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Container Transhipment and Demand for Container Terminal Capacity in Scotland

3. Forecast containerport supply and demand in North Europe

3.1 Forecast supply

Tables 3.1 and 3.2 detail anticipated containerport investments with completion dates for North Continent and the British Isles respectively. In estimating the future supply/demand balance, Ocean Shipping Consultants have assumed that all of these projected developments come to fruition. This is considered to be highly unrealistic given ongoing environmental concerns and strong local opposition to containerport developments, particularly those in heavily populated and congested areas. OSC acknowledge that there are increasing constraints to such developments, but nevertheless assume they will proceed in any event.

On North Continent, major port expansions are planned for Hamburg, Bremerhaven, Rotterdam, Antwerp and Le Havre. Brand new port projects are also being considered for Vlissingen and Wilhelmshaven. Almost all of these projects are subject to varying degrees of local (and in some cases regional and national) opposition so it is not certain that they will all proceed.

In the UK, the port of Felixstowe plans to expand the existing terminal. Aside from this there are three proposals for major new port developments in the south of England, at Dibden bay (Southampton), London Gateway (Thames), and Bathside Bay (Harwich Haven). The Dibden Bay Public Inquiry has ended and a final outcome from this is expected towards the end of 2003 or early in 2004. The London Gateway Public Inquiry began earlier in 2003 and a decision on this proposal is expected in first half 2004. A Public inquiry has yet to start in respect of Bathside Bay.

Again, it is uncertain that all three major UK south/south-east coast developments will be approved. OSC nevertheless make the assumption in its supply/demand assessment that all three developments will take place.

Table 3.1: North Continent anticipated containerport investment

QCC - quayside container gantry crane
Source: Ocean Shipping Consultants Limited

Table 3.2: British Isles anticipated containerport investment

* dependent on demand levels
Source: Ocean Shipping Consultants Limited

Table 3.3 summarise for North Europe as a whole, and by sector, the total planned containerport capacity to 2010, based on OSC estimates and assumptions that all proposed developments will take place. The projections suggest overall North Europe capacity will increase from 39.4 m teu in 2001 to 74.7 m teu in 2010.

There is therefore expected to be a virtual doubling of capacity in the major deep-sea sectors of N. Continent East and West, and British Isles, with more moderate increases expected for Scandinavia. A greater relative increase is expected in 'other Baltic' ports, although this is from a relatively low base. Nevertheless, to restate, these estimates assume that all planned containerport capacity expansion schemes will occur, which in our view is highly unlikely. Consequently, a proportion of this capacity may not materialise.

Table 3.3: North Europe planned containerport capacity to 2010

3.2 Forecast demand

As economies have converged, so trade has also increased to meet the demands of industry for raw materials and intermediate goods, and the demands of consumers for competitively priced products. Trade in manufactured goods and intermediate goods - the prime constituents of containerisation - has been at the centre of this global economic expansion.

Over recent decades the fundamental structure of the world economy has altered. The ability to source finished or partially manufactured goods in areas of low costs has been at the centre of the 'globalisation' of industries. Not only has this boosted world output, but it has also intensified the relation between economic output and trade. In the longer run, it will be the sustainability of this pattern of growth that will define the outlook for containerisation.

The container system has been both a catalyst and a beneficiary of these investments. The availability of low-cost transport effectively eliminates freight charges as a significant consideration in the cost of most higher-value commodities. This allows complex global sourcing patterns to be developed. With the continued availability of low-cost labour in China and other developing regions, the progressive migration of manufacturing to these locations seems certain to continue.

OSC uses data from the IMF to contrast the growth of world output (the global equivalent of GDP) with the growth in world containerport demand since 1991, as shown in Figure 3.1 and Table 3.4. This shows that containerport demand has consistently increased more rapidly than output, on average by a factor of 3.2. In addition to direct, trade-related factors, containerport demand has also been boosted by the continuing containerisation of general cargoes in developing markets and of backhaul bulk cargoes in developed markets, as well as by the increasing use of transhipment.

Growth in transhipment has been even more dynamic than general container growth. Transhipment traffic during the 1991-2002 period has expanded by an average 13.8% per annum. Growth has been very steady over the period with the exception of 2001 when transhipment expanded by 5.8%, still almost three times world output growth for that year.

