PortEconomics co-directors and several members of the PortEconomics team are in Gothenburg, Sweden, to attend the European Sea Ports Organisation 2014 Conference. While they shape discussion of the conference they provide to the readers of our initiative the “PortEconomics diary” live from Gothenburg.
Under the overall theme “level playing field between ports, a must or a myth”, the conference aims at giving some more substance to this concept by looking how ports compete at different levels, which factors determine competition, which factors can undermine fair competition. The conference also wants to assess how the competitiveness of a port can be challenged by different elements on which they have no leverage and to investigate on the contrary how ports can play a role in keeping industry in Europe. In a final debate both ports and European policy makers will discuss the role of policy in enhancing the level playing field and will hopefully answer the basic question of this conference: a level playing field between ports: Is it a must or a reality?
09h00: A welcome surprise by PortEconomics members and colleagues participating at the flagship European program PORTOPIA: The arrival of participants is accompanied by the dissemination of the PORTOPIA leaflet and gift – more about PORTOPIA here
09h20: Isabelle Ryckbost, Secretary General, ESPO welcomes participants
09h30: Santiago Garcia-Mila, Chairman of ESPO, opens the Conference stating, “for European ports finding a common ground regarding the Commission proposal for a Regulation on port services was not a walk in the park”. ESPO however managed to open the dialogue. There are many more to be discussed. The 2014 conference is about leveling the playing field between ports… It is interesting to understand the implications of alliances and bigger containers…
10h00: The hosting port: Magnus Karestedt, CEO Port of Gothenburg, expresses the importance of knowing how port authorities create value? How do they organise resources to advance competitiveness?
10h05: The first President of the Transport Council of the European Union to address the ESPO Conference: Miltiadis Varvitsiotis, Greek Minister for Shipping and the Aegean, stresses the importance of the recent Athens declaration for promoting the maritime economy. Short-sea shipping is back on stage, along with the TEN-T programme. Passenger traffic deserves more attention.Environmental protection discussion is associated with LNG presence in ports.
The aim of the new Commission to be elected will be to create a stable framework for state aid, so that investments are not delayed because of a ‘case-by-case’ examination. The Council had several discussions but it is still not clear what the Commission proposal will be.
The port regulation will not go away, but the initiative needs to secure that it does not undermine the competitiveness of port. The Greek President has not reached an agreement on which areas to be liberalised. We need to realise with whom are port are competing. Do they compete with each other? Or they compete with other ports internationally.
The Greek minister focus on port privatization stating that this is a target that has been a priority in Greece to make a better use of infrastructure. Meeting specific targets from privatization is important. A major challenge how to privatize Greek ports. Varvitsiotis acknowledges that the process has puzzled both Brussels and the Greek government, and calls the selling of the shares of the ports of Thessaloniki and Piraeus ‘a call for tender’.
Cruise activities and the cooperation of ports on this sector are important in order to offer multiple opportunities to cruise lines and cruisers…
10h40: ESPO Conference participants vote: “Level palying field between ports: A Must or A Myth?” Replies by 149 participants: A must: 57.4% A myth: 42.6%
10h45: Voting time: ESPO Conference participants vote: “Are ports recovering from the economic crisis? Replies by 156 participants: Yes: 78.2% No: 21.5%
10h30: Theo Notteboom, PortEconomics co-director, provdes an outlook of trends in the European port industry. There are signs of recovery, although the traffic volumes are below those of 2008. There is a recovery in dry bulk while liquid bulk is declining… Container business is on the rise with 27%… The LNG market is a very important and booming market and will play a significant role in the future. LNG for bunkering is expected to increase to 20-30% between 2025-2030… The steel industry is under a moderate growth of 2%… There is a war regarding distribution networks as a new wave of them is underway (especially for container transport), lthough there are a lot to do especially for the optimization of hinterland accessibility… Container shipping alliances are not putting all eggs in the same basket. They distribute the flows, and this is something that creates opportunities for some ports.
