Wales and the Atlantic Arc: Developing Ports
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Wales and the Atlantic Arc: Developing Ports Wales and the Atlantic Arc: Developing Ports Document Transcript

  • Wales and the Atlantic Arc: Developing Ports Sarah Kendall Professor Stuart Cole Wales Transport Research Centre University of Glamorgan A Report by the Wales Transport Research Centre March 2006 Wales and the Atlantic Arc: Developing Ports
  • The Wales Transport Research Centre is grateful for the financial support from the National Assembly for Wales/Welsh Assembly Government and wishes to thank them for funding this research. WTRC also wishes to thank all those who provided information or who were interviewed during the research. This final report is however solely the responsibility of the authors and the Centre. Wales Transport Research Centre University of Glamorgan Trefforest Pontypridd CF37 1DL ISBN No 1-84054-139-3 WTRC D15 Wales and the Atlantic Arc: Developing Ports
  • Contents Executive Summary 3 Introduction 6 Objectives 6 Part I European and Global Context 7 Introduction to Part I Section 1 Freight and port policy affecting ports, short sea shipping and intermodality 7 1.1 European Union policy and actions 1.2 UK Government policy and actions 1.3 Welsh Assembly Government policy and actions Section 2 International trends affecting port development 16 2.1 Industry concentration and the growth of international logistics companies 2.2 Economies of scale 2.3 Containerisation 2.4 Road congestion 2.5 Environmental awareness 2.6 Quality and reliability 2.7 Investment in port infrastructure and equipment Section 3 Freight Market Analysis 23 3.1 The freight market and modal choice 3.2 Port choice 3.3 Marketing to the freight business 3.4 Potential products for business development Section 4 Emerging issues and conclusions for Wales 30 Part II Ports in Wales 32 Introduction Section 5 Case Studies on Welsh Ports 32 5.1 Milford Haven 32 5.2 Swansea 37 5.3 Cardiff 40 5.4 Holyhead 44 Each case study includes: 5.x.1 Port facilities 5.x.2 Current infrastructure connections between ports and markets 5.x.3 Potential market opportunities 5.x.4 Potential employment impact and possible economic generation 5.x.5 Potential infrastructure and equipment needed 5.x.6 Port specific conclusions Wales and the Atlantic Arc: Developing Ports 1
  • Section 6 Rail infrastructure, services and access to the ports 49 6.1 UK rail freight strategy - current position 6.2 Rail services and terminals in Wales 6.2.1 Services 6.2.2 Terminals 6.3 Development of infrastructure 6.3.1 Loading gauge 6.3.2 Track capacity and speed 6.3.3 Terminal infrastructure and facilities 6.4 Potential barriers to development 6.4.1 Cost, grants and start up support 6.4.2 Open access to rail 6.4.3 Complexity 6.4.4 Rail performance and reliability 6.5 Conclusions for rail 6.5.1 Network infrastructure 6.5.2 Open access to terminals 6.5.3 Terminal infrastructure 6.5.4 Grant schemes Section 7 Road infrastructure and access to the ports 60 7.1 Current position 7.2 Future road strategy for ports in Wales 7.2.1 Port and road capacity 7.2.2 Modal shift from road to sea Section 8 Economic impact of ports and port development 63 Part III Conclusions Section 9 Conclusions and implications for the development of ports in Wales 66 Section 10 Recommendations 69 Recommended short term actions Recommended longer term actions Appendices: 71 Bibliography List of people interviewed for this research Wales and the Atlantic Arc: Developing Ports 2
  • Executive Summary This report draws on research on the Atlantic Arc ports and looks at its application for the development of the ports in Wales. Case studies were completed for the ports of Milford Haven, Swansea, Cardiff and Holyhead. This executive summary covers key finding, conclusions and recommendations. Key findings (pp 7-65) Modal choice in freight is on price • Transport customers value price first, and then overall time period second. End customers are not interested in the transport mode used • Quality of service and reliability are important (after price and time period), and could potentially give sea routes and ports a competitive advantage over road. Port choice based on poor knowledge • Port choice is often due a mix to current traffic and inertia rather than being a properly evaluated decision • The ports in Wales do not seem to be well known within Europe. This is vital as new services will need to be developed in partnership with another port, as well as with shipping companies. Capacity is available but is not enough in itself • There is significant port capacity available at the ports studied, and this is understood to be the case at other ports in Wales • The availability of port capacity and facilities is not sufficient to win new traffic. • Capacity expansion elsewhere in Europe seems less constrained by environmental considerations than is the case in Wales. Marketing and new business development has scope for development • Business development and marketing for ports seems to be haphazard and often based on existing products, customers and shipping operators • A shift of business to a new route and or mode can take at least 12-18 months. 'Just in Time' transport means that switching from existing modes may carry greater business risk. • For a real modal shift it is necessary to divert traffic from road routes through Europe/ Channel tunnel. This will involve winning road freight traffic which doesn't necessarily originate or end in the area of a port hinterland. This involves looking at existing road transport rather than with current short sea shipping customers. 'Added value' activities can be very important • Ports can obtain significant revenue from the 'added value' activities such as packaging and warehousing. Many of the employment opportunities come from these added value activities. International trends to bigger ships and increased containerisation • Containerisation and use of bigger ships and containers reinforces industry concentration for ports and shipping companies as very few European ports can take ships of 10,000+ teu. This means that the smaller ports therefore need to look at options for feedering. Wales and the Atlantic Arc: Developing Ports 3
  • Conclusions (pp 66-68) Modal choice and strategy for freight Given the dominance of price as a driver, marketing efforts will need to be aggressive, and also recognise that a modal shift is likely to be a slow decision, require considerable support. Given the difficulty of generating a modal shift, it may be appropriate to look at traffic flows which are already on sea for part of the journey. Port choice and port capacity Port choice is often made on imperfect information and the existing or historical use of ports. This creates an opportunity for ports to correct misunderstandings and demonstrate what they can offer. In comparison with other European ports, the range of services offered by the ports in Wales is extensive and flexible to suit customer needs. The ports examined all have significant capacity available to take new traffic and this is a significant opportunity. Marketing research options to develop new business In marketing themselves and their services, it seems clear that ports need to go beyond their existing customer base and origins and destinations in their immediate hinterland. There is scope for more research into 'divertible traffic' which may not be using sea transport now. Pricing options to develop the market Given the dominance of price, it is appropriate for both ports, and the National Assembly for Wales (NAfW) to examine options of schemes which would change the relative price of short sea traffic through some kind of freight revenue scheme. Revenue subsidy schemes are common in passenger transport but have been more limited for freight. Grants have traditionally been awarded for ongoing traffic but it may be more appropriate to take a funding decision for a single year, or the period of a one off contract. Options to develop the infrastructure to ports and on port land Port management teams have been gradually developing their infrastructure and equipment in response to the market and opportunities identified. There is a fundamental issue of whether infrastructure development should be done in advance of traffic growth, or in response to an identified need. In general there are not long term plans for development. From the research for this report, connecting infrastructure quality is a factor but does not appear to be a key driver to port choice or modal choice. It follows that infrastructure development should be market led, rather than being developed speculatively. Economic development and employment opportunities Ports have a significant impact on the economy in their local area through direct employment, employment in related businesses and with subcontractors, tenants and suppliers in their local area. There is also an impact from the spending power of those employees. Flexible port services are an attractive feature of the ports in Wales. However, that flexibility means that increases in traffic are not automatically matched by increases in employment. In some instances new traffic will improve job security, or give opportunities for additional hours to be worked, rather than leading to a direct increase in numbers employed. Non freight business opportunities All of the ports in Wales used for the case studies are developing their non freight traffic. This is a significant opportunity but may have to be balanced with the traditional freight activities. Wales and the Atlantic Arc: Developing Ports 4
  • Recommendations (pp 66-67) Short term actions (1-12 months) Marketing activity There should be increased marketing activities to raise the awareness of the Welsh ports and their potential. This could link in with the role of the Welsh Development Agency, who particularly in their overseas work can support the development and promotion of the ports of Wales. For example, some standard information could be provided in paper and electronic form, and possibly some 'road show' type activity to promote the ports, particularly in potential Ro-Ro or short sea shipping destinations in Europe. Port information should be included as standard for possible industrial and commercial investors in Wales. Review of freight grants A full review should be conducted to identify the impact of past awards, the delivery of intended benefits, value for money and lessons learned. This should cover general issues from Marco Polo and PACT awards as well as freight facilities grants in Wales. Consideration should also be given to awards for one of traffic flows, and short term contracts rather than traffic which is assumed to be ongoing. The announcement in February 2005 of a combined pot for all freight grants whether for road, water or rail makes this review even more essential. The NAfW has the opportunity to develop a system of freight transport grants which it can directly administer, and which reflects its economic and environmental priorities. Promotion and development of cruise shipping The ports are already doing work to develop in this area. Cruise shipping brings benefit to a wider area than just the port through tourism and supply contracts for the ship. Cruise ships require a complete network of related activity. Support may be necessary to promote the ports as cruise destinations as well as to improve their facilities such as baggage handling and security to handle this specialised traffic. There may also be a role to ensure that lessons and best practice from other cruise destinations are shared across the ports in Wales, regardless of their ownership structure. Longer term actions (1-3 years) A freight strategy for Wales There seems to be a need for an overall freight strategy which sets out objectives and priorities for freight in Wales. Major long term issues such as the provision of multi-modal facilities, or the location of retail distribution centres, or the better handling of containerised freight require a framework for the development of solutions. Particularly with new powers under the Transport (Wales) Act 2006 it would be timely to address the options for and scope of a freight strategy for Wales. Freight issues also impact on passenger transport issues, whether on funding, or issues such as congestion. A specific freight strategy would help ensure that a balance can be struck between possibly competing demands. In depth market research and analysis for potential short sea shipping for Wales It has been seen from the Atlantic arc work that there is potential to transfer transit traffic to short sea shipping. However, to develop this will require detailed origin and destination analysis for products and traffic and also using product information from transit regions where possible. Wales and the Atlantic Arc: Developing Ports 5
