Since the global financial crisis of 2008/9 and with generally weak performances in the eurozone economies, intra-European general cargo volumes have increased relatively slowly, particularly within the northern European sector of the market.

 

For the region as a whole, which includes the faster-growing Mediterranean basin, cargo volumes have risen from about 6M TEU in 2011 to 6.8M TEU in 2015, a five-year rise of just over 13%. Last year, the market was extremely  sluggish and, while the first seven months of 2016 have posted some sort of recovery, the 2.7% increase in volumes is extremely modest (see table, p43).

 

Following the cargo

 

The Irish Sea trades have performed better, with recent data published by the Irish Maritime Development Office (IMDO) showing robust quarteron-quarter performances for both lo-lo container and ro-ro cargo ships for more than four years.

 

IMDO’s Q2 2016 figures revealed that, while ro-ro cargo to/from Eire grew by 7%, containerised traffic rose by 4% to 178,183 TEU. By also taking into account the trades linking Northern Ireland, IMDO’s data revealed that ro-ro
traffic was up 8% in the second quarter of 2016, and lo-lo traffic by 2%. 

 

Both lo-lo containership and ro-ro operators have responded to the improving market conditions by adding capacity. One of the latest carriers to do this has been Heysham-based Seatruck Ferries, which has replaced the smaller and
slower vessel CLIPPER RANGER with CLIPPER POINT (105 trailers). It adds 25,000 trailer spaces a year to the carrier’s operation between England’s northwest port of Heysham and Dublin.

 

According to Alistair Eagles, CEO of Seatruck, deployment of the more powerful vessel offers the company many operational benefits, and its customers a range of service improvements, including faster transit  times and better schedule reliability.

 

“The ship also gives us greater trailer free height and faster turnaround times in port, as the ship benefits from a ramp interface to the lower hold instead of a lift,” he said. “For drivers, the single berth cabins and comfortable lounge area will be appreciated.” Eagles is convinced that the larger vessel will attract more cargo, and that the timing of the move is important, given the changes that he sees taking place in the Irish Sea freight market.

 

“We specialise in the shipment of unaccompanied freight trailers, which is more efficient for the operators and makes better use of their HGV drivers, which continue to be in short supply,” he explained. “Historically, HGV freight to Ireland has predominantly moved through Scotland or Wales on a driver accompanied basis, but the market is shifting significantly.” 

 

Seatruck, which earlier this year started a new service between Bristol and Dublin, appears to be taking the right decisions, with Eagles referring to its cargo volumes this year as growing at three times the rate of the market. 

 

In addition to the relatively sluggish growth in the market, there have been notable operational challenges too. The imposition of the Sulphur Emissions Control Area (SECA) in the Baltic, North Sea and English Channel sectors on 1 January 2015 means carriers have to use bunkers with only 0.1% sulphur content. This has raised their voyage costs considerably.

 

The migrant crisis of the past two years has also had a significant impact on costs and service levels, with the reliability of many through-transport operations severely affected, as some emergency border checks have been  introduced. This year, for instance, saw Austria impose additional security checks along its eastern border.

 

Any further escalation of the migrant crisis that could lead to the abolition of the EU’s Schengen Agreement or the imposition of controls on free-border movements would be catastrophic for the freight industry and intraEuropean  trade in general.

 

To date, it has been users of roro vessels and rail services through the Channel Tunnel that have been worst affected by this issue and, to some degree, by traffic congestion, too, particularly during holiday periods. The resultant
long queues in both France and the UK have caused widespread disruption and led to some carriers diverting cargo to ships deployed on other corridors. Ports in Humberside, such as Immingham and Killingholme, and further north appear to have benefited the most from these decisions.

 

Interestingly, there are ro-ro operators that believe longer northern routes will prove more popular and provide significant growth opportunities in the future. This appears to have strengthened since the UK voted on 23 June to leave
the EU. Brexit, it seems, could result in southern British ports having less of a pull when it comes to future cargo flows and the UK’s reduced reliance on Europe as a trading partner. 

 

Investment decisions 

 

This potential structural change  and the fact that competition with lo-lo container operators is more intense in the North Sea than in the English Channel is affecting several ro-ro carriers’ investment decisions. In addition, there is a general requirement for carriers to replace ageing fleets with more cost-effective ships, purpose-built for operating in the SECA areas.

