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Container Transhipment and Demand for Container Terminal Capacity in Scotland

5. Strengths of Hunterston & Scapa Flow

The key strengths of the proposed transhipment hubs in Scotland in relation to existing major ports in North Europe are shown in Table 5.1 and further analysed/explained below. Strengths are considered under five headings - natural/physical, economic, operational, environmental and safety.

Table 5.1: Strengths of Scottish container hubs

Natural/Physical

• Natural deep-water channel
• Sheltered location
• Plentiful land for expansion

Economic

• Cost savings for users
• Market growth
• Grant assistance
• Low cost of land relative to large city ports

Operational

• Easy and fast access for the largest ships
• Improved network management
• Reduced transit time
• Productivity advantages of transhipment
• Port authority is single service provider
• Ready supply of labour

Environmental

• Limited land transport impacts (freight movement)
• Brownfield site with planning safeguards
• Land access

Safety

• Avoid congested English Channel
• Avoid shallow estuarial North Sea and Channel ports

It is evident from this analysis that the strengths of Hunterston and Scapa Flow are not necessarily the same for each category of analysis. An attempt is therefore made to highlight the differences that exist between both locations, whilst also illustrating how these locations differ from established container port locations elsewhere in northern Europe.

5.1 Natural/Physical

5.1.1 Natural deep-water channel

Both Scapa Flow and Hunterston benefit from the natural advantage of having very deep-water access channels (some 30m and 40m water depth respectively). None of the current major container ports in northern Europe has a natural deep-water channel, which means existing hubs are all dependent on dredging and/or maintenance dredging. This results in significant additional costs being incurred at established port locations, and with further deepening required to accommodate larger ships, it raises the question of sustainability of future port development at such locations given the availability of natural deep-water alternatives within the same region. The availability of natural deep water access channels capable of accepting the largest container ships in service or envisaged is a key strength for both locations.

5.1.2 Plentiful land for expansion

Scapa Flow and Hunterston both offer developers substantial areas of land for development now and in the future. This will be an important factor given the expected continued strong growth in container traffic, plus the fact that transhipment traffic tends to increase at an even faster rate. These factors imply that transhipment terminals will need to virtually double capacity after 10 years or so. The availability of land to expand the terminals in future in line with container volume growth represents an important strength for both sites.

5.1.3 Sheltered location

Scapa Flow and Hunterston are natural harbours in the sense that they each enjoy natural protection from the open sea due to their position vis-à-vis adjacent land areas/islands. They do not therefore need to construct expensive breakwaters positioned in deep water, as is the case in ports such as Bilbao, Le Havre and Sines (Portugal).

All major ports suffer at least some effects from strong winds (many hub terminals are located in monsoon and hurricane affected regions, such as Singapore, Hong Kong, Colombo and Freeport Bahamas). Scapa Flow may be perceived to suffer more than Hunterston in this aspect, although available wind data does not appear to suggest major problems and the developer (International Container Hubs Ltd) is intending to make provision for the effects of strong winds during the terminal design stage. The Scapa Flow terminal has some protection from prevailing westerly winds thanks to the high island of Hoy lying adjacent to the port site on Flotta.

The natural sheltered locations of both hub options is an advantage many other ports do not enjoy, although at both ports efforts will need to be made at the design stage to minimise the potential effect of adverse weather on terminal downtime.

5.2 Economic

5.2.1 Cost savings for users

Carriers will expect to generate substantial cost savings due to reductions in mainline and feeder costs as a result of using a more optimal hub location. Table 5.2 provides estimates of feedership costs per teu for the three principal feeder markets in northern Europe (i.e. North Atlantic/Norwegian Sea, Baltic Sea/Scandinavia, and Irish Sea/Iberia) and compares these for transhipment hubs at Rotterdam, Hunterston, and Scapa Flow ¹⁶. For the purpose of this analysis, costs are based on a feeder rate of $0.20 per teu/mile (i.e. approximately 300 teu ship size, 70% load factor), ignoring terminal handling charges.

Taking North Atlantic and Norwegian Sea feeder markets first, Scapa Flow has a clear advantage here given its more northerly position. For Scapa Flow the average spoke port/feeder shipping cost is $135/teu. This compares with an average $196/teu for Hunterston and $200/teu for Rotterdam. On average, for these markets Scapa Flow should be able to offer a feeder cost saving of $65/teu, which is about one third less than Rotterdam.