  • Introduction This report by the Wales Transport Research Centre for the Welsh Assembly Government builds on a research report commissioned by the Atlantic Transnational Network (ATN). Wales is represented on the ATN Orienteering Committee the Wales Economic Fora. The current Chairman (2006) is Sir Roger Jones, Chairman, WDA. The ATN's accessibility working group commissioned a research project to look at intermodality issues for ports in the Atlantic Arc, including the development of short sea shipping. The accessibility working group includes representatives from Wales (the only UK representative) France (Bretagne, Pays de la Loire, Centre, Poitou- Charente, Limousin, Aquitaine) Spain (Vasco, Cantabria, Galicia, Canarias) and Portugal (Lisbon and the Algarve). Professor Stuart Cole represents the Welsh Economic Fora on the working group. The ATN study is largely factual, examining the regulatory context, existing port facilities and regional development plans. Subsequent studies commissioned by the ATN from 2005 onwards following the initial report may encompass more analytical work. The ATN study provides the starting point for this report and the work of the partners is gratefully acknowledged. Objectives This report explores the policy context in Wales, the UK and Europe, and identifies some major current trends in the business. In particular it considers how modal choice and port choice decisions are taken in the freight business. Understanding the decision process is fundamental to targeting and diverting traffic flows to sea routes via the Welsh ports. Case studies examine in detail the ports of Milford Haven / Pembroke, Swansea, Cardiff and Holyhead, including potential markets. The possible impact of infrastructure developments is explored and the options and impact on economic development considered. The conclusions identify some short term and some longer term options to further develop business through the ports of Wales and encourage modal change to short sea routes. Wales and the Atlantic Arc: Developing Ports 6
  • Part I European and Global Context Section 1 Freight and port policy affecting ports, short sea shipping and intermodality Section 1.1 European Union policy and actions Freight Traffic Growth Over the last 30 years, economic growth in Europe has been matched by increased demand for transport. Road traffic growth has outstripped all other modes, which have grown more slowly and lost modal share. Since 1970, European road freight traffic has more than trebled to1300 billion tonnes/ km. Short sea shipping has more than doubled to 1200 billion tonnes / km. Inland waterway and oil pipeline volumes have remained static over the same period. Rail freight has however seen a slight decline to 250 billion tonnes/km. Looking ahead, the growth is expected to continue. In 2001, the European Union forecast 38% more freight transported within the EU and a 50% increase in HGV traffic by 2010. This poses major issues of sustainability across the European Union (EU), both in terms of environmental impacts from transportation, and also from the economic impacts, if lack of transport capacity slows economic growth. It is important to realise that this growth pattern is not exclusive to Europe. It is a global phenomenon. The US is predicting similar 50% growth for its domestic and international freight traffic over the next 15 years. European Transport Policy for 2010: Time to Decide This massive growth in demand for transport is the context for the main EU policy document on transport, the white paper 'European transport policy for 2010: time to decide' published in September 2001. It aims to shift the balance between the modes by 2010 by revitalising the railways, promoting maritime and inland waterway transport, and by better linking the modes. As well as improving the quality and efficiency of Europe's transport, the strategy aims to break the link between constant transport growth and economic growth in order to reduce pressure on the environment and prevent congestion, while maintaining the EU's economic competitiveness. The white paper sets the scene on many of the issues pertinent to this report, on ports, intermodality and short sea shipping. It also sets out measures affecting other modes, which are also expected to have a positive impact. Road congestion and the environment On congestion, the paper notes that if nothing is done there will be “apoplexy at the centre and paralysis at the extremities”. The Marco Polo programme of grants is created to promote and encourage modal transfer. On the environment, the paper noted that transport has to be compatible with environmental protection and proposed measures on infrastructure charging which take into account external costs and Wales and the Atlantic Arc: Developing Ports 7
  • takes into account the least polluting modes. Sensitive areas, such as the Alps and the Pyrenees were identified as needing additional funding for alternative transport. For major transport infrastructure, the European Commission proposed to concentrate on 'missing links' and on infrastructure with the potential to transfer freight from roads to the railways, such as the large capacity rail link across the Pyrenees. Harmonised working hours and conditions The road haulage industry has been recently affected by measures such as the working time directive and limitations on driver hours. These changes are thought to potentially benefit other modes of transport, although there appear to be concerns that these requirements will not be fully complied with. Non compliance with legal requirements appears to give road hauliers a competitive advantage over other modes of transport. The EU white paper in 2001 identified that 'the competitiveness of the roads is explained in part by the lack of minimum social regulation in Europe.' The recent limit of an average of 48 hours per week for truck driver's hours contrasts with the pre- existing average of 22 to 30 hours per week which is typical for train drivers who work in the more heavily regulated rail sector. PACT and the Marco Polo programmes to develop intermodal freight services The programme set up in the 2001 white paper was launched in 2003 with a first call for proposals from commercial freight organisations for international services only (not studies or infrastructure). It aims to help the following: • Start-up support for new non-road freight transport services, which should be viable in the mid-term ("modal shift actions"); • Support for launching freight services or facilities of strategic European interest ("catalyst actions"); • Stimulating co-operative behaviour in the freight logistics market ("common learning actions"). 13 projects are now approved for the first stage of this scheme, estimated to take €13.6 billion tonnes/ km of traffic off the roads. None of these relate to transport in Wales or the UK. €15 million of EC- funds were available under the first call, and private investments of about €360 million (without infrastructure) will be triggered with selected 13 actions. The average environmental efficiency is calculated under the scheme to be 15, i.e. for every €1 of subsidy spent, there are €15 of external costs saved for society. A further call for projects is planned for further projects to begin in 2005. In July 2004 the European Commission presented a proposal to establish a second, significantly expanded "Marco Polo" programme from 2007 onwards. Marco Polo II includes new actions such as motorways of the sea and traffic avoidance measures. The programme, which has a budget of €740 million for 2007-2013, has been extended to countries bordering the EU. The Commission estimates that every €1 in grants to Marco Polo will generate at least €6 in social and environmental benefits. The final form of Marco Polo II will depend on the outcome of negotiations still to take place within the EU. The Marco Polo programme builds on the work of the earlier PACT programme which gave grants for pilot projects to promote the combined transport of goods with the aim to reduce road traffic in favour of more sustainable modes of transport. The programme was for the five years to the end of 2001 with total funding of € 35 million. The PACT objectives were as follows: • to increase the competitiveness of combined transport both in terms of price and of service quality vis-à-vis road transport from start to finish; • to promote the use of advanced technology in the combined transport sector; Wales and the Atlantic Arc: Developing Ports 8
  • • to improve the range of combined transport available. PACT projects included funding for RENFE and SNCF to improve co-ordination at the Irun-Hendaye border. Another PACT project by European feeder lines set up an intermodal maritime service from La Rochelle to Le Havre and Rotterdam. However in devising Marco Polo, the EU noted that “Commercial viability of the intermodal projects is difficult to achieve, even with the start-up support provided by PACT. This is due to the challenging market conditions for combined transport in Europe.” Motorways of the Sea This concept is still being developed. The idea of Motorways of the sea is to promote high quality, frequent door to door intermodal freight movements, with the long haul stage completed by sea. Ports would need to be highly effective, with good rail and truck access arrangements. It is seen as an opportunity to promote cross - border public private partnerships as well as possibly secure public funding for port and related infrastructure. New Trans European Network guidelines on infrastructure support were published in April 2004. Priority projects are potentially eligible for grants of up to ten per cent funding. There seems to be broad support for the concept, although there is no obligation on member countries, or individual ports or operators to bid for funding. Some groups, including the Atlantic Arc Commission feel these proposals do not go far enough. Some environmental groups felt environmental issues are not sufficiently reflected yet. Other groups, such as the British Ports Association, have commented that the proposals risk distorting the commercial market place. As part of the development of 'motorways of the sea' there are proposals at EU level for the liberalisation of port services, these are in the early stages of development. Wales and the Atlantic Arc: Developing Ports 9
  • Figure 1 Motorways of the Sea Wales and the Atlantic Arc: Developing Ports 10
  • Freight Integrators Some outline information on this concept has been developed by the EU, taking forward the ideas in the 2001 white paper. The concept is to integrate in a single scheme, fully transparent information about all modes of transport to act in the interests of society, shippers and operators. The idea is that with better information, modal choice would be different. Currently it is very difficult for a customer or supplier to have full information about the range of modal options available. Initial proposals from the EU are likely to cover information exchange, training and quality issues as well as liability matters. In a commercial market place, where pricing is variable by customer, it seems difficult to see how this theoretical concept will apply in practice. This is especially true of Wales and the UK where ports, port services, and transport are all operating in the private sector, to commercial objectives. European Union enlargement On 1 May 2004 10 further countries joined the European Union: Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia. This brings the EU membership from 15 countries (the “old” members) to 25. The surface area has increased by a quarter. The population has increased by one fifth, to 450 million people. It is now the world's biggest single market, in population terms, though the North American Free Trade Agreement remains larger in terms of economic might. For the new members, a key purpose for joining is to further develop their trade and economic activity within Europe. The new member states have an average GDP per head of 40% of the average level in the “old” 15 member states. Increasing trade will of necessity have an impact on transport within the enlarged EU, but the precise impact remains to be seen. Labour wage rates in the accession countries are generally lower than those in the “old” EU which may have an impact on road haulage and maritime transport which have a high level of labour mobility. The new member countries currently have a higher percentage of rail freight traffic than is the norm in the “old” EU with some 40% of total freight travelling by rail. This figure is however expected to reduce as trade develops over the coming decade. Car traffic and road congestion which is generally low in the new member countries is expected to increase rapidly in the coming years. For Wales, and the Atlantic Arc regions, enlargement shifts the geographic centre of high European production (the ‘blue’ banana) and markets further east, and away from them. This accentuates the geographic fact of the Atlantic arc as the 'west of the west'. Wales and the Atlantic Arc: Developing Ports 11
  • Figure 2 Wales in Europe Wales and the Atlantic Arc: Developing Ports 12
