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