For Baltic/Scandinavia feeder markets, Scapa Flow and Rotterdam are virtually identical in terms of feeder slot costs ($184/teu and $183/teu respectively). Hunterston is the more expensive with an average of $251/teu due to the longer average distance involved. Using Scapa Flow instead of Rotterdam (or any other Le Havre-Hamburg range port) also avoids the need for a Kiel Canal transit and the extra costs and ship time associated with this. Kiel Canal transit expense (i.e. canal expense plus ship time) adds an estimated $15-20/teu, which in turn makes Scapa Flow at least 10% less expensive for Baltic/Scandinavia feeder markets compared with Rotterdam.

For the third major feeder market (Irish Sea, UK and Iberia), Hunterston appears in the strongest position, with an average feeder cost of $109/teu. This represents a potential saving of 24% over Rotterdam's average of $142/teu. For these feeder markets Scapa Flow has an average feeder cost of $165/teu. However, for Ireland and UK feeder markets alone (i.e. ignoring Iberia), Scapa Flow would be competitive in relation to Rotterdam, and moreover would be less expensive for central and northern Scotland (e.g. Grangemouth-Scapa Flow feeder cost would be $45/teu (225 miles) compared to $80/teu for Rotterdam (401 miles), giving a potential feeder ship cost saving of 44%).

In summary, in terms of feeder costs/teu, all things being equal, Scapa Flow would offer the most competitive feeder rates for North Atlantic/Norwegian Sea and Baltic/Scandinavia markets, while Hunterston is more competitive for Irish Sea, UK and Iberia. In all instances transhipment via Rotterdam incurs higher feeder costs.

Table 5.2: Feeder distances (nm) and indicative feeder slot costs (US$) for selected north European feeder markets

Feeder slot cost per teu-mile = $0.20 (300 teu ship size); Kiel Canal costs to be added for Rotterdam Baltic/Scandinavia.

The corollary to this is that, by reducing average feeder distance there would be a proportionate saving in transport movement (i.e. tonne-kilometres), as well as transit time.

Any potential for mainline ship (i.e. the deep-sea vessel) cost savings necessitates separate analysis. It is relatively straightforward to demonstrate that a large mainline ship calling at a single hub (in this case either Hunterston or Scapa Flow) instead of a multiple port call rotation in the southern North Sea basin area would benefit from a reduced deviation distance and time. To illustrate this, we have to first consider current practice, which involves very large ships calling at typically 4 ports in northern Europe. An example of this is given in the following port rotation for a typical Europe-Asia service:

[Ship arrives inbound from Asia - Southampton - Rotterdam - Hamburg - Le Havre - Ship sails to Asia]

Taking the deviation position as Ushant Island in north-west France (i.e. the point at which the vessel ends the ocean passage and enters the English Channel), the above 4-port rotation involves a total sea distance of 1,512 miles, inclusive of the return journey to Ushant. A large ship would take 3.5 days to complete the at-sea portion of such a multiport rotation (based on reduced average speed of 18 knots to take account of routing via busy seaways). In addition, the ship would spend 4 days in port (i.e. 1 day/port, including port entry/exit time), which means that from the time of arrival at Ushant and return to the same position on the outbound leg, each large container ship based on this port rotation will spend a total of 7.5 days in northern Europe.

Conversely, the distance between Ushant Island and Hunterston is 435 miles, and between Ushant and Scapa Flow it is 719 miles, implying a steaming time of some 0.8 days for the former and 1.3 days for the latter (based on normal average speed of 23 knots). We assume in the example given that carriers would then wish to pendulum¹⁷ ships across the Atlantic as this avoids any further deviation in northern Europe. The very short deviation in northern Europe also means that carriers would be able to carry cargo between other regions and North America in addition to north European trade (e.g. Asia-USEC, Mid East-USEC, Mediterranean-USEC etc.) and vice versa.

The distance between Ushant-Halifax (2,393) is virtually the same as between Hunterston/Scapa Flow-Halifax (2,384 and 2,446 nm respectively). Assuming a slightly longer ship time in port of 1.2 days for both Hunterston and Scapa Flow (to take account of increased container interchange), this implies a total mainline ship deviation of 2 days and 2.5 days respectively.