  • 1.2 UK Government policy and actions Port ownership and management, and the Government role In looking at some of the EU developments, it is clear that the ports in Wales are not typical of the rest of the European Union. Some of the current EU initiatives, such as the liberalisation of port services, aim to set out guidance and recommendations for approaches which have been widespread in the United Kingdom (UK) for many years. The Welsh port sector is privatised, and deregulated. Port ownership in Wales is of three main types. Some ports are privately owned and operate to meet commercial and shareholder needs, for example the ports of Cardiff and Swansea are owned and operated by Associated British Ports plc (ABP) and Holyhead is owned by Stena Line Ports Ltd. Other ports are municipally owned, i.e. owned by the local authority for example Portsmouth. A third group of about 100 ports are operated under a trust arrangement, formally designated by an Act of Parliament. Milford Haven is a trust port. There is no formal 'ports strategy' for Wales nor for the UK. Recent consultation on this issue has concluded that port development is best left to the market place. The most recent policy document 'Modern Ports' (Department for Transport 2000) confirmed the free market principles on which the port sector in the Wales/UK operates: “There is a long-standing principle that customers may choose which Wales/UK port they use not the other way round. So ports must compete by offering long-term value, and must be allowed to do so domestically and internationally on level terms.” The report confirmed the principle of not subsidising port operations, or interfering in port management decisions: “Commercial decisions, as well as responsibility for port operations, lie with those who have these powers and the duties that go with them. This continues to be fundamental. It is not Government's job to run the ports industry.” The report set out the policy objectives as follows: “The Government and the devolved administrations will work with the industry, its users and other interests, to achieve these four key objectives: • to make regulation add value rather than unnecessary cost, ensuring that different regulators co-ordinate their overall demands; • to promote agreed national standards and good practice for port management and port operations alike, without detracting from the legal responsibilities of harbour authorities and other port interests; • to promote training and the recognition of skills for those who work in the ports industry at all levels not just those engaged by harbour authorities; • to maintain a balanced policy on development which aims to makes the best use of existing and former operational land, secures high environmental standards, but supports sustainable projects for which there is a clear need.” Intermodality and sustainable distribution The Welsh Assembly Government and UK government support “sustainable distribution” and have policy to promote rail freight, and intermodal transfer away from road, but this is done within the context of an open market place in which commercial parties, take decisions in their best commercial interests. Wales and the Atlantic Arc: Developing Ports 13
  • It is notoriously difficult to switch traffic from one mode to another. Non-road options are often more expensive than road haulage. A modal switch can require both support with start up costs, such as grants towards capital investment, and possibly ongoing revenue support for a longer period. In a purely commercial environment modal switch away from road haulage has tended to be limited, whereas transfer to road has been common. There is no central government or regional body with sole responsibility to specifically promote either sustainable distribution, or intermodal transfer although sustainable transport is a stated government objective and grants are available. More details on specific road and rail issues are given in section 4.1 1.3 Welsh Assembly Government policy and actions Within the Welsh Assembly Government, the executive body of the National Assembly for Wales, Transport Wales, is responsible for: • Transport Policy of the National Assembly for Wales • Maintenance and Improvement of over 1,000 miles of trunk road in Wales and 75 miles of Motorway • Administration of grants to local authorities and other bodies to fund a range of capital transport schemes and transport services and revenue support for passenger transport. Wales' transport policy is generally in line with UK transport policy although the Transport (Wales) Act, provides for several new approaches. There is provision for the Assembly Government to specify certain service levels and priorities. The Welsh Assembly Government also has a key role in the provision of funding and grants. This can be for transport grants specifically at its own initiative, or grant regimes transferred from other areas, such as the freight facilities grants. The infrastructure responsibilities for access to the four ports are as follows: Roads A40 / A48 / M4 - National Assembly for Wales (NAfW) A55 Expressway via a new link road currently in the planning stage - NAfW. Local road links from these trunk roads to the ports - Local authorities Rail Freight facilities grants- NAfW Local authorities can make payments for rail investments. The Ebbw Vale and the Vale of Glamorgan upgrades were initially funded through Section 22 powers but transferred subsequently to direct NAfW funding. The Railways Act 2005 and/or the Transport (Wales) Act 2006 will provide powers for the National Assembly to undertake direct rail investment both for rolling stock leasing/purchase or funding infrastructure upgrades. These financial assistance schemes are aimed at securing the provision, improvement or development of rail freight. The co-ordination of such grants between Transport Wales and the Department for Transport in England is to be encouraged for cross border schemes between the two countries. At present, and until March 2007, there are three types of grant available to help meet the extra cost that may be associated with moving freight by rail. Wales and the Atlantic Arc: Developing Ports 14
  • • Freight Facilities Grant (FFG) helps offset the capital cost of providing rail freight handling facilities in recognition of the environmental benefits of transferring freight from road to rail. It is also available to help companies re-invest in existing rail freight facilities. It is available in Wales, administered and funded by the Welsh Assembly Government. • Company Neutral Revenue Support (CNRS) is a revenue support grant for inter-modal traffic and helps support the viability of moving inter-modal units by rail where the difference in cost between rail and road as environmental and other grounds justify such support. Subject to budget limitations it is available in Great Britain, funded and administered by the Department for Transport. • Track Access Grant (TAG), also a revenue grant, helps freight services operators to meet the charges paid to Network Rail for access to the rail network. TAG is available for traffic that does not qualify for CNRS. For Wales and England it is funded and administered by the Department for Transport. The criteria for Freight Facilities Grant are as follows: • The grant is based on assessment of the environmental benefits determined by the calculation of Sensitive Lorry Miles awarded over the life of the project. Employment and regeneration benefits are not relevant. • The grant is also assessed in terms of its financial and business case. • It does not provide revenue support or capital funding for speculative commercial schemes. This responsibility is currently (2005) with the Department for Transport and Network Rail who continue to have these powers in parallel with those of the National Assembly for Wales. The Railways Act 2005 also enables the NAfW to become joint franchisor for a rail passenger franchise providing “Wales only services” as defined by the Act. At present this refers to the Wales and Borders franchise operated by Arriva Trains Wales but might include others so designated in the future. The NAfW is able to provide financial assistance in various forms e.g. line improvement or re-opening, new or improved passenger facilities to “Wales only services” and to “Welsh” services where it is not a franchisor. It is also able to provide financial assistance outside a franchise agreement for “Welsh purposes”. This will enable funding to be provided for a wide range of purposes to Network Rail and freight operators. These are wide powers and are in addition to arrangements under a passenger franchise agreement. The Transport (Wales) Act 2006 requires the National Assembly to produce a National Transport Strategy for Wales. This would be a follow up to the Transport Framework for Wales. This will include port facilities. However, there are no powers for the National Assembly to provide funding for port facilities although road and rail grants infrastructure to and from ports may be made. Grants to ports and for shipping services remain the responsibility of the Department for Transport. This includes coastal shipping and short sea shipping, Inland Waterways grant, freight facilities (such as exist) lie with the National Assembly. It is not as yet clear if the infrastructure inside the port may be financially assisted under the new process. The Department for Transport is currently carrying out a UK wide review of ports policy. An integrated transport policy is a stated objective of the Assembly Government. Any significant development of the ports in Wales will have an impact on the road and / or rail network that connects the port to its market. It appears that the extension of responsibilities provided for in the Transport (Wales) Act will help facilitate the development of the Welsh ports. Wales and the Atlantic Arc: Developing Ports 15
  • Section 2 International trends affecting port development This section briefly examines some of the global business trends which are likely to have an effect on developing ports and short sea traffic. These trends are against the background of the major growth in freight traffic, and road freight in particular, as seen in the previous section. 2.1 Industry concentration and the growth of international logistics companies As trade has developed and volumes increased, there has also been a trend towards greater concentration with large global companies dominating international freight transport, and some of the larger ports continuing to grow while small companies and facilities have closed or seen a reduction in business. Road haulage companies or shipping companies such as Maersk, and Christian Salvesen as well as car industry specialists such as Gefco have now expanded into international logistics. Some logistics companies own and operate intermodal facilities, for example, Excel logistics operates international intermodal 'rail ports' at Daventry and Doncaster in England. These have become global logistics companies. Exel, a UK based logistics company now has an annual turnover of 7.4 billion euros (2003), with about 50% of their business in Europe and the rest primarily with the US and Asia. It grew out of Britain's National Freight Company Ltd. following an employee buyout at privatisation in 1982. Its growth is continuing as Exel has recently bought Tibbet and Britten, a well known UK transport and logistics company. Norbert Dentressangle, a Northern France based haulier focusing on the cross channel market, has doubled turnover in five years to 1.2 billion euros in 2003 with a business that is still 78% based in France but increasingly international. Logistics companies work on a complete supply chain and are able to develop their business through economies at each stage of the chain. It appears likely that the industry concentration and the growth of logistics companies will continue. The road haulage sector currently has a large number of very small companies, with an owner / operator possibly with one or two trucks. It appears likely that these will concentrate into larger companies, particular as new regulations, and improved information systems begin to be introduced. The two types of companies can operate in quite different ways. The major logistics companies tend to operate in mature markets which are relatively stable. Their business development is through efficiency savings and economies of scale. They typically locate their business around regional and national distribution centres, based on the motorway and expressway network in Wales and of only limited relationship to the ports and their infrastructure. Smaller companies which are focussed on road haulage tend to be more locally and regionally based and of greater importance to port operators. These companies provide container, flatbed, tautliner or bulk haulage and can provide local road services from the closest port to the receiver. The higher costs and reduced reliability of long haul road haulage from the south east of England and east coast ports into Wales provide opportunities to Welsh ports for short sea shipping/container feedering as they encourage direct calls into Welsh ports. These direct calls then make use of the locally based general haulage companies to complete the short road journey to final destination. Wales and the Atlantic Arc: Developing Ports 16
