Port Strategy March 2019

MARCH 2019 ❘ VOL. 1019

ISSUE 2

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INSIGHT FOR PORT EXECUTIVES Imaginative drone uses | Niche TOS options | Breaking China’s grip | Creative warehousing solutions

MISSING PART Completing the mental health puzzle

The international magazine for senior port & terminal executives EDITORIAL & CONTENT Editorial Director: Mike Mundy mmundy@portstrategy.com Editor: Carly Fields editor@portstrategy.com News Reporter: Rebecca Jeffrey rjeffrey@mercatormedia.com

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What use is a cash splurge when UK ports and surrounding areas don't really know what to prepare for on EU departure day?

Man the life rafts

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£3.14 million: it’s a deliciously grand figure for a promised pot of cash to support communities of major ports in the UK that will be impacted the most by Britain’s departure from the European Union. But it may as well have come with some fairy dust and a magic wand.

While a few million pounds may sound significant, once the cash is apportioned out between all ‘ports’ of entry, including airports and rail termini, it doesn’t look anywhere near as attractive. In fact, it boils down to £136,362 per major port of entry.

Ten seaports appear on the payee list: Dover, Ramsgate, Goole, Hull, Grimsby, Immingham, Portsmouth, Southampton, Harwich and Felixstowe.

The money will be given to the councils across England that house each major port of entry.

The funding is designed to allow those councils to increase their resources to work through the immediate impacts from Brexit in their local areas such as “ensuring their port’s resilience and potential impacts of greater traffic to surrounding communities”.

Unlikely much, if any, will actually end up at the port itself. Added to which, the amount is laughable given the scale of the Brexit problem and that the ports themselves will have very little say in how that paltry sum gets spent.

The allocations selection process has also drawn criticism. The choice of ports was based on a number of factors including the amount of EU goods each port area receives into the country and the port’s “wider importance to the UK’s global trade network”. That latter, more subjective statement has meant that Southampton port will be given a double allocation, one for its main docks and another for its container terminal, much to the chagrin of neighbouring councils.

But even with a double dose of the funding, you can’t throw money at a problem to make it go away, especially when you don’t know exactly what the problem is or how the ripple effect will affect your operations.

With Brexit preparations reaching fever pitch in the UK, there are just four weeks until the exit date of March 29, as I write this. Confusion among politicians, populace and ports is rife and token gesture cash commitments will not divert this ship from its collision course. Better head for the muster stations.

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MARCH 2019 | 3

CONTENTS

MARCH 2019

14 15 NEWS

FEATURES

10

16 Healthy on the inside There is still much to be done to address the issue of poor mental health among port workers

COLUMNS

17 Trump pays lip service to ports Ports made the cut in US president Donald Trump’s 2019 State of the Union address

14 Be wary of unjustified optimism

18 Ports ready for UN sustainable goals The World Ports Sustainability Program launches a plan to integrate UN Sustainable Development Goals into port strategies

10 UK sets ‘Maritime 2050’ port targets The UK government has put smart port developments at the heart of its future maritime strategy

12 VICT joins Australia surcharge club Melbourne’s VICT has become the latest Australian stevedore to apply an infrastructure surcharge

Online portstrategy.com 5 Latest news 5 Comment & analysis 5 Industry database 5 Events

16

Weekly E-News Sign up for FREE http://www.portstrategy.com/ aboutus/subscribe/ newsletter-management-page

For the latest news and analysis go to www.portstrategy.com/news

Speed and accuracy of drones for myriad of port uses make them must-have weapons in a terminal’s armoury

Don’t believe in a recession just yet?

Let the facts speak for themselves

22 Finding a perfect fit TOS

15 Setting useful air strategies takes time

26 Breaking China’s grip on Asian growth

UK ports appreciate the importance of addressing air pollution, but they need time to build decent baseline data

Social Media links LinkedIn PortStrategy portstrategy Google+ YouTube

18 Capturing efficiency and safety rewards

Smaller TOS solutions have plenty to offer without the high costs of the big players

India and Sri Lanka need to be able to stand on their own two feet to really win the regional cargo war

29 Warehousing that’s a home from home At least one port authority has taken it upon itself to help out manufacturers trying to break into a new market

35 Bold move or short-sighted?

The decision to shut down the Danish port of Kolding may have repercussions for the way we think about the ownership of stateowned port companies

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THE STRATEGY

TRUMP PAYS LIP SERVICE TO PORTS Ports made the cut in US President Donald Trump’s 2019 State of the Union Address.

In the speech, President Trump said that his administration had submitted a proposal to the United States Congress featuring drug detection at ports in the country.

The address also saw President Trump call for “a great rebuilding of America’s crumbling infrastructure” and for a new trade deal with China featuring real, structural change to end trade practices that are unfair.

In a statement responding to the speech, the American Association of Port Authorities (AAPA) said it was pleased that President Trump had asked the United States Congress to “address issues of concern to the US seaport industry”.

“AAPA looks forward with great anticipation to an infrastructure package this year that focuses on America’s transportation investment needs, including land and waterside connections to ports,” said AAPA president and chief executive Kurt Nagle.

Mr Nagle said that AAPA

COSCO moves on S. American port COSCO Shipping Ports will establish its first greenfield subsidiary in South America by acquiring a 60% stake in Terminales Portuarios Chancay (Chancay Terminal) from Volcan Compañía Minera for $225m, with an initial payment of $56m. Phase one of the terminal will have four berths, of which two will be multipurpose, and two will be container berths with a total annual designed capacity of 1m teu.

8 The US President called for a “great rebuilding” of America’s infrastructure

additionally hopes for legislation featuring its long-term funding solution to end Harbor Maintenance Tax underspend and inequitable funds distribution. He added that the organisation was encouraged by President Trump’s statement to address human

trafficking and reassured by his commitment to increase security at America’s international borders and ports of entry.

“This includes seaports, which critically need hundreds more [United States] Customs and Border Protection officers to inspect and clear international cargo and cruise passengers,” Mr Nagle said of the security commitment.

Abu Dhabi bankrolls Brazilian port The Abu Dhabi Fund for Development (ADFD) is to fund construction of the São Mateus private port project, located in the north of the state of Espírito Santo in Brazil.

In total, the ADFD will make available $2.55bn of the $3bn total cost. The São Mateus Port Complex is scheduled to be completed by 2021 with total capacity of 30m tonnes.

TRADE DIP HURTS CARGO FORECASTING

71.4m teu total container volume handled by DP World in 2018

Savannah ups vessel capacity Credit: John Fielding, Flickr CC by 2.0

Slower international trade and further structural changes to container shipping lines are making forecasting cargo volumes “challenging”, Hutchison Port Holdings Trust has said.

Publishing its 2018 financial results, the trust said a forecast international trade slowdown is believed to be due to a slowing Chinese economy, mainly because of Government policy to address growing debt; a slowing EU economy; the lack of a deal for the UK’s withdrawal from the EU and its effect on business sentiment; and uncertainty as to whether trade negotiations will result in the normalisation of US/China trade.

With regards to US/China trade it noted: “Regardless of the outcome of the negotiations, there is a risk that long established supply chains in southern China will be altered over time to the detriment of HPH Trust.”

The Group has recognised non-

BRIEFS

cash impairment losses of HK$12,289m (US$1566m). This is in the context of “mounting global trade uncertainties” and “behavioural changes in multinational corporations caused by the current trade tensions, including accelerating the

For the latest news and analysis go to www.portstrategy.com/news

8 Hutchison’s UK terminals are feeling a Brexit-induced pinch

diversification of production bases outside of China and the effects stemming from the structural changes within the shipping line industry”.

Georgia Ports Authority’s Big Berth/Big Ship programme will enable the Port of Savannah to simultaneously handle six 14,000 teu vessels by 2024. The Port of Savannah's Garden City Terminal is currently equipped to handle two of these vessels and by April of this year that number will increase to three. By 2024, the terminal will also feature 37 cranes to improve operational efficiency.

MARCH 2019 | 7

THE STRATEGY

BRIEFS

PORTS READY FOR SUSTAINABLE GOALS

Subsea tunnel to link Spanish ports

Credit: Karsten Bergmann, CC0

The Port of Valencia is to build an undersea tunnel costing €400m, with half of the funding coming from an economic development ministry and Valencia port authority Autoridad Portuaria de Valencia (APV). The tunnel, which will require the signing of a protocol with the Valencia autonomous government, will provide access from the proposed northward expansion of the port in the city of Valencia to the harbour at Sagunto, which is also part of the APV.

Asian Terminal Inc targets expansion Philippines port operator Asian Terminals Inc (ATI) is considering developing more facilities alongside its international gateway ports in Manila and Batangas. By expanding its services, ATI aims to improve logistics for manufacturers and shippers.

Posorja port objections Environmental objections have been raised against the DP World-backed Posorja deepwater port project in Ecuador. Regional media are reporting the filing, in early February, of an Acción de Protección Constitucional, or constitutional protection action, against the environment ministry Ministerio del Ambiente (MAE) in relation to the construction of the port.

Incumbents win Fremantle tender The West Australian Government is passing up the chance to open up Fremantle container operations to new competitors by narrowing the choice of tenderers to the current two operators, DP World and Patrick. The leases will be seven years long with options for extensions.

8 | MARCH 2019

The World Ports Sustainability Program (WPSP) has launched a plan to integrate UN Sustainable Development Goals (SDGs) into the business strategies and governance of port authorities to help align them with global sustainability standards.

This month a WPSP-IAPH expert workshop in Geneva will seek to define potential port authority actions per UN Sustainable Development Goal, measurement performance indicators and guiding tools and methodologies for use in practice.

The ultimate goal will be to

integrate the SDGs in a relevant, measurable and manageable way.

Speaking about the WPSP, IAPH managing director Patrick Verhoeven said: "As we reach the first anniversary since the Program began, we have now achieved critical mass with the 60+ clearly defined projects that have joined the WPSP to formulate industrystandard practices in terms of ports integrating UN SDGs into their business strategies and governance.”

Organised in partnership with the Trade and Logistics Branch of UNCTAD, the Antwerp

8 The IAPH programme embraces UN goals

Management School and the University of Antwerp, the workshop will see representatives from UN Global Compact, Mediterranean Shipping Company and BNP Paribas Fortis bank work with delegates from IAPH's port members worldwide to define which of the 17 UN Sustainable Development Goals to apply to the five WPSP themes and identify indicators to measure the sustainability performance of port authorities in these areas.

SUPPORT FOR BILLION-DOLLAR LIBYAN PORT Libya’s government authorities in the East and West have formally agreed to jointly support the billion-dollar development of what is expected to become one of North Africa’s most highly-automated and largest deep-sea ports near the city of Susah in Libya.

Due to be completed and become operational in 2022, the Port of Susah is expected to generate approximately $60m in revenues, which are anticipated to double by the year 2040.

This excludes additional revenues from handling general and bulk cargo, as well as those

generated from the integrated logistics and freight facilities.

Revenue estimates are based on the port being able to handle around 500,000 teu in the first year of operations.

Michael Guidry, founder and chief executive of The Guidry Group, which has been selected to develop the port, commented: “The pivotal goal of the Port of Susah is not only to spark an economic resurgence and additional investments from the international community, but to chart a new course for Libya and its people.”

The development includes

regional cargo-handling facilities, a logistics centre, improved road networks, and employment for Libyan workers as well as expansion of business opportunities elsewhere within the country.

This is the first ever designbuild-operate-transfer, publicand private-partnership infrastructure project in Libya. The Seaport Authority, the governing authority that manages all the ports in the East and the West, will coordinate development.

At the end of the long-term concession, the entire project will be transferred to Libya’s government.

For the latest news and analysis go to www.portstrategy.com/news

THE STRATEGY

The UK government has confirmed that smart port developments are a key part of future maritime strategy and will be led by industry with government support.

Outlining its port-focused plans in the Maritime 2050 report, the Department for Transport (DfT) said that emphasis will be placed on developing existing technologies alongside new ideas, with an innovation hub to support this.

“Joint competitions to develop existing technologies and test new ideas, combined with the establishment of a cross-sector innovation hub at a UK port by 2030, will encourage innovation and the adoption of these technologies. Building on this expertise to further develop a network of regional research and development (R&D) clusters will benefit local economies into the future,” stated the report.

Looking at ways to more to effectively compete globally, the report noted that developing new innovative customs arrangements is an example of an area that could be used to encourage investment in the UK’s ports and manufacturing hubs.

It also announced that the government will engage with the ports and the manufacturing industry to consider the case for free ports in the UK. Data analytics, digitalisation and automation are among the drivers which the government expect will influence maritime infrastructure.

BRIEFS Piraeus/Italy deal Greece’s biggest port, the Port of Piraeus, has signed a Memorandum of Understanding with the Italian ports of Venice and Chioggia in order to strengthen cargo flows. Both authorities have committed to creating stable and mutual co-operation to develop their ports and port services, supporting infrastructure connectivity policies and port services aimed at fostering commercial flows via the ports.

10 | MARCH 2019

Credit: Matt Buck, Flickr, CC BY-SA 2.0

UK SETS ‘MARITIME 2050’ PORT TARGETS

Government will implement a targeted programme of Port Economic Partnerships, for ports meeting specific scheme and success criteria, leveraging the maximum benefits from both government and industry investments. The report suggested that “more specialisation in

commodities is expected, with fewer ports handling the majority of goods entering and leaving the UK.” Diversification into new activities and business models is also anticipated and the government plans to incentivise innovation, work with ports to support R&D, foster partnerships with SMEs and

8 Innovation and partnerships encouraged for UK ports

encourage UK testing of new technologies.

Decisions will also be more closely aligned with developments in shared technology platforms.

DRAFT-RESTRICTED PORTS SUFFERING Draft restrictions at the ports of Hamburg and Bremerhaven have resulted in a shift of market share away from them towards Rotterdam, Antwerp and Wilhelmshaven.

This shift has happened during the last two quarters, said the Institute of Shipping Economics and Logistics’ Sönke Maatsch, commenting in the Global Port Tracker North Europe report. He explained that while some of the import cargo is removed from vessels before they call at Hamburg and Bremerhaven, as

‘‘

We are raring to go with carrying out all necessary preparations, so that even the 23,000 teu vessels can make it safely into the Port of Hamburg

Jens Meier, Hamburg Port Authority chief executive, looks forward to the long-awaited deepening of the Elbe approach

they are seldom the first port of call on intercontinental liner services this offloading is not enough for the ports to accommodate megaships.

Ships do not arrive fully loaded, “yet with the introduction of the latest 20,000+ teu vessels, this is still too much. First, we saw transhipment move from the German ports to Rotterdam and Antwerp so the Asia services could still call in Bremerhaven and/or Hamburg. Recently, we see an increasing number of services turning in Antwerp or Rotterdam,” said Dr Maatsch.