 

The clear trend is to order bigger tonnage, and the first to commit has been Luxembourgbased CLdN RoRo SA, part of Cobelfret. The group has ordered two ships with 8,000 lane metres from Hyundai Heavy Industries in South Korea, and two ships of a slightly smaller 5,400 lane metres from the Uljanik Shipyard in Croatia. The latter deal includes four units of a similar design. The first of the carrier’s new vessels will be delivered towards the end of 2017.

CLdN’s terminal arm, which includes ownership of the port of Killingholme in the UK, will invest in excess of €100M in infrastructure and equipment to accommodate the new series of ships. 

 

CLdN describes its new vessels as “game changers”, given their highly innovative and flexible deck designs, which allow a full range of trailers, containers, high and heavy cargoes, cars, vans and trucks to be loaded. In particular,
the new ships will enable the carrier to expand its operations and offer a wider range of what it refers to as value-added logistics services. One of its goals is to improve its services to Europe’s car manufacturing industry. 

 

Moreover, recent weeks have seen CLdN start a new intermodal service via its hub in Zeebrugge to Lyon (see box story below), and significantly upgrade its operation between northern Europe and Iberia. A third roro vessel has been added to its Iberian network, and this has allowed the carrier to also call at the northern Spanish port of Santander. It means that CLdN is now offering two sailings a week between Rotterdam and Santander, and three sailings a
week to/from Leixões, up from two sailings a week previously. CLdN is one of the biggest roro operators in the trade, moving in excess of 1M trailers and 1M vehicles a year. 

 

Meanwhile, Copenhagen based DFDS has ordered two ro-ro vessels of 6,700 lane metres (450 trailers) capacity, with options for four more, from Chinese shipyard CSC Jinling. The ships, which will feature scrubbers for removing sulphur from emissions and modern ballast water treatment systems, represent an investment of approximately DKR1B (US$146M) on the part of the Danish company. 

 

Trailers to containers 

 

The problems encountered in the English Channel have also resulted in some cargo owners switching their business from trailers to containers, although Europewide this is a trend that has been taking place for several years.

 

While container services are slower than ro-ro operations, especially those where drivers accompany the freight trailers, they tend to be more flexible and are definitely cheaper. Above all, it is reliability that is the most important factor, and lo-lo services have improved and can offer highly effective justin-time solutions in the shortsea sector. Furthermore, the use of 45ft pallet-wide containers has meant similar payloads can be moved as in trailers (see page 25). 

 

Samskip thinks containers will also increase their share of the market, because they are truly multimodal and can be better integrated into more environmentally friendly intermodal service offerings, which fit more neatly with the EU’s transport policies. 

 

Eva Rademaker-de Leeuw, manager of marketing and communications at Samskip, explained: “We have noticed that in recent years, more and more clients are seriously considering converting their freight from trailers to containers, and we expect container and multimodal shortsea transport services to become increasingly important.

 

“We see a major driver of this conversion being the European Commission’s white paper Roadmap to a Single, European Transport Area, published in 2011. It shows that the EU wants to create a single European Transport Area and dramatically reduce Europe’s dependence on oil. The key goal is to have established a 30% shift of medium distance passenger and freight journeys from road to rail and waterborne transport by 2030, further increasing to 50%
by 2050.”

 

However, it is not all plain sailing for shortsea container specialists. They often face stiff competition from their mainline/deepsea (MLOs) counterparts, which load cargo on an opportunistic and selective basis between European 
ports, as a way of boosting their load factors. Their actions are particularly noticeable on the longer-distance corridors, such as those between Scandinavia and Iberia, the Continent and Italy and/or the UK to Turkey. 

 

It is also important to distinguish between those ocean carriers whose main business is intra-regional cargo and those that rely on feeder boxes from MLOs. The relationships have become increasingly blurred in recent years, as  traditional common-user feeder companies, such as Unifeeder and Team Lines, now carry cargo from both camps. Only XPress Container Line is wholly committed to common-user feeder operations and carries no local cargo.

By contrast, the Iceland-domiciled carriers Samskip and Eimskip, which compete aggressively with each other, are focused on European imports and exports, reefer cargoes and the provision of value-added logistics services. Their 
networks have been progressively expanded through a mix of organic growth and mergers/acquisitions, and this year has been no different. 