  • 2.2 Economies of scale There has also been a trend to carrying bigger volumes with ships becoming larger with the construction of large 'post panamax' ships particularly for container ships capable of carrying over 5,000 teu (twenty foot equivalent units); new construction orders include ships over 7,500 teu. These very large container vessels will have less choice as to where they can dock due to draft, length and width constraints. This will both reduce the number of direct ports of call with a concentration into certain hubs, and also possibly encourage transhipment via feeder ship may be the most efficient form of onward distribution. Car carrying ships can take over 5,000 cars. Containers have also increased in size with 2.9m high (9ft 6) containers becoming the new standard (see below). Heavier axle weight trucks have also become the norm, with 44 tonne 6 axle trucks having become standard on major routes. There is currently consultation within the EU over long haulage, and the option of using trailers and semi trailers to a maximum length of 25.25 metres. (The supporters of long haulage argue for its environmental benefits, in needing fewer trucks for transport). These increases in size can be an issue for smaller ports, connecting rail facilities and intermodal facilities which may not have the capacity for larger ships or containers. 2.3 Containerisation There is an increasing trend towards containerisation. This is a result of the globalisation of trade. Products from the Far East can be cheaply produced and transported in containers across the world to reach the key markets in the US and Europe. These products retail far more cheaply than products produced directly in those markets where labour and operating costs are generally much higher. While at first sight this trend appears to affect deep sea traffic more than short sea, there is an impact on the short sea business and other transport modes. Containers which have arrived on deep sea routes, will then transfer to other modes, whether at Rotterdam, or in the English main deep sea ports of Felixstowe, Southampton, Liverpool and Thamesport and Tilbury in the London area. The UK has seen a 60% increase in container traffic in the last 10 years, a period in which overall port traffic was up only 13%. In 2001 some 4, 464,000 containers were handled by UK ports on lo-lo and conventional services. Some of the growth reflects the strength of the UK economy, but Felixstowe in particular is used as a European hub for transhipping containers and accounts for 41% of UK container movements. Growth in containers moved at UK ports will continue at rates well above UK GDP growth. Competition for transhipment traffic from new and existing facilities on the Continent is likely to be intense. Inland distribution of containers remains an issue in Wales. Ports and shipping lines are generally keen to increase the rail share of inland distribution, but there are capacity issues with the Welsh and UK rail network. In a major report by the Department for Transport in 2001, ports and shipping lines apparently did not see a significant role for distribution by coastal services as the distances are not sufficient to justify the extra handling costs and a high frequency service would have to be provided to compete with road freight. The transhipment of containers from deep sea ports in England and continental Europe is increasing. This trend provides opportunities for smaller ports such as Cardiff and Swansea in respect of feedering. Increased road haulage costs and reduced reliability are gradually pushing deep sea shipping lines to make increased use of feeder vessels. Wales and the Atlantic Arc: Developing Ports 17
  • Figure 3 The Atlantic Arc Ports Wales and the Atlantic Arc: Developing Ports 18
  • There are currently relatively small numbers of units moved by coastal container or RoRo services. There are however initiatives to move empty containers by coastal service, back to the main ports such as Rotterdam, using smaller ports such as Brest as a hub for this operation. There are similar initiatives at some UK ports. However it is clear that the facilities at the larger ports have to be geared to transferring traffic to short sea routes. Containers are also getting larger. Today 2.9m high (9ft 6) containers are becoming the new standard, gradually replacing the 2.59m high (8ft 6) containers for international shipping. 1 in 4 of the containers arriving in UK ports are now of the larger 2.9m size. It is projected that by 2010 half of the containers arriving in the UK will be of the larger size. Although there has been some investment in rail freight wagons with smaller size bogies able to convey the “high cube” containers, these larger size containers favour costal distribution or road haulage. This is potentially an opportunity for the development of increased coastal shipping between the major hubs and the smaller ports. 2.4 Road congestion Road congestion is increasingly becoming an important issue across Europe for road hauliers. Congestion affects the speed and predictability of transfer. It also generates environmental impacts as the increase in road freight is felt by other road users, and local communities. Congestion and delays increase fuel consumption - and pollution. Figure 4 Road freight traffic through France and Spain to the British Isles (from p/p) Wales and the Atlantic Arc: Developing Ports 19
  • According to the EU's own figures, one tenth of the Trans Europe road network is congested. Every day 7,500 kilometres of European highways are blocked by traffic jams. Environmental issues and climate change are taking an increasing prominence on the local and international political scene. In July 2004 the UK government published a 10 year transport strategy including local and regional road toll schemes in addition to recent initiatives for motorway charging. It seems likely that some form of congestion charge as an element of road pricing is likely to spread as technological improvements make tracking and collection of charges easier. The combined effects of road pricing, environmental issues, truck driver shortages and driver hours restrictions as well as congestion are factors which can increase the use of currently under-utilised capacity in Welsh ports. There is potential for movement of traffic such as bulk cargoes, timber, steel, waste and containers. Figure 5 Main Bottlenecks in the Atlantic Arc Region Wales and the Atlantic Arc: Developing Ports 20
  • 2.5 Environmental awareness The transport sector is responsible for 28 % of EU emissions of carbon dioxide (CO2), the principal greenhouse gas. The bulk of this amount, 84 %, comes from road vehicles. As road freight and congestion have grown, so the public have become more aware of the environmental impact of trucks, whether on the road network through their community, or with the impact on air quality. Consumers do not generally know, or indeed care, how the goods they buy and use have been transported. Some companies are however beginning to take environmental issues into account as they choose the mode of transport for their goods. IKEA have a rail distribution network and are currently looking to extend their use of rail as they see this as in keeping with the company's environmentally friendly image and corporate values. Shareholder pressure means that some companies are becoming increasingly open about their corporate social and environmental policies. However, the impact of environmental factors on modal choice seems as limited for transport decisions in the business world, as it seems to be for private citizens. In considering major port expansion, environmental factors have to be taken into account as part of the planning process. These environmental impacts are then evaluated by regional or national government appointed specialists. From examining European examples, such as Sines in Portugal, Le Havre in France and Bilbao in Spain, it would appear that the burden of environmental assessment is significantly less in other European countries than in Wales. An environmental assessment completed by the Bilbao port authority was seen as neither onerous, nor as a potential block to the authorisation of massive market led expansion. The recent Dibden Bay enquiry, and the decision not to allow expansion at the port of Southampton is widely regarded by those in Welsh ports sector as limiting their ability to compete with other European ports. Environmental concerns on local issues such as dredging to maintain navigation channels do not appear to be an issue at the mainland European ports visited for this project. However at half of the ports in Wales, the environmental constraints on dredging were raised unprompted by port managers as an issue that constrained their business. 2.6 Quality and reliability Much of the freight and logistics industry has changed in the last decade to reflect business practices with very low inventory, reliant on a 'just in time' delivery system to the customer. This keeps overall costs and working capital low, but the transport element becomes vital for major distribution organisations, whether for finished goods, such as supermarket supplies or components and materials, such as for car production. With a just in time logistics chain, the reliability and quality of service becomes paramount as a failure can lead to empty supermarket shelves, or stop a car production line. Given the criticality of the transport element, it can be difficult to persuade customers, or logistics providers, to switch from their existing transport arrangements unless there is a strong price incentive, and some kind of guarantee that service standards will be met. Typically the delivery time will be very tightly specified within a narrow time slot. The risks associated with a change are higher due to the lack of inventory to cover a delay in transport. Wales and the Atlantic Arc: Developing Ports 21
  • 2.7 Investment in port infrastructure and equipment Across Europe there are a number of different models of port ownership. Many Welsh ports were privatised in the early 1980s but most ports in Europe are under either local authority or regional control. This may be indirect, with a separate port authority management team, and an accounting separation with operational budgets run entirely at the port level. However for capital investments, the port is seen as a local resource to be developed and so in most instances funding for investment comes from regional or national budgets, rather than the port itself having to raise the money. In Spain for example, the smaller local ports are run and funded by the regional authorities. Larger ports have an apparently independent port authority, but call on central government for major capital investment. This contrasts starkly with Wales where capital investment is not available from the Assembly Government. Individual ports access to investment funds depends on the ownership structure and business priorities of the organisation. For example, a trust port such as Milford Haven can set different criteria including regional benefits. This is in contrast to the 15% rate of return required by ABP of its ports in South Wales at Newport, Cardiff, Barry, Port Talbot and Swansea. This uneven access to investment funds has meant that some European ports have highly developed infrastructure and equipment, not all of which is in use. Brest has had major investment in warehouse facilities and equipment, but is largely unused. Infrastructure investment does not automatically guarantee traffic to use the equipment and infrastructure. However it should be noted that across Europe partnerships with private organisations to develop port facilities are common. Most ports have some privately operated facilities, which might be privately owned, or operated on a long lease basis. Leases tend to be for periods of 10 years or longer, with 25 years typical where there has been a contribution towards the construction costs. For example the new container terminal at Lisbon is to be on a 25 year build and operate lease. Many French ports have specific terminals and facilities operated by specific customers, especially for petrochemicals. At Sines in Portugal a new deep sea container port has been built adjacent to the existing port with funding from the Singapore port authority, who also have the contract to operate the facility. Wales and the Atlantic Arc: Developing Ports 22
  • Section 3 Freight Market analysis 3.1 The freight market and modal choice Who is the customer? In the passenger transport business, it is possible to identify two types of customer, who may be the same person. There is the 'customer' who pays, and the 'customer' who travels. The customer of a freight transport service is more difficult to identify. They pay for the transport service, but it is goods that travel. The costs of transport are passed on. The freight customer may be: i) a product manufacturer, ii) another business user of the goods, such as a retailer or assembler of components iii) the end customer for the goods being transported or iv) a logistics and transport provider working on behalf of one of the other three categories. Each of these may place a different value on the key variables of time, cost and quality of the transport. For example, a retailer such as Marks and Spencer with no stocks maintained in stores may regard the time aspect as fundamental. An end customer for marble tiles may regard the quality and condition of the product on arrival as more important than the length of time taken. The end customer will normally have no idea what percentage of the total price is for transport costs. They may also not know what modes of transport are used. Decisions on mode of transport. It is essential to realise that many 'decisions' on modal choice are not a decision at all. Most are a passive decision to 'do what happened last time'. This may be because of existing contracts with partners, or simply because of convenience. The customer of the transport service will generally have an idea of what transport costs are affordable, based on an historical view of 'what it cost last time'. The EU study on Freight Integrators (September 2003) identified that transport decisions are taken firstly on price, and secondly on timescale. The modal preference is not usually part of the decision. Only when there is a new traffic flow will a modal choice be made. Even then, in many instances the 'choice' is based on extending previous transport patterns. For example, new delivery point B is 100 miles beyond existing delivery point A so we will pay X% more and use the same method. This new traffic is likely to be given to an existing transport partner, using the current mode of transport. If there is a decision to change mode of transport, that decision may not be immediately implemented. The EU study also found that for an existing traffic flow it can take 6 to 12 months to make a change in the mode of transport used. Hence the considered view that a new transport service needs at least 3 year of operation to reach a stable level of traffic. Wales and the Atlantic Arc: Developing Ports 23
