A cargo ship at JadeWeserPoint in December 2012. JadeWeserPort Realisierungs GmbH & Co. KG

A cargo ship at JadeWeserPoint in 2012. Photo courtesy JadeWeserPort Realisierungs GmbH & Co. KG

By Nicholas Brautlecht

(Bloomberg) — The 33,000 containers handled at JadeWeserPort since Germany’s only deepwater docks opened for business in September are a far cry from the annual 2.7 million forecast when state governments embarked on the 10 billion-euro ($13.1 billion) project a decade ago.

That’s not deterring policy makers from pressing ahead with the development of the harbor, whose debut coincided with the shipping industry’s worst crisis in decades. The decline has turned it into a ghost port that relies on two weekly services from the operator’s main shareholder, A.P. Moeller-Maersk A/S, to keep the 400 people that work there in employment.

“It is not yet the success story we wished for, but it was right to build the port,” Deputy Economy Minister Hans-Joachim Otto said in an interview on April 25. Otto, who coordinates the federal government’s maritime policy, expects the shipping industry to overcome the overcapacity and low charter rates that are crippling returns by the end of 2014.

The port’s troubles haven’t dissuaded investors from buying the bonds of operator Eurogate GmbH, a unit of which holds a 40- year lease on the harbor and which runs 10 container terminals from the North Sea to the Mediterranean.

Eurogate’s 150 million euros of 6.75 percent perpetual bonds, with a May 2017 call date, have returned 28.8 percent since its lowest on June 26, Bloomberg data show. That compares with a 17.4 percent average return of bonds included in the Bank of America Merrill Lynch CCC & Lower Global High Yield European Issuer Index.

More Investment

Bremen and Lower Saxony, the two German states that constructed JadeWeserPort, also aren’t discouraged by the slow start. They announced on April 19 that they will spend 2 million euros to examine the technical and economic feasibility of a second container port north of JadeWeserPort by early 2015.

When more than 1,000 guests, including Economy Minister Philipp Roesler, gathered to inaugurate the port on Sept. 21, Eurogate forecast that the potential 2.7 million annual container turnover could later double.

Its 1.7 kilometer-long quay can handle four large container ships at once. Eight giant cranes, among the world’s biggest, can stretch over 25 rows of containers. The port’s depth of 18 meters (59 feet) means the world’s biggest vessels can dock regardless of the tide.

The new Maersk vessels will have the capacity to carry 18,000 standard containers, enough to ship 111 million pairs of running shoes. They will overtake CMA CGM SA’s Marco Polo, with a 16,000-TEU capacity, when the first ship sets sail in July.

Carbon Cuts

Maersk says the ship’s size, coupled with a twin-propeller propulsion system, will cut fuel burn 35 percent while halving carbon emissions.

“The battlefield for the ultra-large container ships with a capacity of more than 10,000 standard containers is the Far East to Europe trade,” said Peter Sand, chief shipping analyst at shipping association Bimco in Bagsvaerd, Denmark. “This is where they have to prove that they are much more efficiently run and thus also provide liners with an economic upside compared with those who run a less efficient fleet.”

The newcomer will have no trouble calling at Wilhelmshaven when fully loaded and 14.5 meters deep in the water. That gives JadeWeserPort an advantage over Hamburg, which can’t accommodate vessels of that size at low tide.

Still, it may be some time before JadeWeserPort welcomes the first super-ship. So far, the logistics area, the size of 224 soccer fields, has only been able to attract one major customer.

Fruit Truckloads

Nordfrost GmbH, Germany’s biggest deep-freeze logistics company, handles an average 50 truckloads of fruit, carpets and other goods at the site every day.

Eurogate is relying on Maersk, a unit of which owns a 30 percent stake in the JadeWeserPort operations company, to keep workers at the quay busy. The only two weekly services calling at Wilhelmshaven are run by units of Copenhagen-based Maersk.

One of them, Seago Line, operates smaller-sized feeder ships from Wilhelmshaven to St. Petersburg via the Finnish port of Kotka. Maersk’s Maersk Line, the world’s biggest container carrier, runs the other service, which transports goods from the Far East with stops in Japan, China and Malaysia.

“At the start, Maersk and Seago Line expected to do more in Wilhelmshaven,” said Ulf Langschwager, managing director of Seago Line Germany. “Now I believe we will hardly see the volumes we initially anticipated this year.”

Thilo Heinrich, head of trade and marketing at Maersk Line’s German unit, said the crises buffeting the industry couldn’t have been predicted when the plan was hatched more than a decade ago.

Naval Base

“The volume forecasts date back 10 years to 12 years and not a few months,” Heinrich said. “We had the financial crisis in 2009, followed by the shipping crisis, which has all negatively affected the market.”

Bremen and Lower Saxony spent around 600 million euros to transform the former naval base during the two world wars and build docks, creating new ground by pumping sand and dredging entry and landing points at Wilhelmshaven.

Eurogate and Maersk invested a further 350 million euros on cranes, trolleys, technology infrastructure and buildings to lure the new generation of container ships away from competing northern European harbors such as Antwerp, Le Havre and Rotterdam, Europe’s biggest.

Yet of the 33,000 standard containers loaded and unloaded from September 2012 through March this year, only 7,000 were in the first three months of this year.

More Megaships

“The shipping industry suffers from overcapacity and there are more mega-ships coming into the market this year,” said Thomas Wybierek, a shipping analyst at Norddeutsche Landesbank Girozentrale in Hanover. “Furthermore, Chinese growth is below expectations, the euro zone is stuck in crisis and there are no stimuli from the US.”

The European Commission expects 2013 will end in a recession for the European Union for the second consecutive year. China’s economy expanded 7.7 percent in the first quarter, trailing analysts’ forecasts and slipping from a 7.9 percent pace in the previous period.

The weaker-than expected-start meant Eurogate had to take measures to rein in costs. Since March 18, 332 of its 400 workers in Wilhelmshaven have been put on shorter hours, a policy the operator says will continue until traffic picks up.

“An expansion of the port would currently not make sense,” said Corinna Romke, a spokeswoman for Eurogate.

“We won’t reach an overall capacity of 2.7 million standard containers overnight,” she said, declining to give a volume forecast for the full year. “Our priority this year is to win a contract from a second shipping company.”

Seago Line manager Langschwager said he expects the harbor to play a supplementary role within the existing port infrastructure in northern Europe in the future.

“Should volumes in the shipping industry grow and other ports like Hamburg or Bremerhaven be swamped with containers, then Wilhelmshaven is a good option,” he said.

Copyright 2013 Bloomberg.

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