The EU port traffic is still below the 2008 volumes but is recovering… In 2013 we observed zero growth…In 2014 the growth of the European port market is expected to be 1.8-2%. Container market are estimated to growth by 3%, while liquid bulk will decrease by 2,5%-3%. Finally the other cargoes are expected to grow by 3-6%. The outcome is that the EU ports are still fragmented while they are facing commonalities challenges.
PortEconomics co-director Theo Notteboom concludes in style; PORTOPIA is central stage:
11h15: Time for a break – regular updates will follow; stay tuned…
11h20: Life at PORTOPIA: The ports of Dublin, Stockholm and La Spezia visited the PORTOPIA booth during the break and expressed their interest to step up the contribution to PORTOPIA. We would like to thank these ports for their interest and look forward to collaborating. Visit us at the permanent PORTOPIA booth or the PORTOPIA Roundtable, animated by Michaël Dooms, PortEconomics member and PORTOPIA coordinator, later this afternoon at 16.00.
11h35: Time for an update from a users perspective: Shipping lines approach presented by Tim Power, Drewry. Tim presents the liner shipping fundamentals: a highly cyclical industry cycles driven by cash balances and cash… Last years more sources for shipping finances… scale economies are important… Cycles were always here and will continue… Structural overcapacity… Push for short-run contribution- rate erosion… Focus on price competition… Limited differentiation of product; price competition… No coordination of capacity development, intense competition… Falling rates have a limited effect on demand… Liner shipping makes money by accident… The P3 will be a powerful force.
11h45: Port Authority reactions: Giuliano Gallanti, President of PA of Livorno: “Where are ports? How they will accommodate the bigger ones? Made my turn to a ‘lake’ with only few accommodating big vessels. Is this a political problem?”
11h50: The shippers perspective by Ghris Welsh, Secretary General of the Global Shippers Forum: Shippers support vessel sharing agreements that improve service options, frequency, reduce costs, leading to lower rates… Does P3 pass the test? The jury is still out there… The US perspective: FMC agreed and has imposed some strict monitoring conditions including PR3 must negotiate individually with terminals. The focus is now on DG Comp for further investigation on the P3 compatibility with the EU competition guidelines. …Shippers Ned reassurance that the P3 will not eliminate effective competition and that shippers will share in the benefits through improved services and lower rates…
12h05: Port Authority reactions: Eddy Bruyninckx, CEO Antwerp: Alliances are about rationality of operations. We faced different questions of rationality in the past, i.e. remember 2005 & 2006: Everybody was talking about congestion… Now the factors of rationality are different… Efficiency requires scale… This applies to all not to vessels only: we need big ports, big vessels, big corridors, to have big business… and we need them to be efficient… The basic fact: Cargo is King.
12h10: An update on trends in Far East, by Eung-hyuk Lee, Busan Port Authority. Βigger vessels are a problem everywhere: Dredging, channel drafts, and safety issues need to be addressed… But do you prepare for fully loaded vessels? And what will be the effect of the Panama Canal and the cascading of vessels to trans-pacific trade?
12h45: What about small ports? Theo Notteboom argues that there is a role for secondary ports in the future, even if scale is important: this depends on the content of the cargo… Tim Power provides examples of UK small ports that survived because they managed to enter logistics game… Marc Desmonds, Terminal Investment limited, agrees: a big vessel might carry everything that can be carried in bulk, so through cooperation there might be opportunities for smaller ports despite size increase. This requires a vision. Shippers add to the concept: yes there are prospects by port-centric solutions. Chris Welsh, ([for shippers] Big vessels are the best thing after sliced bread”.
12h50: LIFE at PORTOPIA: The portopia stands idle during a session on the P3 alliance … With PortEconomics member Theo Notteboom asking the panel about the link between martime and inland distribution networks
12h55: Re-voting time and the effect of debate: ESPO Conference participants re-vote: “Ports are facing increasing market forces”. This could be a threat for ports – 37.2%. This could be an opportunity for ports – 62.8%. Is sceptisism back?
13h00: Delegates break for lunch – regular updates to follow.
13h00: LIFE at PORTOPIA: awareness was created during the break in the plenary room through a video (available shortly on ESPO, PORTOPIA and PortEconomics websites) as well as a presentation on both some updated and former work of PortEconomics.eu members Theo Notteboom, Michaël Dooms, Peter de Langen and Thanos Pallis in the context of PPRISM and PORTOPIA.