  • Modal Options for Freight Transport This section examines options for transport within Europe, for a complete journey, or for the European leg of a global journey. Option 1 Truck Within Europe, road transport can offer a door to door service, for a huge range of products. In some instances a truck may also use another mode of transport, such as a RoRo ferry or a Channel Tunnel shuttle train, but the goods can travel by truck from door to door with no need to transfer the load. This option has a great deal of flexibility. Often the same driver and the same truck can complete the entire journey across national borders. Within the enlarged EU, this can now be done with a relatively light bureaucratic burden for customs and other regulations. The fact that handling is limited reduces the risk of damage to the load. A road haulage company is a 'one stop shop.' Although some countries have bans on truck movements at certain times (notably in France at the weekends), this option generally operates 24/7. This option is viable for a single load, or multiple loads. It is viable for a one off need, or regular traffic. There are some potential limiting factors - following tighter restrictions on truck drivers' working hours there are some concerns about driver availability. Fuel costs have increased in recent years and seem likely to continue to do so. However it should be noted that working hours and fuel cost limitations apply equally to other modes. Option 2 Rail (probably also with a truck element) Within Europe, rail freight can occasionally give a door to door service, although this may be to another business user, as for example with car components travelling to a factory, rather than the retailer or ultimate end user. There is a fundamental issue with 'last mile' provision. Whereas it is possible to get a truck to most locations, many locations will be 20-50 miles from the nearest railhead for freight services. Typically a rail option will need to involve a road transport element at start and the end of the journey. For the customer, this will require dealing with a rail freight operator, as well as road haulage companies. Railfreight operators, do not also provide road haulage as well. Depending on the rail journey, it may be necessary for a number of different crews to staff the train as each national network has its own operating rules and requirements for driver and train licensing. Unlike the truck driver, who can qualify in any developed country, a train driver has to qualify separately for each network and each type of locomotive. Transfer of the load will be required to and from a truck. This transfer will add to the overall journey time. Railfreight services tend to operate Monday to Friday only, with weekends typically given over to track maintenance work. Railway maintenance is generally scheduled in the slack periods for passenger train operators. For this option a high level of traffic is needed, not just in volume, but also in frequency and regularity. For example a full train load 2 or 3 times a week for the next 12 months. Alternatively, it may be possible to add a small load of 'wagonload' traffic to an existing intermodal service, which has to meet an existing schedule. These are often published in advance. EWS for example publishes schedules on its website. Due to the need for wagon availability as well as haulage and track capacity, rail is not an option for a short term one off traffic, or a low level of traffic. It may not be possible to start a new rail Wales and the Atlantic Arc: Developing Ports 24
  • service at short notice. The rail industry does not have resources, in staff, locomotives or wagons available on a 'just in case' basis. Similarly, it is difficult to offer a service on a short term 'trial basis' without a longer term commitment. Within rail freight much seems to depend on the willingness of all parties to find a solution to bringing new traffic to rail. In particular cost can be a limiting factor as rail transport tends to be more expensive than the road alternative. Option 3 Sea (probably also with a truck element) Few customers are located at a port. In some instances, businesses have been located close to a port to benefit from the transport links. For example steel works in South Wales are close to both raw materials and transport links. The Milford Haven oil refineries are an example of industrial processing being located close to inward and outward sea transport. Port development plans need to encourage businesses with potential traffic to locate in the port area. However, in the majority of cases, a sea journey will also need a road journey, (or possibly a rail and a road journey) probably at both ends of the sea transit. The transfer will add to the overall journey time. Even for a global journey from the Far East, with the European leg of the journey beginning at a port, (such a Rotterdam or Felixstowe), the onward transfer is often by road rather than by sea. The sea option will involve decisions not just on the shipping operator, but also on the ports to be used as well as the transport at either end of the sea leg. A freight customer may provide a full ship load, for example with timber, or scrap steel, which may be all for one destination, or 2 or 3 separate ports. Other products, such as industrial components, may only constitute a part load. With a part load, or a single leg traffic costs are significantly higher unless a matching load can be found to help defray the costs. Option 4 Logistics and Transport Operators This isn't so much a modal choice as a decision based on complexity and overall price. Many businesses delegate to a logistics provider, all the transport decisions and operational management for an overall price. Some larger logistics providers such as Maersk and Exel will have their own containers, ships, rail wagons and trucks; others will have partnership arrangements with other operators. They regard themselves not as transport companies, but as 'complete supply chain managers'. The EU concept of the freight integrator, providing transparent information on routes services and pricing to assist freight customers in their modal decision making, is in its early stages but has some similarities to the services these companies provide. It is difficult for a single freight customer to fill a whole ship, or a complete train on a regular basis. A transport operator, or logistics provider provides a service for a number of customers. They may be able to plan journeys with three or more legs to avoid the problem of empty 'back loads'. The price they quote to a customer will depend in part on a range of other customers using the same service and equipment. Conclusions on modal choice for freight From the above it is clear that price is the driver of decisions in the freight business. Mode is chosen on the basis of the cheapest price. Wales and the Atlantic Arc: Developing Ports 25
  • Road is generally the cheapest option for transport within Europe. It is also usually the simplest to organise. Growth patterns for freight confirm the apparent ease of choosing road transport. Road traffic has grown faster than any other mode, and is predicted to continue to do so. The domination of road transport poses a major issue for those who seek to persuade traffic to switch modes. Other modes do not have a simple 'one stop shop' for pricing and scheduling information. In many instances end customers do not care about the mode used, just the price. Reliability is a secondary factor. However, road congestion does not yet seem to be having an impact on reliability as a truck has options to divert to another route. This is in contrast to rail or shipping for example, where a delay will affect an entire shipment. The complexity of the decision process for 'non road' modal options has an impact on business development. A port cannot single-handedly pursue new business without an idea of onward transport whether land or sea based. A port has to work in collaboration with road and / or rail partners, shipping lines, and other ports in order to successfully develop new traffic. 3.2 Port Choice Having seen that modal choice is often of little consequence to the customer, what of port choice? Port choice seems to be either a question of habit and inertia, and also is often based on imperfect information. There is relatively little genuine competition. The 'habit' element can be seen as ports tend to build traffic from their current customers, and range of destinations, i.e. the people that already know them. The Atlantic Arc commission project to promote short sea shipping noted in interviews with various operators that they were generally very reluctant to change established business patterns. In describing their ports, even the operators and port authorities typically refer to the current hinterland accessible by road and current types of traffic rather than potential growth. Rail or logistics operators may have an interest in using ports which connect to their current network of services. Shipping operators too, turn to the ports they currently serve reinforcing historical and contractual ties. For example, car import traffic is handled currently through the port of Avonmouth, Bristol. Although other ports nearby, such as Cardiff or Swansea, have the potential to handle this traffic, Bristol is seen as the natural choice, because of the existing traffic patterns. This tends to reinforce the trend of industry concentration. The bigger British ports continue to get bigger. This trend can be seen at extreme level with the ports of Rotterdam and Singapore. Those ports, which have been at the heart of the growth of containerised traffic, are now experiencing congestion problems and possibly beginning to see the limits of their growth, although both have ambitious expansion plans. Within Great Britain, infrastructure development has, based on forecast traffic increases, been based around the largest ports such as Felixstowe thus reinforcing and enhancing its role as Britain's biggest port. While Holyhead is linked through a high quality expressway (A55) to the English motorway network and Swansea has the M4 motorway, both roads had other objectives. The suggested improvements on the A40 (towards Milford Haven) and the Cardiff east bay link (towards Cardiff port) have an economic development or 'ring road' rationales. None have been speculative developments for the smaller ports they will also serve. The access provided for Holyhead for example is coincidental with the A55's role as a euro route to Ireland. Wales and the Atlantic Arc: Developing Ports 26
  • The 'imperfect information' has become particularly clear as the ATN report has been prepared. Compiling basic information about berths, equipment and road and rail infrastructure of the ports along the Atlantic arc has proved a major challenge. There is no single source of this factual information either for ports within Wales, the UK, or within Europe. Even among port operators, knowledge of the facilities and traffic of their competitors and potential collaborators seems to be limited. Knowledge about the infrastructure connections to and from ports is also at a very low level. Operators know the detail for the ports they use, but only have a vague idea if that is better or worse than the access to alternative ports. For the development of short sea shipping, particularly for new services, it is essential to have knowledge of other ports, either to recommend a port over its neighbours, or to develop links with potential collaborators. Within the ATN work with European partners, it is clear that knowledge is based on old and often imperfect information. Milford Haven for example, is frequently described as an oil port, without any realisation of the Ro-Ro services which operate into the port. 3.3 Marketing to the freight business. The nature of the freight business makes marketing and developing new business difficult. Traffic for ports is often based on existing customers, existing products and existing destinations. Milford Haven for example, is looking to develop business for a pipeline for Liquefied Natural Gas. This is very closely allied to the existing range of petroleum related products through the port. Cardiff has developed its steel business so that it exports scrap steel for a company whose finished products are imported through the port of Cardiff. However, for new traffic, or for a modal change, ports and short sea shippers need to look beyond that. Table 1 Types of potential new short sea traffic for a port Level one Existing customers Existing traffic types/ products Existing destinations Level two New customers from hinterland New destinations New traffic types Level three Through traffic not originating / terminating in hinterland Other traffic not originating / terminating in hinterland Within the ATN project are two inland regions in central France. These regions do not have ports, but they are interested in port and sea based options to divert traffic away from the trunk roads in their region. For example, fruit traffic from southern Portugal to the English midlands currently travels by truck through Spain, over the Pyrenees, through France and then through the Channel Tunnel. It crosses two countries which are not part of its market, and two major natural obstacles, a mountain range and a 20 mile sea strait. This traffic could be diverted to a short sea route between say Lisbon and Swansea. This change is difficult for the ports of Lisbon and Swansea to develop in isolation, as the traffic does not originate or terminate in their immediate hinterland, and there is currently no service between the two ports. Wales and the Atlantic Arc: Developing Ports 27