Thus, in the event of transhipment via Hunterston or Scapa Flow, to maintain an each-way weekly schedule on an Asia-Europe-USEC pendulum itinerary would require a string of 11 vessels compared with 12 ships at present (Table 5.3 illustrates the Orkney example). Based on a ship size of 5,500 Teu, a fleet of 11 vessels represents a total annual charter cost of approximately $112.4 million. The alternative (i.e. current) multiport service offering 4 direct calls in northern Europe requires 12 mainline vessels and this results in annual charter costs of $123.9 million. Using transhipment via the proposed Scottish hubs as opposed to current multiport schedules therefore offers carriers a potential fleet saving equivalent to 1 large vessel and $11.5 million per annum for each weekly service string deployed, and for the size of ship stated. That is to say, if two service strings were deployed, the potential saving would double to $23.0 million, and so on for each service string subsequently introduced.

It should be stressed that any roundtrip time saving has to be at least 7 days if one vessel is to be taken out of the system and both Scottish hubs can easily achieve this for an east-west pendulum string. This therefore means that there would be no difference in fleet cost between Hunterston and Scapa Flow - essentially the same number of vessels would be necessary to maintain a weekly schedule, even though Hunterston involves a lesser deviation. The only saving in this respect would relate to fuel. However, a further important consideration relates to the average feedership distance/cost and as noted in Table 5.2 above the outcomes differ here for both Scapa Flow and Hunterston.

Table 5.3: Asia-Europe-USEC pendulum service mainline vessel charter cost by transhipment and direct call in N. Europe (5,500 teu ship size)

Notes: N.Europe port time (4 ports) for direct call is 4.0 days, and 1.25 days for Orkney.
All other ports are 1 day.
Service speed 25.5 knots less sea margin = 23 knots.
Suez transit of 1 day included in time at sea.

It is also likely that there would be additional operating cost savings resulting from using a pure transhipment terminal due to factors such as:

• Access to more competitive port labour costs and working practices ¹⁸;
• Higher productivity ¹⁹; and,
• Lower terminal construction costs compared with traditional cityport locations ²⁰.

Transhipment terminals at Hunterston and Scapa Flow therefore potentially offer the market significant cost savings in terms of:

1. Mainline and feeder operating costs;
2. Mainline fleet capital/charter costs; and,
3. Terminal capital and operating costs.

Collectively, these cost savings constitute significant strengths and would help both terminals build a sustainable competitive advantage.

5.2.2 Market growth

Table 5.4 presents traffic forecasts by sector for the respective catchment areas of Hunterston and Scapa Flow. The key difference between the catchment areas is that Hunterston would endeavour to serve the UK direct import/export market, but is not expected to be competitive for North Continent East ports' transhipment traffic (i.e. Baltic/Scandinavia markets). Scapa Flow, being a pure transhipment terminal, would not compete in the UK import/export market, but would target North Continent East transhipment traffic.

Where there is some common ground this relates to the North Continent West and UK transhipment markets and it is here that both Scapa Flow and Hunterston would be likely to compete for business. However, it should be noted that the UK import/export market accounts for over 60% of Hunterston's catchment, and the North Continent East transhipment market equates to some 52% of Scapa Flow's catchment. In essence, for more than half their respective catchment areas Hunterston and Scapa Flow are not expected to be rivals, but for certain other markets they would compete.

Figure 5.1 illustrates the forecast traffic growth in both port catchment areas. For Hunterston's catchment, the market is expected to increase from 10.7m teu in 2004 to 19.4m teu in 2015. For Scapa Flow the market is expect to increase even more rapidly, from 8.4m teu in 2004 to 17.1m teu in 2015.

Table 5.4: Market size and growth trends for Hunterston and Scapa Flow catchment areas

Source: Derived from Ocean Shipping Consultants data

Much of this growth will be fuelled by imports from Asia, which are expected to grow by almost 20% in 2004. Cargo volumes are growing so strongly that ocean carriers are expected to add an additional four or five loops (i.e. services) of post-panamax ships a year to meet customer requirements ²¹.

