Commerical review: Transport & Logistics - Ports

So far, as BPA CEO David Whitehead notes, the turmoil in global markets caused by the struggles between Greece's hard left government and its chief creditors, the European Union, the European Central Bank and the International Monetary Fund, have as yet not had any real impact on the throughput of freight and passengers as far as UK ports are concerned.

The BPA, along with its partners in the Maritime UK network, recently commissioned a study by Oxford Economics, which aimed at putting some numbers on the contribution made to the UK economy by the UK ports industry. Whitehead points out that the study, which focused on the data for 2013, showed that the sector employs some 118,200 people, with 43 per cent working in either transport or a transport-related activity. Another 18 per cent are employed in cargo handling.

"What the study showed is that the sector is highly productive. Labour productivity (measured as gross value added, divided by employment) works out to £65,400 per employee. That is 1.3 times the average of the UK economy as a whole," Whitehead comments. The estimated contribution of the sector to the UK's GDP is £7.7 billion, which puts it almost on a par with the contribution made to the economy by the UK's advertising industry - which, unsurprisingly, gets much more press!

"Business has held up particularly well for Scottish ports," Whitehead says. Scottish ports have the highest direct gross value add contribution by comparison with any other parts of the UK. Scottish ports also have the highest direct employment by comparison with all the other regions of the UK. The total traffic through Scottish ports amounts to some 15 per cent of the UK's total ports traffic. "Considering the size of the respective populations, that is a tremendous achievement," he comments.

Another feature of Scottish ports is that taken as a whole, they have the widest spectrum of business, catering for everything from freight, to cargo, renewables activity, cruise passenger lines and leisure, plus all the connecting ferries that sail from Scottish ports. "Port activity in Scotland amounts to some 2.6 per cent of the Scottish economy, second only to Northern Ireland, which is a special case," he comments. "These are impressive figures, which demonstrate how fundamental ports and port related activity is to Scotland.

In terms of sheer activity, the largest Scottish port is undoubtedly Grangemouth. Some nine million tonnes of cargo are handled through the dock facilities each year, with around 2.5 million tonnes of this being dry cargo. This is comprised of incoming raw materials destined for Scottish industries, together with the outgoing finished product shipped out by Scottish factories and manufacturers.

In all, Grangemouth handles some 150,000 containers a year and just under a third of Scotland's gross domestic product goes through the port. It is the UK's largest feeder port and the only one that exports more than it imports.

Second to Grangemouth is Clydeport, owned by Peel Ports, owners of Greenock Ocean Terminal. At the start of 2015 the Terminal was on course to be the first Scottish port to welcome more than 100,000 cruise passengers in a single year. In all, 56 ships are expected to call at the port in 2015, which would bring more than 108,000 passengers to Greenock, a 14 per cent increase over passenger traffic the prior year. In all, numbers have quadrupled at Greenock over the past eight years.

Greenock Ocean Terminal is part of Clydeport, which also includes the King George V Dock and the Hunterston Terminal. Hunterston itself handles some 15 per cent of all UK coal imports, making it Scotland's largest coal terminal and the second largest in the UK.

Whitehead points out that a feature of the activity at Scottish ports over the past 10 years has been oil and gas-related business. The oil-related trade has been diminishing as the output from the North Sea has shrunk, but it is being largely replaced by the growth in roll-on, roll-off ferry business and the container trade. "We have seen general port activities in Scotland grow by 50 per cent since 2001, representing steady growth," he comments.

Renewables activity at Scottish ports awaits decisions from the big renewables players. "The whole renewables market is very political and highly dependent on government policies over subsidies. A lot of consents have been given for offshore wind farms but now it is all about waiting for developers to commit," Whitehead says. As and when they do, ports stand to gain.

However, he points out that the renewables sector tends to be rather land hungry, requiring large areas for construction and fabrication. Many ports are relatively squeezed for space and will be loath to commit large areas for long periods because they need it for general business, such as offloading timber and other raw materials and containers.

Freight rates have been notoriously volatile in recent months but Whitehead points out there is no one to one correlation between a sudden falling off in demand for shipping to make the roundtrip China to Europe and back again, and a diminution in the trade seen by Scottish ports.

"Clearly, if global trade falls away badly, then that will ultimately impact port freight throughput. However, if you look at British shipping figures for 2013, for example, there was quite a sharp decline for shipping at the time, but it did not impact the fortune of UK ports," he notes.

Scottish ports have a major advantage over many English ports in that a number of the ports have natural deep water and do not require the same extensive dredging that the English ports need to keep their channels free. This again, is a competitive advantage for Scottish ports to offset, to some extent, their distance from the major UK industrial centres.

Transport sector more competitive than ever

ROAD transport across the UK is under pressure as never before, says Callum Bastock, CEO of CCL (Consolidated Carriers Ltd). The industry is going through some significant changes across multiple markets, from parcels to pallet deliveries.

Bastock points out the parcel delivery market in the UK changed dramatically with the demise of City Link on Christmas Day 2014.

As he notes, with City Link's vans pulled out of service the rest of the parcel delivery network in the UK came under tremendous pressure. "Some £300 million worth of business had to find a new home, which put a lot of pressure on the parcel network."

The palletised delivery network is also under huge pressure. Bastock points out that pallet delivery prices today are much the same as they were 10 years ago, while every facet of the business has gone up, including fuel, labour and equipment. At the same time, as the UK's shopping habits have changed, with e-shopping ramping up the number of direct deliveries to the home, the pressures on both the parcel and pallet networks have increased significantly.

"For pallet rates to move upwards it would require the pallet network members to be strong, however there seems to be a Mexican stand-off with their competition. No one wants to be first to put in a big hike in delivery prices because they are afraid that will just hand business to the competition. Perhaps this is a hangover from the recession and more confidence is needed," he comments.

CCL specialises in being a single source logistics provider, so it is not directly impacted by the challenges that face road haulage companies, such as driver shortages, fuel taxes, high insurance on young drivers and so on.

But, as Bastock points out, it has to work with these suppliers so anything that adversely impacts them feeds through to CCL's relationship with its end customers.

Of course, not all the transport sector's problems stem from local UK issues. When the global export market booms, trunking heavy loads to British ports for onward shipment becomes a very significant source of revenue for haulage companies.

At the time of writing, China's stock exchanges were having their first major crash since 2007, with some stocks down more than 50 per cent. Bastock points out that on top of the general slowing down of China's GDP growth this is bound to chill global trade and shipping to some extent.

"If you look at the ocean rates for imports from China, they are very volatile, changing from month to month and often from the first week of the new month to the last week by as much as 50 per cent. This kind of crazy volatility in rates helps no one and keeps putting pressure on the various supply chain relationships involved" he notes.

Despite the challenges, CCL has managed to grow at roughly 20 per cent a year for several years now.

Part of the reason for this success, Bastock says, is a very substantial and continuing investment by CCL in technology.

"In logistics you need great people and great systems to deliver high levels of customer service - if you can show you have both, then why would a customer not want to increase their business with you?" he comments.