Underperforming UK enjoys massive investment in container infrastructure

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A wave of investment is being unleashed into the UK’s container handling infrastructure at ports across the country and in its hinterland – possibly at a time when it is least needed.

Yesterday the Duke of York (pictured below, left) visited Felixstowe to open its new North Rail Terminal, significantly expanding the intermodal capacity of the country’s largest container gateway, and representing a £40m investment that was partly funded by the EU’s Trans-European Transport Network (TEN-T) programme.

Altogether, 10km of new track has been laid for the terminal, giving it nine additional tracks and enabling it to service trains of up to 35-wagons length, up from the current limit of 24. For Thomas the Tank Engine fans, it has the only traverser at a UK rail freight terminal.

The inauguration of the new facility was accompanied by the announcement that Freightliner is to launch a new daily service out of Felixstowe, representing the port’s 60^th daily service (a figure inflated by the fact it actually refers to 30 services in each direction). The broad menu of intermodal services out of Felixstowe and across the country will be a key weapon for the port as it fights to retain market share from London Gateway, which opens later this year.

Hutchison Ports UK chief executive Clemence Cheng (below, right) said: “Rail is becoming the mode of choice for an increasing number of shipping lines, forwarders and shippers to move their goods to and from ports.

“The new North Rail Terminal will increase still further our rail capability. By allowing us to run longer trains, as well as more of them, it will allow users of the port to improve the efficiency of their supply chains and at the same time reduce cost for them.”

Over the next 12 months or so, trade flows into – and out of – the UK will look to settle into some kind of pattern, as shippers and their freight service providers contemplate and possibly test out a London Gateway-based supply chain, while Felixstowe will look to strengthen its hold on the hinterland from the Midlands northwards.

At the same time, Network Rail is upgrading the rail infrastructure around Nuneaton, where it connects with the West Coast Main Line, and Ely, where it connects with the East Coast Main Line, both of which “increases the width of pipeline”, according to a spokesman, and will eventually will have the capacity for 58 trains per day in each direction.

Despite the unfavourable size of the UK – the advantages of intermodal transport are typically borne out over longer distances – it has proved increasingly popular with shippers. Last year around 750,000 teu was transported in and out of the port by rail, equating to 27% of its inland UK throughput, and the new facility will allow it to eventually double the number of containers handled.

Current utilisation of rail services is at the 80% mark, and the expanded rail capacity will ultimately give the port a greater frequency of services, a key attraction for shippers.

However, it will also face a challenge from a resurgent, combined Liverpool-Manchester logistics corridor, which is planned for substantial redevelopment. As the Duke of York cut the ribbon at the new rail terminal in Suffolk, football legends Kenny Dalgleish and Sir Bobby Charlton were presenting the beginning of dredging operations on the Mersey River to create a 16.5-metre pocket draught for the berths at the planned Liverpool2 container terminal.

Due to open in 2015, Peel says the facility will be able to handle vessels up to 13,500 teu, far bigger than anything currently operating on the North Atlantic trades, and have an initial annual capacity of around 600,000 teu. The £300m development – half of which has been funded by a 20-year European Investment Bank loan – is to be supported by a series of port and logistics developments along the Manchester Ship Canal. Both it and Liverpool Port are owned by the Peel Group.

Peel Ports group chief executive Mark Whitworth said: “Liverpool has already seen increased interest from shipping lines and cargo owners. Over the last 18 months APL, Evergreen and Zim have started to offer weekly feeder connections into Liverpool, whilst MSC and CMA have continued to grow their long-standing feeder volumes through the port. Liverpool2 sends a fantastic message to shippers and the wider international trade world – namely, that Liverpool is investing heavily to secure their business now and in the future.”

The irony is of course that while these different strands of investment are being undertaken at a time when the UK economy stubbornly refuses to show any real return to growth, there was a discernible lack of the same levels of investment prior to 2008, when the country’s container terminals and intermodal network were operating near to full capacity.

Additionally, the fact that in May the UK government contributed £35m to the Peel subsidiary Mersey Docks & Harbours Co  for the Mersey dredge through its regional growth fund, presented by Chancellor of the Exchequor, George Osborne (also MP for the nearby borough of Tatton) has not gone unnoticed by executives at rival ports.

And neither did it appear to go unnoticed by the EC’s transport commissioner Siim Kallas, who is touting another revised ports services package arguing that European ports need greater transparency of state aid financing – a point often made by UK port executives complaining of unfair competition with continental rivals. However, in terms of state aid, the one country Mr Kallas singled out in a speech at the recent European Sea Ports Organisation annual conference in Varna last week was the UK.

“It was cringe-making,” one UK attendee told The Loadstar. “We’ve spent all these years complaining about state aid in Europe, and here we were on the receiving end. Liverpool wouldn’t have gone ahead without the grant, there’s going to be massive overcapacity in the market soon and here’s the government giving subsidies to ports that the market can’t appear to support.”