He noted that while it appears that Hamburg and Bremerhaven aren’t cut off from business yet, the tide-independent draft of 13.5 metres is far below the maximum ship draft of the latest vessels with 16 metres.

“While no alliance can afford not to call in the two major German ports, they can use transhipment or interlining strategies to avoid the need to call there with every line,” he said.

“The competitive disadvantage will be weaker, but it will not disappear completely.”

DPW volume growth

Seattle investment

Port operator DP World handled 71.4m teu across its container terminals last year, with gross container volumes growing by 1.9% year-on-year on a reported basis and 2.9% on a like-for-like basis. DP World’s group chairman and chief executive, Sultan Ahmed Bin Sulayem, said: “In 2018, we have made good progress in strengthening our product offering, which will enable us to participate in a wider part of the supply chain.”

More than $300m in infrastructure improvements is being considered as part of a drive to grow international marine cargo to the Port of Seattle. To prepare for ever-larger container vessels, the port is considering significant new investments, which include finding a new tenant at Seattle’s Terminal 5. Seattle’s Terminal 5 is marked for development because of its naturally deep berth, wide footprint and the availability of an on-dock rail yard..

For the latest news and analysis go to www.portstrategy.com/news

THE STRATEGY

BRIEFS

VICT JOINS AUSTRALIA SURCHARGE CLUB

The National Ports Administration of Uruguay (ANP) has invited ‘expressions of interest’ for a project to build and operate Punta Sayago Logistics Port.

Interested parties can lodge their interest from March 1, 2019 to June 30, 2019. The project will be part of ANP’s integrated expansion strategy and will complement the existing facilities at the Port of Montevideo.

Credit: Port of Melbourne

Uruguay project invites investors

A 10-year port development programme which will expand operations, diversify cargo and develop port infrastructure at the Freeport of Riga has been approved by its board. The Development Programme 2019-2028 provides for significantly expanded operations at the Freeport of Riga, facilitating industrialisation and the entry of new companies into its territory.

Melbourne’s Victoria International Container Terminal (VICT) has become the latest Australian stevedore to apply an infrastructure surcharge, a move which has drawn criticism from industry.

The increase to A$85 (US$61.5) plus GST per container represents a 77% rise and applies to all full boxes received by the terminal from March 1.

In a statement, VICT said the increase was to ensure it remained competitive and provided a viable alternative service. “As market pricing shifts towards split waterside and landside tariffs, the infrastructure surcharge will be

EU window on efficiency

KPMG PANS NEWCASTLE DEVELOPMENT

The new regulation establishing a European Maritime Single Window environment (EMSWe) will help simplify administration and enable supply chain efficiency, said the European Sea Ports Organisation (ESPO).

Following an agreement reached on 7 February between the European Parliament (EP) and the European Council (EC), the new EMSWe framework repeals the current Reporting Formalities Directive and provides for the creation of an EMSWe dataset, harmonised National Single Windows and the application of the reportingonly-once principle.

12 | MARCH 2019

A new KPMG report has added fuel to a long running dispute over port development in New South Wales (NSW) by finding that container investment at the Port of Newcastle is the worst choice for the Australian state, with the highest costs and lowest benefit.

‘Quay conclusions: Finding the best choices for additional port capacity in NSW’ concluded that the NSW Government’s container port strategy, which would see Port Kembla developed as the next container port in NSW to augment capacity at Port Botany, makes the most sense for containers, but only once Botany nears capacity, but added a new container terminal will not be needed until the mid-2040s.

NSW Ports chief executive, Marika Calfas, said that Kembla would be the most efficient as it

8 Melbourne terminal applies infrastructure surcharge

The CBFCA and other industry bodies have already approached the competition watchdog, the ACCC, with concerns about the implementation of such infrastructure surcharges by other stevedores.

Australian Federation of International Forwarders chief executive Brian Lovell supported calls on the government to intervene.

“Any entity is allowed to apply charges as they see fit, provided they don’t contravene competition legislation,” he said.

Credit: Port of Newcastle

Riga sets 10-year development plan

revised accordingly,” the statement said.

“The rebalancing allows VICT to remain competitive in the market, while continuing to provide shipping lines and shippers with leading service levels and a viable alternative container terminal in Melbourne. Ongoing access to VICT will be conditional on payment of these charges as per our terms and conditions.”

VICT’s action has drawn expected criticism from customers.

The Customs Brokers’ and Forwarders’ Council of Australia said VICT was following the lead of other stevedores in increasing infrastructure surcharges.

best serves the population and business needs of NSW. “Port Botany is closer, better and cheaper for most container freight in NSW,” stated Ms Calfas.

“Port Botany is less than half full, is directly connected to dedicated freight rail, road and intermodal infrastructure and is supported by modern warehousing and logistics

8 Newcastle was described as the worst choice for a new Australian container terminal

facilities in Sydney’s west and south west.

“The KPMG modelling shows Port Kembla is the obvious next choice for the state’s next container port, once Port Botany nears capacity.”

For the latest news and analysis go to www.portstrategy.com/news

THEECONOMIST COLUMNIST BEN HACKETT

Ports, terminal operators and especially ship owners tend to look for any sign of optimism and then joyously go ahead and invest without paying too much attention to the downsides facing the maritime industry. This is especially true when economic indicators suggest that a recession is around the corner.

Don’t believe in a recession just yet? Let the facts speak for themselves and these are not Trumpian facts. The German government has dropped its economic growth forecast for 2019 to 1.0% from 1.8% due to slower global economic growth and uncertainty about Britain’s exit from the European Union and that, in my opinion is an optimistic forecast. The Q3 2018 GDP growth rate was -0.2% and the likelihood that Q4 will result in -0.3% is high.

That, by definition, is a recession.

Italy is officially in a recession and banks have sharply reduced lending. France with its weekly “yellow vest” mass demonstrations will not be far behind. The UK has so far shrugged off the doom and gloom prophesies of Brexit with a

BE WARY OF UNJUSTIFIED OPTIMISM 8 Italy is officially in recession.

Who’s next?

Q3 2018 growth rate of +0.6%.

In Asia economic growth is slowing down with China reporting its 2018 GDP growth rate at 6.5% but that is

THESTRATEGIST

very likely on the high side with 6% being more realistic. Either way well down on historical levels. The Chinese National Bureau of

Statistics said the country’s official manufacturing Purchasing Managers’ Index (PMI) was 49.4 for December which was lower than expected. A reading below 50 indicate signals of contraction.

Weaker growth in emerging markets, trade disputes driven by U.S. President Donald Trump’s ‘America First’ policies, geopolitical uncertainties and rising savings rates all suggest that there will be continued downward pressure on global trade as well as declining consumer demand.

The implication for this is that the maritime industry should be cautious about the coming 18 months yet we see shipping capacity growing in a number of sectors well outpacing demand.

Ports are being impacted by China driven investments related to the One Belt One Road strategy which has nothing whatsoever to do with economic factors. After more than seven years of growth we can expect a recession.

COLUMNIST

MIKE MUNDY

BUILT ON MISCONCEPTIONS The new Zagreb Container Terminal, under development in Rijeka, Croatia, is currently experiencing a dispute over the award of construction works relating to allied rail facilities, including the new intermodal yard.

More concerning, however, is the issue of proven need for the project over the short to medium term at least.

The quay construction is nearly complete and the process for the public procurement for road D403 is underway. But some serious misconceptions remain regarding the demand scenario for such a facility – to the point where the question has to be asked: was the project initiated without a comprehensive market study in place to analyse in-depth

14 | MARCH 2019

future demand and other critical related issues?

The European Commission website gives details of the project, describing it as a €350m project and states that “the container traffic of...Rijeka port was increased from 15,000 to over 200,000 containers in only a few years”.

This is simply not true. It took around 20 years for the port of Rijeka to achieve a throughput of 200,000 teu (not containers) by 2017.

Similarly, the website says: “…the number of containers handled in the port of Rijeka will exceed 600,000 by 2025”, this information stated as drawn from “a new Master Plan for the port”.

This would effectively mean a trebling of the port’s existing

container throughput in five to six years. History tells us that such a scenario is totally unrealistic.

Furthermore, it doesn’t seem to acknowledge that the port, serving an extended cross-border hinterland, is hampered by inefficient rail capacity with the Rijeka–Zagreb line requiring extensive modernisation. Plans are on the drawing board, and some relatively small works have been undertaken, but there is absolutely no prospect of the line from Rijeka–Zagreb and beyond to key destinations such as Hungary

being upgraded and ready to complement the start-up of the Zagreb Container Terminal scheduled for 2021, or the immediate years beyond this point.

There is also the notinsignificant issue of the existing Adriatic Gateway Container Terminal possessing ample spare capacity and the ability to be upgraded. So, the big question remains: where is the realistic economic rationale for a project which by comparison with others in the same category is a very expensive one?

This would effectively mean a trebling of the port’s existing container throughput in five to six years. History tells us that such a scenario is totally unrealistic

For the latest news and analysis go to www.portstrategy.com/news

THEENVIRONMENTALIST COLUMNIST CHARLES HAINE

The UK didn’t waste any time in releasing its Clean Air Strategy in 2019: it was published on January 14.

We’d seen a draft which suggested that major ports should have their Air Quality Strategy in place by May. That has since been pushed back to December but ports are not exactly jumping for joy. While they all appreciate the importance of addressing air pollution that kills seven million humans globally, the supply chain is complex, their contributions relatively small, and the programme too tight. A meaningful response requires proper planning, the collection of a decent set of baseline data and some budget – because that’s how ports operate.

The Department for Transport has promised guidance in May, leaving just six months to sort everything out and post the strategy to Westminster with your Christmas card. What could possibly go wrong?

It is understood that “ports” (define a port, I hear you muttering) handling one million tonnes of cargo, per annum, since 2016, fall within the scope of the Strategy. Is that a port authority (some of which carry out their own cargo activity), or the terminals within? It's not yet clear and any delay in providing a definitive list is likely to lead to in-scope ports delaying their air quality strategy activities for fear of getting things wrong.

Just as in established carbon footprinting methodologies, one important foundation stone is the building of an ‘inventory’ of emission sources with an explanation of who is responsible for each contribution. For instance, there are emissions from visiting ships, a terminal's own equipment, an HGV picking up a box, a third-party civil works contractor, maintenance dredging vessels and the linesmen’s minibus!

This will show that the port is inherently connected to multiple cogs in the supply chain yet demonstrate that it has limited influence over controlling, or taking responsibility for, many of the emission contributors.

SETTING USEFUL AIR STRATEGIES TAKES TIME

8 It’s not clear where emissions from ships fit into a port’s clean air strategy

At the same time, ports and terminals have to be measuring baseline air quality but unfortunately most are behind the curve. A relatively inexpensive way of gaining a snapshot of air quality is via the deployment of passive diffusion tubes. Fixed outside for up to four weeks, the subsequent lab analysis will offer a single reading of say, nitrogen dioxide, in that month. Somewhat useful but they have a +/- 20% accuracy rating. Also, how can a port squeeze in a (minimum recommendation) six-month programme – to include three months of both summer and winter – to meet a December 2019

deadline? To gain a better understanding of the ambient air in a port, a variety of measurement and monitoring equipment will need to be deployed..

Lord Kelvin’s – a Scots-Irish mathematical physicist and engineer famous for his Kelvin scale – assertion that “...when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind...” has never been more apt.

Target-setting, taking tangible action and ongoing monitoring can only be meaningful when used in conjunction with a viable baseline and cross-referenced with that up-to-date inventory.

Remember, once you’ve seen one port ...you've seen one port.

Target-setting, taking tangible action and ongoing monitoring can only be meaningful when used in conjunction with a viable baseline and cross-referenced with that up-to-date inventory. Remember, once you’ve seen one port ... you’ve seen one port

For the latest news and analysis go to www.portstrategy.com/news

Each cargo-handling facility’s emissions are a product of the mode of operation, age of equipment, fuel base, size and type of visiting vessel, cargo mix (e.g. containers, dry bulks), not to mention proximity of local traffic and windblown pollution. Getting to the bottom of who contributes what to this cocktail around the port has no simple fix.

What should be happening is a smarter process of ascertaining which ports are located near local authorities’ formal Air Quality Management Areas and those with the most sensitive receptors nearby. The latter is primarily residential areas. After all, ‘exposure’ to pollutants is acknowledged as a key factor in the Government’s Strategy.

So why on earth aren’t we prioritising those terminals and port-cities that face the most pressing air quality challenges and then seeking to assist them on a fast-track to continual improvement?

8 Charles Haine is technical director, maritime, at WSP.

MARCH 2019 | 15

PERSONNEL: MENTAL HEALTH

HEALTHY ON THE INSIDE AS WELL AS THE OUTSIDE

Credit: 123rf

There is still much to be done to address the issue of poor mental health among port workers, finds Kate Jones

Five years ago, in 2014, port worker Remco Span’s sister committed suicide by jumping in front of a train. Some months later, Remco, now 44, began to experience depression and post-traumatic stress disorder. He works in the Netherlands for a ferry company, in a ferry terminal where there are incoming and outcoming trains for discharging containers to go to the UK, and one day, while working on the rail service, he collapsed.

“I just, in my mind, saw what must have happened,” he reflects.

From that moment, every time Remco had to work on the rail service, he had a negative experience, triggered by the environment in which he was working. Remco is a union representative, meaning he has a closer relationship with his HR manager than other employees, and at one point, she asked Remco how he was doing following the death of his sister.

Remco told her about the problems he had been experiencing, and she told him to speak to the company doctor about what he had been going through. In the Netherlands, all businesses have their own doctor.

Following his appointment with the doctor, Remco made a follow-up appointment with the doctor's company’s mental health service. He had 10 sessions with the service, and the ferry company worker says that they “helped [him] through”.

However, when Remco had done 10 sessions (the maximum being six or seven), the service advised a follow-up – but Remco’s company didn't want to pay for it, directing him to go to his own doctor under his own health insurance. The port worker ended up seeking treatment in this personal capacity.

16 | MARCH 2019

8 In the maledominated port business, it isn’t common to talk about mental health issues

“You build up a good relationship with your therapist, and that had to stop,” he says of the change in support he went through.

SETTING PRIORITIES Mental health is clearly a priority for the ports sector. Richard Steele, chief executive of Port Skills and Safety, the UK’s professional ports health and safety membership organisation, says that one area of opportunity for the ports sector “is very much around mental ill health and positive mental health, and creating workplaces that promote positive mental health and diminish mental ill health”. Mental health is an area where an impact on the sector’s health and safety can really be had, he claims.

‘‘

As a port, we would spend millions or thousands servicing a crane: changing its oil, ... giving it a good check-over before it starts ... but nobody focuses on the operator COLIN BASSAM, PORT TRAINING SERVICES “People who are experiencing mental ill health are less likely to make the best judgements and decisions,” he says. “That then can have an effect on their risk taking.”