14h00: The platform to the Commission: Keynote speech by Olivier Onidi, Director European Mobility Network, European Commission DG MOVE: ESPO a strong partner in Brussels… 2014 a politically and economically transition year. Good prospects for economic growth (although still fragile for 2014). Ports are representing an important aspect for the competitiveness of EU… Ports are more and more engaging in investments. Is not about small or big is about the chain
Public intervention and public funding are heavily present in ports. Multiple players interact in port. The basic principles: transparency and clarification of state aids. Strong public role for ports needs to be recognised.
The debate on port regulation at the EP will continue, but a cross-party agreement seems to be there…Need to rethink what type of infrastructure is needed… National choices are important… Commission expects contribution by ports… Request to not focus only at chapters focusing on ports only.. “Freight services” are something to help ports, financially and beyond… ‘More integration” is also a concept to help ports…
Need to rethink what type of infrastructure is needed… National choices are important… Commission expects contribution by ports.. Request to not focus only at chapters focusing on ports only… “Freight services” are something to help ports, financially and beyond, ‘more integration” is also a concept to help ports… Commission will take into account the input of social partners. A lot of pride when looking at the strength of European ports.
Three principles will guide European Commission activities: First, a stable framework providing autonomy for the necessary modernisation; this is the aim of the draft regulation.. Second, to continue to help ports integrate in the overall logistics chain; don’t forget Horizon 2020 Third, a strong a dedicated work force.
14h20: External factors that might influence the playing field between European ports: Starting from the Arctic route state of play: Felix Tshudi, Chairman of Tshudi Group talks why his company started using the route, the economic sense, the conditions and the logic of ice-breaking multi-purpose vessels.
Moderator Olaf Maerk, Administrator Ports & Shipping, OECD, qualifies the argument: “an effect for at least some ships at least in some regions of the world”
14h35: Crossing the Atlantic: Manuel Benitez, Panama Canal Authority: 104,3851 vessels have crossed the Panama Canala 1914-2013. Panama 22% of gantry cranes around the globe. When the new Panama Canal is completed 2016, 13,200 TEU vessels will be able to pass. Today this limit is just 5.100 teu.
Message from the other side of the Atlantic: Participants enjoy a video on the expansion programme of Panama Canal, when AAPA (the Association of American Port Authorities) tweets: “Without investments that rebuild and/or renew infrastructure, America will lose…” The need for infrastructure investments is today discussed at both sides of the Atlantic.
15h05: Is the Panama canal a game changer? Rune Arnoy, CEO Narvik Havn, welcomes the opportunities that the expansion of Panama Canal brings with.
15h10: Note of caution: Rune Arnoy recalls that some years ago port conferences were certain that 8.000 TEU vessels will never be reality; Your PortEconomics reporters worry & hope that we talking and reporting sense this time !!
15h15: The periphery of Europe: Steve Bouckaert, Senior Manager, Maritime Transport and Business solutions presents the recent key shipping economic developments in neighbouring regions, asking to look ‘beyond the continent’ (Europe, that is)… Magreb countries are part of the game. Developments in Egypt and the Suez Canal, the difficulties in Syria, Ukraine, Russia are accompanied by major developments in the port industry (i.e. Mersin, Piraeus rising)… Need to think beyond the Le Havre-Hamburg range, as there is substantial traffic in South-East Europe and the adjoining regions. The industry operates “beyond the European continent” as “Europe does not end at the borders”… Transhipment brings more than transhipment; one needs to look at Tanger where the impact that this vision of the Moroccan government has affected both imports and exports in the region… The ‘Ukraine – Russia” turbulent times will affect Baltic ports -given the traffic relations with Russia. The tension might result in shifting cargoes and traffic.
15h45: Coffee break – and PortEconomics heads to meet port authorities at PORTOPIA booth.
