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Mar. 03, 2014

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COMMENTARY 96 THE JOURNAL OF COMMERCE www.joc.com MARCH 3.2014 Bruce Barnard SMALL PORTS, BIG GAINS AMID THE DELUGE of year-end sta- tistics highlighting the yawning economic gap between the Euro- pean Union's more solid northern member states and its debt-stricken southern half, there's one set of data that looks, at first glance, like a mis- take: container traffic. But it isn't. While Europe's giant northern ports are reporting declines, or at best modest gains, in cargo volume for last year, some Mediterra- nean hubs are basking in double-digit growth rates. Volume at Rotterdam, Europe's biggest port for all types of cargo, dipped 1.7 percent in 2013 from a year earlier, and volume at neighbor- ing Antwerp was down 0.7 percent. Hamburg's traffic is up around 7 per- cent, but that was partly because of feeder traffic lured from Rotterdam. Mediterranean ports, in con- trast, are rolling. Cargo volume at Gioia Tauro, the Italian transship- ment hub whose future looked grim a couple of years ago following the departure of top customer Maersk Line, jumped more than 13 percent, the second consecutive double- digit gain. The CICT terminal in the Sardinian port of Cagliari grew 13 percent despite the political tur- moil and economic downturn in its target North African market. Piraeus, once a byword for labor disputes and low productivity, did even better, boosting traffic nearly 20 percent. This made the 5.5 per- cent increase at the southern Spanish port of Algeciras look modest, but by North European standards, it was decidedly bullish. Eurogate, Europe's largest ter- minal operator, broke through the 14 million-TEU mark in 2013 for the first time since the 2008-09 global recession. But the rise, to 14.2 mil- lion TEUs, was due almost entirely to its minority-owned Italian termi- nals, which outweighed a 4.7 percent decline at its flagship Bremerhaven home base and overshadowed other- wise impressive 7.9 percent growth in Hamburg. Eurogate's Lisbon ter- minal handled 15.8 percent more containers than in 2012, while its new Wilhelmshaven facility, Ger - many's first deep-water container port, managed just 76,265 TEUs in its first full year of operation. The strong 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 $27 billion. Italy, the third-larg- est eurozone economy, is struggling to emerge from its longest postwar recession, and the government's forecast of 1.1 percent growth this year looks a bit optimistic to most independent economists. Portugal is recovering from its deepest slump since the 1970s. Spain's GDP 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 because the leading terminals func- tion 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 approximately $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 2.5 million TEUs following a 75-plus percent increase in 2012. The majority state-owned Piraeus Port Authority, by contrast, saw traffic at the third terminal rise just 3 percent to approximately 645,000 TEUs. Although rival global terminal operators regard Europe as a mature, slow-growth market, Cosco Pacific is bullish about its Greek asset. It's spending more than $300 million to expand annual capacity to 6.2 mil- lion TEUs from today's 4.2 million TEUs, is reportedly considering 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 follows through on its privati- zation pledge. To be sure, there's still a big north-south gap. But that gap is nar- rowing 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 capac- ity planned in the heady days of the pre-2008 container shipping bull run come on stream. Wilhelmshaven could yet jolt Hamburg and Bremer- haven as it leverages its status as a port of call in the P3 Network's Asia- North Europe schedule. Rotterdam faces a testing time, too, as the massive new Maasvlakte 2 terminal opens at the end of this year, with the addition of some 5 mil- lion TEUs of annual capacity. The U.K. 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 confident the good times will continue to roll, even if at a less spectacular rate than in 2013. JOC Bruce Barnard is a JOC special correspondent based in London.Contact him at brucebarnard47@hotmail.com.

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