  • This 'level three' potential traffic (as in Table 1 above) is the most difficult to identify, and then to win. It goes against the habitual approach to deciding which port to use. There are unlikely to be existing relationships to build upon. Market intelligence about traffic flows which could potentially switch may be difficult to obtain. The Atlantic arc group may be able to provide some information from the knowledge of inland regions, such as Limousin and Centre in France. These regions suffer currently due to the large number of trucks that transit the region's roads with traffic that neither originates nor ends there. They would be potentially beneficiaries if the transit traffic avoided their area completely. Unlike ports and shippers looking to win traffic, transit regions may be looking to have traffic diverted away from them. 3.4 Potential products for business development What products might be available for switching to a short sea route to Wales? Some information is given in the products imported to Wales and exported from Wales by road. These commodity statistics are collated by the Department for Transport and disaggregated for Wales. Foodstuffs may not be suitable for modal shift as the nature of the product often makes a short journey time and flexible access essential. However, the machinery and engines and leather and textiles classification may yield some possible traffic for transfer. Further research into potential traffic will be necessary. From initial research it appears that potential traffic flows for the Welsh ports are coal, aggregates and other bulks, containers, forest products and steel. These all exist today but there is scope for much greater traffic. Wales and the Atlantic Arc: Developing Ports 28
  • Table 2 Freight tonnages carried by road (000 tonnes) (2003) by key EU member state Country From Wales To Wales .000 tn % % UK total UK Total Republic of Ireland 0.6 0.3 0.3 0.3 Finland - - - - Sweden 2.8 33.3 3.1 75.6 Denmark 0.8 6.0 0.1 0.7 Netherlands 31.5 4.8 30.0 3.8 Belgium 135.3 17.3 111.9 8.5 France 118.9 6.2 81.3 3.5 Germany 180.1 17.1 88.5 7.9 Austria 2.5 7.2 2.1 8.8 Italy 24.3 4.2 23.9 3.1 Spain 32.2 8.2 18.8 4.4 Portugal 4.7 20.7 5.3 18.4 Greece 10.3 16.4 - - European Union 543.9 9.6 365.3 5.3 Other countries 25.0 8.5 3.2 1.5 All countries 568.9 9.5 368.5 5.2 Freight tonnages carried by road (000 tonnes) (2003) by commodity Commodity From Wales To Wales .000 tn % of % of UK total UK Total Agricultural products 16.2 6.7 46.8 6.3 Building Materials 7.1 7.7 20.7 13.6 Chemicals 238.8 28.0 91.8 15.8 Fertilisers - - - - Foodstuffs 64.7 7.0 27.2 1.7 Fuels* 3.0 7.5 - - Leather goods and textiles 24.8 2.9 15.3 2.0 Machinery and engines 108.6 10.6 68.9 7.7 Metal ore & waste - - 3.0 45.5 Metal products 30.4 11.4 12.1 7.4 Miscellaneous 39.5 8.9 34.0 6.0 Petroleum products - - 8.3 10.8 Groupage (c) 35.6 2.9 40.4 2.6 All commodities 568.9 9.5 368.5 5.1 * A large proportion of coal from/to Wales is carried by rail Source: Transport Statistics Wales 2003 Table 3.7 and 3.8 National Assembly for Wales Wales and the Atlantic Arc: Developing Ports 29
  • Section 4 Emerging issues and conclusions for Wales The following issues are emerging from the Atlantic Arc research within Europe. They are of direct relevance to the situation in Wales. • There is very poor knowledge within the Atlantic Arc about the other ports and their facilities. Importers and exporters are also often ill informed about their choices. • The Atlantic arc group of ports do not all have the same issues or opportunities. • Business development and marketing for ports seems to be haphazard and often based on existing products, customers and shipping operators. • A shift of business to a new route and or mode can take at least 12-18 months. • 'Just in Time' transport means that switching from existing modes may carry greater business risk. • Access to investment capital varies with port ownership structures. Welsh ports generally find it more difficult to access and fund capital investment than mainland European ports. • The availability of port capacity and facilities is not sufficient to win new traffic. • Transport customers value price first, and then overall time period second. • End customers are not interested in the transport mode used. • Port choice is often due a mix to current traffic and inertia rather than being a properly evaluated decision. • The mix of public and private interests may make collaboration in pursuit of modal shift very difficult and objectives and priorities may not be aligned. • Some constraints on port development do not appear to apply consistently across the Atlantic arc (for example environmental assessment requirements). • Where port services have been liberalised, increases in traffic are less likely to lead to proportionate increases in employment. • The Atlantic arc ports generally have reasonable road and rail infrastructure connections. Not all have direct access to motorway standard roads. • Rail freight services may currently be limited in frequency and reliability. There is generally scope for development. • Relations with rail operators and infrastructure planners may be weak. • The Atlantic arc ports suffer due to their perceived and real remoteness from major markets. • Capacity expansion elsewhere in Europe seems less constrained by environmental considerations than seems to be the case in Wales. Wales and the Atlantic Arc: Developing Ports 30
  • • Increasing containerisation, and the domination of the major European ports is an issue for the ports on the Atlantic Arc. • The Motorways of the Sea initiative has scope to support the development of key ports. • Containerisation and use of bigger ships and containers reinforces industry concentration for ports and shipping companies as very few European ports can take ships of over 10,000+ twenty feet equivalent unit (TEU). • The Atlantic arc ports are in competition with the North Sea and Baltic ports in some instances. EU enlargement may shift this balance further away from the Atlantic arc. • Quality of service and reliability are important (after price and time period), and could potentially give sea routes and ports a competitive advantage over road. • There may be scope to expand business in existing product categories e.g. cars, Ro-Ro and dry bulk such as aggregates and fertilisers. Some of these products are low value and have limited margin and scope for added value activities. • For a real modal shift it is necessary to divert traffic from road routes through Europe/ Channel tunnel. This will involve winning road freight traffic which doesn't necessarily originate or end in the area of a port hinterland. • Market intelligence for new and potential traffic may need to be from inland areas and existing road transport rather than with current short sea shipping customers. • Market research and business development for new services, such as a Ro-Ro service is a complex process and may need to be specifically funded. • Ships for new services may be in limited supply. Ro-Ro ships are specialised and tend to be more expensive than container ships. • Ports and short sea shipping are not currently high on the political transport agenda. Wales and the Atlantic Arc: Developing Ports 31
  • Part II Ports in Wales Introduction This part of the report contains case studies of the ports of Milford Haven, Swansea, Cardiff and Holyhead. There then follows an examination of infrastructure issues for both rail and road. Issues of the economic impact of ports and port development are then explored. These points are taken from interviews conducted as part of this research. The list of people interviewed is given in an appendix to this report. Section 5 Case Studies on Welsh Ports This section presents case studies of four main ports in Wales: Milford Haven Swansea, Cardiff and Holyhead Each one covers the port facilities, current infrastructure connections between ports and markets, potential market opportunities (inc passenger shipping), potential employment impact and possible economic generation, potential infrastructure and equipment needed and finally some port specific conclusions, including a SWOT analysis. 5.1 Milford Haven 5.1.1. Port facilities Summary The port is a deep water facility situated in south west Wales. It is the largest in Wales and the fifth largest port in the UK . Its main traffic is petroleum products, both inward and outward. There are refineries in the port area. The port authority manages the Port of Pembroke as well as the marina and oil port at Milford Haven itself. Ownership Milford Haven is a trust port and as such has to meet its trust obligations. These require the port authority to operate efficiently using its available investment and to generate sufficient revenue to cover its future business needs. There is also an objective to benefit the local area. Traffic The majority of traffic through the port is oil traffic, both crude oil in, and then refined oil products which go out by sea. This is both import and export traffic. Oil related foreign import traffic in 2002 was 10,500 thousand tonnes (of a total of 10,940 thousand tonnes). Oil related foreign export traffic in 2002 was 8,726 thousand tonnes (of 8,531 thousand tonnes total). Oil products are also the biggest part of the domestic traffic both inward and outward for the port at 8,726 and 5,940 thousand tonnes respectively. There is also a significant Ro-Ro traffic to and from Ireland, operated by Irish Ferries. A large number of different road haulage companies operate the individual trucks/ trailers which use the Ro-Ro service. Wales and the Atlantic Arc: Developing Ports 32
  • Table 3 Ro-Ro Operations Wales - Ireland 2002 (000tonnes) Imports Exports Self propelled 260 190 Non self propelled 160 165 Other traffic is smaller and includes forestry products (foreign imports) iron and steel (foreign exports) and some general cargo (foreign and domestic traffic). The port also accommodates leisure traffic in a marina, fishing boats and cruise ships. Port equipment and facilities The port's main focus is the oil traffic and the port is well equipped with facilities for loading and unloading. The oil companies have their own facilities and dedicated berths adjacent to their own refineries. There is access direct to pipelines. One oil company, Total is rail connected. A small amount of refined oil leaves the port by road to serve the local west Wales market. Pembroke dock is a separate facility further up the estuary where the Ro-ro traffic to Ireland and other general freight is handled. There is also a small port at Neyland. The port's location in a special area of conservation, and the Pembrokeshire National Park imposes additional constraints beyond those which any other port operator would have to meet. For example this can limit routine operations such as dredging as well as business expansion opportunities. Port services and staffing The port directly employs about 250 people including pilots and other staff. About a third of ships are piloted into the docks. There are significant numbers of staff employed by other companies in the port area, mainly in related businesses. Milford Haven Port Authority has recently made a partnership agreement with Williams Shipping (previously in Southampton) for port services. A new company based in Pembroke Port will provide a range of marine services to shipping and terminal operators in the Milford Haven waterway and throughout South Wales. It brings together the assets and business of Marine and Port Services, a trading division of the Milford Docks Company, with the operational management and experience of Williams Shipping, a Southampton based port services company. 5.1.2. Current infrastructure connections between ports and markets Rail Rail access is provided to the port. Current services are operated by EWS with 2-3 trains a week. There is also a passenger service to both Milford Haven and Pembroke Dock. The rail infrastructure is low speed in places due mainly to the track crossing bridges and viaducts. The track to Swansea includes sections of single line and freight services have to be timetabled to accommodate timetables passenger services. Line speeds make the rail journey to west Wales slow in comparison with road journeys. Wales and the Atlantic Arc: Developing Ports 33