16h00: Special session on concession directive and PortEconomics member Larissa van der Lugt reports: key to the discussion on the new concessions directive are following questions: What kinds of contracts are we talking about? Do we talk about the same thing? This is not clear as shows also from the discussion of the participants; but should be made clear also because particular concession types, land lease contracts, are not covered by the Directive. And if the interpretation remains vague it is extremely difficult to act properly on this. This requires additional discussion both by ports as stakeholders over the Directive that should be done in the coming period.
16h00: Life at Portopia: The project team provides an extensive demonstration of the prototype of the PORTOPIA service cloud which is quickly devoted to become a user-friendly and reliable statistical interface for port managers and decision makers. The project coordinator, Michael Dooms of the VUB University (Brussels), the group of ICT managers from GLINTT, and other team members met a delegation of port authority managers attending the ESPO conference for showcasing the main characteristics and potentialities of the data warehouse developed during the first months of the project. At this early stage, the data warehouse was fed using the data from the Rapid Exchange System (RES) – a platform involving over 60 ports across the EU – the statistical departments of some port authorities and other sources. The PORTOPIA cloud service, which is going to aggregate meaningful and transparent performance indicators (e.g., market structure, governance, environmental and social issues, inland connectivity, etc.) on major EU ports, aims to provide multiple-functionalities to stakeholders in regard to data consolidation, analysis, reporting and benchmarking.
16h00: A research agenda for ports: PortEconomics members Peter De Langen and George Vangelas participated in a roundtable regarding the development of a research agenda for ports along with Dimitrios Theologitis (DG MOVE) and representatives from ports (Valencia, Venice, Gdansk, Busan) and Universities.
Ports highlighted that their priorities regarding research is focused on efficiency, environmental sustainability, integration of ports in supply chains, information management systems in ports, security and safety, ort governance and port-city relations. On behalf of European Commission Mr Theologitis stressed the need for the development of an agenda. This requires the active participation of ports which have to think out their needs in the years to come, to examine what they have and what they will need. As Mr Theologitis pointed out the EC provides some instruments regarding research in the port industry like the Horizon 2020 framework. The EC needs basic reflections from the port authorities and the terminal operators regarding their research needs. Challenging times – as a participant said, the other transport sectors “are sucking” research funds, while the port industry in this section is at least ten years back.
17h00: Economic outlook for Europe and impact on ports: Yves Leterme, Deputy Secretary-General, OECD (Belgian Prime Minister 2008-11) reports on the strengthening of the economy: Euro area heading for +1.2% growth in 2014 and 1.7% in 2015. Growth in OECD countries lower than that of emerging countries.
17h30: Ending of a long day – time to party: PortEconomics diary will return tomorrow with news of the 2nd day developments.
09h00: Voting good morning: Participants, and PortEconomics members, gather again for the 2nd day of the ESPO 2014 Conference, starting with voting:
09h10: Discussing the role of ports, transport and transport policy in keeping industry in Europe: Knut Hansen, Senior Vice President, Stora Enso Logistics: Paper market in European paper demand was 42 million tones in 2007, it just 32 since 2007. Three κey factors for ports wishing to be part of supply chains: Cost, Reliability and Agility – with the latter becoming dominant.
09h30: Another users (shipowners) perspective: Paul Kyprianou, External relations Manager, Grimaldi Goup suggests that ports should specialise; when ports want to do everything does not really help…. North African ports might challenge the European ones… Future stricter environmental regulations will affect ports… Time to rethink which instruments might further promote the use of maritime transport – this is because of the need to avoid distortion of competition – and pleads for the installation of European Eco-bonus system.
09h45: Another users (shippers) perspective: Per Bondemark, Chairman of the Swedish Shippers’ Council: Severe impact of the sulphur directive for the Swedish and SECA area economies. High capacity utilisation of railways that need modernisation. Slow steaming EU decisions on heavy trucks; cross bordering traffic of truck regulation is under examination.
10h00: Auditing port project: Luc T’Joen, Principal Auditor, European Court of Auditors, Transport and Energy – Performance Audit discusses whether EU funding schemes for transport freight services and infrastructure are effective for ports. The Court of Auditors examined port project effectiveness; focusing on results impact and consistency with the EU transport policy objectives. One out of 27 projects examined did not support transport infrastructure at all. Three (3) projects ended with completely empty ports. The number of port projects that at the end do not support transport were 5.2% of audited projects.