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PERSONNEL: MENTAL HEALTH

A MAN’S WORLD A similar picture was painted by a former port worker in the Netherlands in his late fifties, who asked not to be named. In 2011, he was made redundant from a long-held port job in which he claims the workload was too high. Additionally, he was involved in negotiating redundancy pay when his job ended, a process he describes as “very stressful”. Some years later, his wife recognised that he was suffering from burnout, and he sought help from a psychiatrist.

“It’s a man’s world, and you don’t talk about mental problems or physical problems, because [the feeling is] always: ‘Be a man’”, he says of the port environment. “Since I’ve worked in a completely different environment, I see that’s not the right thing to do.”

The ex-worker claims that discussion of mental health issues doesn’t happen in ports to avoid being viewed as weak. Mental problems suffered by both himself and colleagues were not recognised by his port, he says, and when he approached higher-ups about mental health, the response was: “‘You will pay for it, and when you can’t do your job any more, be free to go elsewhere.’”

Colin Bassam is manager at Port Training Services, an organisation based in the UK’s Port of Blyth that provides training for the port, marine, warehousing, logistics and heavy industrial sectors. He says that although there is currently a societal focus on mental wellbeing and opening up about issues, in the ports industry, which is still “very macho”, stigma remains. Yet, male suicide rates are over three times higher than rates for females in most high income nations, according to 2005 World Health Organization data. In Mr Bassam’s eyes, port workers are not given enough mental health support.

“As a port, we would spend millions or thousands servicing a crane: changing its oil, ... giving it a good check-over before it starts ... but nobody focuses on the operator,” he says. “What have they been through that night before? ... They need to do a pre-start check on them.”

TAKING HOLD OF THE SITUATION Of course, it’s not all bad practice in the ports industry when it comes to mental health. At the Port of Southampton in the UK, “Mental Health First Aiders” have recently qualified, with the port saying that they are “proudly promoting positive mental

For the latest news and analysis go to www.portstrategy.com/news

health by increasing their knowledge to raise awareness of mental health issues and illnesses to support our employees”.

In port operator PD Ports’ magazine Wave, the organisation said it was rolling out a wellbeing programme across the business to help raise awareness of mental health issues and “look to remove some of the stigma previously associated with such issues”. Over the 12 months following the time of publication, the organisation wanted at least one mental health first aider on all of its sites/operations, and the company also said at this time that it was running a course for managers that would seek to address and reduce mental health issues at work.

At Port Everglades in Florida employees have access to resources like employee assistance programs to use to anonymously tackle issues in the workplace. Additionally, the Seafarers’ House at Port Everglades is open to the port community – it previously worked with stevedores following the deaths of three longshoremen in an argon gas leak. The port’s county also has a 24-hour phoneline that people with mental health issues can call anonymously.

“Comparatively speaking, the availability of resources is much greater for those in a port environment [than seafarers],” notes Glenn Wiltshire, deputy port director.

Mr Steele says that “port organisations work really hard on health and safety and mental health and wellbeing”.

“What we’re trying to do now is find new ways of approaching this,” he explains. “It’s about giving them the tools to get better.”

But more can always be done, and Mr Bassam thinks that the fundamental issue for dockers is the work-life imbalance. “The work-life balance sometimes goes the other way towards ‘it’s all work’, and that has an adverse effect on them,” he says.

8 Ports spend much on hardware, but often a lot less on the wellbeing of workforces

8 Port operations can be physically and mentally demanding

Credit: 123rf

Mr Steele notes that an opportunity is being missed if mental health and wellbeing support is not right. “It’s relatively new territory for us, but we’re learning in the same way that many other industries are learning,” he says. “The construction industry, for example, has put a lot of time and work into this and it has paid dividends, and we are looking to kind of grab some of the best ideas from other sectors and work those into our people. Our people deserve the learning that’s been gained from elsewhere.”

Mr Steels adds that industry partners are being sought for collaboration to try and enhance awareness and identify things like mental health first aid, as well as the kinds of services and providers that are able to support employers in helping their people to be as mentally healthy as possible in their work life.

But how easy is it to promote good mental health practices at all levels of the port industry when its culture seems to prevent open conversation about psychological ill health? Remco says that in the male-dominated port business, it isn’t common to talk about mental health issues.

“When I’m telling it to somebody else ... it can [be the case] that I’m a bit emotional about it in the first instance,” Remco says of his sister’s suicide, “and that's not really appreciated in a male-dominated area.”

MARCH 2019 | 17

CARGO HANDLING: DRONES

CAPTURING EFFICIENCY AND SAFETY REWARDS

INVENTORY BENEFITS Amsterdam is not alone in realising the benefits of employing drones to perform inventory control operations of outdoor bulk terminals and material storage areas. Eitan Rotberg, vice president of product at drone manufacturer Airobotics explains that the double attraction of increased productivity and financial savings are too good to ignore. Added to which, manual inventory management can result in miscalculations or mistakes, and takes time to get right.

“Autonomous drones are able to fly over the storage areas and calculate inventory in mass quantities with great accuracy in a time-efficient method. The productivity of a port is increased and drones can help to avoid miscalculations and thus save money,” says Mr Rotberg.

Safety plays an important part in APM Terminals’ use of drones. As well as boosting operational efficiency and security levels, three drones have been introduced at inland facilities in San Antonio (two drones) and Santiago, Chile (one) to improve safety. The previously unavailable vantage points provided by

18 | MARCH 2019

8 An image of APMT Vado Ligure in Italy taken from a drone and showing the arrival of one of the container cranes

drones allow safety workers at the ports to concentrate on areas with less marine traffic.

The drones can also carry out dangerous tasks that would have previously been performed by safety workers, such as crane or rooftop inspections. Any potential safety risk can be picked out by the drone, allowing operators to deal swiftly with the problem. Italy’s APMT Vado Ligure terminal also uses drones to monitor the progress of the works on the development of the terminal, and for marketing purposes.

REACHING FURTHER The opportunities for drone usage by bulk terminals in the Port of Amsterdam are growing by the day. “As technology develops further and further, companies are rapidly starting to see the benefits of the technology and are starting to adopt it, mostly in the form of pilot projects to compare the results to the current processes,” says Mr Zuidema.

Skeye’s Mr Mink adds that drones can map large areas, visualising them with a detailed height model and aerial overview image. In addition to this, drones are capable of performing high resolution visual inspections. Mr Mink adds

8 In contrast to traditional survey techniques, Skeye drones can measure up to 100 hectares in one day of surveying

Credit: Skeye

Drones can be considerable assets for ports, boosting security levels and efficiency, and improving operational times; speed and accuracy make them exciting weapons in a port’s armoury.

Measurements that might traditionally have been taken manually can be done in a fraction of the time by a drone. Joost Zuidema, the Port of Amsterdam’s project manager strategy and innovation, explains that drones with 3D imaging and smart software can fly over bulk commodities stockpiled at the port and undertake detailed measurement and mapping within minutes. “The results we have seen from companies show that the accuracy is greatly enhanced by using drone technology,” he says.

When using drones to calculate stockpile volumes, Jasper Mink, manager data processing at drone company Skeye, summarises the four main benefits: safety – “people are not required to climb on steep and unstable stockpile slopes”; speed – “in contrast to traditional survey techniques, we can measure up to 100 hectares in one day of surveying”; accuracy – “typical absolute accuracies of 20 millimetres are obtained or 0.3% of the volume of a stockpile”; and finally, completion. As Mr Mink explains: “This method yields well over 350 measurement points per square metre, giving a more complete, and thus more accurate result.”

Besides measuring the size of bulk cargo piles stored at a terminal, Mr Zuidema adds that the bird’s-eye view of a drone, coupled with certain sensors, can also provide additional information on, for example, temperature, or gasses emanating from the bulk, which in turn can give data about the state of the cargo and, crucially, prevent fires from spontaneous smouldering.

For the terminal itself, drones also offer other distinct advantages for maintenance of infrastructure and equipment.

“Inspections of infrastructure, checking for heat or gas leaks, and warehouse inventory countings are all things a drone can do at the moment,” says Mr Zuidema, adding that some customers in the port are actively experimenting with drone operations.

Credit: APM Terminals

Helping ports with operations, convenience, safety and security, drones are the new technological marvel. John Bensalhia investigates

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CARGO HANDLING: DRONES

Credit: Skeye

8 Drones can perform high resolution visual inspections at ports, including cargo, equipment and vessel holds

that ports can also benefit from drones creating 360 degree aerial panoramas or high resolution point clouds and 3D models of industrial areas.

Drones, along with Artificial Intelligence and unmanned sea vessels are being used in the SAINTS (Situational Awareness Information National Technology Service) project. These technological breakthroughs are being used as a means of tracking cargo, boosting security levels, lowering costs, helping the environment, and increasing all-round efficiency.

Five North East ports are taking part in the project: the Ports of Tyne, Berwick, Sunderland, Blyth, and Teesport. The North East was selected as a good location for a ‘test bed’ because its local economy is strongly connected with the area’s ports.

SAINTS gathers together and challenges experts from universities, businesses and the public sector, who use AI to analyse data and come up with solutions for the various challenges posed. For example, the Port of Berwick will use new technology to see how it can increase the work done between the port and the hinterland in order to grow the economy. The Port of Sunderland will use technology to improve its freight business efficiencies and customer service, while Teesport will use it to improve logistics and warehousing.

This meant that flying drones in the port was not possible until March 2018, when regulations were eased. “With further changes to the rules and regulations expected soon, opportunities for companies in our port to fully make use of the benefits that drones offer will grow exponentially,” he adds.

Mr Mink sees a busy future ahead for drone capabilities. “We will see drones that will autonomously take-off, perform the survey flight, land themselves, charge their batteries and upload the imagery to a server for online processing without human intervention.”

He adds that these drones will operate from their own small charging stations, which will be an enclosed box that holds a landing pad with wireless charging capabilities. “The drones will communicate with a central server through a 4G or 5G network and will upload their captured images onto this server. Once the images are uploaded, they will be processed through automated steps in photogrammetry processing software.

“The final results will be communicated directly to the end client who will have the ability to edit the stockpile outlines and calculate new volumes on the fly”, allowing for safer, faster, and more accurate operation of a terminal which will ultimately have better data to respond to.

8 Creating high resolution point clouds with drones

Credit: Skeye

HURDLES TO OVERCOME However, ports do face challenges relating to drone use as well. For one, the elements can seriously hamper a drone’s effectiveness. “There are limitations in which weather the drone can operate in, such as heavy winds and heavy rain,” explains Mr Mink. Also, in certain situations it is possible that water evaporation from the stockpiles reduces visibility for the drone.

He adds that another challenge is to maintain a grid of fixed control points on the ground which are needed for processing the drone imagery into meaningful data.

Location can also pose problems. Amsterdam’s Mr Zuidema explains that a large obstacle for his port is Schiphol Airport.

Shippers investigate drone uses There are emerging opportunities for drones on the quayside. BHP Billiton has pioneered the use of drones to take draft readings and to inspect the holds on large bulk carrying ships during waiting times at berth.

Manual inspections of holds are timeconsuming, uncomfortable for the inspector, and pose serious safety issues. Each BHP inspector, for instance, uses fall protection and an oxygen metre to make sure that there

20 | MARCH 2019

is enough air in the hold. But a drone can bypass all of these problems and do the job in a fraction of the time. BHP says that drone inspection can reduce the time required by as much as three quarters, from one hour to 15 minutes. Another gain is that a drone can pick out more detail with greater accuracy than the human eye.

“With drones, we can fly them into a hold and capture 4K images and also infra-red. Other types of cameras can show cracks or other

specific parameters that cannot be seen with the naked eye,” says BHP's vice president of marketing freight, Rashpal Bhatti.

“There are basically three or four types of ships with hold sizes about the same.

Once you program a drone to go into a certain ship, it can become an autonomous process. So you have a better way to assess the condition of the hold, and you are removing a person from a potentially hazardous situation.”

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TECHNOLOGY: TOS

FINDING A PERFECT FIT TOS FOR EVERY TERMINAL

Credit: ITS

Smaller TOS solutions have plenty to offer without the high costs of the big players, says Martin Rushmere

Adaptability and flexibility plus cost savings are expected today from terminal operating systems. Customers are looking beyond the original wonders that dazzled ports, IT and computing power, to applying the same programme and platform across different cargoes and terminals.

Yet a perception still lingers that the software and equipment needed (especially dedicated on-site servers) means a costly and complicated package.

Richard Willis, port operations technical director of Royal HaskoningDHV, puts it this way. “Well-established vendors have a deep range of product functionality, tailored over many years to their clients’ needs, gradually standardising process and creating standard working practices.”

He cautions that the installation of a new system “always needs some degree of business change from a non-systemised operation to manage cargo flows and when adopting a wellestablished TOS the terminal client is recommended to align their practices with the standard product features, to capture the benefits of using the toolkit features.

“This is often a sensible approach” says Mr Willis, “but some terminals who have more specialised local needs or variations may benefit from using a TOS company that can be more flexible and engage in product customisations to shape around the client requirements.”

Miami-based Cetus Labs, which has a total of just nine people, is one such TOS provider that bears this in mind, through its Octopi platform. Catering to mixed ports and container terminals of less than 500,000 teu a year, the system is linked through Amazon Web Services. “Every feature is in the Cloud,” says Miles Varghese, head of sales, “which gives tremendous flexibility, speed of implementation and low cost of installation. Implementation takes four to six months.”

The company sees itself as “the Gmail of TOS”. One of the strategic priorities is to tailor the system to what the customer wants. “We innovate the data to what the customer wants and

22 | MARCH 2019

8 ITS’ PortSpective system uses IoT to track cargo handling equipment in real-time

do not try to convince the terminal operator to buy a readymade product.

“We guarantee 99.9% of uptime,” adds Mr Varghese, “and have a huge advantage in being totally based on the Cloud.

Caribbean Port Services in Haiti is a customer and Octopi kept working even when that terrible Hurricane Matthew devastated the island.”

Cetus has an iron rule of installing and providing a feature specially requested by a customer only if it can be used by all customers. “We will be up front and we are not going to build something that is not scalable,” says Mr Varghese, “and if it is scalable, we will often install it for free.”

Maintenance and repair features have been added, which Cetus says are usually outside the scope of products from large providers, and berthing areas usage/analysis functions have been developed in response to customer needs.

CHALLENGING THE STATUS QUO Mr Willis sees the marketplace dominated by a few leading companies, but smaller and start-up companies like Cetus are challenging around the periphery, specialising in particular regions or in certain cargo operations, and these companies “cater for those terminals that don’t fit the standard or want to take a more ambitious route to differentiate from local competition perhaps”.

Smaller terminals (arbitrarily 500,000 teu and less) tend to do a mixture of cargo types and need a TOS that is designed to both manage the cargo variety properly and to equip the terminal with the ability to show greater flexibility to their customers.