While there is indeed some overlap, it is anticipated that for more than half the respective catchment areas, Hunterston and Scapa Flow would not compete against each other. This is due to Hunterston's primary focus being towards UK direct import/export markets, the latter currently served via congested UK south-east ports, whilst Scapa Flow's orientation is towards Baltic/Scandinavia feeder markets currently served via North Continent East ports. Thus, it is largely for UK transhipment as well as North Continent West transhipment markets (e.g. Iberia, Ireland and UK feeder markets) that competition would exist.

5.2.3 Grant assistance

Grant assistance should be available to assist both Scottish transhipment terminals. At the local level the Enterprise Network would be able to assist employee training costs, and help take forward international marketing initiatives.

If the transhipment hubs result in road to sea freight modal shift in the UK then this suggests the projects could qualify for UK Freight Facilities Grant (FFG).

If modal shift can be demonstrated at the European level, then the projects could qualify for funding under the EC Marco Polo Programme. Marco Polo (MP) financial assistance could, for instance, be aimed at assisting start-up costs for intra-European short sea shipping (i.e. feeder) services. MP could therefore play an important role in helping to kick-start new (feeder) services. MP is a new programme intended to improve the environmental performance of the freight transport system. The objective of MP is to move, in aggregate, the total growth of international road freight transport to alternative modes.

The focus of MP is international rather than national, with the main orientation towards:

• Start-up support for non-road freight transport services, which should be viable in the mid-term ("modal-shift actions");
• Support for launching freight services or facilities of strategic European interest ("catalyst actions");
• Stimulating co-operative behaviour in the freight logistics market ("common learning actions").

The proposed Scottish transhipment hubs may qualify under the first two orientations. Start-up support could be sought for specific intra-Europe feeder services that result in modal shift ("modal-shift actions"), although a key factor in any deliberation will relate to potential distortions to competition (this is most probably the argument that would be employed by established EU cityports in any endeavors to dissuade the Commission from supporting the Scottish hub projects). In view of their transnational focus, the hubs may also be regarded as facilities of strategic European interest, and therefore as "catalyst actions".

MP intends to support commercial actions in the market for freight transport services and both Hunterston and Scapa Flow are commercially driven projects. The budget to finance MP between 2003-2007 is Euro 117.5 million. Subsidy for modal shift actions is calculated on the basis of Euro 1.00 per 500 tkm (tonne-kilometres). MP envisages supporting on average 16 projects a year at an average intervention level of Euro 1.43 million, giving a total expenditure of Euro 23 million per annum. As the figure of Euro 1.43 million represents an average, it might be expected that major projects could be funded above this level (e.g. perhaps Euro 2.0-3.0 million/annum), with minor projects receiving less. Applicants will need to clarify the likely project funding ceiling and other conditions with the relevant Commission officials.

In addition to Marco Polo, various supranational institutions are involved in providing financial assistance for seaport modernisation and expansion projects. These include:

• The European Investment Bank (EIB), which can provide low interest/long payback period loans equivalent to a third of the total cost of projects of common interest and projects targeting balanced regional development;
• The European Regional Development Fund (ERDF) co-finances specific schemes, if funding is requested;
• The Cohesion Fund is an additional initiative which covers the infrastructure needs of lagging EU regions;
• Complementary projects are financed in the context of other European programmes, like Interreg and Regis, which target inter-state co-operation and the financial support of geographically isolated islands of the EU periphery respectively.

EU initiatives focus on support for launching viable projects, on the identification of missing links in the lagging EU regions, and on the supply of a financial stimulus to national investment programmes pursuing infrastructure development.

ERDF funding has previously been awarded for a number of container transhipment hub projects, including Gioia Tauro (Calabria), Cagliari (Sardinia), Algeciras (Spain) and more recently at Le Havre. Some of these projects also benefited from soft loans provided by the European Investment Bank. Highlands & Islands still has limited access to ERDF resources and the Scapa Flow project could qualify for funding, as well as EIB loans.

A further (and possibly more important) funding source could be the trans-European Transport Network (TEN-T) programme. Guidelines for TEN-T define the EU's priorities by attaching the network "label" to certain routes, so channelling EU financial support to projects with greater Community added value. The principal aims are to reduce the effects of congestion due to bottlenecks and to help facilitate the process of enlargement to include 12 new countries - this accentuates the need for a new approach to preserve the competitiveness of the European economy and to guarantee a balanced and sustainable development of transport.