As a next port generation expasion will need money, Luc T’Joen offers recommendations to managing authorities looking for European financing of their projects: 1. Plan well ahead; 2. Reduce read tape and delays; 3. Improve transparency in selection of projects; 4. Focus on use and results (not only building).
There are recommendations to the Commission as well: 1. Increase the added value of the decision making process. 2. Ensure sound financial management (…and stop paying)
10h45: Break time – with PortEconomics members ready to enjoy Life at PORTOPIA booth.
11h00: Voting time and a close call: Is European port policy enhancing the level of playing field? Yes 45.6%; No: 55.5%.
11h05: Commission takes the floor: Dimitrios Theologitis, European Commission, DG MOVE, Head of the Ports Policy Unit : integrated ports in the TEN-T network – a historic moment: A visual representation of what Europe is about. These are multimodal corridors. What has been already been done:
- Appointment of European coordinators for each TEN-T corridors. Including the Adoption of the annual and muti-annual programmes for 2014-2020. Publication of calls for proposals September 2014.
- Reduce of legal uncertainties; including the adoption of Directive 2014/23 on the award of concession contracts (March 2014) 2 years for MS to transport; the proposal for port regulation; the commencing of the infringement procedures against abused restrictions of port services.
- Modernise state aid rules – (transparency of accounts is important).
- Promote a good social climate in ports – Four meetings of the committee for a European social dialogue since June 2013.
- Raise the environmental profile of EU ports and promote innovation; including agreement on the Clean power transport directive (March 2014) =- LNG refuelling points and shoreside electricity by 2025; inivitation to see ports developing an agenda for innovation and research (Horizon 2020)
An interesting note by Dimitris Theologitis: It was the member states that promoted the restrictions in SECA region – not the Commission. This took place without the normal consultation process being in place.
Theologitis on Port Services regulation: The state of discussion in the Council: Open issues include scope charging supervision, transparency for small ports, and consultation of users. A progress report for the Council of Transport Ministers is exected on 5 June. The state of discussion in the EP: A letter of TRAN President Simpson to Commissioner Kallas “important file; make the best use of time extension. Commission agrees with some of the Rapporteur’s amendments that improve the Regulation: avoid administrative burden of supervision; rules of charging.
11h30: Commission on State aid: Joachim Luecking, European Commission, DG Competition, Head of Unit, State Aids: industrial restructuring emphasises that any provision of aid should secure compatibility with Treaty provisions – the question is not what level of traffic is handled but whether intervention is necessary. The assessment of state aid has changed over time; before 200 basic infrastructure were though to be out of scope. The Court decisions on airport since 2010 and 2012 seems to be the turning point. The decision on airports by the Court states that the construction of infrastructure is an economic activity especially when connected with the use of infrastructure. The Commission feels that this applies to all infrastructure not only to airports (a case that this applied is the port of Katakolon). Proposals need to be realistic (i.e. parking, malls, and spa were part of a proposal. But these project are not “infrastructure”).
- Principles for public funding: (1) Are they of common interest (2) Financial value of project is not negative. (3) Money spend is limited (4) Effect on competition that the projects will have. Aid would be limited to the funding gap.
- Conditions: (1) The concessionaire to be selected through an open and fair tender – not unfair as the concessionaire pays a market price for the use of infrastructure. (2) Equal and non-discriminatory use by shipping lines.
- Questions remaining to be answered: (1) Need to analyse the competitive position of the port . How this might be done better ? (Explicit criteria exist in the case of airports: that there is not unused capacity 100 kilometres further). (2) Should port fees allowed to remain low? Or should rise to cover the funding of the project.
- What seems clear is that there is not possible to cover operational project.
- Calls for clarity are present and understandable; acknowledgment that this is important… the case by case examination is not necessarily negative, gives the boundaries of what is possible.
- Guidelines can provide clarity but not legal certainty (i.e. a individual might still complain against a project receiving aid.) Block exemption needs detailed criteria (i.e. intensities, amount) to be given to member states on how to operate. There are 8 categories that would be possible to give such exemption (i.e. disaster conditions).