  • The line to west Wales has not been identified for any major schemes by Network Rail or the DfT for either passenger or freight services. Road Milford Haven is located in a rural area and traffic arriving at the port is usually for end customers in the midlands or south east of England. The existing road connection from Milford Haven is not a dual carriageway. It is necessary to travel some 28 miles via the A4076 /A40 before reaching the dual carriageway section of the A40 at St Clears (and then on towards the M4/5/6 corridor). From Pembroke Dock it is necessary to go approximately 23 miles on the A477 before reaching St Clears and the dual carriageway. In the summer there are occasional congestion problems. Although some increases in traffic can be accommodated on the road's current capacity, there may be a need to do spot improvements at particular points. This could be to create an additional 'crawler' lane on uphill stretches of the road, or straightening or widening in some instances. A significant growth in freight traffic might justify further improvements. 5.1.3. Potential Market Opportunities Milford Haven, in common with a lot of other ports, has the capacity to take new traffic. The port management team is well structured to seek business development opportunities. In particular the trust structure, which includes customer representatives, ensures that the port is kept updated with the business plans of the customers. However, it should be noted that the oil business is a global one. Business decisions may not always reflect the specific aspirations of the local operations at Milford Haven. Milford Haven is in an area which allows it to benefit from Objective 1 European Union funds. The port employs a specialist based in France who looks for new market opportunities for the port, in particular on the western coast of France. A new service for Liquefied Natural Gas is being developed. This traffic will use a currently unused jetty and then leave the port by pipeline. Further planning permissions are needed and the pipeline is currently some 70 miles (120 km) short of the port. It is useful to note that this project uses a facility that had been previously taken out of operation. Other jetties which at times have been closed by oil companies have also been brought back into use. The port's trust structure helps ensure that unused facilities can be 'mothballed' rather than removed. Options are being examined for a possible military logistics base to be relocated from the Southampton area to Milford Haven. This would involve some rail and road improvements. It would also involve additional freight handling facilities which could be made available for commercial use if not actively used by the military. There are options for increasing traffic across the short sea routes to Ireland, with a possible further Ro- ro operation that could call at a number of ports in Wales (including Milford Haven) and Ireland. Traffic between Wales and Ireland is increasing. However the current structure of the Irish haulage industry with a large number of smaller hauliers can make development of Ro-ro services a slow business. The Ro-ro facility at Pembroke is currently used about 25% of the time so plenty of capacity is available for new services to call at the port. Wales and the Atlantic Arc: Developing Ports 34
  • Irish ferries have considered a containerized service but not yet seen sufficient commercial potential in this. There could be potential for a new Ro-Ro service from Spain and / or Portugal to Milford Haven, up to 2 or 3 times a week. This would mainly be unaccompanied traffic. The port is actively marketing the port to companies who operate cruise ships. There have been major developments to improve the leisure facilities and the marina area. 5.1.4. Potential employment impact and possible economic generation The traffic opportunities shown above would generate some additional employment. The military logistics base could provide the biggest opportunity as basing a regiment in the area could lead to 40-50 new local jobs in a supporting role. There has been some very effective diversification into related industries such as ship repair and environmental clean up activities DV Howells. DV Howells has expanded employment from 5 to 36 staff. The joint venture on port services, with an eye to expanding to other locations in south Wales is another initiative which may have a positive effect on employment. The development of the port area with new offices and shopping and restaurants has increased employment in the port area although is not directly related to the shipping activity. The additional employment has been for the construction and development work, as well as then in the ongoing operation of the new businesses. The £40 million investment to develop the docks area is thought to have increased employment from about 150 to 250 jobs as well as the 200 jobs thought to be have been involved in the construction and development work. 5.1.5. Potential infrastructure and equipment needed As a trust port, Milford Haven Port Authority can take decisions on investment in port facilities and equipment to broad criteria. They are not constrained by commercially driven objectives to make a pre- determined financial return on investment but have to demonstrate financial responsibility. This gives them the opportunity to develop the port in the light of business opportunities. They have also been able to mothball unused facilities to await future developments (see the above example for the LNG traffic). The port management have expressed concerns about the road access to and from the port, and how that might affect port developments. The Welsh Assembly announced on 7 Dec 2004 plans to improve the A40 trunk road west of St Clears, including the provision of by-passes for Robeston Wathen and Llanddewi Velfrey. Wales and the Atlantic Arc: Developing Ports 35
  • 5.1.6. Conclusions on the development of Milford Haven Table 4 SWOT Analysis - Milford Haven Strengths Weaknesses Sheltered deep berths In Special Area of Conservation and National Park Close to Atlantic shipping lanes Distance to markets by road Capacity available Distance to markets by rail Rail linked Outstanding liability issues from the Sea Empress accident Trust ownership and objectives Perceived as an oil port Close relations with oil customers Current quality of road infrastructure Isolation an advantage for oil/ dangerous goods traffic Development of non port businesses Road infrastructure adequate for modest increases in traffic Rail network adequate for modest increases in traffic Opportunities Threats Diversification to other oil products e.g. LNG Risk of a further pollution spill Business development consultant already working Geo-political issues affecting global oil markets in France Possible unaccompanied Ro-Ro service to Pipeline LNG scheme not yet finalised Southern Europe (for example Santander) Options for container traffic? The geographical factors which make the port of Milford Haven attractive to the oil refining industry are also factors which limit its attraction for other types of traffic. The Liquefied Natural Gas developments would seem a very valuable opportunity for the port, although the employment impact beyond the start up phase seems limited. The other maritime options identified by the port management all require further study and evaluation. The funding for the research and development work may not always be readily available. For example, the option of a Ro-Ro service to and from northern Spain or Portugal would require a significant amount of work to identify traffic and viability. In each instance of potential new business, the decision seems unlikely to be one for the port alone and will require collaboration and joint funding with partners. Wales and the Atlantic Arc: Developing Ports 36
  • 5.2 Swansea 5.2.1 Port facilities Summary Swansea is a mixed port, historically linked to local mining activity and iron and steel production. Ro- ro services to Ireland operate from the port. The port is owned by ABP and the main docks area is accessed via a lock. It is the only port in the area where ships can turnaround on the tide. It is situated close to the city and has dual carriageway links to the M4 motorway. Ownership The port is owned by ABP and managed as part of the group of south Wales ports. The port is required by internal company objectives to achieve a 15% rate of return on investment proposals which can mean that some less profitable or more speculative ventures may not be undertaken by the company. However in other cases they will work with other developers, or sell land to let that happen. For example the SA1 development is a £200 million development on disused dock areas funded by the Welsh Development Agency. SA1 is a mixed development of housing, offices and leisure facilities around a new 400 berth marina and linked by bridges and public spaces to the centre of the city of Swansea. Traffic The port handles about 500,000 tonnes of traffic each year in addition to Ro-Ro traffic. Traffic serves Ireland, northern and western Europe, and the Mediterranean. Swansea Cork ferries operate a Ro-Ro service to Cork. The service is predominantly car and passenger focussed rather than seen as a major freight service. It operates approximately 9 months of the year, with no service in the late winter months. There are 4 - 6 sailings per week. The port traffic is mixed and there is a significant amount of general cargo. Steel products are exported for Corus. There is some import steel traffic. Forest products for Arco are imported from South America and the Far East. There are also dry and liquid bulk products (such as cement and fertiliser), and packaged glass for Corning. There are export coal services approximately twice a month. In its marketing materials, the port emphasises its westerly position in South Wales as an opportunity to reduce sea-freight costs. Port equipment and facilities The port has a container terminal but no regular services are currently operated. The terminal has approvals for Channel Tunnel operation but no rail services currently operate. There are extensive chemical storage facilities which are no longer used. The dry dock facility is no longer used and other options for its use are being explored. These include possible recycling of 'clean' ships for the scrap materials (see below). Port services and staffing ABP has 6.5 staff on management, Health and Safety, Engineering and admin work. ABP also employs 5 staff at the Yara terminal where there is a fertiliser bagging and distribution operation run by ABP. In addition to this there are a team of 8-10 staff to undertake engineering work and maintenance. Wales and the Atlantic Arc: Developing Ports 37
  • Stevedoring work is done under contract and about 12 staff are employed on this. Given the proximity of adjacent ABP ports, it is usual to supplement staffing from elsewhere when necessary. For example, staff to help with timber work will be transferred from Newport, or staff for steel traffic transferred from Cardiff. Other staff are employed by other companies at the port, for example by Swansea Cork ferries (which is owned by the port of Cork) and at the cement terminal. 5.2.2 Current infrastructure connections between ports and markets Rail There are rail connections to the port. A rail grant was given in 2003. However some of the track is understood to be in need of maintenance and an upgrade. There are no regular rail services operating currently. Options for building a rail linked warehouse are currently being examined by ABP. It is understood that steel traffic for Corus could potentially switch to rail if improved facilities, such as a covered siding, could be provided at the port. ABP nationally has a specialist who looks at rail issues as they impact business development. Road The port uses its good road connections as part of its marketing: “Swansea is less than 3 miles by dual carriageway from junction 42 of the M4 motorway.” 5.2.3 Potential market opportunities The port are developing a number of options although it should be noted that these relate to land / facility use as well as directly in shipping. There is scope for port related businesses to be developed. The port management are looking at possible factory and warehouse options for the port site. A local business, Paper Dragon, deals in export recycled paper to the far east. The traffic is containerised and sent by sea. Imported paper currently arrives at the port of Sheerness and then is transported to South Wales by road. ABP are looking at options for improving the rail facility and building a warehouse within a £1.5 million development project. As part of the preparations, they are looking to find grant support for 30-40% of the costs. The warehouse facility is seen as key to winning the traffic for the port. A bigger scheme would be to develop a larger multi - modal facility on the land in the port area. This could involve more than one warehouse, and work with a range of companies and products. There are thought to be opportunities to develop the freight only Ro-Ro service to Ireland. The service is currently unattractive to larger freight companies as the limited service and closure in the winter months forces them to find alternative routes and rates for their traffic. The service is owned by the port of Cork so it would be difficult for ABP to work on the development of this service. There are thought to be opportunities to develop meat traffic from Ireland as there a meat packing facilities in the Swansea area. This would however require a border inspection post to be developed. The port has extensive jetties and berths previously used by the chemical industry. They are no longer used due to structural changes in that industry. Wales and the Atlantic Arc: Developing Ports 38