TEN-T envisages the development of a single transport infrastructure network via the interconnection and interoperability of the individual modal networks, according to their comparative advantages. In this respect, improvements to ports are regarded as essential. However, rather than specifying particular ports in terms of strategic functionality, all ports are considered to be of common interest. Unfortunately, in practice this does not take account of the relative comparative advantage of specific port locations as nodal points and/or their geographic or natural characteristics. In terms of ports the general focus of TENs is:

• To facilitate trade (the primary objective of any port);
• Helping to relieve congested land corridors;
• Reducing the external costs of European transport;
• Improving accessibility in the EU;
• Strengthening economic and social cohesion in the EU.

Member states have sought to promote their own interests in TEN-T. The UK surprisingly has only one project in List 1 (i.e. projects to be operational by 2020), which relates to what is described as 'multimodal links Ireland/UK/Continental Europe'. There is no specific TEN-T project envisaged for Scotland (which is surprising, in view of Scotland's peripheral location and faltering economic performance). Both Scottish hubs, given their potential implications for pan-European transport, for enlargement (probably more so in the case of Scapa Flow given its easier access to Baltic Sea markets and Russia), and sustainable development, clearly merit consideration in the context of the TEN-T programme. In this regard the TEN-T guidelines aim of promoting a 'motorways of the sea' also fits well with both hub developments.

Member States have been asked to submit to the Commission proposals for 'motorways of the sea' transnational projects before 2007, and this is an aspect of policy (and potential public funding) that the Scottish Executive, the Enterprise Network, and Local Authorities together with hub port developers may wish to make some progress on.

Under the new Van Miert Group proposals for TEN-T, the focus is to prioritise projects and to increase the rate of Community financial aid for cross-border projects (from 10% to at least 20% of the project cost), develop new lending facilities and enhance the role of the EIB ²². Emphasis is on private-public participation, which would also seem to enhance the potential for Hunterston and Scapa Flow as both projects are being taken forward by the private sector.

The proposed Scottish hubs could qualify for various forms of grant aid at Scottish, UK and European levels, in addition to EIB loans and local support for training and marketing. This would be conditional on each port's ability to demonstrate effectiveness in positively helping to address the challenges of road traffic growth, safety at sea, reducing bottlenecks, offer more sustainable development, reducing peripherality, improving competitiveness, and facilitating European enlargement. The appropriate agencies need to explore these issues in more detail and as a matter of some urgency.

5.2.4 Low cost of land

The value of land in established cityport locations tends to be high, reflecting land and property prices locally, whilst for remote islands or areas distant from major centres of population land values tends to be somewhat less. A different situation may exist in the case of a brownfield site within an urban/semi-urban area for which clean up costs may render the land virtually worthless, or worse - London Gateway/Shellhaven is perhaps an example of this, as was Thamesport (Isle of Grain). Indeed, one of the incentives to develop London Gateway may well be the low cost of the site, which is largely reflected in what would be very significant alternative clean-up costs, reinstating it to as close to its natural state as possible (some 50m has already been spent at the site). A further issue relates to the continental port investment approach where the state bears the cost of dredging, reclamation and creating basic infrastructure, with these costs seldom adequately reflected in user charges.

In Hamburg, there was significant opposition from the local Green Party and environmental lobby when the city state decided to proceed with development of a new container terminal on land that, it was argued, could have been used instead for housing to help tackle the city's accommodation shortage. This serves to illustrate the high potential opportunity cost of continued terminal development in cityports. Similarly, in Antwerp the villagers of Dole opposed and remain opposed to the development of the new Left Bank port complex, even though the relevant permissions and consents appear to have been obtained after several years of local protests.

The lower (relative) cost of land at Hunterston and Scapa Flow should be a strength, all things being equal, compared with similar developments at established port locations in urban and semi-urban locations. However, other factors such as state subsidies at continental ports will serve to diminish this advantage. The opportunity cost of using land for commercial port activities in urban locations, especially where there is a shortage of land for city development purposes, will be higher relative to the opportunity cost of land in rural locations, and this will tend to strengthen the case for development at sites such as Hunterston and Scapa Flow.

