For several years the threat of London Gateway loomed large over the Port of Felixstowe. As the largest container port in the country with over 40% of the share of the container market Felixstowe was thought to be particularly vulnerable to the Dubai-financed London Gateway.
Written by Andrew Cann
Many predicted job cuts at the Port of Felixstowe with a concomitant impact on other businesses and the wider economic health of Suffolk.
With almost a year elapsed since London Gateway opened the outcome appears rather less disastrous.
Dubai Ports World, the owners of London Gateway, are good at PR. They need to be. Opening a new port and enormous distribution park on a contaminated site costs a lot of money. £1billion by the time it's finished according to some experts. To recoup that investment new customers need to be coming on fast. These new customers have to be persuaded to leave other ports (shipping lines) or set up brand new distribution arrangements (retailers and logistics companies) with the inherent risk and cost this implies.
London Gateway's PR is second to none but it is increasingly apparent that no player in the UK market is taking the message without a big pinch of salt. Logistics, retail and shipping companies prise reliability of service above all else.
Shipping lines want efficient and cost-effective ports close to the major seaways in order that their ships schedules are disrupted minimally. Importers want to know that their just-in-time goods will arrive, well, just in time. Certainty is prized by all. That's why the PR operation is so slick. Dubai Ports understand their customers (they operate many ports around the world) and know how loath to change and take on risk their potential customers are.
London Gateway promised a nirvana. A port close to the shipping lanes and close to London. Perfect? Well putting aside friction of change is appears not.
To date London Gateway has failed to take a service from the Port of Felixstowe. In fact this author understands that the Port of Felixstowe's throughput continues to rise. That's no surprise to anyone locally who can see the giant, 400m, megaships now calling at the Port's improved facilities. The majority of services London Gateway has attracted are from what was once its own port - The Port of Tilbury. This is no surprise given that Tilbury is further up the Thames and therefore less attractive to shipping lines. These lines were using Tilbury as a cheap option as opposed to the premium option at Felixstowe. Gateway must be offering bargain-basement rates simply to buy shipping lines in and see some return on investment and something for their workforce to do.
On the distribution park side things aren't much better. Marks and Spencer pulled out of a deal to build a distribution centre in May and it is rumoured Tesco have done likewise. Other than operators such a ProLogis who have to be at Gateway there is little good news for the south Essex port.
At present it is estimated (because all ports guard their statistics) that Gateway is moving less than 1 million containers per year through phase 1 of its development and the majority of those are cheap boxes formerly moving through Tilbury. In terms of the capital employed, reckoned to be £600m so far, that is simply not enough traffic to pay back a reasonable return - in fact any return - let alone match the opportunity cost of a better investment of the same money elsewhere.
Of course all new businesses have their initial issues but with new ports confidence is key. They need bags of it and momentum and signs of progress. Those signs of progress have stalled, momentum is stalled and therefore confidence is low.
Meanwhile the Port of Felixstowe has raised its game. Once thought of as 'the best of a bad bunch' its productivity levels have soared after many years spent on process, training, equipment and systems designed to see a step-change in its ability to serve customers. That step-change has happened and whilst shipping lines will always want more they are not grumbling the way they used to.
So what does the future hold? Well long-term growth rates in containerised traffic used to be 7% per annum. That has tailed off somewhat in recent years - you can't put much more in containers that isn't already in containers - but there is still growth of perhaps 4% there.
Increasingly it is looking unlikely that London Gateway will be able to poach even one of the major services from the Port of Felixstowe. Its early days, and no-one at the Port of Felixstowe is complacent, but the Port of Felixstowe, whilst no doubt coming under rates pressure, will continue to grow as will London Gateway. But Gateway taking Felixstowe's lunch? Not a chance and DP World may well have a white elephant on their hands.
ANDREW CANN
Andrew is Cultural Editor of IpswichSpy.com
Email andrew@ipswichspy.com
Andrew,
For all Suffolk's sake we all hope that you are right and that Port of Felixstowe will continue to see off the threat. However, DP World are no mugs, so what is for sure is that PofF cannot be complacent and neither can Suffolk's leaders.
