As port of Rotterdam expands, some ask why

The recession has slashed container traffic and the cranes in the harbour lie still. But large-scale expansion is still underway.

Metre by metre the vessel Prins der Nederlanden, creeps towards a sandy peninsula off the Rotterdam harbour. Three knots per hour. Two knots per hour. One. Standstill. The motors roar. A slurry of sand and water is sucked up from the hold of the ship and ejected through a hose two kilometres away. One more layer of land has been shifted to the ‘Maasvlakte 2’, a man-made peninsula off the Rotterdam coast.

The Maasvlakte 2 is to be a working container harbour in 2013, complete with roads and rail-tracks. Four months ago it was just two sandbanks. Now it is five metres tall. But the energetic construction raises disquiet in some people here. The recession has hit the harbour hard, the container business is experiencing overcapacity.

The unthinkable is already being thought. Is the expansion still needed? While dredgers are creating a 2,000 hectare-large island three kilometeres off the coast, which will expand the harbour by one-fifth, few ships are coming into the Yangtze harbour on the ‘Maasvlakte 1’. Many cranes at the hypermodern Euromax-terminal ECT – officially open since the spring of 2008– are standing idle.

Cannibalisation of existing business?

Jan Westerhoud, head of Europe Container Terminals, the largest employer in the harbour, is worried. Early in 2008, he expected an annual growth of 10 to 15 percent. Instead, there was shrinkage. Last year, the number of containers ECT handled fell by nearly 10 percent. He doesn’t expect a quick return to the exuberant pre-recession growth. “It will take five or six years before the existing terminals are full,” he says.

ECT handles 70 percent of all the harbour’s containers. Its head sees great risk in the rapid expansion. But he has no influence on its progress. His neighbour and competitor, APM-T disagrees with him. “Postponement of the expansion would be a very bad idea," said its head John Verschelden at a conference in Rotterdam at the end of last year. “That would further weaken the position of the harbour in comparison to the competition, and lead to a drop in market share."

Handling about 20 percent of the container work in the harbour, APM-T was also hit hard by the recession. A quarter of current capacity now goes unused. But they want to build a new container terminal on the Maasvlakte 2. Rotterdam World Gateway (RWG), a consortium of four shipping companies led by DP World from Dubai, agrees with APM-T. Both firms would like the harbour’s turnover capacity to be increased by a third in four years.

ECT’s Westerhoud wonders where all the extra cargo will come from. He fears a shift of turnover from the original Maasvlakte to its newer likeness, a “cannibalisation” of existing business. Last summer he raised an alarm, calling on all involved to be aware of the consequences of unbridled expansion. His initiative wasn’t appreciated everywhere. There’s a suspicion that ECT, owned since 2002 by the Hong Kong conglomerate Hutchison, wants to protect its dominant position in Rotterdam.

Encouraging healthy competition

Hans Smits, president of Rotterdam harbour management, denies that the expansion will eat away at existing business. “The transition from the old to new terminals will be phased,” he says. “Our job is to make this an orderly process.” He knows there is overcapacity. But he also sees advantages in that.

The Rotterdam harbour will be poised to fulfil shippers’ needs just before new market developments. “We can better accommodate peak demand,” he says. That wasn’t so in the past. “We were always lagging behind the market.” The years of bickering over the Maasvlakte 2 has, he argues, caused the Rotterdam harbour to systematically lose market share to other harbours from Le Havre to Hamburg.

The recession actually turned things around. Last year, market share rose by over one percent. Construction of the Maasvlakte 2 fits into Smits’ broader strategy. He wants to break ECT’s dominant position and increase competition in the harbour so it will attract more shipping agents and higher volumes. In the long term, he wants to nearly triple the number of containers that the harbour handled in its best year, 2008. “The harbour’s policy is to encourage healthy competition in all segments where there is growth,” he tactfully states.