 

While Samskip has strengthened its operations in Norway by acquiring Euro Container Line and the reefer ship and cold chain logistics specialist Silver Sea (previously Silver Green), Eimskip has forged a strategic alliance with  Greenland-based Royal Arctic Line and announced the purchase of a 90% interest in Rotterdam-based Extraco Internationale Expeditie. The latter deal will boost Eimskip’s share of the reefer logistics market in the Netherlands.

Extraco provides transport services to importers of chilled and frozen products in the Netherlands, and also offers import services, including handling, warehousing, customs brokerage, and distribution for bulk, chilled and frozen goods in the region. 

 

Seago and Maersk

 

Seago Line is something of a hybrid, as the Copenhagen-headquartered operator was established in 2011 with the specific objective of running Maersk Line’s intra-European services and its affiliates’ feeder links in the region. While Seago still moves the bulk of Maersk’s European relay volumes, it has to compete for this cargo. 

 

In starting new services, Seago has to carefully evaluate the benefits that will accrue to each sector of its business, as conflicts of interest can arise and/or customers’ demands can easily be compromised, given the different operating disciplines of running feeder and local cargo services.

 

The provision of dedicated (or at least streamlined) shuttle loops is the most straightforward way of dealing with these challenges. This approach was perfectly illustrated by the launch of the Algeciras, Dublin and Liverpool service
earlier this year. 

 

First, the use of the Spanish port as a relay hub, rather than Rotterdam, has improved Maersk’s transit times for Irish imports from/exports to Asia. Second, by using Algeciras as a hub, it has meant Seago providing its Irish  customers trading with North Africa and the Mediterranean basin, in particular, with much quicker transits and more reliable connections.

 

Brian Godsafe, managing director of Maersk Line UK & Ireland, said: “This development represents a major change for our Irish customers, who will now receive a faster and direct call service to better meet their import and export needs.” 

 

Robert Clegg, general manager for UK & Ireland at Seago, was equally enthusiastic about the new operation and the opportunities it would give the carrier. “This service means we are well placed to serve customers looking for new opportunities through a Mediterranean connection, thanks to our competitive transit times and convenient berthing windows. We are also able to offer our customers in Liverpool’s hinterland access to south European and north African markets.”

 

Seago is actively investing in its network, and a series of 3,600 TEU ships ordered by sister company Maersk Line in 2015 from the Cosco Shipyard Co in Zhoushan, China, are scheduled to enter the carrier’s North Sea and Baltic 
Sea regional operations next year. 

 

The seven ships, which will be powered by marine gas oil, will be delivered between April and November, and will replace tonnage half their size or less, giving Seago significantly improved operating economies of scale.

 

Eyeing breakbulk

 

Seago believes that containerships will continue to increase their share of the intra-European trades, especially at the expense of breakbulk services and particularly in the Scandinavia/Baltic Sea region. “Our general advantage is that
we provide stable and reliable services on fixed schedules, and this gives us a lower cost base in general,” said a spokesperson for Seago. “We do not believe that the conversion from traditional breakbulk carriers to container shipping lines has stopped, and we see, for example, liner companies increasing their share of the project cargo market.”

 

Elsewhere, the intra-European trading specialist Containerships is also modernising and expanding its fleet. Despite some significant fiscal challenges in the past couple of years, and a decision to change the shipyard contracted to  build its pioneering dual-fuel LNG-propelled  tonnage, the recently publicly listed company expects to take delivery of the first four units in a series of six ships in 2018. 

Each vessel will be able to load 1,400 TEU, but could accommodate a full complement of 639 x 45ft containers if required. The new ships will be owned by GNS Shipping/Nordic Hamburg, and Arkon Shipping will be the commercial  manager and charter broker. 

 

The varied operating strategies and intense competition has meant that rates in the intra-European trades are among the most competitive in the world, and they have been falling in most years since 2011. According to Container Trade Statistics’ pricing index, which is calculated on the basis of average rates recorded in the trade in 2008, a continuous slide in freight rates has taken place since 2012, with the rate of decline posted last year the steepest of all (see table above). 

 

The situation emphasises the need for carriers to be vigilant on their costs but, at the same time, proactive and innovative when it comes to investing in assets and services. The European trades will remain a melting pot, full of  challenges for the foreseeable future. 

 

Read this item in full
This complete item is approximately 3000 words in length, and appeared in the October 2016 issue of WorldCargo News, on page 41. To access this issue download the PDF here.