out later in this chapter. The Bremore proposal is being presented, in some quarters, as an alternative location for Dublin Port.
10.12 Waterford is the third largest container port in the Republic with about 15% of the Lo- Lo market. Container numbers have been relatively flat over the last three years, despite a growing market. This reflects factors including the growing competitiveness of both Dublin and Cork as Lo-Lo ports and the ship size limitations of the port. The port, however, has the potential to extend the berths and quays at Belview.
10.13 Shannon/Foynes is a new entrant with about 1% of the market, based on the niche opportunity in the South West that is being exploited by one container line. Whilst the port has very deep water it has a locational disadvantage relative to main markets on the East coast and also in Northern Ireland.
10.14 Lack of capacity in ports in the Republic is noted by the Port of Belfast which states in its Corporate Plan 2006-10 “While the anticipated shortfall in container capacity on the Island of Ireland (12.2m tonnes, over the next 10 years, in the Republic of Ireland alone, according to 2005 Ports Policy Statement) represents a major opportunity for the Port of Belfast, it will also accelerate expansion plans by competitors and new entrants”. This is relevant in that Belfast has capacity for significant growth in Lo-Lo throughput and sees mounting congestion in the Republic as an opportunity for its own growth. But at the same time it is aware that capacity constraints in the Republic are likely to bring about solutions within the Republic.
10.15 The Port of Belfast Corporate Plan is also interesting in that it is forecasting growth in the Lo-Lo market on the Irish Sea will be 6% per annum for the next five years. We would accept this broad argument but note that this growth is primarily going to be driven by trade between the island of Ireland and the Continent. We expect no growth in the UK-Ireland Lo-Lo market and could even foresee this trade switching to Ro-Ro, except for feeder services from Felixstowe and Southampton. Assuming this assertion is valid, it implies significant continuing trade growth with markets served by trans-shipment services.
Forecast trade growth for Irish Ports 10.16 Table 10.2 below captures the growth that would be experienced by the Irish ports if the forecast made by the port of Belfast of 6% growth per annum to 2010 is accepted. The volumes per port are based upon present market shares. This results in a significant 34% growth in container trade through ports in the Republic by 2010.
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Development of Container Capacity in the UK – Implications for Ireland
Table 10.2 Projected Container Trade Growth 2006 to 2010
2006 2007 2008 2009 2010
TOTAL 597,811 633,690 671,700 712,001 753,722 Cork 106,130 112,498 119,248 126,402 133,987 Drogheda 25,849 27,400 29,044 30,786 32,634 Dublin 367,820 389,899 413,283 438,080 463,364 Shannon/Foynes 5,792 6,140 6,507 6,898 7,312 Waterford 92,220 97,753 103,618 109,835 116,425
TOTAL 126,000 130,000 139,000 149,000 156,000 Belfast 111,000 115,000 128,000 139,000 133,000 Warrenpoint 15,000 15,000 11,000 10,000 23,000
TOTAL ALL PORTS 723811 763690 810700 861001 909722
Source: Consultants estimates based on 6% growth per annum
10.17 The crucial point in a relatively fast growing market is that growth in unit numbers will require larger ships to be deployed on the routes. It will not mean more smaller ships simply because the economics of shipping are weighed heavily in favour of economies of scale which larger ships provide. Therefore not only will trade grow but it will move in ever larger ships so only ports that can handle larger vessels will be enjoy the benefits of this trade.
Planned future port development in Ireland 10.18 The largest planned development is a new port at Bremore. This would be a development by the Port of Drogheda in conjunction with a private operator. The Port of Drogheda is currently looking for a partner. The viability of this facility is questioned by many in the absence of substantial State aid.
10.19 The Bremore development is large. Phase I is based on a 60 hectare site that is projected to handle 5 million tonnes of cargo, including 250,000 TEUs. Three Ro-Ro berths handling 350,000 units per annum are also planned. Phase 1 envisages the port with a depth of water of 10.5m below chart datum (CD), which can handle the largest feeder vessels likely to visit Ireland, although it is not adequate for a way-call by a trans-Atlantic mother ship.
10.20 Dublin Port wishes to develop a new 21 hectare site at the east end of the port from re-claimed land. Whilst there is no dispute about the commercial viability of this scheme, there is political opposition from some sectors of the local community.
10.21 Cork is seeking to develop a new container terminal downstream from the present facilities at Ringnaskiddy. This is also understood to need State support in order to be commercially viable.
Inland transport linkages 10.22 While considerable improvements have been made in the road infrastructure in recent years, Ireland faces the problem of infrastructure provision always lagging behind market demand. The newest significant infrastructural link will be the Dublin Port Tunnel which is scheduled to open later this year.
10.23 The rail system is no longer available for container movements. There is arguably there an opportunity here to redress this omission, particularly if a scheme were adopted that is similar to the CNRS scheme (Company Neutral Revenue Support) in the UK. This scheme accepts that railways are not commercially viable for moving
46 Development of Container Capacity in the UK – Implications for Ireland
containers over short distances but that the wider economic benefits of reduced congestion and pollution outweigh these costs. Therefore successful freight train operators are therefore paid a fee for every container unit carried.
10.24 There could also be scope to create an inland satellite port for the Port of Dublin and the Port of Cork, both linked by railway and electronically integrated into the mother port which would further relieve traffic congestion in the main port and city areas.