“The reality in the market is that although some suppliers may cover the complete range, the buyer should look carefully at the nature of their customers when making a buying decision because each occupies a segment in which they

8 Royal Haskoning DHV’s Richard Willis believes that terminals with specialised local needs may benefit from using a more flexible TOS company

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TECHNOLOGY: TOS

Keep it simple, stupid When it comes to system functionality, the choice of a TOS is dependent on what the terminal needs and it’s important to avoid over-investment in features that will remain unused or not add value to the operations. It may be that a simpler, and perhaps lower-cost, product covers all the base features and will be adequate for a terminal’s needs, so it is important to pay attention to detail during the requirements scoping and procurement exercise to get best-value.

Sweden’s Hogia emphasises flexibility, with its system operating in real-time and offering automated information flow in a small terminal or a large port. The system is designed to improve financial control and increase profitability, monitoring the costs that should be billed to each client.

“The system gives you total control and management of the charges associated with the operation, allowing reliable billing to your customers,” explains Ulf Hille-Dahl, sales executive in the international market.

24 | MARCH 2019

8 Cetus’ cloudbased Octopi system kept working in Haiti even after Hurricane Matthew devastated the island

equipment control in unmanned operations, with sophisticated stock management and sensor usage.”

He sees huge potential from smart ports initiatives for Royal HaskoningDHV’s clients, from data capture and predictive analysis, innovative decision-making support and driving forward a lower-cost, lower-impact operation with the use of technology tools right across the port.

ITS’ Mr Jones believes that a key criterion should be how well the TOS can talk to other systems. “These terms are traditionally associated with larger terminals, but now all have their place in smaller terminals.” He points to the big advances in data availability – even in relatively small operations – and this is only set to increase with IoT. “As an example,” he says, “we have just completed implementation of our PortSpective system in a 250,000 teu terminal. The system uses our IoT platform on the cargo handling equipment to track it in real-time to provide visualisations of the state of the operation, identify and highlight operational, engineering and safety issues instantly as they occur, and provide very detailed real-time data for both operations and engineering business analysis.”

For Cetus, a principal business approach is to deal with clients that Mr Varghese terms “forward thinking, who can see five to 10 years ahead. We are not comfortable with the ‘if it isn’t broken, don’t fix it’ philosophy.”

8 Cetus sees itself as "the Gmail of TOS"

Credit: Cetus

TECH QUESTIONS All vendors agree that it’s essential to stay abreast of the latest technology, but they disagree on which aspects to concentrate on. Blockchain is possibly the area of most uncertainty.

“We tell clients not to take blockchain too seriously”, says Cetus’ Mr Varghese. “The main focus is to get rid of pen and paper and move to digital methods.”

Jade takes a different view. "Platforms such as this will play a key role in the future of collaboration and sharing of information among supply chain actors. While blockchain is still in its infancy with respect to its place in the global supply chain, Master Terminal already integrates with the CargoChain information sharing platform which utilises blockchain as a means of proofing that all information stored is accurate and unaltered.”

Royal HaskoningDHV’s Mr Willis says the future of technology in terminals will be influenced by pressures from outside the terminal too, with environmental impact and closer supply chain collaboration being important.

"Technology, particularly around process automation, machine-led decision making and remote-control equipment, is leading the way, with other cargo terminals learning from this sector and implementing their own solutions tailored to different cargo types.

“However,” says Mr Willis, “within bulks particularly, automated operations have been well-established for many years, using

Credit: United Nations, Logan Abassi, CC BY-NC-ND 2.0, Flickr

are naturally much better,” says Allan Jones of International Terminal Solutions (ITS).

“There are systems that do a better job for the requirements of the smaller terminal,” he adds. “Look for open TOS systems that can communicate with other systems; the TOS is an element of your automation, business intelligence and Internet of Things strategy and will need to work in synergy with specialist systems in this area.”

New Zealand-based Jade sees the TOS as the core of a port's operation, and the platform from which a port can provide enhanced levels of efficiency to all stakeholders across their port community.

President of global sales, Kaustubh Dalvi, notes that from its beginnings in the early 1990s, Jade’s Master Terminal “was designed as a turn-key solution for a marine terminal operator to handle multiple cargo types and have 24/7 support”.

For the latest news and analysis go to www.portstrategy.com/news

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AREA SURVEY: SOUTH ASIA

BREAKING CHINA’S GRIP ON ASIAN GROWTH

Credit: Ashlyak CC3.0

India and Sri Lanka need to be able to stand on their own two feet to really win the regional cargo war, writes Stevie Knight

South Asian trade has seen China tighten its hold and India start to fight back. But to do so with any real gusto, India urgently needs a proper transhipment hub of its own. While this is primarily a commercial issue, this vulnerability is also creeping into the geopolitical realm.

“At present, India’s south and east coast throughput is getting hammered by Sri Lanka's Colombo,” says Darron Wadey of Dynamar. “About three-quarters of its 7m teu is transhipment, and while some is going to Bangladesh, most is Indian cargo.”

This has long been a thorn in the country’s side in terms of trade, but he also points out the lack of a transhipment hub also means India “has very little control over its own south and eastern seaboard cargo”.

Further, there's the suspicion of a co-ordinated game plan from China says Mr Wadey. “Suspicion only because, at least in public, there’s no such thing as a central ‘Belt and Road Authority’,” and it could still be the result of opportunistic investment. However, other readings could be more cynical: a Chinese naval submarine docked at Colombo’s China Merchants Port’s (CICT) terminal in 2014, although he says to be fair, the resulting furore meant the port refused another visit in 2017.

Either way, any further Chinese influence in the region is not good news for India.

And the same is true for Sri Lanka: as Nivesh Chaudhary of Ascela points out, Sri Lanka “has walked right into China’s debt trap”.

Chinese loans, he explains, can have very high interest rates – often over 6% – with non-repayment allowing the assets to be appropriated. But despite being forced to sign over Hambantota port and 15,000 acres of land on a 99-year lease in 2017, like a gambler who’s still trying to recoup his losses at the table, the island has become even further mired with the Colombo Port City project. Some estimates now put its foreign debt at around $55bn – about three-quarters of its total GDP. Worse, a nasty political spat – about Sri Lanka’s place

26 | MARCH 2019

8 DP World’s ICTT facility at Vallarpadam in Kerala still hasn’t taken off as a transhipment hub

between India and China – has weakened the country's bargaining position: credit downgrades have left it with few lenders to help it face this year's record debt repayments of $5.9bn, apart from a $1bn Bank of China lifeline which looks to be adding rope to the noose.

The question is how far will Colombo itself fall under Chinese control and, where does this leave India’s transhipment?

‘HAPHAZARD’ APPROACH It’s not that India hasn’t made a start on its own hub: rather too many, in fact. Mr Wadey says: “There’s been a plethora of proposals, plans and projects – the result of Indian states and ports competing with each other.” Mr Chaudhary adds that “historically, India’s port development has been haphazard”.

Take what was to be India’s first transhipment hub, DP World’s ICTT facility at Vallarpadam in Kerala. This is fighting not just with Colombo but also silting issues and even after several years of operation its volumes have only just reached 556,000 teu.

So, Kerala state handed over a contract for a development at Vizhinjam to the seemingly indefatigable Adani Group which had already demonstrated its privately-run facilities could give the government-owned ‘major ports’ a run for their money.

However, it appears that the charismatic Guatami Adani might have bitten off more than he can chew. At the same time as Adani Ports and Special Economic Zones (ASPEZ) is putting its effort into Vizhinjam, it’s trying to develop both the 1.2m teu Kattupalli and the delayed 1.5m Ennore Container Terminal just 10 kilometres to the south, explains Mr Wadey, who adds that this juxtaposition alone may undermine the chances of success.

Further, the shine has definitely worn off the $1.05bn (Rs 7,525 crore) 1.8m teu Vizhinjam transhipment project, not just because of an 18-month delay (a ‘weather damage’ excuse being rejected by the central government) but also as a result of Kerala’s ‘pick ‘n’ mix’ attitude to the contract which, although

For the latest news and analysis go to www.portstrategy.com/news

AREA SURVEY: SOUTH ASIA

BRIGHT SPOTS However, there have been some notable changes: after a lot of talks, India has finally relaxed its cabotage rules. “It’s worth keeping an eye on; already early signs are that more transhipment activity is taking place within India,” says Mr Wadey.

Further, the Sagarmala initiative – India’s domestic infrastructure development programme – aims to link the entire India ports sector into one all-embracing ecosystem. But it does mean that along with the big winners there are those that don’t stand to gain as much, which brings the whole issue back round to its starting point: more acceptance of a central strategy, less local competition.

India has started to invest in cracking China’s hold on the region’s trade lanes. It began, albeit slowly, with Iran’s Shaheed Beheshti terminal in Chabahar port which has just been handed over to a joint venture formed by Jawaharlal Nehru Port Trust, Kandla Port and a local Iranian company.

It’s an attempt at balance and tackles two rivalries in one, providing an alternative route into Afghanistan to its neighbour

Credit: A Rehman &amp; A Azeez CC4.0

not actually corrupt, may have tilted the table toward ASPEZ. Now, it seems, another project is joining the fray. Enayam near Colachel in Tamil Nadu State could have 16m draught and handle 18,000 teu vessels. However, once again the lack of coordination shows through, as according to Mr Chaudhary “the announcement that Enayam would become a transhipment hub was shortly followed by objections and other proposals for the location”. Both alternatives are now under fire from local fishing groups.

Pakistan, who also happens to have given the operation of Karachi Deepwater Container Port to Hong Kong-based Hutchison and Gwadar International Terminal to China Overseas Port Holding, says Mr Wadey.

However, this has not been straightforward. The Chabahar plans have been stewing for several years and it seemed that the return of US sanctions would undermine the project although, surprisingly, it ended up being removed from the banned list.

There are also inevitable questions about its inward draw, although some predict the 7,200-kilometre International NorthSouth Transport Corridor will facilitate $5bn of Afghan trade.

Realistically, it’s also up against the better-developed Gwadar only 72 kilometres away, “and the anchor of the China Pakistan Economic Corridor” says Mr Wadey, pointing out that

8 About threequarters of Colombo’s 7m teu is transhipment, and while some is going to Bangladesh, most is Indian cargo

Pace Group’s sea terminal project

Website: www.pace.ge

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MARCH 2019 | 27

AREA SURVEY: SOUTH ASIA

8 Colombo has recently broken the 7m teu mark, but Sri Lanka itself is looking increasingly boxed in

STRATEGY GOALS But the venture holds more strategic than economic and commercial value, says Mr Chaudhary. “Chabahar port was never envisaged or developed looking at its short or mediumterm commercial viability.”

So, although it translates into reduced logistic costs for Iran and it's the closest link to the Indian Ocean for Afghan goods, he underlines “for Afghanistan itself it reduces dependence on Pakistan and, hence, less Pakistani leverage over its domestic politics”, as well as giving India another route into the region.

Therefore, while it looks as if the project will be dependent on outside help for quite some time (India has pledged a further $500m investment package), Mr Chaudhary says: “there might not have been much choice; if India hadn’t stepped in, the Chinese would have done so and you’d have Chinese dominance on every shore in the region.”

So, if a modestly sized Iranian port is getting that kind of support, what about others? Could we find ports with a potential route into an untapped market and a Chinese neighbour starting to form an orderly queue?

Perhaps this isn’t so far-fetched. India has also just signed up to develop a route through Sittwe Port, Myanmar; “another strategic investment” says Mr Chaudhary. The scheme, which may have been given impetus by Chinese interest in Kyaukpyu, will allow cargo to travel 540 kilometres from Kolkata to Sittwe

Credit: SLPA

while still challenging, some of Gwadar’s inland links are already in place and the port’s ability to attract business is likewise much further along.

and then reach 158 kilometres inland to the Paletwa River Terminal via the newly dredged Kaladin River.

There’s also a pressing domestic reason for development.

From Paletwa the cargo will soon be able to reach back up into the isolated Athalakshmi region in India’s remote north-east: this has, until now, only been accessible from the rest of India through the thin, vulnerable ‘chicken's neck’ of the Siliguri Corridor. The project should cut travel time by three or four days between Kolkata and Mizoram, the southern, landlocked state in the ‘chicken’s head’.

In short, it seems India is working hard to secure its trade routes against Chinese erosion; as Mr Wadey concludes it’s starting to look very much like “the Great Game, 21st Century, Indian Ocean style”.

So, it is possible we’ll soon see signs of a few Indian (as well as Chinese) backed port projects sprouting across the region.

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CUSTOMERS: WAREHOUSING

WAREHOUSING THAT’S A HOME FROM HOME At least one port authority is taking it upon itself to help out manufacturers trying to break into a new market. Stevie Knight reports

8 Busan Port Authority is going ahead with the construction of a 50,000 m2 logistics zone in Rotterdam’s Maasvlakte Industrial Park

Ports have long been looking overseas to broaden their prospects. But for Busan, entwined with the more usual terminal operation, port consulting and management service offerings there’s a new strand: overseas warehousing.

It started, says Jinsun Shin of Busan port Authority, with a series of gripes. “Over the course of a two-year stay in Rotterdam I heard a lot of complaints from Korean manufacturing companies who would like to advance into the Europe market... but they told me they were encountering difficulties in finding suitable warehousing,” says Ms Shin. The issues were fairly broad, covering everything from finding somewhere willing to handle fairly small volumes to high logistics costs and communication difficulties.

She explains that BPA, being both a state-owned entity as well as a commercial enterprise, “recognised that it’s our responsibility to provide a foothold for Korean companies, whether these are importers or exporters”.

Consequently, Busan Port Authority is going ahead with the construction of a 50,000 square metre logistics zone including 34,000 square metres of warehousing and supporting facilities, located in Rotterdam’s Maasvlakte Industrial Park. Commercial operations are predicted to begin in the summer of 2021.

According to Ms Shin, the pairing is entirely natural: “Rotterdam is not just a port for the Netherlands but a gateway for Europe. Likewise, Busan is not just a Korean port but a Northeast Asian transhipment point – so I would like to connect these two hubs, the one in Europe and the one in Northeast Asia.

“It’s early days,” she says, but so far the plans are that Rotterdam will support the site’s administrative procedures required for construction and running, while BPA will draw up business plans, facility designs, and business models. “Though

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obviously in terms of selecting the tenants there will be several conditions that will need to be met, it’s really open to all Busan’s clients.”

VALUE PROPOSITION It makes sense to Drew Davis of Establish Inc who sees this move as a value proposition. It could mean that customers “get favourable rates and guaranteed space at this compound... and that equals more freight through Busan”.

Busan is also looking at replicating the experiment further afield. According to Ms Shin, if this venture yields enough returns in the way of custom or reputation “we’d like to do the same in Poland”: a European manufacturing base which poses rather similar issues for Korean manufacturers.