5.3 Operational

5.3.1 Easy and fast access for largest ships

Ease and speed of port access are critical aspects in modern container shipping operations. Direct access to a port at any state of tide, fast access from the open sea, absence of ship size constraints in terms of length, beam or draft, and close proximity to ocean trade routes are all positive attributes for both Hunterston and Scapa Flow. Under present conditions, with acute congestion in some ports, the need to meet tight arrival windows means that any delay incurred in one port will have a knock on effect on other ports in the regional itinerary. Conversely, a single port call at either Scottish hub avoids these difficulties entirely.

Speedy access and ease of navigable access at Hunterston and Scapa Flow, coupled with a reduction in the number of regional mainline vessel port calls, would ensure a more reliable transport service.

5.3.2 Improved network management

Reducing the number of regional port calls for mainline vessels will have significant managerial and operational implications. Easier operations management and enhanced service reliability due to coordinating just one regional mainline ship port call instead of 4/5 port calls, assuming transhipment markets can be as well served as before, should constitute a strength for the hub and spoke approach.

Consolidating regional transhipment flows at a single location should also enhance feeder reliability and offers added scope for improved feeder ship scale economies (i.e. using larger feeder ships where possible).

5.3.3 Reduced transit time

As noted above, routing east-west pendulum mainline service strings based on hub and spoke via Hunterston or Scapa Flow offers the potential for carriers to substantially reduce mainline ship deviation time from 7.5 days to between 2.0-2.5 days for each ship visit to the region. For a significant proportion of transhipment cargo currently routed on longer multiport itineraries this offers the potential to reduce overall transit time.

Selection of a more optimal transhipment hub location that helps to reduce feeder distance will also serve to improve feeder transit times for transhipment traffic. Table 5.2 above provides feeder distances and costs for Scapa Flow, Hunterston, and compares these against Europe's biggest container port at Rotterdam. This illustrates that Scapa Flow has far shorter feeder distances for North Atlantic and Norwegian Sea markets compared to Hunterston or Rotterdam. Scapa Flow's average spoke port/feeder distance for North Atlantic and Norwegian Sea markets is 674 miles, compared with 980 miles for Hunterston and 1,002 miles for Rotterdam. Compared with Rotterdam, Scapa Flow has the potential to reduce average feeder distance for these markets by one third, while Hunterston would offer a slight reduction in feeder distance compared with Rotterdam.

For Baltic Sea/Scandinavia feeder markets, Scapa Flow and Rotterdam have virtually the same average feeder distance across the range of main spoke ports (921miles and 917 miles respectively), whereas Hunterston has a significantly longer average distance (1,256 miles). However, feeder ships calling at Rotterdam (or other Le Havre-Hamburg range ports) will incur additional expense and time for a Baltic Sea voyage due to transit via the Kiel Canal, whilst from Scapa Flow (or Hunterston) passage is via the Skagerrak and then the Danish Sound. In addition to a fee charged to vessels for using the Kiel Canal, feeders will also incur a time delay for canal passage, typically around 8 hours.

Table 5.5 provides an estimate of the additional costs associated with Kiel Canal transit, in this instance for a 600-teu feedership. Assuming a canal transit time of 8 hours, inclusive of lock time at each end, then based on the stated daily ship cost this equates to a cost of $7.71 per teu/slot for ship time. Canal fees add a further $7.35 per teu/slot, giving a total expense of $15.06 per teu/slot for a 600-teu feedership using the Kiel Canal. Kiel Canal expense therefore adds some 15-20% extra to feeder ship costs for Le Havre-Hamburg range ports serving Baltic/Scandinavia transhipment markets.

Hunterston is a more competitive location for Irish Sea, UK (west coast) and Iberian feeder markets. The average feeder distance for Hunterston in respect of these markets is 547 miles, compared to Rotterdam's 710 miles and 823 miles for Scapa Flow. However, Scapa Flow would offer a reduced feeder distance for UK and Irish feeder markets relative to Rotterdam.

Compared with Rotterdam, Scapa Flow therefore offers the potential for shorter feeder connections and hence faster transit times in respect of North Atlantic/Norwegian Sea, Baltic/Scandinavia and Scotland, while Hunterston offers shorter feeder connections to Irish Sea, UK west coast and Iberian markets (in addition to direct access to the GB market). This implies that Scapa Flow and Hunterston would compete for business in rather different sectors of the north European direct and feeder markets.

