High Shipping Costs Are Here to Stay Says Bloomberg
By Henry Ren (Bloomberg) Stubbornly high shipping expenses for businesses are getting sealed into contracts for the next 12 months, forcing companies to pass the extra costs on to consumers....
By Jonathan Saul
LONDON, Dec 23 (Reuters) – Peel Ports, one of Britain’s largest port operators, expects to withstand the container shipping slump with a bold project aimed at attracting cargo to Liverpool away from southern gateways, its chief executive said.
The container market, which ships retail goods from iPhones to designer clothes and food products, has been hit hard by a slowdown in demand for goods from Asia, especially China.
The Baltic exchange’s main sea freight index, which gauges the cost of shipping dry bulk commodities such as coal, has fallen to the lowest level since data is available on the China slowdown.
Peel Ports, which competes with Associated British Ports, has invested more than 300 million pounds ($445.92 million) in transforming Liverpool into a deep water container terminal that can receive ships carrying up to 19,000 TEU boxes (20-foot equivalent units), CEO Mark Whitworth said.
It expects to start operations in the first quarter of next year.
“Our business case is predicated on taking existing market share,” Whitworth said in an interview. “In a market that is stagnant, hopefully there will be an improvement in efficiency and costs (for shippers).”
Whitworth said that around 90 percent of container volumes comes into southern British ports such as Felixstowe and Southampton while Liverpool accounts for only around 7 percent. Peel Ports is aiming to increase that to 20 percent.
Decades ago, Liverpool was a major centre for UK shipping, but failed to keep up with the push for scale by container shipping lines.
“Ship sizes got bigger and physically we could not get them through the lock system,” Whitworth said, adding that Liverpool’s port enlargement would create “a northern gateway”.
Peel Ports is 50.1 percent owned by Peel Group which is controlled by British tycoon John Whittaker. The remaining 49.9 percent stake is held by Deutsche Bank asset management unit RREEF.
“Neither are short-term investors,” Whitworth said.
Peel Ports, which handles 70 million tonnes of cargo annually and has a turnover of around 800 million pounds a year, owns several ports in the UK and Ireland. It is also developing a separate logistics hub at Salford in neighbouring city Manchester.
Liverpool will become a cargo transfer point for Manchester and beyond using smaller vessels via the 36-mile long Manchester Ship Canal waterway, which Peel Ports also controls.
Peel Ports said 50 companies had already signed up to the project to move their routes from southern ports to Liverpool, including spirits giant Diageo, discount store chain B&M , car maker Jaguar Land Rover and clothing and homewares retailer Matalan.
Whitworth said it would be “a negative step” if the UK left the European Union, when asked about concerns over a possible “Brexit” following a referendum promised by British Prime Minister David Cameron by the end of 2017.
“To some degree it would give us (Peel Ports) a level of complexity,” he said. “I am a big fan of what we have today (being in the EU). It does need to be refined.” ($1 = 0.6728 pounds)
(c) Copyright Thomson Reuters 2015.
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