However, she doesn’t expect the initiative to stop with Europe: BPA is also investigating possibilities from Africa to South America “and Russia too”. In fact, it seems as if Busan is looking at most places with a budding hub and a promising economy “although we are looking for commitment to development”, she says.

But is port warehousing the best option? There are obvious benefits accruing to certain hub ports with free trade zones in their backyards, but bonded warehouses are only a tiny part of the story as the advantages only apply to transhipment goods.

“From the client’s perspective it’s typically better to have distribution closer to the customers,” says Mr Davis.

Brian Templar of Davies & Robson adds: “It’s all about the stem mileage.” He explains: “A lot of companies will want to keep their goods in the shipping container where it’s all tightly packed in and get it closer to a more strategically positioned warehouse before opening it. That’s generally easier than breaking it up and shipping fragmented orders out from the

MARCH 2019 | 29

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CUSTOMERS: WAREHOUSING

arrival port which leaves you with multiple, long road legs before you get into the main delivery area.”

Despite this, Mr Davis points out “if you’re struggling to find warehouse space, you’ll take what you can get”.

However, this approach can lead to problems, as short-term solutions might be at the cost of long-term viability.

“Warehousing has to be strategically sound, rather than tactically convenient,” says Mr Templar.

“What you don’t do is start with deciding where the warehouse will be. You first ask where the optimum solution is: it’ll fail if it’s not in the right spot as it won’t be cost effective.” He goes on to say: “I’ve seen it in the past, someone comes into the country with a quick and dirty fix, then recognised that they’re with the wrong supplier, in the wrong place. Then you either stick with a suboptimal solution or go through the whole process again.”

PORT PROXIMITY Having said all that, there are exceptions, says Mr Davis. “I’ve seen strategic location projects where, because of the freight terms, product type and business model, shippers are better off being near a port.”

He continues: “Some shippers don’t pay for their outbound freight as that’s down to their clients: for example in the US, the big retailers have their own networks and contracts which pick it all up.” In these situations he argues that “being near a port could be the best financial decision as it minimises your inbound costs”. Likewise, “If you’re importing frozen or perishable goods, being near a port helps prolong the shelf-life.”

There are other challenges with flexibility being high on the list.

For it to work well, says Mr Templar, “they’ll need to realise that most people with a new venture will be trying to avoid high fixed costs”. He adds: “Common sense demands making it as flexible as possible, not tying people into 10-year contracts but telling them they can have a space on a six-month rolling basis or whatever. The more tailored they make it, the more attractive it's likely to be.”

However, while BPA won’t be operating the warehouse themselves, it will be looking at a certain level of commitment to make the venture commercially feasible.

That could be a sticking point, says Mr Templar. “If the cost-

Competition for cargo There are other issues at playing in the Busan-Rotterdam warehousing plan. “Currently, South Korea is landlocked

by North Korea, so apart from air, ports are the only shipping method out," says Establish Inc’s Drew Davis.

“That said, take a look at the news and you’ll find that it’s just a matter of time until the Koreas agree on a railroad to connect South Korea to the Trans-Siberian railway, which will enable rail freight to the European market. If this happens, Busan’s European exports through the port will decrease, potentially significantly.”

It’s still a largely unknown quantity, and – at least for Busan – it may heighten the reasons for co-operation.

Davies & Robson’s Brian Templar admits that “Rotterdam itself is a special case, as the Dutch have made a big point about putting in lots of facilities to support its role as Europe’s gateway”, but “that still doesn’t necessarily mean you should put your warehousing there too”.

But, as Mr Davis concludes: “This space in Rotterdam is worth money. It may just be a good investment overall.”

For the latest news and analysis go to www.portstrategy.com/news

base of your operation ends up higher than that of the locals’, then the competition will only go one way.”

CULTURE CALL Mr Davis says that culture has a part to play: “Having worked through finding warehouses for clients across the world, the various regions and countries have very different ways of doing things...and it's sometimes a challenge to merge expectations,” he says.

“Having a warehouse space operated by the same country of origin as the client is a plus. That said, the warehouse must still be capable of shipping and working with the local market.”

Mr Templar echoes this point and goes one step further: “I am fairly sceptical of making it too much a ‘Korean embassy’,” he says. “It might – initially – all seem rather convenient: for example in the UK, FedEx used to think that it would get a legup from US companies already here.”

“But if you are going to compete, you have to learn the language, rules and business culture of that marketplace.

Trying to stay on a campus might seem appealing, but I am not sure how good an idea it is longer term: you have to ask yourself, ‘are our competitors out there, finding local connections and people to work with?’ So, it might be a good way to start off, but I’m not sure about it going forward.”

Moreover, he adds: “Most businesses are highly competitive, and if you want to compete, you have to do it with the locals.

Still, Mr Davis says: “If Busan’s clients are having a hard time finding warehouse space, they are just trying to help them out.

Good on them.”

8 Busan is looking to better connect itself with Rotterdam

8 Rotterdam has established many facilities to support its role as Europe’s gateway

MARCH 2019 | 31

FINANCE: RAISING FUNDS

FOCUS ON DE-RISKING CAN PAY DIVIDENDS Mitigation of risks provides a smooth path to securing port finance for both green and brownfield developments, finds Alex Hughes When pitching a port project for finance, there is one simple rule: The focus has to be on mitigation of main risk components.

So says Reinout Polders of financial expert MTBS. Mr Polders identifies three main categories of risk that he sees as the main impediments for the borrower. First, there is the market risk, which has to be mitigated as best as it can be.

Second, there is the design and construction risk, which is especially true for greenfield projects. Third, and increasingly importantly, environmental and social impact risk – traditionally a focus of development banks – is becoming more of a focus point for private lenders as well.

“Other key points of de-risking concern political risk and the concession agreement,” adds his colleague Victor van Leengoed. Explaining the latter point, Mr van Leengoed points out that “if the concession agreement is terminated, the concessionaire’s ability to generate income to pay back the loan will disappear. Financiers therefore look very closely at the clauses in the concession agreement, especially as to what will happen if that concession is terminated.”

Nevertheless, Mr Polders says that not all port projects are presented correctly; those that are make the life of the lenders very easy and are more likely to result in funding being secured.

Mr van Leengoed points out that large corporate companies in the ports sector have an advantage in this respect, because they have more experience in sourcing finance. “In contrast, smaller, e.g. local, investors have more challenges providing the correct information to potential lenders. They may even structure their projects in a sub-optimal way,” he says.

ALL IN THE PREPARATION Johan-Paul Verschuure, technical director in the maritime team of WSP, agrees that borrowers have to be well prepared and fully transparent to ensure that a port project gets financial backing.

“In the case of debt funding, sponsors have to prepare a solid business case, where the risks and opportunities are well defined and understood. The downside risk has to be very clearly quantified as does the project’s upsides,” he says. “In contrast, half-baked pitches just won’t go anywhere – and developers do still sometimes seek finance based around halfbaked ideas.”

The lack of solid business cases, he says, is more often found at smaller or developing ports outside of North America or Europe. Experienced international terminal operators are highly unlikely to be counted among this latter group.

Significantly, the errors that are made don’t always revolve around poor documentation. Instead, it is often when finance is sought that ultimately decides whether it is secured – or not.

“A greenfield project at the feasibility stage, for example, might be viewed as too risky to back, since too little information might be available at that time,” says Mr Verschuure.

However, roll forward to a time when the port’s backers have signed a contract securing future guaranteed traffic volume and the reaction from investors will change dramatically, since much of the risk has effectively gone.

32 | MARCH 2019

Mr van Leengoed highlights further differences between brownfield port projects and greenfield ones.

“Brownfield ports are considered lower-risk assets because they have an established cash flow and also moveable assets, including handling equipment. It’s easier to finance these than to finance pure infrastructure projects, which are immovable,” he says, pointing out that infrastructure can become worthless if there is no market for it.

This difference is applicable if a project finance structure is applied. However, implementing project finance is far more challenging than funding on a corporate finance basis or through sovereign debt.

GREENFIELD CHALLENGES Mr Polders explains that greenfield ports, particularly in emerging markets, typically require backing from international financial institutions, potentially in combination with export credit agencies, to raise debt finance.

“Commercial lenders often struggle to provide loans in these markets for these types of assets,” he says, noting that some global banking groups therefore focus on corporate operators or big terminal operating companies, financing them on a corporate basis.

“In major port infrastructure development, the role government plays can’t be emphasised enough. Governments are asked to provide partial or full sovereign guarantees when large sums of money are invested,” says Mr van Leengoed. “These guarantees are especially important in emerging markets where subsidiary institutions, including port authorities, are not strong enough to act as the main guarantor, forcing the government to assume this role.”

8 Construction risks need to be mitigated to attract investment

8 Half-baked pitches won’t go anywhere and yet developers still sometimes seek finance based around half-baked ideas, says WSP’s JohanPaul Verschuure

For the latest news and analysis go to www.portstrategy.com/news

FINANCE: RAISING FUNDS

‘‘

Governments are recommended to take sound advice, because otherwise they may be taking on a long-term finance burden that doesn’t pay the type of financial or economic dividends they are looking for Significantly, Mr Polders notes that publicly funded facilities can also be among some of the riskiest assets. It is therefore vital to determine whether a state-backed project is based on an objective analysis rather than simply on politicking, for example to fulfil a campaign promise to provide a port to a particular region, even though there is no market for it.

“Governments are recommended to take sound advice, because otherwise they may be taking on a long-term finance burden that doesn’t pay the type of financial or economic dividends they are looking for,” he says.

STILL ATTRACTIVE Overall, ports remain very attractive assets to invest in, says Mr Verschuure, because they are seen as relatively low risk, driven mainly by hinterland economies which tend to be relatively stable and predictable.

“This has been the case for decades. However, considering where we are in the economic cycle and the abundance of liquidity in relation to the loose monetary policies of central banks, some investors are actively seeking safe options rather than more volatile ones,” he says.

So, now is a good moment for port promoters to seek out financiers.

“The more mature economies, such as Europe or North America, are more attractive for financial investors and lenders compared to more peripheral regions, such as Africa, Asia or, to some extent, South America. These latter regions are having to look more towards international financing institutions, such as the World Bank, or even export credit agencies, to secure funding for some projects,” says Mr Verschuure, who points out that there are a few smaller players carefully exploring this market and actively lending to it.

Although large global terminal operators remain the most important sector developers, there are some financial institutions that are also developing a particular speciality in the ports sectors, of which he points to Macquarie or IFM Investors.

The latter acquired a stake in Mersin International Port in Turkey,

several ports in Australia, and also the Global Container Terminals portfolio.

Mr Van Leengoed adds that major global terminal operators have “quite deep pockets, so they can decide whether or not to seek external debt finance. Some mostly use external project finance, others prefer to use their cash in the bank to fund projects.”

The Chinese, too, have become keen ports investors.

Traditionally they have been very interested in acquiring facilities on routes linking China and Europe. They sometimes also take stakes in exchange for access to raw materials or markets, which can happen in Africa. Finally, more recent developments have actually seen Chinese investment in the Central and Southern American markets. For example, Chinese investment has gone into developing a new container terminal next to the Panama Canal.

“The Chinese have been very active in the last five to ten years,” says Mr Polders, who identifies COSCO and China Merchants as the most dynamic operators keen on expanding their global port portfolio.

“Recently, COSCO took major stakes in multiple ports in Europe, which also shows the interest in strategic investment in mature markets.”

8 Chinese port operators have been expanding their portfolios

8 MTBS’ Reinout Polders notes that publicly funded facilities can be among some of the riskiest assets

White elephants stubbornly persist Not all port projects come good straight away. According to MTBS’ Reinout Polders: “Ports are often built on the basis of at least 50 years of operational life, so sometimes they need investors with longer term horizons who will potentially be prepared to take on riskier investments.”

His colleague Victor van Leengoed adds: “Lenders have to be particularly careful when investing in a project where

transhipment traffic forms a major part of its reason for existence. These projects are risky, since transhipment containers can quickly move to other ports. The investment case is substantially stronger, if there is import-export traffic, too.”

If an investor finds they have backed a ‘white elephant’ port, they have to make the best of a bad situation, says WSP’s Johan-Paul Verschuure. A terminal might have to be

For the latest news and analysis go to www.portstrategy.com/news

re-purposed, equipment redeployed, or sold off. It might also be a case of ditching an established partner in the project and partnering up with somebody else who can bring in cargo, even though this might involve having to offer equity stakes or volume discounts, which might impact negatively on the loan repayment period. However, ‘needs must’ and such measures might save the project in the longer term.

MARCH 2019 | 33

THENEWYORKER

COLUMNIST

BARRY PARKER

NEW SLANT TO ‘WORKING TOGETHER’ Politics looms large, again.

Infrastructure spending is a recurring theme in my articles, as is the importance of ports making a lot of noise on this subject.

At the just-completed American Association of Port Authorities (AAPA) Planning for Shifting Trade Flows conference, in Tampa (where I escaped the frigid New York climate in late January), a group of knowledgeable Washington, DC insiders stressed that infrastructure is one item that Democrats and Republicans can agree on.

In President Donald Trump’s ‘State of the Union’ speech (a week late due to the earlier partial shutdown of the Federal government), a big theme was the idea of both sides working together – of paramount importance after an incredibly divisive two years of the Trump presidency.

Seasoned readers may see familiar patterns. However, older opinion articles don’t exactly apply since there are some important

EQUIPMENT BRIEFS ❙ Konecranes stands by UK

scale-back move Konecranes has reported that its business has slowed down in the UK, vindicating its decision to scale back UK operations in 2018.

With the announcement of its fourth quarter and 2018 results, Konecranes’ president and chief executive, Panu Routila, stated that decision making within certain customer sectors was slowing down and economic activity among its UK customers stagnated during 2018 “amid Brexit uncertainty”. But the company, which has 12 locations throughout the UK, expected limited impact from Brexit itself.

Mr Routila said: “We are the only foreign vendor in our industry with local manufacturing in the UK. While our local presence can potentially be a relative benefit to us in the case of hard Brexit, we are confident that the scalingdown of our UK operations in 2018, as a part of our integration activities, was rightly timed.

“Any Brexit outcome that would

34 | MARCH 2019

differences on the horizon as distribution patterns change – an important topic at the AAPA event.

The ‘working together’ aspect now takes on new meanings and different dimensions for port planners as online shopping, with increased inventories needed closer to consumers, is bringing warehousing back towards urban clusters. When these urban concentrations of shoppers are at or

negatively impact the UK economy is likely to have a negative impact also on Konecranes. However, we expect the impact on Konecranes as a whole to be limited, regardless of the Brexit outcome.” ❙ Leixões embraces

accelerator programme The Port of Leixões is undertaking a nine-month pilot programme aimed at modernising and boosting efficiency through the use of digital technology. The so-called “Bluetech Accelerator” programme, which was first introduced in January, is being implemented in partnership with Beta I. The programme will initially evaluate the innovation needs of the port and then put forward strategies and tools to improve overall performance activities, making use of such tools as the Internet of Things, blockchain, artificial intelligence, terminal automation, ship automation, robotics and 3D printing. The port authority said: “The use of the Bluetech Accelerator as a tool to accelerate the use of new

8 President Trump encouraged working together in his State of the Union address

near ports, there are new wrinkles.

