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June 23, 2014

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20 THE JOURNAL OF COMMERCE JUNE 23.2014 COVER STORY Rotterdam is preparing to add 5.1 million TEUs to annual capacity, with APM Ter- minals, the port arm of Maersk Group, due to open a 2.7 million-TEU facility on the Maasvlakte 2 container complex in Novem- ber, followed shortly by the 2.4 million-TEU Rotterdam World Gateway. The latter is a joint venture among Dubai-based DP World and four carriers: MOL, Hyundai Merchant Marine, APL and CMA CGM. The new terminals boast cutting-edge technology, including remote-controlled ship-to-shore cranes and automated guided vehicles to achieve the higher level of pro- ductivity needed to handle the big ships. But the new terminals will be operating in an environment that would have been unthinkable when they were commissioned in the double-digit-growth era before the 2008 global financial crisis. Rotterdam's container traffi c contracted 2.1 percent in 2013 to 11.6 million TEUs and only man- aged a miserly 0.3 percent rebound in the fi rst quarter of this year. "We are facing a period of slow growth, (and) some terminals will lose out as a result," Maersk Group CEO Nils Andersen told Dutch fi nancial daily Financiele Dag- blad this month. "Naturally, it's awful if you have made large investments and have enough capacity and then you are overtaken by other terminals. But that's the reality. We overestimated the future growth in Europe." The growing f leet of mega-ships is intensifying pressure on Europe's top ports, underscored by the 11,600 TEUs generated on a recent visit by a Cosco vessel at the Eurogate terminal in Hamburg. A more typical call involves upward of 5,000 TEUs, according to Drewry Maritime Research. "This peaking demands larger, more capa- ble terminals than before, even if the annual throughput is no greater," the London-based analyst said in a recent newsletter. (Euro- gate's Hamburg terminal ranked sixth in the Europe-Middle East-Africa region in 2013 berth productivity, with 93 container moves per-hour, per-vessel.) The average size of ships in the Asia- North Europe trade in April had grown to just short of 11,000 TEUs over the past two years, while the number of weekly services declined from 30 to 22 and the number of port calls from 104 to 87. Quayside productivity isn't the only issue facing Europe's ports. The Achilles' heel is weak intermodal transport links, according to Drewry. Port rationalization by the P3 carriers and the introduction of larger vessels "means that much bigger chunks of Asian cargo will have to be discharged from every vessel, and then just as importantly, processed through each gateway to its hin- terland before the next arrives, possibly a few days later," Drewry says. European terminal operators "have yet to show their hinterland cargo can be delivered effi ciently under the conditions envisaged." Although industry talk is dominated by the arrival of fully loaded Triple Es and the opening of the Maasvlakte 2 terminals, an equally important game-changer is about to emerge: A German federal court is set to rule in July on whether Hamburg can pro- ceed with a long-stalled project to widen and deepen sections of the Elbe River, the port's 50-mile link to the open sea. Approval is critical for Hamburg to han- dle the larger, wider mega-ships fl ooding the Asia-Europe trade, its major market. The port — the seventh-most productive port in the EMEA region with 81 container moves per-hour, per-vessel — can accommodate vessels up to 16,000 TEUs, but they can't sail fully loaded down the Elbe, and ships with a combined width of 90 meters can't pass each along half of the river. These restrictions haven't stopped Europe's second-largest container port from outpacing its closest rivals. It boosted first quarter traffic 8 percent to 2.4 mil- lion TEUs, lifting its northwest European market share by 1.4 percentage points to 26.8 percent. But warnings from some car- riers that they might transfer calls to other ports because of limited accessibility under- scores the importance of a positive ruling. While Europe's top ports focus on con- solidating their market shares, they are constantly looking over their shoulders at cargo-hungry newcomers offering carriers attractive deals to fill their underutilized terminals. Wilhelmshaven's 2.7 million-TEU- a-year Jade Weser terminal, which opened in September 2012, handled slightly more than 76,000 TEUs in 2013. DP World's London Gateway, the U.K.'s 7-month-old container port, is operating at a fraction of its initial 1.5 million-TEU annual capacity as its nearby rival, Felixstowe, the U.K.'s top container hub, hangs on to its customers in a fl at market. Europe's southern ports, meanwhile, are rapidly increasing their container volumes at a much faster pace than their northern peers, as their reputation for low productiv- ity and labor strife gradually fades. Piraeus's traffi c soared almost 16 percent in 2013 to 3.2 million TEUs, as China's Cosco Pacifi c bids to transform its terminals at Greece's largest port into the Mediterranean's big- gest transshipment hub. Italy's Gioia Tauro, whose future was in doubt after Maersk pulled out, was up 13.4 percent at just over 3 million TEUs, and Malta's Marsaxlokk grew 8.3 percent to 2.8 million TEUs. The Middle East market is growing rapidly, too, driven by surging Asian and African transshipment traffi c, but most of the big gains are accruing to a few terminals, notably DP World's fl agship Jebel Ali com- plex in Dubai, which is soaring up the global port rankings. Africa also is a key emerging growth market attracting signifi cant investments in new terminals by global port companies seeking to take advantage of accelerating economic growth across the continent. Some ports are breaking big as transship- ment hubs in the east-west trades, including Tangier, which poses a major threat to the Port of Algeciras, Spain. Eurogate, the oper- ator of the Jade Weser terminal, saw traffi c at its twin facilities in the Moroccan port leap nearly 85 percent in 2013 to top 1 mil- lion TEUs for the fi rst time. The main event of the year, however, is sure to be the opening of the Maasvlakte 2 terminals. But Maersk's Andersen strikes a cautious note. "Rotterdam is doing very well. It has invested heavily," he said. "But it's very important that not only the seaside of the port is effi cient, but also the land side. We therefore need big motorways, more rail capacity and expansion on the inland water- ways to make the port successful." JOC Contact Bruce Barnard at "IT'S VERY IMPORTANT THAT NOT ONLY THE SEASIDE OF THE PORT IS EFFICIENT, BUT ALSO THE LAND SIDE."

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