The relationship between UK and Irish ports 10.25 UK and Irish ports both work in a market where the State is reluctant to supply grant aid to ports. Instead it would prefer ports to be generators of cash for Government, whether through dividends or taxes paid by employees.
10.26 In addition in both countries there are serious concerns about the increasing consolidation of port trade upon one area: in the UK this is the south-east and in the Republic this is focused on Dublin. Planning is also a problem in both countries.
10.27 For the the Republic, it is arguably immaterial whether trans-shipped boxes are handled through UK or Continental ports. Deep-sea containers will not be moved by train to Liverpool or Holyhead and shipped on the short routes, even if they are handled in a UK port. They will be trans-shipped in the deep-sea port from mother ship to feeder ship, which will then come direct to Ireland.
10.28 Indirect movements, however, through a UK RDC (Regional Distribution Centre) will benefit from improved UK port infrastructure as the threat of trans-shipment of UK cargo from the Continent would increase the cost of such flows. (Trans-shipment costs for UK cargo using a continental port are about £150/unit or €220/unit).
10.29 Increasing UK road and railway congestion will increase the costs to Irish consumers of using a UK RDC. Whilst it is of little consolation, increased costs will also hit UK consumers and the evidence is that congestion in and around Rotterdam is causing similar problems there.
10.30 Overall if UK ports increase capacity and efficiency, this will benefit the Irish economy, but does require ongoing and matching investment in Irish ports.
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APPENDIX 1
Basic Assumptions ( see chapter 3) 2005 2006 2007 2008
US$/€ exchange rate 1.25 1.21 1.22 1.22 Nominal effective exchange rate 0.0 -0.8 0.4 0.4 (% change) World GDP (excl EU) % 5.2 5 4.7 4.7 EU GDP Growth % 1.5 2.1 2.4 2.4 Growth of relevant foreign markets % 5.1 5.7 5.7 5.7 World Import volumes (excl EU) % 8.6 8.7 8.4 8.4 Oil Prices (Brent US$/Barrel) 55.0 61.4 60.3 60.3
Source: European Commission, as reported by Department of Finance Ireland – Stability Programme Update, December 2005. This Programme includes macroeconomic projections up to 2008 and takes account of the measures adopted in Budget 2006.
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APPENDIX 2
Ports Policy Statement 2005: Seaport Capacity Update In January 2005, the Marine Minister launched the Government’s Ports Policy Statement. The Policy Statement aims to better equip the port sector and its stakeholders to meet national and regional capacity and service needs. One of the key challenges that lies ahead is the provision of adequate in-time port capacity, particularly for unitised trade. The Policy Statement sets out a framework to ensure that capacity needs are identified, planned and progressed in a coordinated manner.
As an initial step in this process, the Department consulted with the commercial ports handling unitised trade to determine their view of port capacity and how they intended to deal with the projected capacity requirement.
Furthermore, and to ensure insofar as possible that all possibilities concerning the provision of additional seaport capacity are fully explored and considered as part of this process, the Department intends that terminal operators at the commercial ports handling unitised trade be given the opportunity, where appropriate, to submit project proposals. In addition, in September 2005 the Department appointed Fisher Associates consultants to:
Refine the criteria to be used for project evaluation. Fisher Associates recently finalised these criteria following consultation with the commercial ports and other key stakeholders; Draw up a uniform template for submission of detailed project proposals. This template was recently finalised and issued to relevant parties by Fisher Associates; Assess the scope for efficiencies within existing areas of ports handling unitised trade and Advise on evaluating the projects submitted with a view to the Department’s recommendations to Government. It is envisaged that the final report of Fisher Associates and subsequent Memorandum to Government will be finalised by the second quarter of 2006.
The purpose of this process is to satisfy the Government that the anticipated capacity requirement to 2014 and beyond can be efficiently and adequately met through the successful advancement and implementation by the port sector of some combination of the key projects referred to above, which have been the subject of an independent and expert evaluation.
The Government expects that the market itself should decide which projects or combination of projects are completed. Direct Government intervention would only arise if the market were found wanting in that regard and some level of State aid was considered essential in order to meet the national capacity requirement.
Further information18 in relation to this process can be found on www.fisherassoc.co.uk, the website of Fisher Associates consultants and www.imdo.ie, the website of the Irish Maritime Development Office.
18 It should be noted that on 1st of January 2006 The Irish Coast Guard, Maritime Safety Directorate and Maritime Transport transferred to the Department of Transport. The Department of Transport website is at www.transport.ie
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References, Chapter 3
REFERENCE 1 : RoI Department of Finance, Monthly Economic Bulletin, March 2006, Dublin.
REFERENCE 2 : Economic and Social Research Institute, Medium-term Review, 2005- 2012, December 2005, Dublin.
REFERENCE 3 : NI Department of Enterprise, Trade and Investment, “The Northern Ireland Economic Bulletin 2005”, Belfast.
REFERENCE 4 : Northern Ireland Invest, “Why Northern Ireland –Economy”, 2006, Belfast.
REFERENCE 5 : NI Department of Enterprise, Trade and Investment, “Northern Ireland Economic Overview”, 22 March 2006, Belfast
REFERENCE 6 : Department of Transport, Government’s Ports Policy Statement, January 2006, www.transport.ie, Dublin.
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