Economic outlook for

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Economic outlook for

Economic outlook for ports ports

Theo Notteboom

President and professor, ITMMA - University of Antwerp, Belgium

ESPO 2013- The European Sea Ports Conference

Varna, Bulgaria – 30-31 May 2013

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EUROPEAN PORT TRAFFIC:

SURPASSING PRE-CRISIS VOLUMES?

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-20%

-15%

-10%

-5%

0%

5%

10%

15%

2006 2007 2008 2009 2010 2011 2012 Q1 2013

Percentage growth compared to the prrevious year

Total throughput GDP growth EU27

Year-on-year growth in total EU port traffic (basis = ton) and EU GDP

Ports still ‘overreact’ to swings in economic growth

Traffic decline in 2012:

-2% to 3.79 billion tons

Note: growth figures 2012 and Q1 2013 are estimates based on a sample of about 60 European ports

Traffic peaked in 2008:

4.18 billion tons

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A weakening GDP multiplier?

Source: Alphaliner Weekly Newsletter, vol. 2013, issue 17, April 2013

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The GDP multiplier in the EU container port system?

0.00 1.00 2.00 3.00 4.00 5.00 6.00

-10%

-05%

00%

05%

10%

15%

20%

2006 2007 2008 2009 2010 2011 2012 Q1 2013

TEU growth

GDP growth EU27

GDP Multiplier (right axis)

New situation = negative GDP growth combined

with growth in container volumes

Complexity behind TEU growth:

Derived (economic activity) Substitution (containerisation) Incidental (traffic imbalances) Induced (transhipment)

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-20%

-15%

-10%

-5%

0%

5%

10%

15%

2006 2007 2008 2009 2010 2011 2012 Q1 2013

Percentage growth compared to the prrevious year

Containers Liquid bulk Dry bulk

Conventional general cargo Roro traffic

Total throughput GDP growth EU27

Year-on-year growth in total EU port traffic (basis = ton) for cargo groups

The shock effect of 2009 and 2010 Mixed growth pattern after 2010

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Distribution of cargo flows in the EU port system

Increased containerisation despite a lower ‘container fetish’ in ports

19.8%

39.6%

24.2%

6.2%

10.3%

2005

22.8%

37.5%

23.6%

6.0%

10.2%

2008

26.4%

36.4%

21.8%

5.3%

10.2%

2012

Conventional general cargo

Roro traffic

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75 80 85 90 95 100 105 110 115

2005 2006 2007 2008 2009 2010 2011 2012 Q1 2013

Index evolution -2008 = 100

Total

Are we back at pre-crisis traffic levels?

Index evolution of throughput in the EU port system (2008=100)

Only container volumes managed to get above the

2008 level (+5% in 2012) Liquid bulk saw a minor

drop in 2009, but records further traffic

decline after 2009

Dry bulk and conventional general cargo remain 15 to 20%

below 2008 levels.

Total throughput is still about 10% below the 2008 level

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Throughput in the European container port system (79 ports)

- 10 20 30 40 50 60 70 80 90 100 110 120

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Container throughput in million TEUs (79 ports)

European port system Hamburg-Le Havre range Mediterranean range UK range

Atlantic range Baltic

Black Sea

Non-anticipated traffic gap of >20 million TEU

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Regional shares in total TEU of the European container port system

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

55%

60%

1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Share in total container throughput

Hamburg-Le Havre range Mediterranean range UK range

Atlantic range Baltic

Black Sea

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Middle East – Far East Main shipping route

Americas

Transhipment/interlining port (transhipment incidence >75%)

Multi-port gateway region

Main shipping route Gateway port

Gateway port also handling substantial transhipment flows

1

2

9

3

6

7

5 4

10 8

11

12

Main stand-alone gateways

2013 - T. Notteboom – ITMMA, University of Antwerp UK

Germany

France Belg.

NL Ireland

Romania Sweden

Spain

Croatia Hungary Czech Republic

Slovakia

Serbia Bosnia&

Herz.

Alb.

Greece Bulgaria

Turkey Lithuania

Latvia Estonia Norway

Finland

Ukraine Belarus

Russia

Portugal

Mace.

Den.

Austria Switz.

Italy

Poland Multi-port gateway regions (% in European TEU traffic)

Nantes-St-Nazaire

Bordeaux

Bilbao Brest

Marseille-Fos

Sines Lisbon

Leixoes

Valencia

Malaga Algeciras Cadiz

Barcelona Tarragona

Cagliari

Gioia Tauro Taranto Naples

Thessaloniki

Piraeus

Constantza Le Havre

Rouen

Marsaxlokk Genoa

Livorno La Spezia Savona

Venice Ravenna

Trieste Koper

Varna Burga Vigo s

Gijon Santander

Ferrol (A) Antwerp

(B) Zeebrugge (C) Ghent (D) Rotterdam (E) Amsterdam (F) Dunkirk (G) Southampton (H) Felixstowe (I) Thamesport (J)Tilbury (K) Bremerhaven (L) Kotka (M) Hamina (N) Helsinki (O) Wilhelmshaven (B) (A)

(C) (D)

(E)

(G) (F) (H) (J) (I)

Lübeck Gdynia Gdansk Hamburg

(K) Teesport

Hull Grangemouth Belfast

Dublin

Cork

Liverpool

Aarhus

Göteborg

Szczecin Copenhagen

Malmö Helsingborg Oslo

Bergen

Tallinn

Klaipeda

St-Petersburg

Ventspils Riga Rauma

Turku Stockholm

(L) (M) (N)

