South European Container Ports — An Unlikely Success Story

Amid the deluge of year-end statistics highlighting the yawning economic gap between the European Union’s more solid northern member states and its debt-stricken southern half there’s one that looks, at first glance, like a mistake — container traffic.

But it isn’t. While Europe’s giant northern ports post declines, or at best modest gains, in 2013 traffic, some Mediterranean hubs are basking in double-digit growth rates.

Rotterdam, Europe’s biggest port for all types of cargo including boxes, saw volume in 2013 dip 1.7 percent from a year earlier, and neighboring Antwerp was down 0.7 percent. Hamburg is up around 7 percent, but that was partly due to feeder traffic lured from Rotterdam.

Mediterranean ports, in contrast, are on a roll. Gioia Tauro, the Italian transshipment hub, whose future looked grim a couple of years ago following the departure of top customer Maersk Line, hiked volume by over 13 percent, the second consecutive double-digit gain. The CICT terminal in the Sardinian port of Cagliari grew 13 percent despite the political turmoil and economic downturn in its target North African market.

Piraeus, once a byword for labor disputes and low productivity, did even better, boosting traffic by close to a world-beating 20 percent. This made the 5.5 percent increase at the southern Spanish port of Algeciras look extremely modest, but by north European standards, it was decidedly bullish.

Eurogate, Europe’s largest terminal operator, was cock a hoop that it broke through the 14-million-TEU mark in 2013 for the first time since the 2008 global recession. But the rise, to 14.2 million TEUs, was almost entirely due to an 11.2 percent increase at its minority-owned Italian terminals, which outweighed a 4.7 percent decline at its flagship Bremerhaven home base and overshadowed an otherwise impressive 7.9 percent growth in Hamburg. Its low-key Lisbon terminal handled 15.8 percent more containers than in 2012, while its brand new Wilhelmshaven facility, Germany’s first deepwater container port, managed just 76,265 TEUs in its first full year of operation.

The sizzling performance of these southern European terminals contrasts with the dire economic situation beyond the waterfront. Greece is looking to a third bailout of up to €20 billion ($27 billion) on top of the €250 billion it has already pocketed since 2010 to keep its battered economy afloat. Italy, the third-largest eurozone economy, is still struggling to emerge from its longest post-war recession, and the government’s forecast of 1.1 percent growth this year looks a tad optimistic to most independent economists. Portugal, which got a €78 billion bailout, is just recovering from its deepest slump since the 1970s. Spain’s gross domestic product shrank about 1.3 percent in 2013, and the government is forecasting growth of just 0.7 percent this year.

The disconnect between the strong port performances and the fragile inland economies is largely due to the fact that the leading terminals function as transshipment hubs for the broader Mediterranean region and Central and Eastern Europe rather than as gateways to their domestic hinterlands.

In the case of Piraeus, the surge in traffic has little to do with Greek companies or the Greek government. The port is on target to become the biggest Mediterranean container hub, overtaking Valencia, in 2016, thanks to Hong Kong-based Cosco Pacific, which paid around $5 billion in 2009 for a 35-year operating concession to transform the port into a gateway for Chinese trade with Europe. Traffic at its two terminals soared 20 percent in 2013 — its third full year of operation — to 2.52 million TEUs following a 75+ percent increase in 2012. The majority state-owned Piraeus Port Authority, by contrast, saw traffic at the third terminal rise by just 3 percent to around 645,000 TEUs.

While rival global terminal operators regard Europe as a mature slow growth market, Cosco Pacific is bullish about its Greek asset. It’s spending over $300 million to expand annual capacity to 6.2 million TEUs from today’s 4.2 million TEUs, is reportedly mulling the construction of a logistics complex and assembly facilities for imports of manufactured goods from China and is the prime candidate to acquire the port when the Greek government finally makes good its privatization pledge.

Other southern success stories like Algeciras also have as much to do with the strategies of ocean carriers and global terminal operators as the state of their domestic economies.

To be sure, there’s still a big North-South gap. Rotterdam handled 11.7 million TEUs in 2013 and Antwerp 8.6 million TEUs, way ahead of Algeciras at 4.3 million TEUs, Piraeus with 3.2 million TEUs and Gioia Tauro with 3.1 million TEUs. And not all southern European ports are up: Valencia’s traffic dipped lower in 2013, and it has lost out in the planned schedule of the P3 Network among Maersk Line, Mediterranean Shipping Co. and CMA CGM.

But the North-South gap is narrowing as southern transshipment hubs challenge their northern rivals for the increasing trade between Asia, particularly China, and Central and Eastern Europe.

And northern ports face greater competitive pressure as traffic growth slows just as extra capacity planned in the heady days of the pre-2008 container shipping bull run come on stream. Wilhelmshaven could yet jolt Hamburg and Bremerhaven as it leverages its status as a port of call in the P3’s Asia-north Europe schedule.

Rotterdam faces a testing time, too, as the massive Maasvlakte 2 terminal project opens for business at the end of 2014, with the addition of some 5 million TEUs of annual capacity.

The UK risks a ruinous battle for market share as well, as the newly opened London Gateway, with just one regular service and two more due in May, attempts to pry traffic away from Felixstowe, the nation’s largest container port.

The southern European ports, by contrast, are pretty confident the good times will continue to roll, even if at a less spectacular rate than in 2013.

Contact Bruce Barnard at brucebarnard@hotmail.com.

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