After siting distribution centres far out of town, the urgent delivery mandate has pulled warehousing closer in. In New York, the first steps towards congestion pricing have been implemented. These affect ‘for hire’ taxi and Uber-type vehicles in midtown and

technologies … seems to us to be a [positive] and innovative way forward, with great potential to generate value both for national ports and for the Portuguese economy.” The port authority hopes the programme will help to consolidate the concept of the “Smart Port”, leading to more efficient, reliable, fast, secure and sustainable port business model. ❙ ICTSI streamlines with

Navis partnership International Container Terminal Services Inc (ICTSI) has partnered with Navis to use the N4 terminal operating system within its 31-terminal network and improve overall site functionality. ICTSI currently operates N4 at 17 of its terminals and the partnership allows for N4 to be more easily adapted to its global business model. It also enables ICTSI to deploy a global business intelligence solution – bridging data across terminals and connecting to monitoring and reporting functions for increased clarity and insight around business decisions. “This agreement allows

downtown. Consider the next iterations which will impact delivery vehicles in the evolving distribution matrices.

In New York and other metros (where presumably steps may be taken to ease congestion), ports should be paying attention, and, as appropriate and as loud as necessary, weighing in with local governments and with Beneficial Cargo Owners whose supply chains may be whipsawed. Such actions may, in turn, have a blowback effect on the businesses of ports where significant throughputs are serving local markets. It was heartening to hear at the AAPA event that at least one major terminal operator (appearing on a panel discussing distribution issues) was thinking along those lines.

It’s all very complicated. But maybe the positive agreement contagion can spread to local distribution patterns and supply chains – a first cousin of the allimportant infrastructure.

ICTSI to consolidate the execution of its strategy and address changes and resources on a holistic basis rather than by individual terminal,” said Bruce Jacquemard, chief customer officer at Navis. With a current focus on improving process and performance, ICTSI is also working to further streamline operations and eventually evolve to cloud-based solutions in close co-ordination with Navis. “This new agreement removes administrative and transactional complexity, focusing the relationship on the delivery of technologies to drive operational results. We have an agreement that puts the focus on moving the products forward into the cloud,” said Brian Hibbert, chief information officer at ICTSI. ❙ Florida terminal makes

emissions history Six Kalmar zero-emission rubbertyred Gantry cranes (RTGs) will be supplied to South Florida Container Terminal (SFCT), LLC at PortMiami, enabling it to be the first container terminal in the US with 100% zero-emission RTG

For the latest news and analysis go to www.portstrategy.com/news

THEANALYST

COLUMNIST

PETER DE LANGEN

At the end of 2018, the Danish municipality of Kolding, the owner of Port of Kolding and the landlord port development company, decided to shut down the commercial port with a transition period of 25 years.

That deserves a WOW. It also begs questions: is this a bold visionary move to be applauded? Is it likely to be replicated elsewhere? Does it have repercussions for the way we think about the ownership of state-owned port companies?

From a public policy perspective, the core question is whether or not closing the port is in the public interest or not. If that is the case, the municipality has taken the right decision, even if this inflicts damage on the business community.

However, it is questionable whether the municipality did consider the interest of the public at large (e.g. all Danish citizens).

More likely, they focused on their constituents only. Detailed analysis would be required to

cranes. Scheduled for delivery in 2020, the cranes will be equipped with a busbar energy system and operator assist features like auto steering and container stack profiling. They are also the first RTG cranes to be installed in PortMiami. Mark J Baker, managing director of SFCT, stated: "We are excited about the opportunity to increase our capacity through this terminal redevelopment project. We will not only offer better service to our customers, but we will do it eco-efficiently with all-electric RTGs.” Troy Thompson, vice president of sales at Kalmar Americas, commented: “We are very pleased to be the first to bring zero emission yard cranes to Miami. We have worked extensively with the team at SFCT and are certain that our partnership will only strengthen further as we move through this major redevelopment project together.” The Kalmar Zero Emission RTGs will be delivered as part of an ongoing densification and terminal redevelopment project at SFCT.

Credit: Kolding Havn

BOLD MOVE OR SHORT-SIGHTED?

assess how relevant ‘extramunicipal effects’ are.

I expect that at least four of the effects may not have received the attention they deserve. First, the labour market effects (such as potential job losses) of the port are partly ‘extra-municipal’: some of the workers, both from the companies operating in the port and from their suppliers, are from outside the municipality. Perhaps the labour market effects are limited, or perhaps the regional

8 Is closing Kolding port in the public interest?

economy is strong enough to cope, but a strong economy is a public interest that municipalities may take too lightly, unlike regional and national governments.

Second, the state (and region) may have to make public investments to accommodate the relocation of the companies involved to other areas, for example through investment in

Leixões is undertaking a nine-month pilot programme aimed at modernising and boosting efficiency through the use of digital technology ❙ Zárate secures

GlobalSim simulators Argentina’s Terminal Zárate has completed arrangements for a deal with crane simulator and training system provider GlobalSim for two new crane simulators to train operators in the area. The simulators, which are currently under development, will be installed at the port in the second quarter of this year, according to a release. US-based GlobalSim will provide the facility with its Essential Plus system and a portable virtual reality (VR) system. The former is an enhanced platform with several configuration options that will include a rubbertyred gantry crane, a mobile harbour crane and ship pedestal cranes. The VR system will deliver operator training on a hydraulic telescopic crane. Commenting on the move, Oscar Delgado,

For the latest news and analysis go to www.portstrategy.com/news

GlobalSim’s international sales director, said: “Terminal Zárate will have the ability to conduct simulated, real-life situations seen in their area and cut the time and costs of their training.” ❙ Cummins chosen for

tractor electrification Kalmar has chosen engine, filtration and power generation product firm Cummins as its terminal tractor offering’s electrification solution provider.

The move marks the latest step from the Cargotec business towards its objective of offering its entire equipment portfolio as electrically-powered options by 2021. Cummins, which is headquartered in the US state of Indiana, will provide electrification for Kalmar’s second electric terminal tractor, which is due to be released next year. It will supply

roads, rail and/or the provision of utilities. From a state/regional perspective, these investments do not lead to new ‘value for society’, but just enable the relocation of economic activity.

Third, and in a similar vein, the relocation of companies may lead to increased costs for society. If importing companies in Kolding shift supply chains to more distant ports, that increases emissions and use of public infrastructure. Finally, this decision may have an effect on private sector investments in other municipally-owned Danish ports.

However, in my view it is sensible to downplay this effect, since all lease agreements are honoured in Kolding.

I lack the information to make the call between visionary or short-sighted decision, but due to the apparent lack of an impact assessment with stakeholder involvement – which is widely accepted as a necessary basis for good decision making – I lean towards the latter.

powertrain technology, including the batteries, for the Kalmar Electric Terminal Tractor, known as KT2E. The organisation’s driveline solution gets rid of the need for a transmission on a terminal tractor, simplifying the overall system and decreasing maintenance needs.

According to Gina Lopez, vice president for terminal tractors at Kalmar, Cummins was chosen due to a “longstanding co-operation in providing world-class drivetrain platforms, their global reach and their strong commitment to leading the industry in electrification solutions”.

“We're excited to take on the next phase in our journey in providing electric solutions to industrial markets in collaboration with Kalmar,” commented Julie Furber, executive director for electrified power at Cummins.

“Combining Kalmar’s nextgeneration terminal tractor platform with our lithium-ion battery expertise and experience in system-integration, I look forward to delivering optimised electric powertrain solutions for port and distribution customers.”

MARCH 2019 | 35

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PORT SERVICES: VALUE-ADD

AN EXTRA SOMETHING FOR THE NEGOTIATING TABLE

BARCELONA SERVICE GOALS The Port of Barcelona also claims that value-added services are essential for it to fulfil its mission of contributing to the competitiveness of its customers by providing efficient services

For the latest news and analysis go to www.portstrategy.com/news

that meet their needs for maritime transport, land transport and logistics services.

“No modern port can nowadays function without offering value-added services,” a spokesperson for the port authority told Port Strategy. “As a port authority, we therefore offer a whole raft of these. However, we don’t regard these services as a cost per se, but rather as part of our strategy to carry out our main functions of managing and promoting the port.”

The port’s strategy over the last two decades has been based on three main pillars: infrastructure expansion, connectivity with the hinterland and, very importantly, customer orientation, offering added value services which make the logistics chains that pass through the port more competitive and sustainable.

“We also actively encourage terminal operators to provide added value services, especially in terms of railway connectivity.

For example, the port’s two container terminals (APM Terminals and BEST Hutchison), have set up their own rail operators (APM Railway and Sinergy) that offer regular rail services with key hinterland points,” says the spokesperson.

The port authority has also established a presence at ten rail-connected hinterland freight terminals, where service provision offers the same quality standards as in the port itself.

When listing the various added value services that it offers, invariably the adjacent Logistics Activities Zone (ZAL) is mentioned first. It is Spain’s leading such facility, with more than 120 clients located in the 239-hectare area that exclusively specialises in value added logistics.

In addition, the port authority also emphasises the importance of its customer service platform (SAC), which is the most direct link that the port has with the market that it serves.

“Its main objective is to provide both

8 Duisburg lays claim to being the "leading logistics turntable in Central Europe”

8 "The availability of value-added services is very important for modern ports and we encourage terminal operators to provide these,” Erich Staake, Duisport

Credit: Duisbur

Competition between ports is undeniably increasing and the pressure is on to stand that inch taller than the rest.

Port of Oakland maritime director John Driscoll sees the problem as particularly pressing in the US and believes that services that can differentiate ports will therefore be a “big determinant of success in the next decade”.

“Carriers, shippers and supply chain managers all seek efficiency and cost effectiveness in the transportation of cargo.

As a result, port-related services that can help them save time and money have become increasingly important to them,” he adds.

The Port of Oakland is therefore evolving into a multidimensional logistics centre, developing new capabilities that can set it apart from competitors.

The most recent of these was the opening in November 2018 of Lineage Cool Port Oakland. Cool Port is a partnership of Lineage Logistics and Dreisbach Enterprises on 100,000 square metres of property leases at the port. It’s unique in the US, being a 26,000 square metre cold storage distribution centre in the heart of the port, adjacent to its new rail yard and just across the street from its marine terminals.

“Cool Port enables shippers to transport chilled and frozen product – such as beef and pork – in bulk via rail or truck. Once inside, cargo can be instantly trans-loaded into 40-foot ocean containers and whisked across the street to waiting container ships for export,” says Mr Driscoll.

The Port of Oakland’s next major value-added service will be the Seaport Logistics Complex. This will be a campus of distribution and trans-loading facilities also at the very centre of the port complex. Construction is due to commence this year on the first 43,000-square metre building. Just as at Cool Port, shippers will be able to transport cargo to the Seaport Logistics Complex for efficient, lower-cost supply chain management.

The new complex is scheduled to open in 2020.

Mr Driscoll notes that the port is currently negotiating to provide another value-added service: a Truck Service Center.

This 32,000-square metre facility will meet all the needs of port drayage drivers, from fuel and food to overnight parking, again all located at the heart of the port.

“This not only makes it easier for thousands of drivers to do business in Oakland, but also it eases the traffic burden on city streets by keeping drivers inside the port’s footprint,” says Mr Driscoll.

Significantly, the City of Oakland is also developing logistics capability on property it owns just across the fence from the Seaport Logistics Complex. One building for distribution and warehousing has been completed and is operational, a second is nearing completion, and the third will start construction later this year. Although these are not port developments, they should attract more cargo to Oakland.

Credit: Duisport

Adding value is now a must to attract and maintain customers, reports Alex Hughes

MARCH 2019 | 37

PORT SERVICES: VALUE-ADD

COMMUNICATION FACILITATOR The port authority also sees its role as one of identifying and communicating market needs to the overall logistics community while ensuring that importers and exporters have access to the maximum amount of information regarding available services and infrastructure.

“Also falling within our remit is the management of queries and complaints; looking into queries regarding port costs; offering a traceability service; and also undertaking incident management. Furthermore, we believe that it is vital to provide training courses for shippers on the overall operation of the port, on internationalisation procedures, foreign markets, and so on.”

However, one of the services that the port is particularly proud of is PortLinks, a tool that allows users to build transport chains when importing or exporting a container between any port in the world and a European location while passing through Barcelona.

“Port Links offers transit times, distances, information on CO2 emissions and other pollutants, transport links and information on the passage of the container through the port,” explains the spokesperson, pointing out that this helps users to accurately identify costs and transit times.

One of the other great successes has been the Port of Barcelona’s introduction of its Efficiency Network quality standard. A total of 84 port community companies now have

Credit: Port of Oakland

transparency and reliability to the passage of goods through the port,” says the spokesperson, noting that this helps to overcome the complexity of port operations.

this certification, which guarantees reliability, transparency and security in the logistics chains for goods that pass through the port.

“A study has shown that companies signing up to the brand, besides being 15% more efficient, also increase their business activity by 9%,” says the spokesperson.

Barcelona has long been associated with shipping lines serving destinations in Asia. It has therefore leveraged this connectivity to launch Barceloc, a free advisory service for Asian companies interested in establishing their logistics distribution centres in Barcelona.

8 Oakland’s Cool Port is unique in the US for its location at heart of the port and adjacent to a new rail yard

Cargo / Passenger and Recreation / Military Facilities Core Services Advisory Services Port Planning and Analysis Environmental Services Engineering Services Coastal Engineering Program Management Construction Services Asset Management

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38 | MARCH 2019

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PORT SERVICES: VALUE-ADD

“In addition to all of the above, the Port of Barcelona is fortunate to occupy a position at the heart of a unique logistics hub, which brings together the maritime port, El Prat international airport, the ZAL, the Barcelona Free Trade Zone, and Mercabarna, a large wholesale market.”

Credit: Port of Oakland

DUISBURG’S HUB FUNCTION In Germany, Duisburg handles around 131m tonnes annually and, in 2017, posted a container throughput of 4.1m teu. Given these figures, chief executive Erich Staake claims to have developed the facility into “the leading logistics turntable in Central Europe”. In essence, this means that Duisburg functions as a hub for the transport of goods to and from Central Europe.

“The availability of value-added services is very important for modern ports and we encourage terminal operators to provide these,” says Mr Staake. “The duisport Group sees itself as a partner of the logistics industry and makes its own contribution towards optimising transport chains to deliver to and from industry and retail. Nowadays, about 300 logistics orientated companies are based in the Port of Duisburg and they generate added value in excess of about €3bn per year. Altogether, more than 50,000 jobs depend on the port, more than twice as many as recently as 20 years ago.”