These factors mean that the relationship between output growth and containerport demand is not clearcut. However, as Figure 3.1 indicates, a correlation between these two has been more evident since 1997.

Table 3.4: World economic, container and container transhipment demand growth, 1991-2002

Source: Derived from Ocean Shipping Consultants Ltd and Drewry Shipping Consultants Ltd

The economic relation between output and trade is considered by OSC to be useful in forecasting the development of the containerised sector. However, this underlying relationship is not considered a sufficient explanation of the growth in containerport demand. There are numerous other factors at work, and the limitations of economic data (which are often revised) and container handling statistics further complicate the picture. Factors affecting the development of containerport demand, and issues relating to the measurement and comparison of output growth and containerport growth include:

• In addition to imports and exports, container throughput also includes empty containers moving which is part of a port's business, but they do not represent cargo actually being traded. The proportion of empty containers within a port's throughput (and at the national level) can vary significantly and whereas handling empty units provides revenue for a port (usually at a discount compared to full containers) transport and handling costs for empties represents an expense for carriers;
• Transhipment doubles the number of port moves per container (and hence the teu count), but again it does not represent additional cargo;
• The increasing penetration of containerisation - this is perhaps less of a factor in developed markets, where the containerisation of general cargoes is more or less at saturation level. However, an imbalance of loaded inbound and outbound containers (for example, between the Far East and both North America and Europe) means that shippers continually search for more cargo to containerise on return legs of voyages. This has led to the increasing use of containers in cargo sectors that have not historically been regarded as suitable for containerisation - for example, iron and steel scrap, forest products, hay and waste paper;
• Containerisation itself generates trade, by making it easy to transport goods cheaply over considerable distances;
• Container throughput is quantified in volume terms and output is measured in value terms, so the two measures are not directly comparable. In recent years, the volume of containerised cargo has increased more rapidly than its real value, due to factors such as the fall in price of electronic goods;
• International trade agreements and removal of tariff and other trading barriers (e.g. EU, NAFTA, COMESA etc.);
• There are also significant relationships which modify the underlying link between economic growth and trade growth, notably fluctuations in the relative propensities to consume or save, to import or purchase domestically, to export or sell domestically, all mediated by relative movements in prices, incomes, exchange rates, tastes, confidence and other factors;
• In addition to the limitations of available economic data, there are lags in the economy between causes and effects, so that it is not always clear which periods should be compared when different aspect of economic development (such as output and trade) are contrasted;
• OSC generally use the container handling statistics published by ports themselves, and whilst every effort is made to employ comparable statistics, the actual methods of calculation can differ between ports and distort the data. Furthermore, ports may not distinguish between different elements of throughput. Not all ports record transhipment ( and few distinguish between hub-and-spoke and relay).

OSC postulates two cases of macroeconomic growth, using these to inform the forecasting of non-transhipment containerport demand to 2015. These cases define the anticipated likely range of GDP growth. The forecasts are essentially average rates and there will continue to be cyclical variations around them. Forecast economic growth rates for respective economies are set out in Table 3.5. There is not a great deal of difference between demand figures for either case.

Table 3.5: European forecast GDP growth to 2015 by country

Source: IMF and OSC

Taking into account factors affecting the relationship between GDP growth and import/export container handling demand growth, forecasts of import/export container flows for North European ports are presented in Table 3.6 and Figure 3.2.

Over the 2001-10 period, import/export container demand in North Europe is forecast to grow by 56-58% to 39-42 m teu, depending on the pace of economic growth. Further expansion of 23-38% is anticipated to reach 48-53 m teu in 2015.

At North Continent ports, growth over 2001-10 is forecast at 58-65% to 23-24 m teu; the British Isles has forecast growth of 48-54% to 9.5-9.9 m teu over this period. Scandinavia is forecast growth of 53-60%, whilst the East/South Baltic region is expected to achieve growth of 134-225% to 2.27-3.15 m teu - the wide range reflecting the uncertainty of forecast economic growth for this region, particularly in Russia.

Table 3.6: North Europe forecast import/export container handling demand to 2015

Source: Ocean Shipping Consultants Ltd

As in other world regions, transhipment demand has increased more rapidly than demand for import/export container handling due both to:

• The pressure on large vessel operators to keep port calls to a minimum in order to maximize economies of scale; and,
• The fact that conversion of a direct container move to a transshipped operation adds two more container moves, which are included in the port throughput count.

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