2015 European Logistics Update: Stuck between hope and fear

In Europe, the new year has started out in much the same way as the old one—with political and financial uncertainties and many questions revolving around the future of trade within the region. How will the European community respond to the Greek debt crisis? Can the Eurozone afford a possible Greek exit? Can the Transatlantic Trade and Investment Partnership (TTIP) meet expectations regarding elimination of tariffs, harmonization of standards, better regulatory cooperation, and improved access to the U.S. and European markets?

Last year, shippers, carriers, and logistics service providers on both sides of the Atlantic were faced with many challenges, but 2014 was not as bad as expected in terms of the logistics and transportation landscape. The major European seaports and airports reported growth, investments into infrastructure projects are well underway, and traffic routes and services have been expanded.

With this relatively good news in mind, let’s look and the developments shaping the logistics and transportation environment throughout Europe.

Greece: Keeping the world in suspense
At the beginning of 2015, Europe and the world held its collective breath. In February, Greece finally made a marathon deal with its creditors to extend its 172 billion euro bailout by four months. However, this only brought short-term relief in the Eurozone and concern is still great that the Greek promises will not be kept. In fact, the new government has already suspended the planned privatization of transport infrastructure projects.

Last year, the German airport operator Fraport was awarded a contract for 14 Greek regional airports, but now the deal is in danger of failing as the new government has stopped the sale pending review.

In November 2014, together with its Greek partner Copelouzos Group, Fraport received operators’ licenses for the airports. At that time, the total purchase price was approximately 1.23 billion euros, with Fraport planning to hold at least two-thirds of the shares in the airport consortium. The final contract was originally to be signed later this year, but the new government, under Premier Alexis Tsipras, is rejecting further privatization in the debt-ridden country.

At this time, unfinished privatization projects are being reviewed, so a number of other privatizations are also on hold, including sale of the port of Piraeus, where China’s Cosco is involved. Cosco currently operates two of the three container terminals in the port, including Piraeus Container Terminal (PCT), which handled almost 3 million TEU in 2014.

At the same time, Tsipras campaigned to strengthen economic relations while visiting China and offered Beijing his support for investments. According to Tsipras, the port of Piraeus should be expanded “to become one of the most important hubs and gateways for Chinese goods arriving in Europe by sea.” In the meantime, Europe and the U.S. are cautiously observing Greece’s move toward closer ties to China and Russia.

Northern EU ports see stable trade
While the Aegean region is under stormy weather and the future of the port in Piraeus remains uncertain, the ports along the Hamburg-Le Havre range are enjoying smooth sailing.

In 2014, container trade into and out of Europe showed positive growth trends overall despite the difficult economic environment. According to Container Trade Statistics, a weekly report, in February 2015, twenty-foot equivalent unit (TEU) volumes to and from Europe—including all countries bordering the Mediterranean and among European countries—increased by 5.4 percent to 46.9 million TEU.
Imports grew faster than exports (5.7 percent and 4.5 percent, respectively), while regional trade—excluding feeder boxes—was up 7.3 percent. Exports from Europe increased on all routes, except for Latin America, while trade to North America benefited from the depreciation of the Euro against the dollar, leading to a 9.6 percent growth rate.

Containerized imports into Europe were higher, particularly due to a high 7.4 percent rise in Far East imports and a significant increase in trade with the Middle East/ISC. With the lower value of the euro, European citizens apparently decided to buy fewer products made in the U.S., leading to a drop of 1.2 percent, reported Container Trade Statistics. Due to growing container trade, Europe’s ports in the Hamburg-Le Havre range also announced new records.

Port of Rotterdam: In 2014, throughput in the port of Rotterdam went up to 445 million tons, one percent above the previous year. After two consecutive years of negative volume growth, Europe’s largest container port was back on the growth track. The port reported a 5.8 percent increase in container throughput, at 12.3 million TEU, and a 5.2 percent increase to 127.6 million tons.

The growth was mainly driven by rising deep-sea volumes on the shipping routes to Asia and North America, as well as by the fact that the port has become a leading hub for the larger vessels, explains Allard Castelein, Port of Rotterdam Authority CEO. “In 2015 we expect the same growth in throughput as last year at one percent,” he says. “This year, the new container terminals on Maasvlakte 2 will be busy starting up. From 2016 onwards, however, there will actually be extra capacity for further growth.”

Port of Hamburg: With a total throughput of 145.7 million tons, representing a growth rate of 4.8 percent, the Port of Hamburg achieved its best-ever result in 2014. Container traffic increased by 5.1 percent to a new record of 9.7 million TEU, just slightly below the 10 million mark that is now the aim for 2015.

“Hamburg has thus consolidated its position as Europe’s second largest container port,” says Axel Mattern, CEO of Port of Hamburg Marketing. “A rise of over 50 percent in seaport-hinterland traffic in the next 15 years will decisively shape the growth in total freight traffic forecast for Germany in the future.”

According to Mattern, developments like the continued growth in Hamburg container traffic and the increasing deployment of ultra-large containerships, which now have a capacity of up to 19,000 TEU, are underlining that the port will need to move forward with the dredging and widening of the Elbe River.

Port of Antwerp: Antwerp also confirmed a new record in freight volume with a total 199,012,082 tons handled in 2014 and a rise of 4.3 percent compared to the previous year. The container segment shows robust growth both in tons and in number of boxes. The number of standard containers increased by 4.7 percent to 8,977,738 TEU. In terms of tonnage, the figure is even more pronounced, up 5.9 percent.

In 2015, the Port of Antwerp has taken a further step toward sustainable energy use by obtaining ISO 50001 certification. This standard defines the procedure for sustainable energy management in companies and large organizations. The Port Authority has defined the various areas to improve the energy efficiency of its services and departments, so as to use less energy overall.