Where I have some insight is that I was that I worked at the very heart of two giant liner companies for nearly 20 years. Cost benefit studies of European port rotation was a regular occurrence. The UK by geographic location was first or last port of call. Often, the study would also be to evaluate whether a direct port of call was necessary at all, and if there were cost benefits to tranship/feeder via Rotterdam into UK local ports (thankfully this was never cost effective). The reason for Felixstowe's unrivalled success versus Southampton & Liverpool was its geographic location opposite Rotterdam. It’s a while since I did these studies and for different size ships. However, the variable costs on vessel lease or charter for a 12,000-18,000 TEU vessel; and bunkers were substantial. So, as you can imagine an extra 1.5-2.00 days sailing and bunker time can add significantly to a single vessel/voyage. Times that by a vessel per week, it could be perhaps be $10,000,000 over a year on one service loop (times possibly 3-5 loops per week).
Thamesport was never a serious threat because it never had the economies of scale versus Felixstowe, and it was south of the river Thames (restricted by the bridge). London Gateway is a different beast, same scale and economies as Felixstowe. North of the river. It can offer transport into the mega midland warehouses in 2 and a half hours; and 140 miles, with 135 miles of it on three lane motorways. Felixstowe to the mega midland warehouses is approx. 20 -30 minutes longer. And approx. 40 miles roundtrip further. 165 miles with only 9 miles on motorway, and 156 miles on a increasingly very congested A14 (with bottle necks at the Orwell Bridge, Cambridge, Huntingdon, A6). With a vessel discharging some 4000-5000 containers a time, these small minutes and miles add up. Could be as high as 160,000 miles per vessel/voyage, so this starts to seriously negate Felixstowe's edge. If you then take the 40 extra miles x 4000 containers per vessel/voyage = 160,000 miles (x miles per litre at £1.15 per litre) could be as much as $8,500,000 per loop. So you can start to see that Felixstowe's advantage over DP World's London Gateway is slim - and in the balance.
A clear highway really will play a significant factor in which port (Felixstowe or London Gateway), ocean carriers chose in future. A blockage on the Orwell Bridge, a lack of investment on the A14, a lack of understanding on the significance could easily cost ten thousand or more Suffolk jobs!
Yet, the Port Of Felixstowe is the only major European container port not connected by/or close to motorway. It has a single track rail line. These issues were less important when Felixstowe had no serious geographical rival, but that has changed and the pendulum could swing away from it. In short an Ipswich Northern bypass, plus upgrades at Cambridge, Huntingdon and the A14-M6-M1 junction are absolutely necessary.
The timing of a concerted bid for a Northern bypass is critical, because the transport industry paper Lloyds List confims that: "The government is tripling funding on the road network over the next eight years with more than £24 billion to be spent on upgrading and improving the network until 2021. Roads Minister Robert Goodwill has today called on Britain’s road building companies to get ready for a massive increase in work ahead of the biggest investment in the road network since the 1970s".
Suffolk County Council has been negligent in its response. YET AGAIN no money, and no leadership from Suffolk County Council. NOT even a request for money to conduct a feasibility study !!! The fact is that if we don’t put in an expression of interest it will be 50 years before we see an upgrade to the !4 at Ipswich, or a Northern bypass. If we DO start to review now, it will still take 10-15 years. Can we really afford not to begin the process ?!!
With 4m TEUS of freight, an ever growing Ipswich and Northern Fringe the whole route via Ipswich will be gridlocked in 20 years. Those villages north of Ipswich campaigning against a Northern Bypass will be exactly the same ones screaming for a northern bypass once Northern fringe is complete !!
For all Suffolk's sake we all hope that you are right and that Port of Felixstowe will continue to see off the threat. However, DP World are no mugs, so what is for sure is that PofF cannot be complacent and neither can Suffolk's leaders.