The port is nowadays a full-service supplier for the logistics industry in the Rhine and Ruhr region. This has even resulted in land development beyond the actual port, including settlement management for logistics and industrial companies, the development of port and logistics concepts, transport services, industrial packaging and contract logistics.

8 Oakland is evolving into a multidimensional logistics centre

Mr Staake points out that, in partnership with others, the duisport Group has implemented trans-continental train connections between Duisburg and China, where there are links to Chengdu, Wuhan and Chongqing.

In terms of packaging logistics, the port is now involved in providing logistics services for mechanical and plant engineering all over the world – including at facilities specifically set up by duisport in Belgium, France, China and India.

8 Port of Oakland’s John Driscoll sees that port-related services have become increasingly important to shippers

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MARINE WORKS: FENDERS

QUAY PROTECTION WITHOUT THE HEFTY PRICE TAG

Credit: Jurong Port

Hiring fenders offers the double whammy of reduced capital expenditure and increased flexibility. Dave MacIntyre explains

Fenders are certainly a core component of the operational hardware for ports – you’d find few people arguing against that fact. But perhaps less appreciated is that it is not always necessary to make a long-term capital investment to furnish berths with the required equipment – particularly if it is for a short-term need.

Ports which need to equip for a project or special contract can keep capex investment costs to a minimum and ensure flexibility by opting for the hire of fenders. Some mainstream fender manufacturers advertise fender hire while some third parties purchase fenders and then hire them to others. An example of the latter is COMAP in Italy which hires Yokohama fenders to private terminals, shipowners and shipping lines specialising in heavy-lift transport.

COMAP reports that customers make the decision to buy or rent depending on the period of use required and the possibility of easily stacking the fenders when they are not being used.

Often, the hire period may only be a week or two.

UK-based Fendercare Marine, part of the James Fisher and Sons group, is an international fender manufacturer which also deals in the hire market. Examples of ports which have rented from Fendercare include ABP Southampton, Dover, Teesport, Bristol, Aberdeen, Peterhead, Rosyth, Jurong Port (Singapore), Johor Port (Malaysia), Sepangar (Malaysia), Batam (Indonesia), Muara (Brunei), DP World and Abu Dhabi Ports, plus agencies including GAC, Inchcape and Kanoo.

40 | MARCH 2019

8 Double-banking vessels sometimes calls for additional hired fenders

Lara Griffin, product support director for Fendercare, says the company’s range of hire products include Yokohama pneumatic fenders, Fendercare’s own brand of Hippo foam fenders and also Mooreast offshore anchors for short- and long-term duration hires.

They can be used for berthing alongside quays, ship-to-ship cargo transfer, in conjunction with bunkering operations, and in the handling of large project cargoes. They can also be used for double/triple banking, where to save room in busy ports for mooring or during ship-to-ship transfer operations, vessels are moored next to each other and fenders are used to keep the hulls apart.

“Fender hire is mainly to vessel agents, ports, rig-repairing companies and offshore vessel owners, bunkering companies, naval contractors and shipyards,” says Ms Griffin.

TAILOR-MADE PROVISIONS Rental contracts can be tailored to include some kind of specialisation for the port’s needs. “Sometimes we would tailormake for a longer-duration rental,” says Ms Griffin, adding that contracts can vary from one week to one year. “It just depends on the length of job – we offer flexible rentals to meet the needs of clients. Any duration can be accommodated.”

Ms Griffin adds that fender rental can fit the needs of certain clients: “It is ideal to rent if the project is only short-term. It saves money and [the customer] is not left with the asset.”

For the latest news and analysis go to www.portstrategy.com/news

MARINE WORKS: FENDERS

RESTRICTIONS TO CONSIDER Leading shipping agency GAC also sees benefits in fender hires. Ashan Welagedara, senior general manager – shipping and business development, GAC Sri Lanka, says that in that country, GAC is partnered with a reputable ship-to-ship service provider to support their operations in the region, providing logistics and rigging services. “Most of the fenders are Yokohama and are 3.5 x 6.5 metres or 1 x 1.5 metres.”

Gary Stewart, logistics manager of GAC UK, says that in Aberdeen, fender use varies according to the needs of the job in terms of size, number of fenders, their condition and classification. “We have a range of 2.3-metre and 3.2-metre fenders available to our clients.”

Given that a rental fender would not be tailor-made for a specific port, GAC says there could be restrictions on their application.

“Size, age, certification for specific use – for example OCIMF

For the latest news and analysis go to www.portstrategy.com/news

standard for ship-to-ship operations – are factors to be considered when looking at renting fenders that haven’t been tailor-made for a specific port,” says Neil Godfrey, group sales director, GAC Group.

In GAC’s experience, hire is most commonly for a proposed number of days, either at a lump sum or on a per-day rate.

“The benefit to us as a client of the port, and to our clients, is that we do not have to make the capital investment for equipment that we only need on an occasional basis,” says Mr Godfrey.

“That said, if we have business in hand in which our client has a regular and time-definite requirement for fendering, it would make sense for us to look into investing in our own fenders to better support the client.

“However, it’s not just a matter of cost. There are also the storage, depreciation, insurance, testing and certification aspects to consider. But if it benefits the client and we can add value to our operations to buy our own fenders, we'd do it.”

8 Fendercare’s floating fenders are available for hire

8 GAC hires fenders for clients when necessary

Credit: GAC

FENDER INVENTORY Another port which benefits from renting fenders is Singapore’s Jurong Port, which has grown over the last 50 years to become a main point of entry to the island state. It prefers to hire pneumatic fenders in the 1.5-metre to 3-metre diameter range, for tasks such as berthing alongside quays, ship-to-ship cargo transfer, bunkering and the handling of large project cargoes.

Walter Lin, senior manager of commercial, urban solutions and projects at Jurong, says that hiring fenders can complement a port’s existing on-site fenders. “Most ports would already have rubber fenders installed. Pneumatic will only be deployed when required, e.g. for ship-to-ship transfers.”

He advises that different rental terms are needed to suit different tasks, and ports would need to hold an inventory of fenders of different sizes that would cater for different needs.

“It really depends on the nature of business activities,” says Mr Lin. “For a layup, the rental period will be longer. For projectbased, the rental lease can be on a weekly basis.”

He also stresses the benefits of ports avoiding capital expenditure on fenders which may only have limited deployment.

“Capex involvement might not see a positive ROI (return on investment) due to the frequency of usage. The maintenance and storage will add indirect costs as well.” Whereas by hiring “... pay per use will help the port to reduce investment. Relying on fender rentals allows the port to choose a wide range of specifications available ...” compared to being committed to a single purchase.

Credit: Fendercare

Fendercare protects itself from misuse of rented fenders through protections in the contract, which clearly states the terms and conditions of hire. Customers also have an option to pay for insurance for the duration of hire.

One port which has discovered the benefits of hiring fenders is Forth Ports, the UK-based multimodal ports company which owns and operates eight commercial ports in the UK. The company’s chief harbour master, Captain Alan McPherson, says hiring is usually out of necessity rather than choice and almost exclusively Yokohama-type fenders are chosen.

Asked if a rental fender would imply operational limitations for a specific port, due it not being tailor-made, Capt McPherson says Yokohama fenders are general use and as such don’t pose too many restrictions.

Forth Ports usually hires fenders mainly for berthing ships on quays, but also for bunker operations and double-banked berthing. The rental term varies but a hire for a few weeks or months is the norm to deal with specific vessels.

“Renting avoids capital outlay for an asset that is maybe only used a few times a year for specific vessels,” he says.

MARCH 2019 | 41

REGIONAL SURVEY: EAST AFRICA

SIGNING UP TO SMOOTHER AND EASIER TRADE

Credit: Michael Edward Walsh, Flickr, CC BY-NC-ND 2.0

Cheaper, faster, simpler – East African countries are onboard for better trade facilitation.

Felicity Landon reports

Investments, developments, volumes up, volumes down – for East African ports, these factors are as dependent on their landlocked neighbours as they are on what’s happening at home.

Politics, conflict and red tape can all conspire to create business uncertainty. Commentators agree that building berths and quay cranes is only the start. The connections are also vital, and that includes efficient IT solutions as well as road and rail links.

Intra-Africa trade is another vital part of the mix. In December 2018, Burundi, Kenya, Rwanda, Tanzania and Uganda agreed to implement trade facilitation reforms, including reducing ‘nontariff barriers’ such as burdensome and incompatible product regulations, to make regional trade cheaper, faster and simpler.

The five countries, which are members of the East African Community (EAC) customs union and common market, signed the agreement during Africa eCommerce Week, organised by UNCTAD (the United Nations Conference on Trade and Development) in Nairobi.

“This is an opportunity for the EAC countries, many of which are landlocked, to sell their products within the region, in Africa, and across the whole world,” said Frederick Ngobi Gume, Uganda’s minister for co-operatives. “It also gives us an opportunity to simplify the import and export of commodities.

Such an approach reduces bureaucracy, with online clearances reducing contacts at the border. This initiative will go a long way to stimulate trade within the EAC and further afield.”

The African Continental Free Trade Agreement, signed by most countries in March 2018, is looking to create a free trade

42 | MARCH 2019

8 Lamu looks to have a real future in the region

area by building on regional blocs such as this – and the EAC declaration also aligned with the World Trade Organization’s Trade Facilitation Agreement, which entered into force in 2017.

ROUNDED TRADE Jan Hoffmann, chief of the trade logistics branch at UNCTAD’s technology and logistics division, says: “This was a really good event in December and we are proud that we got five ministers’ commitment to give their blessing to and invest more in trade facilitation.”

However, he emphasises, this is not just about intra-Africa trade. “Sometimes there is a perceived arrogance of developed countries of ‘why don’t you trade more with each other’ – but that will never be the total solution. What’s needed is a combination of intra-regional and export.”

Exports are often dependent on regional value chains, he says.

“You want to produce textiles or shoes in Uganda. You also need input – for example, nails, leather, packaging, etc. You want to have good quality shoes to export and, in order to be more competitive, you want a wide hinterland from which to buy your inputs. Some you may import from outside Africa and some you may source from inside Africa. That is where our integrated approach is vital.”

The EAC countries have improved their trading conditions “on whatever international benchmark you choose”,

8 UNCTAD’s Jan Hoffmann says that a combination of intraregional and export is needed in East Africa

For the latest news and analysis go to www.portstrategy.com/news

REGIONAL SURVEY: EAST AFRICA

says Mr Hoffmann, introducing measures such as juxtaposed border posts, reduced bureaucracy and moves against corruption.

Trade facilitation moves are important when crossing borders, while so-called non-tariff measures (NTM) governing product standards, certifications, and so on, are particularly important for exports out of the region, he adds, to ensure quality and any necessary certification of products.

With an average growth rate of 6.7% between 2013 and 2017 – double the African average – East Africa is one of the fastest growing regions in the world, growth that is accompanied by rapid social improvements, says TradeMark East Africa. TMEA, funded by a range of development agencies to grow prosperity in East Africa through trade, works closely with EAC institutions, national governments, the private sector and civil society organisations towards increased physical access to markets, enhanced trade environments and better business competitiveness.

Referring to an analysis of port developments issued by PwC last year, TMEA emphasises: “Africa needs to take advantage of the economic potential of its ports and shipping sector if it is to realise its growth ambitions.”

Investment is not always about building new ports or terminals, it says: “Investment spent on infrastructure without cognisance of the efficiency and effectiveness of the port may not produce the desired results.”

The analysis showed that a 25% improvement in port

performance could increase GDP by 2%, but said that with growing congestion in many African ports, the continent ran the risk of sacrificing further growth through lack of investment.

PROCESS EFFICIENCY Regional ports expert David Mackay, director of Varuna Consulting, agrees that trade facilitation measures and IT solutions are just as vital as physical infrastructure for a port’s success.

“IT, Single Windows, processes and security have been playing a bigger and bigger part in ports. There are two reasons – first, for basic security, and second as an anticorruption measure. Also, this has improved performance and it helps bring in the taxes and duties that should be paid.”

African container ports generally lag fairly far behind in performance compared with the top ten container ports in the world, says Mr Mackay: “And there is no reason except for general inefficiency and a lack of IT. Mombasa is looking at a brand new terminal handling system and there is a battle going on because certain vested interests want to keep the old one – which should be in a museum. At the moment, Mombasa doesn't have a proper terminal yard planning system. How can you operate like that in 2019?”

Having said that, Mombasa – recently named by TMEA as the seventh busiest cargo port in Africa – continues to surge ahead with long-term investment and new infrastructure. “Mombasa is extending its container terminal and adding more berths. It can keep growing – there is room.”

Worth of single window projects Port Community Systems (PCS) and Single Window projects have been gathering pace in the East Africa region, as a crucial way of speeding the flow of cargoes and information.

The Djibouti Port Community System (DPCS) was launched in July 2018 and covers the ports of Doraleh, Ghoubet and Tadjourah.

“There was no PCS in place before – all ports, Customs and government agencies had their own separate systems,” says Warsama Mouhoumed Bouh, chief executive of DPCS. “A PCS was needed for a number of reasons.

For example, the shipping agents were sending vessel arrival documentation and manifests to four or five different entities in different formats. It was time-consuming and submission delays resulted in penalties. The ports had good performances but the import/export documentation was taking some time, due to lack of integration between the different entities such as Customs, port authority, terminal operators, immigration, quarantine, etc.”

The terminal operators and port authority must now respond to all requests submitted through the PCS within a 60-minute limit, says Mr Bouh. “It would take two to four days for a berth to be delivered in the past. Now berth allocation happens in 60 minutes.

Online payment has been a plus, since all payments previously had to be made onsite by cheque; we have introduced a DPCS

payment card on top of online payments.”

Senegal-based Single Window specialist GAINDE 2000 has implemented a Customs management system called SIMBA in Kenya; an initiative is under way to upgrade the system to make it more interoperable with Customs in Uganda, Rwanda and Tanzania.

“We have been in charge of the integration between the Kenyan Customs Service Solution and the KenyaTradeNet (KenTrade) Single Window solution for the interoperability of data,” says GAINDE’s international business development director, Mor Talla Diop. The main challenge, he says, is to remove fraud connected with goods entering Mombasa and in transit to Uganda and Rwanda. A Single Customs Territory has been initiated to enable payment of taxes and duties at the port.

For the latest news and analysis go to www.portstrategy.com/news

8 Djibouti now has a port community system to cover the ports of Doraleh, Ghoubet and Tadjourah

Cargo clearance documents for cargo via SGR (the Mombasa-Nairobi rail link) and also at Lamu port will be processed through the system, says Daniel Kiange, representing KenTrade.

“As a trade facilitator, KenTrade is very important in Kenya’s ports and the neighbouring countries. It has assisted a lot in terms of reducing delays and costs associated with cargo clearance through the port of Mombasa and the northern corridor,” he says.

