Cut capacity and improve logistics, urges Rotterdam boss

10/8/2012

Shipowners should reduce freight capacity and improve logistics services to save themselves from industry woes, aside from seeking discounts in port dues, according to Port of Rotterdam Authority CEO Hans Smits.

Rotterdam, Europe’s largest port by cargo throughput and container volumes, has been one of the more generous ports to cash-strapped shipping lines, granting various discounts in harbour dues since 2010.

The Dutch hub began two-month-long negotiations over next year’s harbour dues in mid-September and was “carefully listening to its customers,” Smits said.

However, even though lower fees bring obvious benefits, there are also other ways that owners can ride out the current downturn, according to Smits.

“First of all, our customers will have to reduce freight capacity, so rates go up, then they can make money,” he told our sister publication, Lloyd’s List, in an interview.

“Ports are not responsible for the decisions shipping lines are making. [But] if shipping lines continue to have overcapacity and low rates, losing money year in and year out, that’s not a sustainable business model and not in the interest of ports,” he said.

Moreover, Smits suggested lines should work with ports and terminal operators to improve the logistics process, which can add more value to the services they provide, creating better margins.

“Ports, shipping lines and terminal operators should get very close to increase logistics efficiency in ports and hinterland,” he said.

“We work very closely together with many parties, including shipping lines, to help them have better margins and lower costs.”

Rotterdam has been investing heavily to improve hinterland links. It is due to complete the construction of the Blankenburg road tunnel by 2020, after building the A4 Midden-Delfland road and widening the A15 Maasvlakte-Vaanplein route by 2015.

Those initiatives have come despite flat cargo volumes. Plagued by weak demand in Europe, Rotterdam expects its container volumes to reach 11.8 million teu this year, against 11.9 million teu in 2011.

Affected by a slowdown in container traffic in the second half, Rotterdam’s total cargo throughput is expected to grow 1% this year from the year-ago level of 434.6 million tonnes, despite healthy growth in volumes of liquid bulk. Its total cargo throughput was growing at a similar rate in 2011.

Smits said Rotterdam’s landlord business model – in which the port earned roughly half of its income from lease contracts with terminal operators and the other half from port dues – had helped to protect its margins amid industry woes.

Rotterdam posted a net income of €195 million (US$253.6m) last year, up 26.6% from the 2010 level and way ahead of its volume growth.

“The income from land lease is stable for a very long period. Harbour dues may be less if there is a slowdown, but that doesn’t mean there is no profitable margin for the port authority to invest,” Smits said.

Rotterdam will look for future growth from container handling, which could account for 42% of its total freight in 2030 compared with the 2011 level of 28.4%. Two new terminals with a total capacity of 4.8m teu a year in Maasvlakte are due to begin operation in 2014.