Where I have some insight is that I was that I worked at the very heart of two giant liner companies for nearly 20 years. Cost benefit studies of European port rotation was a regular occurrence. The UK by geographic location was first or last port of call. Often, the study would also be to evaluate whether a direct port of call was necessary at all, and if there were cost benefits to tranship/feeder via Rotterdam into UK local ports (thankfully this was never cost effective). The reason for Felixstowe's unrivalled success versus Southampton & Liverpool was its geographic location opposite Rotterdam. It’s a while since I did these studies and for different size ships. However, the variable costs on vessel lease or charter for a 12,000-18,000 TEU vessel; and bunkers were substantial. So, as you can imagine an extra 1.5-2.00 days sailing and bunker time can add significantly to a single vessel/voyage. Times that by a vessel per week, it could be perhaps be $10,000,000 over a year on one service loop (times possibly 3-5 loops per week).
Thamesport was never a serious threat because it never had the economies of scale versus Felixstowe, and it was south of the river Thames (restricted by the bridge). London Gateway is a different beast, same scale and economies as Felixstowe. North of the river. It can offer transport into the mega midland warehouses in 2 and a half hours; and 140 miles, with 135 miles of it on three lane motorways. Felixstowe to the mega midland warehouses is approx. 20 -30 minutes longer. And approx. 40 miles roundtrip further. 165 miles with only 9 miles on motorway, and 156 miles on a increasingly very congested A14 (with bottle necks at the Orwell Bridge, Cambridge, Huntingdon, A6). With a vessel discharging some 4000-5000 containers a time, these small minutes and miles add up. Could be as high as 160,000 miles per vessel/voyage, so this starts to seriously negate Felixstowe's edge. If you then take the 40 extra miles x 4000 containers per vessel/voyage = 160,000 miles (x miles per litre at £1.15 per litre) could be as much as $8,500,000 per loop. So you can start to see that Felixstowe's advantage over DP World's London Gateway is slim - and in the balance.
A clear highway really will play a significant factor in which port (Felixstowe or London Gateway), ocean carriers chose in future. A blockage on the Orwell Bridge, a lack of investment on the A14, a lack of understanding on the significance could easily cost ten thousand or more Suffolk jobs!
Yet, the Port Of Felixstowe is the only major European container port not connected by/or close to motorway. It has a single track rail line. These issues were less important when Felixstowe had no serious geographical rival, but that has changed and the pendulum could swing away from it. In short an Ipswich Northern bypass, plus upgrades at Cambridge, Huntingdon and the A14-M6-M1 junction are absolutely necessary.
The timing of a concerted bid for a Northern bypass is critical, because the transport industry paper Lloyds List confims that: "The government is tripling funding on the road network over the next eight years with more than £24 billion to be spent on upgrading and improving the network until 2021. Roads Minister Robert Goodwill has today called on Britain’s road building companies to get ready for a massive increase in work ahead of the biggest investment in the road network since the 1970s".
Suffolk County Council has been negligent in its response. YET AGAIN no money, and no leadership from Suffolk County Council. NOT even a request for money to conduct a feasibility study !!! The fact is that if we don’t put in an expression of interest it will be 50 years before we see an upgrade to the !4 at Ipswich, or a Northern bypass. If we DO start to review now, it will still take 10-15 years. Can we really afford not to begin the process ?!!
With 4m TEUS of freight, an ever growing Ipswich and Northern Fringe the whole route via Ipswich will be gridlocked in 20 years. Those villages north of Ipswich campaigning against a Northern Bypass will be exactly the same ones screaming for a northern bypass once Northern fringe is complete !!
Is that the mark ling that stole money off his work mates and got the sack !!! well resign or get sacked if it is..... f*** you s***
ReplyDeletegood job your not worried.
DeleteI love your arrogance, it makes all the sweeter. It starts with a trickle.
DeleteHead buried firmly in the sand by the looks of it.
ReplyDelete