Bremen’s ports. Bremen’s Economic and Port Senator Martin Günther was satisfied with the 2014 results on the whole, which reached new records in automotive throughput, but showed a slight decline in container volumes. “The Bremen Ports have held course in a difficult economic environment,” he said. In 2014 the ports handled 78.3 million tons of sea cargo in Bremen and Bremerhaven and 5.8 million standard containers (TEU) in Bremerhaven, a slight decrease of 0.6 percent compared to last year.

A new record was set in automotive throughput, which increased by 4.2 percent to total 2.3 million units handled at the quays of Europe’s largest automotive hub. As further growth is expected, especially in exports to China and the U.S., the logistics provider and terminal operator BLG plans to invest 20 million euros in the construction of a new parking deck.

HAROPA network of ports.  HAROPA, the French joint venture among the ports of Le Havre, Rouen, and Paris, experienced a slight decline of 1.3 percent in its total throughput, which reached 89.2 million tons in 2014. Container traffic increased by 2.3 percent to 2.6 million TEU.

According to Commercial Director Hervé Cornède, HAROPA was able to increase its market share from 5.8 percent to 6.4 percent and maintain its position as the fifth largest port complex in Northern Europe. Within the network, Le Havre has become a solid hub port for major alliances like Ocean Three, 2M, G6, and CKYHE.

Keeping an eye on major ocean alliances
The trend towards new alliances and market concentration in shipping is continuing in 2015. In February of this year, the container shipping line and global carrier, United Arab Shipping Company, announced a vessel sharing agreement with CMA CGM and Hamburg Süd to enter the North Atlantic trade.

On the basis of this new vessel sharing agreement, the three partner companies will start a new service in May that links Northern Europe with the U.S. East Coast, calling at the ports of Antwerp, Rotterdam, Bremerhaven, Le Havre, Southampton, New York, Norfolk, Charleston, and Savannah. The new service will offer competitive transit times and a weekly capacity allocation of 3,300 TEU.

In 2014, Maersk Line and MSC Mediterranean Shipping Company signed a 10-year vessel sharing agreement called 2M, which will serve routes between Europe, Asia, and the U.S. East and West Coasts. The two carriers started their services between Europe and North America in January.

European air cargo market in recovery
Despite the uneven recovery in the global economy, local strikes, European debt crises, and geopolitical tensions in Ukraine and Russia, most European air cargo markets are recovering.

According to Airports Council International’s (ACI) full-year traffic report for 2014, freight traffic across the European airport network grew by 3.6 percent over 2013. EU and non-EU airports showed similar levels of performance, up 3.6 percent and 3.3 percent respectively.

Cargo volumes at Frankfurt airport, Europe’s largest airfreight hub, advanced despite several strikes in 2014—rising 1.7 percent to about 2.2 million metric tons by the end of the year. In the meantime, throughput at the Paris airports Roissy and Orly increased 1.2 percent to total 2.2 million tons, while Amsterdam Schiphol reported a growth of 6.7 percent to total 1.6 million tons.

Clear vote for TTIP
Many companies are placing great hopes in the expansion of U.S.-European trade relations. Many hope that the Transatlantic Trade and Investment Partnership (TTIP) treaty will lower barriers and increase trade.

But the eighth round of negotiations on TTIP in Brussels earlier this year showed that there’s still much to be discussed. In some European countries there are deep concerns regarding the survival of Europe’s comparably strict consumer protection norms and standards. However, a clear vote for TTIP has come from the automotive industry.

At their recent meeting in February, the European Automobile Manufacturers’ Association (ACEA), the American Automotive Policy Council (AAPC), and the Alliance of Automobile Manufacturers (Auto Alliance) voiced their common position on behalf of the transatlantic automobile industry: Auto trade already represents 10 percent of total EU/U.S. trade.

“Together, we’re calling for a comprehensive automotive deal, which should include the elimination of both tariffs and non-tariff barriers through regulatory convergence,” says ACEA Secretary General Erik Jonnaert. “This will increase trade volumes, lower production costs, create more and better jobs, and improve industrial competitiveness. We believe this can happen without lowering the high safety and environmental standards we have in both the U.S. and the EU.”

Jonnaert adds that he hopes to see mutual recognition of EU and U.S. standards that aim at reaching the same outcomes. “For future regulations, we should aim for harmonization and encourage regulators to work closely together to find common solutions.”

German automotive industry: Yes to TTIP
There are also regional activities to promote TTIP. Under the umbrella of the German Association of the Automotive Industry (VDA), German automotive manufacturers and suppliers are carrying out a “Yes to TTIP” campaign to show that they’re standing together in their support for a comprehensive free trade agreement between Europe and the U.S.

According to Matthias Wissmann, President of the VDA, TTIP offers huge opportunities for Germany and Europe. “A transatlantic market without borders, without import duties, but with common standards and secure investment on both sides of the Atlantic…this will do more than stimulate the world economy,” he says. “It would be a source of sustainable growth and prosperity for everyone in the U.S. and the EU.”

Dr. Dieter Zetsche, chairman of the board of Daimler AG, highlights the importance of TTIP from the manufacturer’s side. “In 2014, a good 14 percent of all German passenger car exports went to the U.S.—that’s around 620,000 vehicles,” says Zetsche. “This means that the U.S. is the second most important export destination for the German automotive manufacturers after the UK. In terms of the value of exports, the U.S. actually takes first place, with more than 20 billion euro. TTIP offers a unique opportunity to better integrate our markets on both sides of the Atlantic.”