Battle lines drawn for UK cargo volumes

DP World's new port in Britain launches blitz to woo Asian cargo owners and shippers in fight with Hutchison's Felixstowe for market share

PUBLISHED : Friday, 12 October, 2012, 12:00am
UPDATED : Friday, 12 October, 2012, 3:00am

The flat lands of Britain's east coast seem an unlikely battle ground between two of the world's largest port operators, but DP World's London Gateway will go head-to-head with Hutchison's Felixstowe port for Britain's cargo volumes.

London Gateway, which is costing the Dubai-headquartered port operator about £1.5 billion (HK$18.6 billion) to build, is set to open in about a year's time. But senior London Gateway executives are gearing up for the tussle with Hutchison with a two-week, six-city Asian roadshow that kicked off this week in Shanghai and continued in Hong Kong.

The seven executives will visit and speak at shipping and logistics conferences and exhibitions in Shenzhen next week. They will also meet cargo owners and shipping lines in Taiwan, South Korea and Singapore.

Simon Moore, London Gateway chief's executive, said it was the first time the port had participated at the Shenzhen events.

The Asian blitz is being done now because the fourth quarter is typically when new cargo contracts are tendered and agreed between cargo owners and shipping lines.

"Cargo owners are thinking about next year. We want them to include references to London Gateway in bills of lading and requests for qualification and requests for proposals" on cargo tenders, Moore said.

He said the port was expected to agree deals with container lines and exporters shortly.

Moore avoided naming specific companies but paper exporter Cycle Link UK has already agreed to use the port to ship waste paper from Britain to China. The firm is part of Shanghai Taison Pulp & Paper (Group) which has a network of mainland mills including a facility in Zhapu, near Shanghai, which handles 3 million tonnes of recycled paper a year and climbing to more than 5 million tonnes by 2015.

Carsten Hinne, the managing director for logistics at DB Schenker Rail, confirmed the train operator is planning to run rail freight services as soon as the port opened, "connecting London Gateway to the northwest, the Midlands and the south" of Britain. The company will also run four trains a day between the port and Scotland.

Hinne said plans were being studied to run freight trains from the port through the Channel Tunnel to Europe.

The company is one of the investors in a network of container freight terminals in China and operates a regular service between Shenyang and Leipzig, Germany, transporting BMW car parts to China.

Research by maritime consultant Drewry showed savings of US$306 per container in road transport costs for companies in London and the southeast of England that used London Gateway, compared with Felixstowe, and about US$100 per container for those in the British Midlands and further north. "London Gateway will bring Asia 200 kilometres closer to the point of demand," Moore said.

He said the first berth at the port, due to open in the fourth quarter of next year, was already three times oversubscribed as cargo volume demand outpaced berth capacity. A second berth would come on stream six months after the first. He added that physical restrictions to complete the necessary construction and testing meant "we can't deliver the berths any quicker than we can at the moment".

The three-berth first phase will handle 1.6 million teu (20-foot equivalent units) while future phases that will be developed according to demand will boost the port's total capacity to 3.5 million teu. By comparison, Britain's total in and outbound container volumes are 8 million teu.

One Hong Kong transport and industrial analyst said: "London Gateway will be a threat to Felixstowe, although as the global market share leader, Hutchison will probably hold on to a number of large customers that use all of its other ports globally."