Thus, Hunterston's opportunity rests in its ability to serve the GB market direct as a deep-water alternative to the saturated ports of Felixstowe and Southampton, plus its superior competitiveness in serving Ireland and Iberia by feeder.

Scapa Flow's opportunity rests in its ability to better serve North Atlantic/Norwegian Sea, Baltic/Scandinavia and UK feeder markets, and this opportunity is strengthened by capacity constraints at the East North Continent hubs Hamburg and Bremerhaven.

5.3.4 Productivity advantages of transhipment

Specific productivity advantages of transhipment terminals compared to regional multiport direct call port facilities include:

• Yard equipment at a transhipment hub mainly supports quay cranes, with a limited requirement to load/unload trains and road trailers, leading to enhanced quayside productivity;
• Moving larger blocks of containers at the one time (due to a larger interchange per ship call) means more quay cranes can be utilised on the same ship for longer periods;
• Increased container interchange means dual cycling is more common, with cranes lifting boxes on and off a ship during the same cycle;
• There are less restows, with the percentage of restows reducing as the number of intra-regional port calls decreases;
• Reduction in container dwell time at a transhipment terminal, with dwell time falling as the incidence of transhipment increases, increases terminal capacity;
• More 'dynamic transhipments' can be performed, with boxes moving directly along the quay between mainline and feeder ship.

Prospects for more effective berth utilisation are also likely to be improved at a transhipment terminal compared with direct call multiport options. In the direct call scenario, very large vessels take up valuable berth and access channel space at several ports during each regional voyage rotation, and each time for a relatively limited container interchange. Conversely, in the hub and spoke transhipment scenario envisaged here a large vessel requires berth space at just one terminal in the region, and for a far larger interchange that benefits from superior productivity levels (and hence faster turnaround overall).

With a particularly strong focus on transhipment, both Hunterston and Scapa Flow offer the prospect of net productivity improvements relative to current ports used in multiport itineraries, with productivity levels expected to be superior at a pure transhipment facility such as Scapa Flow.

5.3.5 Port authority is single service provider

The respective port authorities at Hunterston and Scapa Flow currently provide a range of maritime services, including pilotage and towage, either directly or through subsidiaries. Both ports have considerable experience in the safe, professional handling of the largest vessels at their respective locations.

As a private company, Clydeport has become well integrated into a number of related businesses, including container terminal operations, road haulage and logistics, and container feeder services. Clydeport is therefore able to offer users a more comprehensive service package than Scapa Flow. This is likely to be important in that ports such as Hamburg have made similar investments (via subsidiaries) in feeder services and feeder terminals in order to expand traffic flows.

5.3.6 Ready supply of labour

North Ayrshire has a male unemployment rate of 6.7%, which is well above the Scottish average of 4.5% and almost double the UK average of 3.5% ²³. Nearby East Ayrshire has a very similar unemployment rate. Overall, the unemployment rate (male and female) for North Ayrshire is 4.6% compared to 3.0% in Scotland as a whole and an average of 2.5% for the UK. This would appear to suggest that there is potentially a ready supply of port labour at Hunterston.

Orkney does not have anywhere near the unemployment levels in North Ayrshire, although the islands economy is continuing to undergo structural change and de-population is a concern, albeit more in the context of the outer isles than Orkney mainland. Long term decline in traditional industries such as agriculture and fisheries, combined with a fall-off in oil activity at the Flotta Oil Terminal, might be expected to lead to some labour resource becoming available.

There are also believed to be Orcadians who live elsewhere in the UK and who would like to return to the islands but are unable to do so because there are insufficient well-paid jobs available. These people may be interested in employment at a container terminal. There could in addition be other people who want to live on the islands but are unable to do so unless they can secure well-paid employment. The recent economic impact study commissioned by Orkney islands Council suggested most of the operational jobs at the terminal would be taken by people in the north of Scotland, with other jobs filled by workers from elsewhere in the UK ²⁴.

Thus, while Hunterston would appear to have a ready supply of labour, in Orkney a proportion of labour would have to be brought in, albeit previous experience in the oil industry suggests this can be achieved.

