Container shipping: impact of mega-containerships on portsin Europe and the Med

Sept 16th 2008, MAREFORUM – Ghislain LORTHIOIS – Page 2

A brief port History

The two past centuries,the 19th and the first half 20th century.

Ports: instruments of state or colonial powers.Ports access meant to control market or area. Competition between ports was negligible.Port-related costs were relatively insignificant in comparison to the high cost of ocean transport and inland transport.Thus, improve port efficiency was less relevant.

Today.Globalisation, as a phenomenon, is defined as a substantial (exponential) “expansion of cross-border networks and flows.”Symbols of globalisation have been the ever-increasing size and speed of ships and the shrinking cost of commercial transport.Ocean transports have achieved tremendous productivity gains → increasing ports competition.Port productivity had to and has to be improved.

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World container cargo prospects

Traffic growth.In 2006 goods loaded at ports worldwide 7.4 billion tons, UNCTAD (2007).

The estimation of global container trade in 2007 was 141.5 million TEU, Drewry Shipping Consultants (2008).

The 2008 figure is expected to reach 154.4 million TEU.

A forecast ending in 2020, container trade could exceed 371 million TEU in 2020.

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Past and forecast global container volumes (1980-2015).Source: Regional shipping and Port Development - Container Traffic Forecast 2007 Update (UN-ESCAP / KMI).

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Trade lane growth (2005-2015)Source: Regional shipping and Port Development - Container Traffic Forecast 2007 Update (UN-ESCAP / KMI).

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The fleet growth.

The traffic growth implies a trend for bigger container ship.

Technical improvements → ship-owners have used larger ships, in order to obtain the lowest total cost per cargo ton.

An optimal ship size may exist: trading off economies of scale in hauling operations (at sea) with diseconomies of scale in handling operations (in port).

The subject of optimal ship size has been widely investigated byscholars.

But what is the limit?

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No technical barriers?

Source : compilation, Cullinane et Khanna (2000), Gilman (1983) et Pearson (1988) and other.

more than 8 0006th generation2003 and further

6 0005th generation1995/96

4 5004th generation1984

3 0003rd generation

1 5002nd generation1967 - 1972

1 0001st generation1964

Capacity (in TEU)Type / ClassYear

Ever bigger container ships

No deterrent technical barriers to further increases. Designing vessels up to 18,000 TEU:The Malacca-max concept (Wijnolts 1999 – 2000)

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A new shipping network:

Increasing size of container ships implies to reduce the number of port calls.Such vessels are very costly. They imply to limit the costs in port.Thus, ship-owners have to reduce the number of port calls.

Big ships are working as part of a global network. They imply an extensive use of transhipment to fill them

→ the concept of transhipment terminal has been developed.

Improve port competitiveness with information technology.Port operations are capital-intensive activities (management software, quayside cranes, reach stackers, straddle carriers, automation)

Shipping networks have changed:From the point-to-point network to the collection distribution network pattern (hub-and-spoke).

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Point-to-point network:16 independent connections.

Point-to-point network vs. hub-and-spoke.

Hub-and-spoke network:9 connections.

One of them is operated with mega container-ships.

The others with short-sea services

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A new port hierarchy:

Container lines have required minimising costs by limiting the number of port calls (hub and spoke system): port concentration.

Thus, a new port hierarchy:

Global hubs located closed to the main maritime routes with intense competition. Transhipment activities can move rapidly from one port to another.

Regional hubs.

Direct call ports. (Gateway ports)

Feeder ports.

Niche ports that can be compared to “local monopolies”.

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Ports competition & technology

2 major ports structures → hub ports→ gateway ports

Gateway ports: North Europe;close to final customers

High competition.

Ports innovative, productivity enhancing and cost cutting strategies.

Improve connexions with the hinterland.

Port huge investments.

Hub ports: Geo-strategic location;straits or central position

Lower competition.

Shipping lines provide technology to ports.

Optimising transhipment operations.

Shipping lines huge investments.

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Mediterranean hubs

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North European gateways

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CMA-CGM’ hubs in Méditerranée

Malta Freeport.65 years of concession from 2004

Capacity: 2,400,000 TEUs per annum2007 throughput: 1,900,000 TEUsBerth: 2,000mDraft: 15m20 gantry cranes, 2 RMG, 31 RTG,5 reach stackers

New expansion plan prepared in order to increase the capacity up to 4 MTEUs

Tangiers Med.

Capacity: 1,300,000 TEUs per annumBerth: 800m Draft: 16m on 650m – 12m on 150m8 gantry cranes, 21 RTGsStart of commercial operations planned at the 2nd semester 2008

Damietta.Capacity: 2,900,000 TEUs per annum in phase 1Berth: 2,360m Draft: 17,3m14 gantry cranes, 35 RTGsStart of commercial operations 2009

Istanbul...

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Malta Freeport.

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The container transhipment terminals:

Container transhipment terminals, crossroad of the seas, connecting:Long distance and short distance (feeder) maritime services (connection between Asia/Europe and Mediterranean lines – for example: Marsaxlokk terminal in Malta or Tangiers),Different long distance services (crossroad of Asia/Europe and South/North lines),Services calling several ports along a similar maritime range.

The ever-increasing transhipments?World total transhipment volume from 85 million TEU in 2005 to 184 million TEU in 2015.The share of transhipment is expected to be approximately 23.1 %Almost unchanged from the MPPM (Maritime Policy Planning Models) estimates of transhipment shares in 2005 (22.9 per cent of the global total).

Source: Regional shipping and Port Development –Container Traffic Forecast 2007 Update (UN-ESCAP / KMI).

Thus, the trend is for more and more transhipment terminals.

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Big ships and transhipment terminals,several drawbacks and advantages:

- Big ships are less flexible. Could be a serious liability in a downturn- Ever bigger ships = ever bigger risk- Big ships need deeper water, bigger cranes, longer berths, bigger

container yards. Who will pay for these port infrastructure improvements?

- Increased time in port can quickly outweigh economies of scale.- A less visible presence in the port of origin (or destination) of the

cargo.- Additional handlings than a point-to-point network.- For ports, transhipment volumes can be very volatile.

Transhipment activities can move rapidly from one port to another.

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Big ships and transhipment terminals,several drawbacks and advantages:

+ Economies of scale on connections by offering a high frequency of services. with the same number of ship it can provide a higher frequency of services.

+ Ship-owners can optimise the number of ships and their size.The biggest container ships are affected to the main corridors between the biggest ports and the container transhipment terminals.The load factor of the container ships is improved. Thus it allows to obtain the lowest total cost per cargo ton.

+ Economies of scale at the hubs, enabling the potential development of an efficient distribution system since the hubs handle larger quantities of traffic.

+ Economies of scope in the use of shared transhipment facilities.This can take several dimensions such as lower costs for the users as well as higher quality infrastructures.

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Impact of mega-containerships on ports in Europe and the Med?

A new transport system.

A new port hierarchy.

An higher competition between ports:Stay themselves in the top of the hierarchy.Technological improvements.

What transport system approve?Trade off the point-to-point network with the hub-and-spoke framework.Each port and area is a single case.

A new issue: Is a container transhipment terminal environmentally friendly?

Conclusions

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