Sevilla

Morocco Algeria Tunisia

Cyprus

Malta (O)

Rijeka 2008 2012

1. Rhine-Scheldt Delta 24.7% 24.1%

2. Helgoland Bay 16.8% 15.8%

3. Seine Estuary 2.9% 2.6%

4. Portugese Range 1.4% 1.8%

5. Spanish Med range 6.9% 6.7%

6. Ligurian Range 4.5% 4.1%

7. North Adriatic 1.6% 1.9%

8. UK Southeast Coast 7.4% 6.3%

9. Gdansk Bay 0.9% 1.7%

10. Black Sea West 1.7% 0.9%

11. South Finland 1.6% 1.3%

12. Kattegat/The Sound 1.9% 1.8%

All 12 multi-port gatew ay regions 72.1% 69.0%

Stand-alone gatew ays 8.6% 11.8%

West Med hubs 11.3% 10.7%

Profile map of European seaport system

CONTAINERS

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-80.00%

-60.00%

-40.00%

-20.00%

0.00%

20.00%

40.00%

60.00%

80.00%

100.00%

120.00%

140.00%

160.00%

Piraeus Gdansk Sines Cagliari Riga Koper Leixos Rauma Thessaloniki Tallin Marseille Valencia Algeciras Trieste Dunkirk Genoa Napels Venice Bremen Gdynia Rotterdam Marsaxlokk Rijeka Gothenburg Klaipeda Kotka La spezia Antwerp Ravenna Le Havre Hamburg Zeebrugge Lisbon Gioia Tauro Leghorn Barcelona Constantza Taranto Savona

% growth 2008-2012

+530% +467%

-1,000,000 -800,000 -600,000 -400,000 -200,000 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000

Piraeus Rotterdam Valencia Gdansk Algeciras Bremen Sines Cagliari Genoa Koper Marseille Marsaxlokk Leixos Riga Thessaloniki Trieste Rauma Gdynia Napels Venice Tallin Dunkirk Gothenburg Rijeka Klaipeda Kotka La spezia Ravenna Antwerp Lisbon Savona Le Havre Leghorn Zeebrugge Taranto Constantza Gioia Tauro Barcelona Hamburg

TEU growth 2008-2012

+2.3 mln

Strong growth differences between individual ports – TEU traffic

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MARKET CONDITIONS AND COMPETITION

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Market volatility and uncertainty

• Uncertainty is not a new

phenomenon but the related intensity seems to be changing;

• Non-linear developments, market volatility, trend breaks, ‘wild

cards’, ‘Black Swans’

• Market volatility has exogenous (e.g. economic cycles) and

endogenous causes (actions of market players)

IMPLICATIONS IMPLICATIONS

Ports as buffers – “uncertainty is the mother of inventory” (M. Christopher)

Traditional forecasting techniques and port planning/investment tools?

Need for flexibility (via adaptive planning tools), resilience and agility

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A snapshot of the current and short-term future market conditions and competitive pressures

Using Porter’s five forces model on competition

Pressure on margins

Higher service levels for same or lower price

Pressure towards differentiation and integration

Hedging and spreading of risks

Challenge: how to increase a

company’s share in the

cake?

Logistics sector has hardly any influence on the size of the

cake

Consolidation results in less players trying to get a piece of the cake

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‘Buyers’ of port services look for supply chain solutions and develop a strong network focus

Ports operate in buyers’ markets:

Shippers > logistics service providers >

shipping lines > terminal operators and ports

However, margins are lowest for shipping lines:

Refusal rate problem and GRIs + (forced) divestment in terminals and other activities

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Incumbents defense of market share

Market-based barriers to entry

Capital requirements and access to capital Economies of scale (cf. container shipping)

Less barriers in times of abundance, more barriers when players are facing hard times Threat of government (shelter) policies

Leader/follower Slow steaming Daily service?

Impact on no. of ports of call

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20

New kids on the block?

Container market in Hamburg-Le Havre range

BELGIUM GERMANY

NETHERLANDS Amsterdam

Rotterdam

Antwerp Ghent

Ostend

ZeebruggeFlushing

Wilhelmshaven

Emden Bremerhaven

Hamburg

Dunkirk

Rouen Le Havre

Entrants in other regions:

- Rise of Gdansk (impact on H-LH range)

- Revival of Piraeus - London Gateway ? - Etc..

Wilhelmshaven

JadeWeserPort (opened in Summer 2012) 25,000 TEU in 2012

Prospects for 2013 ?

Amsterdam

Ceres Paragon Terminal – later renamed to ACT

(open in 2001 – closed in 2012)

Flushing WCT

Window of opportunity ?

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Conclusions

• EU port traffic volumes are still below 2008 levels (except for containers), although big differences exist between ports

• Ports are facing a multi-layered buyers’ market situation

• No signs that we will move to a sellers’ market in the short or medium term (cf. economic activity, capacity in the market)

• Ports that do not respond adequately to the buyers’ market imperatives will lose ground.

• Guarantee ports’ autonomy and adaptive capabilities to develop appropriate responses to volatility in the market and requirements of ‘buyers’.

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Thank you for your attention !

theo.notteboom@ua.ac.be www.itmma.ua.ac.be www.porteconomics.eu