The role played by the system was recognised by the World Bank’s ‘Ease of Doing Business’ report last year and is one of the reasons why Kenya’s ranking improved, says Mr Kiange.

MARCH 2019 | 43

REGIONAL SURVEY: EAST AFRICA

What really gets the headlines at present is the controversy over the new standard gauge railway (SGR) which connects Mombasa to Nairobi and is due for further extension towards Uganda (although this is being held back by financial constraints).

The Kenyan government borrowed Sh227 billion from Exim Bank of China to fund the rail project and is under huge pressure to keep up the repayments. Recent press articles in Kenya have claimed that the Port of Mombasa could even be lost to the Chinese government if Kenya Railways Corporation defaults on its obligations.

There is a precedent: when the Sri Lankan government leased Hambantota port to China to meet loan obligations, this sent shockwaves through Africa, says Mr Mackay. “It made people realise – China can be ruthless. The SGR is carrying some very big loans, hence this huge focus on getting volumes and making it a financial success.”

RAIL MOVES Shippers have protested against a government directive that all cargo consignments from Mombasa destined for Nairobi must be moved by train. Mr Mackay says: “Shippers and receivers are not totally happy with it – they feel they are being forced to feed the SGR. But there is considerable pressure to make it viable.”

In fact, he says, the SGR is settling down, trains are loading well and operationally the project is OK. “The SGR has the ability to become a gamechanger. Where it is exciting is that in a few years’ time, SGR should go right up to Kampala. At present, if you a

receiver in Kampala, from clearance up to delivery is an average nine to 11 days from Mombasa. In three to four years’ time, it could be perhaps two days. That is why I use the word gamechanger – really delivering efficiency and time and cost savings.”

There are ‘soft’ benefits too, he points out, including reducing the pollution and congestion caused by the trucks which were making the journey inland. That has created some unemployment – but it is also saving lives. “The deaths per month on that highway to hell, Mombasa to Nairobi road, were horrific. Now, those containers are going on the train.”

Meanwhile, 341 kilometres northeast of Mombasa, three berths are nearing completion at Kenya’s new port of Lamu. Mr Mackay says: “If you had asked me about Lamu two years ago, I would have been a bit reticent, concerned that it might be a white elephant, but now I think it has a real future. Things tend to move slowly in Africa, so not tomorrow or in two years, but at some stage it will be a big player.”

The logic of Lamu, he says, is to be a key port for Ethiopian transhipment, as well as for a pipeline to Southern Sudan.

The first berths are due to open in mid-2019. Lamu offers water depths of more than 17 metres, and there are some very ambitious rail and road links planned to support the port.

Eventually, Lamu is planned to have 23 berths. Will cargo relocate to Lamu from Mombasa? “My feeling is no,” says Mr Mackay. “Mombasa is expanding and can keep growing.

The Ethiopian economy is beginning to boom, and Lamu could become that country’s alternative to using Djibouti. I think Ethiopia is very keen politically and geographically to have [access to] two ports and not be reliant on Djibouti.”

The dispute between DP World and the government of Djibouti over the Doraleh Container Terminal continues.

In February 2018, the government seized control of the terminal, which DPW designed, built and was operating under a concession awarded in 2006.

Speaking at the Heritage Foundation in December, US National Security Adviser John Bolton highlighted and criticised the Djibouti government’s actions.

DP World subsequently said in a statement: “The Government of Djibouti continues to flout international business laws, disregarding multiple international court rulings in DP World’s favour that declared the expropriation illegal.

We will continue to use all available resources to bring about a resolution to this needless dispute.”

In July last year, Djibouti Ports and Free Zones Authority (DPFZA) repeated its claim that the Doraleh Container Terminal concession agreement had been cancelled “due to severe irregularities that threatened the national interest and sovereignty of Djibouti”.

The Port of Djibouti is an important gateway for landlocked Ethiopia. The 759-kilometre Djibouti-Addis Ababa Railway, the first completely electrified line in Africa,

44 | MARCH 2019

Credit: DP World

Dispute over Doraleh Container Terminal

started commercial operations on January 1, 2018 and is said to have reduced Djibouti-Addis Ababa transport times from a week to as little as ten hours.

“Due to the upgraded rail connections, Ethiopia is enjoying a notable economic development,” says DPFZA. “This is based on its gold and agricultural exports, mainly coffee,

8 The legal battle for Doraleh Container Terminal isn’t over yet

dried beans and seed oils, having attracted Chinese, Singaporean and Indian investors to construct processing plants.”

Relieved of congestion by the railway, the corridor road is also being reconstructed.

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PORT PROFILE: DAR ES SALAAM

DREAMS OF BECOMING THE GATEWAY TO AFRICA

Credit: Hutchison Ports

Container volumes are rising as Dar es Salaam port invests in infrastructure, reports Felicity Landon

Records were broken again last year at Hutchison Ports’ Tanzania International Container Terminal Services (TICTS).

The terminal in Dar es Salaam handled 592,000 teu, an increase of 18% on 2017.

The higher throughput can be attributed to operational improvements which increased efficiency at the port, infrastructure developments in Tanzania, and a rise in exports of copper and agricultural products, said a spokesman for TICTS. Overall, the Port of Dar es Salaam handles up to 90% of Tanzania’s trade; it is considered the gateway not only to Tanzania, but also to eastern, central and southern Africa, serving the landlocked countries of Zambia, the DRC, Malawi, Rwanda, Burundi and Uganda.

A major advantage for TICTS is being the only specialised container terminal operator in Tanzania, said the spokesman.

Last year also featured a monthly record for TICTS – August’s throughput was 54,447 teu. Announcing this, chief executive Jared Zerbe said: “Landlocked countries have been driving growth for TICTS as a result of significant increases in global commodity prices and the Tanzanian government's removal of VAT on ancillary services for transit cargo.”

The terminal’s modern equipment and ‘standards of excellence’ helped it to handle the volume increase, said Mr Zerbe. However, he warned that space constraints represented an acute challenge. Transit containers could not be transferred outside the port for storage prior to clearance, and this was leading to very high or maximum yard density at peak times.

TICTS was working with the government to locate alternative storage areas for transit containers; it had been appealing to the government to allow some transit cargo to be sent outside the port to inland container depots (ICD), to find more space within the port, to allow TICTS to buy or rent more space nearby, or to adjust downward the grace period for transit countries to expedite cargo clearance, said Mr Zerbe.

SPACE ALLOCATIONS There have been some developments since then, said the spokesman. Tanzania Port Authority has provided additional space within the port and at its inland container depot at

46 | MARCH 2019

8 Hutchison Ports’ Tanzania International Container Terminal Services has boosted efficiency

Ubungo, where TICTS transfers overstayed cargo. TPA is also developing a dry port at Ruvu, which is aiming to provide additional storage for transit cargo.

And major port infrastructure upgrades are under way. The Dar es Salaam Maritime Gateway Project, funded by a World Bank loan of $345m, will enable the port to handle postpanamax-plus vessels and is designed to double overall throughput capacity, reduce vessel waiting time and increase operational productivity.

The first phase includes deepening and widening the entrance channel and turning basin to 15.5 metres, strengthening Berths 1 to 7 and deepening them to 14.5 metres, and building a new ro-ro/multipurpose berth at Gerezani Creek.

There are also plans to improve the rail links and facilities at the port, and then strengthen and deepen Berths 8 to 11.

A World Bank report says: “Since approximately 90% of Tanzania's international transactions transit through the port of Dar es Salaam, and 35% of the total throughput of the port is intended for the landlocked countries of the interior, improving the efficiency of the maritime gateway is a key element in the regional transport network.”

The development work at the port has started with the ro-ro berth at Gerezani Creek and Berth no. 1, said the TICTS spokesman.

There are no particularly notable investments to report relating to the roads to the six countries being served, he said.

“All the countries are linked with tarmac or all-weather roads which are currently in good condition,” he said. “TAZARA and TRC, which provide the rail network, have not undergone major changes, with the exception of the TRC project on SGR which will link with the local networks in its first phase.”

TICTS set up an office in Rwanda, and the activities there are now being jointly coordinated with TPA, which has also opened an office in Kigali. TICTS also co-ordinates with the port authority’s regional offices in Zambia, DRC, Burundi and Uganda.

TPA is also investing at the Port of Mtwara in the far south of the country, where a new general cargo berth is being built. The 300-metre quay, with 13 metres water depth, will increase the port's capacity by the end of 2020, says TPA.

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PRODUCTS & SERVICES: DIRECTORY

For the latest news and analysis go to www.portstrategy.com/news

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Stäubli Electrical Connectors AG As one of the leading manufacturers of quick connector systems, Stäubli covers connection needs for all types of fluids, gases and electrical power. +41 61 306 55 55 ec-ch@staubli.com www.staubli.com/en-ch/ connectors/

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MARCH 2019 | 47

PRODUCTS & SERVICES: DIRECTORY

Verstegen is worlds leading manufacturer of rope operated mechanical grabs for the dry bulk industry. Stevedoring companies and ports are using our grabs for handling all kinds of bulk materials.

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Box 720, 931 27 Skellefteå, Sweden Tel: +46 910 870 00 info@alimakhek.com www.alimakhek.com

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Künz GmbH Founded in 1932, Künz is now the market leader in intermodal rail-mounted gantry cranes in Europe and North America, offering innovative and efficient solutions for container handling in intermodal operation and automated stacking cranes for port and railyard operations.

Gerbestr. 15, 6971 Hard, Austria T: +43 5574 6883 0 sales@kuenz.com www.kuenz.com

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CERTUS provides Automatic Container Recognition systems in ports and terminals all across the globe. Our systems have consistently demonstrated high reliability and overall high OCR accuracy, streamlining customer operations.

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Liebherr provides advanced maritime cargo handling solutions with a focus on quality, innovation and performance. With more than 50 years’ experience in vessel handling and container stacking, Liebherr supplies premium port equipment for highly efficient port operations across the globe.

Grabs of MRS Greifer are in use all over the world. They are working reliably and extremely solid. All our grabs will be made customized.

Besides the production of rope operated mechanical grabs, motor grabs and hydraulic grabs we supply an excellent after sales service.

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Schwartauer Str. 99 D-23611 Sereetz • Germany Tel:+49 451 398 850 Fax: +49 451 392 374 soj@orts-gmbh.de www.orts-grabs.de

48 | MARCH 2019

The TT Club is the international transport and logistics industry’s leading provider of insurance and related risk management services.

TT Club specialises in the insurance of liabilities and equipment for multi-modal operators.

90 Fenchurch St London • EC3M 4ST Tel: +44 207 204 2635 london@ttclub.com www.ttclub.com

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1-Stop Connections Pty Ltd 1-Stop is a globally recognised leader in innovating and delivering integrated solutions to increase productivity for the Port Community. We are committed to working collaboratively with all members of the community to deliver efficiency gains for everyone.

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PRODUCTS & SERVICES: DIRECTORY

Bromma is the industry’s most experienced spreader manufacturer, known worldwide for crane spreaders of exceptional reliability.

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T ERMINAL OPERATING SUPPORT

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TSV 40 W ENG

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MARCH 2019 | 49

POSTSCRIPT

MGT UNRAVELS CONGO RIVER CONTAINER BENEFITS

ICTSI’s Matadi Gateway Terminal (MGT) has opened the door to cellular containership operations on the Congo River.

Marking MGT’s positive impact, the DRC has climbed from position number 157 to 120, out of 158 countries, in the World Bank’s definitive Logistics Performance Index

50 | MARCH 2019

The Democratic Republic of the Congo (DRC) has received its first cellular containership.

The key to unlocking the door to cellular containership operations, and the scale economies that go with it, is ICTSI’s Matadi Gateway Terminal (MGT), 92 miles upriver on the mighty Congo River.

The terminal, which opened for business in mid2016, provides the modern capacity and handling power to efficiently discharge, load and turn a vessel of this category, as witnessed by the recent call of the 2500TEU Safamarine Nuba – she made her first call at the end of January and a second call in early February.

Both calls were made without incident confirming the potential of the Congo River to accept such vessels and deliver containers to Matadi, the closest port gateway to the DRC’s fast growing capital city of Kinshasa and the major consumption centre for containerised goods.

And ICTSI, supported by the DRC Government, has mapped out plans to facilitate the transit of even higher capacity vessels to and from Matadi along the Congo River.

“MGT is built to handle vessels of up to WAFMAX dimensions (4500TEU capacity) and as such the Safamarine Nuba was straightforward to berth and work,” explains Tim Van Campen, Director General, MGT. “We see this,” he elaborates,” as a step on the road to handling even bigger vessels as demand builds, eventually up to WAFMAX dimensions from direct calls.”

MGT has a two-step plan in place to realise strategic dredging in the Congo River up to a draught of 12.5 meters thereby opening the door to Panamax class vessel calls. This will be demand triggered as will a third phase, under development, which will facilitate access for the slightly larger WAFMAX vessels, which will require a draught of 14 meters.

Efficiency on the quayside is matched by efficiency on the landside with MGT achieving the most efficient container clearance times in the DRC averaging around seven days – half the time normally taken. This clearance rate has also served to boost MGT’s annual capacity, doubling it from 175,000TEU to 350,000TEU.

8 MGT opens the door to cellular container vessel operations on the Congo River – the 2500TEU Safamarine Nuba was the first to call. The diagram, inset, highlights Matadi’s close proximity to Kinshasa and therefore the much lower overland costs it provides

SUPPLY CHAIN BENEFITS “MGT is progressively proving its worth at delivering real benefits to cargo owners – the lower cost freight rates that come with larger vessels, reduced storage costs due to prompt container clearance and most important the lowest land transport costs due to MGT’s status as the closest port gateway to Kinshasa,” underlines Hans Ole Madsen, Senior Vice President, Europe, Middle East and Africa, ICTSI. “There is always competition,” adds Madsen, “but the logic of using Matadi, the closest port gateway to Kinshasa, where virtually all the cargo goes, is irrefutable. If you start your overland journey from points such as Banana or Pointe Noire the additional overland transport costs, compared to using Matadi, will work out to be more expensive than the entire sea-freight cost from Shanghai to Matadi.”

The realities of very high land transport costs in the DRC also serve to throw the spotlight on the DP World project at Banana at the mouth of the Congo River to establish a new container terminal – a USD600 million project as opposed to MGT which was established at a cost of USD100 million. An informed source notes: “How will such a project pay for itself if cargo owners are faced with much higher land transport costs? Why should they accept these when Matadi is a much cheaper option? The road from Banana actually passes through Matadi and so there are no short-cuts! Where is the logic and where is the demand?”

This also applies in a transshipment context with this capacity generally bolstered along the coastline but specifically major capacity available at Pointe Noire, The Congo, just a few hours steaming time from Banana.

For the latest news and analysis go to www.portstrategy.com/news

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