Friday, January 27, 2012

Port Sale May Split Future Thames Container Freight

Acquisition Means Increased Competition in Future
Shipping News Feature

UK – The announcement two days ago that Otter Port Holdings, owners of Forth Ports has purchased the 67% of Tilbury Container Services (TCS) which it didn’t previously own makes for an interesting development in the life of the River Thames as a key hub for British and Continental freight movements. The move means Forth Ports has bought out the other two one third shareholders in a key centre for shipping, namely Associated British Ports (ABP) and DP World.

The largest major port development being undertaken at the moment is that of DP’s London Gateway project, due to open for business in late 2013 and designed to launch an assault on the pre eminence in the box trade which is currently held by Felixstowe and Southampton. It seems to make little sense for DP to retain Tilbury at a time when investment funds are tight and the two ports, a mere handful of miles apart, would seemingly be in direct competition to each other.

London was of course the hub of the Western shipping world in its heyday but the move to Tilbury in the early sixties modernised the trade leaving the Pool of London and the Royal Docks to other more leisurely pursuits. Now, with TCS handling around 314,000 containers in 2011 it holds a significant, if not huge, percentage of the market plus over 120,000 TEU's transiting through the Port of Tilbury on short sea feeder lines and the like. Charles Hammond, Chief Executive of Forth Ports, clearly sees the move as a necessary one for the group saying:

“This is an important acquisition and a major step forward in our plans to grow and develop our ports business. We believe that stronger links between our container and distribution customers will provide benefits in the supply chain for them and further underpins our portcentric strategy.

“With 100% ownership of TCS we plan to combine our existing Short Sea container terminal with TCS to create a new container business branded ‘London Container Terminal’*. The combined terminal will handle close to half a million containers and makes us the third largest single container operation in the UK and one of the few UK ports servicing both deep sea and short sea customers. This acquisition further underlines Tilbury’s role as a distribution and transhipment hub for London.”

As spokesman for ABP on the move Peter Jones, Chief Executive of the company sounded relaxed about the move saying:

“The TCS facility lies within the Forth Ports freehold at Tilbury, and it makes absolute sense for this business to be consolidated with Forth's other container activity. Much as we have enjoyed our involvement at TCS, ABP's focus is now on investment within the 21 ports we own, principally as landlord but also as operator where this will deliver stronger growth in key trades.”

DP World are presumably delighted to pass on what has been by all accounts a thriving business yet one in which they only had one third shares and no freehold interest. Spokesman Flemming Dalgaard, DP World's Senior-Vice President and Managing Director, Europe & Russia made the company’s intentions quite plain commenting:

“TCS will be in good hands with Forth Ports, and will benefit from the resulting consolidation of Forth’s Tilbury Port terminals and connections with its other short sea assets. The offer from Forth made good sense to us and the decision was taken in line with the changing market dynamics in the liner industry including the rapid escalation in vessel sizes. DP World will continue to focus on our other UK businesses in DP World Southampton and at London Gateway."

Watch this space for future developments as it is unlikely that relations will be quite so amicable in the future unless trading conditions rapidly change. The major container ports, like their box line customers will be chasing a slice of a smaller market whilst having invested heavily in expensive equipment and real estate in order to secure the majority of business. It may be of course that the improved infrastructure necessary to make London Gateway a success will enable the new London Container Terminal to bask in reflected glory and encourage suitable traffic, particularly feeder services within the UK and beyond, to use its services.

*London Container Terminal – This entity is presumably not to be confused with the London Container Terminal & Co. Ltd at Alpine Way, Beckton in East London. Let’s hope Forth Ports have ensured that title is not already secured.

Photo:- Tilbury Container Services. Copyright John Winfield.