Overall four building blocks for : (1) individual cases, (2) state aid details, (3) guidelines, (4) block exemption regulation and whether ports would be included.
11h30: EP and Knut Fleckenstein, MEP and Rapporteur for the Ports Policy Regulation, notes that ports need to use this mechanism to develop their strategy; they need to be free to negotiate with customers; not to be forced to provide a minimum level of charges.
To his view, consultation with users is essential but needs to be done by ports and be flexible. What is needed is a body to receive the complains. This can be done at different levels. Whenever such body exists there is not need to recreate it. There is not need to create an ideal model and role that everybody might assume.
We need a framework that allows to ports and policy makers to act within these principles… We don’t have a good answer yet on how do we define private and public ports. We need to find it….Restructuring of European Parliament will mean chances but Mr. Flankenstein promises that he ‘will not leave ports alone’.
It is not clear whether the process might conclude by the end of the year. Most important: four elements need to be in place in order to to complete the picture of a real European port policy. Beyond the proposed regulation we need:
- Concession directive to be in place– that is already there
- Social dialogue to conclude – is in progress, with mixed reactions;
- State aid rules to be defined- and this the most questionable; it has destructed the progress.
The EP will not open its cards before the Commission open its own cards, but one needs to remember that this is a completely different picture of what happened in PSD I and II.
12h00: Port Authorities views on European Port Policy (EPP): Victor Schoenmakers, Director European & International Affairs, Port of Rotterdam Authority, A competitive activity is important; if you assign this to ports it will affect the policy. We have to do it… and this will be a first step in understanding the right policies. With reference to the Dutch study on port financing in the cross-border region Vitor notes that the report concluded that there are differences in neighbouring countries. This doesn’ t support the market and needs to be addressed.
Stavros Hatzakos, General Manager, Piraeus Port Authority, focuses on the issue of subsidiarity.. we support financial transparency….The different conditions in different market development should be taken into account…We should not forget that ‘port are engines of wealth’ …The imbalance of trade South and North exist but we need to see that the ways that cargoes reach Europe are changing. Specific rules need to be there in order to produce effects…careful moves to avoid the crisis spreading…The proposal should go ahead. Yet we need to take care of what happens in nearby regions outside Europe. Ports outside Europe might gain competitive advantage by operating and charging in a very different reaction
Eamonn O’Reilly, Chief Executive, Dublin Port Company, compares EPP initiaitves are “the dots” that we need to combine them carefully. We need to create a “Mona Lisa” not a “Gorilla”…Should be sensible with the waste of capital…Allowing the freedom to commercial entities to do the right thing….We need to collect these right principles in a simple policy framework. Subsidiarity should be in mind…All about transparency- it is the cheapest solution.
12h25: Have you heart of Killing charging prices? D. Theologitis reminds all that charging at an appropriate rate is too important. “Killing charging” practices are in place; they are there not justified by the finances but financial state of the ports but are present because of the rich financial aid by states.
12h30: ESPO Conference participants vote once more: “Level playing field between ports: A Must or A Myth?” Replies by participants: A must: 50.0% A myth: 50.0%. Game is far from being over.
12h30: ESPO memorandum for the Euro-elections: Isabelle Ryckbost presents the ESPO Memorandum for the EU 2014 Elections. It contains 6 principles:
- Important role of Transport and Ports in the Move towards economic growth.
- No ports, no industry
- Ports in the European TEN-T Policy: from word to action
- The internal market for maritime transport: No time to waste.
- European ports operate in Economic, societal and environment context.
- A ports policy that empowers Europe’s ports to meet tomorrow challenges.
12h45: Port of Piraeus is the next destination of ESPO Conference. PPA general manager Stavros Hatzakos presents the port of Piraeus, and invites participants to ESPO 2015 in Piraeus Greece.
12h55: End of ESPO 2014 with a vote: Most visitors expect to return next year !!!
13h00: PortEconomics concludes its diary – inviting its visitors to stay tuned:
- return for further details of the issues discussed during the most interesting Conference
- remember that there is Life at PORTOPIA