Giants of the sea help drive UK port expansion





London Gateway, owned by Dubai-based DP World, might represent the bulk of the investment but its imminent opening means its rivals – Felixstowe, Southampton and Liverpool – are spending heavily on upgrading their own facilities, taking total outlay to more than £2bn, with container capacity set to jump by a third in the next five years
The timing of the investment seems at odds with the weak economic outlook: container volumes in the UK are still below the 2007 peak of 8.4m TEUs – 20ft equivalent units, a standard industry measure. And there is little sign of a strong pick up in demand over the next five years.
“Inevitably there will be commercial pressure on all the UK ports including London Gateway,” says Colin Smith, an infrastructure expert at PwC.
But it is not just the opening of a new port that is driving expansion. The other reason was lying at anchor in Southampton at the start of last week. The Jules Verne, the world’s largest operational container ship at 400m long, was making its first stop at the port on its maiden voyage.
“It is the question of ship sizes that is driving the investment,” says Neil Davidson of Drewry, the shipping consultant. “The shipping lines are struggling in the downturn and are going hell for leather to build bigger ships to get economies of scale, so the ports have to adapt.”
More than 40 per cent of UK container port traffic arrives from Asia and the Middle East, most of which is carried on these ultra large ships
At the turn of the millennium, when planning on London Gateway first started, the largest container ships afloat carried 8,000 TEU. Later this month, Maersk, the world’s largest container shipping line, will top even the Jules Verne when it takes delivery of the first ship in its class capable of carrying 18,200 TEU.
Associated British Ports, Southampton’s owner is spending £150m on building a second berth at the country’s second biggest container port to accept these large new container ships. Doug Morrison, port director of Southampton, believes its geographical position, the first port of call in the UK, gives it an inherent advantage over London Gateway and Felixstowe, the UK’s biggest container port which is just up the coast from the new facility. “We are watching the big guns slugging it out,” he says.
Felixstowe is spending big in an attempt to shore up its number one position. Earlier this month it opened a new £40m rail terminal, part of a near £400m expansion.
Mr Davidson thinks the top three ports, including London Gateway, will be able to survive side-by-side, not least because they will have seven berths between them for the new class of ultra-large container ships.
Nevertheless, something will have to give as London Gateway needs to pull one of the big five container shipping groups out of either Felixstowe or Southampton.
Simon Moore, chief executive of London Gateway, is playing his cards close to his chest and will only say that he has “committed shipping line interest in place.”
So far London Gateway has only gone public with the first tenant for the large logistics park attached to the port, which at 9m sq ft is one of the largest in Europe. Marks and Spencer has committed to building a £200m distribution centre, its third biggest in the UK.
The decision to develop a logistics hub is aimed at transforming how product distribution works across much of the UK by allowing goods to land nearer to the main population centres in the southeast.
Mr Moore sees this as a key selling point to build critical mass. “We will reconnect the UK’s biggest centre of consumer demand with its primary trading partners.” He rejects concerns that the port will put more lorries on to an already congested road network in that part of the country.
Clemence Cheng, chief executive of Hutchison Ports UK, is sceptical the logistic park will be quite so transformational and says Felixstowe has better transport links to the traditional distribution centres in the Midlands and north. “What really drives the internet retailer is that they need to deliver to their customer in 24 hours and get the lorry driver to do a daily turnaround.”
John Kent, leader of Thurrock council, says more work will be needed on the transport infrastructure. “Fortunately it will take 10 years to reach capacity on the port so we have time to deal with those problems.”







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