Victims of their own success

European ports have found themselves in the unaccustomed position of being a
high-growth business. Hutchison Whampoa, whose Hutchison Port Holdings
subsidiary has large investments in the region, now is making more money
from port operations than from its formerly high-flying mobile-phone
business.
But instead of celebrating, terminal operators are sweating about the
prospect of overstretched European ports being strangled by a second
consecutive year of peak-season congestion.
No port better sums up the sector's changed fortunes than Rotterdam. Its
container traffic fell for the first time in 2002, fanning fears that it
would surrender its position as Europe's top container hub to its aggressive
rivals, particularly neighboring Antwerp and Hamburg. But it rebounded in
spectacular fashion in 2003 with a 9 percent increase in traffic that made
it the first non-Asian port to handle more than 7 million TEUs a year.
That performance was eclipsed in 2004, when shipments soared 16 percent to
8.2 million TEUs. Through March of this year, the port was on pace to exceed
9 million TEUs in 2005.
The boom is driven almost exclusively by containers, reflecting the growth
in global world trade, rather than bulk cargoes, which are registering
steady but unspectacular growth. Hans Smit, chief executive of the Port of
Rotterdam, predicts containers will become the port's highest-tonnage cargo
within two years, surpassing crude oil.
Fears that the boom was merely a blip and would soon lose momentum have
ebbed as traffic continues strong growth from Le Havre to Hamburg. The
increase has been driven by trade with China, which last year supplanted the
U.S. as Rotterdam's main trading destination.
But China isn't the sole driver of the boom. A surge in exports from other
Asian nations, including South Korea and Japan, explains why Europe-bound
ships are sailing fully loaded. The EU's expansion to include eight Central
and East European countries last May also has boosted trade through Hamburg
and, to a lesser extent, Rotterdam.
Regional feeder routes also are flourishing, with Rotterdam attributing its
strong first-quarter performance to robust growth on intra-European trade as
well as to and from Asia and South America. Hamburg and Rotterdam are
benefiting from a surge in Russia's foreign trade through the Baltic, and,
because of the weak dollar, all Northwest European ports are importing more
from the U.S.
That has shipping lines worried as they gear up for this year's peak season
for imports. The prospect of double-digit growth in container traffic is
welcome but "makes us all nervous," Chris Bourne, European managing director
of Japanese carrier MOL, told a recent conference on port congestion.
Ocean carriers, terminal operators, barge operators, truckers and shippers
have drawn up contingency plans to cope with congestion, but many fear the
situation is set to worsen until more handling capacity can be added.
Dynamar, a Rotterdam-based consulting group, said port capacity will be
strained for several more years. Many terminals have been operating well
above 80 percent since the 2004 peak season, when European ports suffered
their first bout of congestion.
Carriers also worry that Europe's increasingly congested ports will be
unable to handle the increasingly large ships entering service. Orient
Overseas Container Line said Rotterdam and Antwerp are the only European
ports that will meet the carrier's requirements when it is operating a dozen
8,000-TEU vessels in its services from Asia in 2007.
The top U.K. container ports, Felixstowe and Southampton, are expected to be
congested again this year. The delays are likely to spread to Rotterdam,
which will have to accept diverted containers from Asia and transfer them
onto to feeder vessels for onward shipment to smaller, less-crowded British
ports.
The threat of congestion holds hope for Amsterdam, which is one of Europe's
biggest ports but has a negligible container business. The port's Ceres
Paragon terminal, built around a slip where a ship can be worked
simultaneously from port and starboard, has handled only a couple of ships
since it opened five years ago. The Grand Alliance was expected to switch
some of its Asian services from Rotterdam to Amsterdam after one of its
members, NYK Line, acquired control of the facility. The move has been
vetoed by another alliance member, P&O Nedlloyd, which did not want to
jeopardize its investment in a new Rotterdam terminal it is building with
Hutchison Port Holdings, the owner of Europe Container Terminals.
But with Hapag-Lloyd saying it backs a move, Amsterdam soon could be more
than a blip in the Le Havre-Hamburg container market.
Also expected to alleviate the congestion are several multibillion-dollar
projects that will boost the annual capacity of Northwest European ports by
some 15 million TEUs. Most won't be finished until the next decade, however.
Antwerp is best placed to ward off the congestion that forced it to turn
away 10,000 boxes a week last year to rival Rotterdam. The first phase of
the port's Deurganckdok terminal is scheduled to open in July, boosting
capacity by about 800,000 TEUs a year. Another terminal is scheduled to open
nearby in November.
The northern French port of Le Havre, which has failed to exploit is
position as the main port of Europe's second-largest economy, will get
another chance to win back domestic cargoes from foreign rivals at the end
of the year with the opening of a terminal designed to handle 1.5 million
TEUs a year.
Congestion also will provide a major boost for Zeebrugge. The Belgian port
posted an 18.5 percent jump in traffic to 1.2 million TEUs last year but has
yet to make a breakthrough as a major container port in Northwest Europe.


Source : Journal of Commerce BY BRUCE BARNARD