5.4 Environmental

5.4.1 Limited land transport impacts

Situated on an island, and with a 99%+ focus on transhipment, the Scapa Flow terminal is expected to have minimal landside impacts in regard to containers moved by road. In other words, more or less all containers arriving at the terminal by sea will leave by sea.

Hunterston will require road and rail access as well as feeder connections. Clydeport anticipate approximately 50% transhipment at Hunterston, which implies that up to 50% of containers will require land access. Major efforts are being made by Clydeport to ensure most of this traffic moves by rail, even on short hauls.

Scapa Flow will therefore have virtually zero landside impacts in terms of road and rail container traffic (i.e. unlike any other major UK or North Continent port), and while Hunterston's landside impacts will be more significant, this is expected to be proportionately far less than similar-sized port developments at major UK ports in the south of England where road transport currently dominates inland flows.

5.4.2 Brownfield site

Government policy favours port development on brownfield sites, however, there is much debate about what actually constitutes a brownfield port site. London Gateway (Shellhaven), for instance, is promoted by the developer as brownfield because the site in question is a former oil refinery. But as more than half the land required for the proposed container terminal at London Gateway is to be reclaimed from the river, this aspect of the development may not be regarded as brownfield. In addition, dredging the River Thames is another major environmental issue to consider.

Hunterston is likewise claimed to be a brownfield site, although the land required for the container terminal largely comprises mudflats and intertidal areas and this may not be regarded as brownfield. Scapa Flow is greenfield, and arguably Hunterston is also greenfield or significantly greenfield.

UK Ministers are expected to consider each port development proposal separately. This has led to criticism from the RSPB on the basis that such an approach fails to take account of the need for a long-term strategic plan for sustainable port development in the UK. The RSPB are arguing that all major port development schemes should be considered together.

In the final analysis, progression of the Scottish hub developments will be decided on the basis of economic and social impacts balanced against their environmental impacts.

5.4.3 Land access

As highlighted above, the main focus of Scapa Flow will be on North Atlantic/Norwegian Sea, UK, and Baltic/Scandinavia feeder markets. As the majority of this traffic is currently feedered in any event, the fact that a Scapa Flow terminal has no road or rail access is immaterial.

While Scapa Flow does not require land access, and will therefore have minimal landside container transport impacts, Hunterston will depend to a significant extent on road and rail transport, both of which will need upgrading to allow the proposed terminal to compete effectively in the UK direct container market. Clydeport will promote the Hunterston location on the basis that it offers improved access to the main UK markets using land transport infrastructure that is less congested than is the case for ports in the south of England. This strategy is already partly in evidence with Peel Holdings (Clydeport's parent company) intention to develop a major tri-modal container terminal at Salford on the Manchester Ship Canal. It is with this terminal that Hunterston will be connected, both by rail and coastal feeder.

5.5 Safety

5.5.1 Avoid congested English Channel

Navigation through the particularly busy sea-lanes of the English Channel, Dover Strait, and North Sea basin raises the probability of collision and/or other incidents compared with alternative less congested routings via Hunterston or Scapa Flow. Moreover, the three or fourfold extra distance that ships travel in multiport itineraries must further increase the degree of risk. Reduced risk and safer sea transport should therefore be considered a key strength for both Scottish transhipment terminal options.

Hunterston and Scapa Flow would therefore offer a safer shipping option than current practice whereby very large vessels are routed on far longer intra-European voyages via the heavily congested and shallow Channel and North Sea basin areas, and this should be regarded as a positive aspect for both Scottish transhipment locations.

5.5.2 Avoids shallow estuarial North Sea and Channel ports

Vessels having to navigate in and out of several ports within the same region (as opposed to one hub call) will also increase the degree of risk, more especially for the largest vessels. Transit along what are for the most part busy, narrow, and artificial/inland dredged channels in shallow estuarine port approaches is a very difficult exercise for large container ships to undertake. The extra time required for each port entry and exit, plus lengthy pilotage assistance, adds to carrier costs. Additional factors to consider include very slow speed manoeuvring in confined areas, river hazards (wrecks, sandbanks, leisure craft etc.), and the need to take account of tide and current.

By comparison with present multiple port calls by large ships in shallow estuarial areas, calling at a deep-water terminal at Hunterston and/or Scapa Flow would ensure a far safer transport alternative (i.e. the probability of delay, collision or other maritime incident would lessen significantly).

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