  • Options for the dry dock include the scrapping of 'clean' ships. This is the recycling of ships which have previously had the contaminants and dangerous materials removed. The value is in the scrap steel in the hull and elsewhere. Swansea is close to companies such as Corus who purchase high grade scrap which could make this a financially attractive proposition. There is potential for the development of short sea shipping routes to places such as Le Havre, some 22 hours away. 5.2.4 Potential employment impact and possible economic generation The SA1 development lead by the Welsh Development Agency is a significant regeneration project. It should be noted that the development includes office and commercial space but not industrial units. The development has secured EU Objective One funding. The land used was previously part of the port facility but has been unused for many years. The development is based around a new marina with facilities for 400 berths. The existing marina is run by the council and the 100 berths are oversubscribed. This large scale leisure and residential development would seem to indicate that the best opportunities for economic generation would come from re-using port facilities, rather than trying to build new traffic. New traffic to the port, and new ancillary business can create new jobs. However, it should be noted that there is potential to transfer staff from elsewhere, whether ABP staff or stevedores or other staff from one of the private port services companies. The 5 staff employed on the fertiliser bagging plant gives an indication of possible staff numbers for a new warehouse or packaging type of operation. The paper warehouse being investigated with Paper Dragon could provide employment for five staff. An operation such as ship steel recycling could have a significant impact on local employment, needing staff to cut up and remove the scrap from the ship itself as well as onward handling and transport. An activity such as this would be subject to planning controls. It would remain to be seen in due course how the new residential neighbours at SA1 might react to a scrap steel operation nearby. The port is also pursuing a wind farm development, for which its exposed site would appear to be well suited. 5.2.5 Potential infrastructure and equipment needed Road infrastructure does not need improvement. The rail infrastructure needs maintenance. For commercial operations, the rail infrastructure and related facilities such as warehousing would need to be enhanced. It is interesting to note that the development opportunities being explored by the port all involve new facilities, rather than the re-use of existing installations. The port area is large but there is not a large amount of quayside land available. Some of the port land is being reclaimed from previous industrial use. Such land, once cleared could be available for future developments. Wales and the Atlantic Arc: Developing Ports 39
  • 5.2.6 Conclusions on the development of Swansea Table 5 SWOT analysis - Swansea Strengths Weaknesses Good road links to docks ABP will not fund speculative developments Mixed facility can handle a variety of traffic Rail infrastructure limited Can work in close partnership with customers Close to other ports (although ABP owned ports) to develop facilities and traffic Capacity available to increase traffic, including Current traffic appears to be from / container terminal and chemical berths. to a very small hinterland. Strong focus on developing traffic and Dependent on strength of local economy / industry. business opportunities Westerly position to reduce sea freight journey Remote from main areas of population/ consumer markets Opportunities Threats Joint marketing and business development SA1 development may limit future industrial with other ABP ports activities on the port land Container berth available Role of Swansea in ABP's overall strategy Scope to develop ro-ro further Options for port land use The industrial development led to the port's development and expansion and the decline of heavy industry and manufacturing has also resulted in the decline of the port of Swansea. The port management have a very open view on the business opportunities which can bring income and traffic to the port. Many of the opportunities envisaged relate to land based activities, rather than shipping itself, although the current Ro-Ro service to Ireland is felt to be below its potential. 5.3 Cardiff 5.3.1 Port facilities Summary The port is privately owned by ABP, who also own a number of other ports in South Wales including Swansea. It is located on the north side of the Severn Estuary, is close to the city of Cardiff and has good road and rail links. It is a port able to deal with a mix of traffic including containers and dry and liquid bulk. Cardiff offers a flexible option for shippers and receivers in South Wales, Midlands and M4 corridor and can handle vessels up to 35000 deadweight tons. The port has also used land for a number of port related operations, such as container repair. There is land available for further business development. Ownership ABP owns a significant number of other ports in Wales and the UK. The company is currently focussing on its core ports activity rather than other developments. ABP is a large organisation and can make use of national experience, for example drawing the experience of ABP Southampton in the cruise business, or doing a deal for a joint east coast and a west coast service provision in conjunction with other ports such as ABP Hull. Wales and the Atlantic Arc: Developing Ports 40
  • The port has a container berth which is operated by Coastal Container Line, who also have operations at Belfast, Liverpool and Dublin. Coastal Containers is owned by the Mersey Docks and Harbour Company. The port is owned by ABP and all the berths and quay areas are common user facilities. ABP has commercial agreements with stevedoring companies and terminal operators and also leases warehouses and land, in the main, for port related uses. For example the Bob Martin cat litter packing facility which is operated by Bob Martin. Traffic The current traffic is about 2.5 - 3 million tonnes per year. The port handles a diverse range of cargoes including containers, various dry bulks, minerals, petroleum products, forest products, animal feeds and steel. Container services are operated by Coastal Containers to Dublin and Belfast and by Gracechurch to Dublin, Leixoes, Lisbon and a range of Mediterranean destinations. Port equipment and facilities The port is accessed via lock. The lock is a limiting factor on the size of ships that can be accommodated. As well as shipping berths the port has large areas of open and covered storage. It also has a cold store, operated by ABP Connect, with drive-in racking and over 8,000 pallet spaces for chilled and frozen product. In addition to over 40000 square metres of transit stores and general warehousing, there is a fully racked Distribution Terminal on the port estate ABP has set a 15% rate of return as the objective for any new investment. As a consequence the port now develops facilities to meet the requirements of a specific customer on the basis of a medium to long term contract. They do not invest in speculative investment to enhance their own port infrastructure and facilities but do undertake regular investment to renew or refurbish essential infrastructure such as lock gates, dock walls and roads. A number of related businesses have also set up on port owned land adjacent to the docks. For example Seaport Environmental Ltd operates a hazardous waste treatment facility in the dock area, licensed by the Environment Agency, which specialises in the treatment and disposal of liquids, sludges, and solids contaminated with hydrocarbons and organic substances. Cardiff is also a major liquid bulk port with extensive storage facilities operated by Texaco Chevron. The Port of Cardiff is zoned for port-related and industrial use and as such can accommodate a wide variety of industrial/commercial uses. Port-related industries may benefit from the provisions of the General Development Order 1995 which grants permitted development status in certain circumstances. Port Services and Staffing ABP employ 81 fulltime staff at Cardiff although some have responsibilities across other ports in South Wales. There are a further 16 working for ABP Connect, the distribution company. ABP do not provide port services with their own staff. They provide general-cargo stevedoring services through Cardiff Stevedoring and Cargo Handling Company Ltd and Marshall Maritime Services. Commercially ABP has relationships either directly with the importer, for example, importation of molasses for Arkady Feeds, in which case ABP contracts a terminal operator to provide handling services on its behalf, or via the terminal operators who contract directly with the Principal, with ABP raising its own revenues via the terminal operators commercial agreement. The choice of service provider or which party a contract is with rests with the client The port facilities can be available 24 hours a day if required. Wales and the Atlantic Arc: Developing Ports 41
  • 5.3.2 Current infrastructure connections between ports and markets Rail The port has a rail connection and services operated by EWS run to the port. A freight facilities grant was obtained for this. There is a daily rail services operated to Nottingham and the Midlands. The comprehensive provision of rail facilities allows containers, steel, dry and liquid bulks to be distributed directly from a number of berths including steel to and from the Celsa UK Ltd. steel works contiguous to the port estate.. There is also scope for provision of additional rail infrastructure, should a client require and be prepared to fund it. Cardiff has the potential to expand its rail facilities and has good connectivity to the rail network including availability of freight paths to & from the port. ABP nationally has a specialist who looks at rail issues as they impact business development. Road The road route to the port is to the west by dual carriageway. The M4 can be accessed within about 15 minutes although this western route involves additional mileage to reach the port. The more direct route from the east does not have road access suitable for heavy trucks. An eastern link road is very expensive. The East Gate is on Rover Way through which the majority of port traffic exits and connects to the A48(M) within a few miles. This provides good access to the motorway however there are also plans to complete the route via the Eastern Bay Link which will eventually make the current route via Rover Way superfluous. Plans to develop a new M4 toll road have been announced recently by the National Assembly (Dec 2004) but completion is not expected before 2013. 5.3.3 Potential market opportunities Business development is seen as a core activity of the port management team, but there is not a separate individual solely responsible for new business development. The Deputy Port Manager has specific business development brief. The ABP corporate objective of a 15% rate of return on investment is very clearly understood by the managers and as a consequence they are keen to pursue grant opportunities, which will reduce the size of the ABP investment. This rate of return requirement may also mean that more speculative ventures, or less profitable ones, may not be pursued and developed. As part of ABP there is scope for working with colleagues in other ABP ports, whether in south Wales, or for example with colleagues in Southampton with specific experience of building the cruise business. ABP Connect is a logistics company which is able to develop new business working with the ABP ports. The port management consider that the traffic through the port could double to approximately 5 million tonnes per year without problems with port capacity. There is capacity at Cardiff to double traffic from the current level of 2.5 - 3 million tonnes a year to about 5 million tonnes per year without the need for major investment. The port are actively following new business leads at all stages along the logistics chain. There is capacity both at the dockside, and in land for development for logistics support. The port works with both the rest of the ABP organisation, particularly with ABP Connect, the logistics arm of the organisation which has regionally based teams. The ABP headquarters marketing team also do market intelligence gathering. They also work closely with shippers and receivers and terminal operators on site in order to seek out new trade opportunities. For example, the port manager has worked with the terminal manager for Coastal Containers to visit other ports, for example Felixstowe (which is not an ABP port). Wales and the Atlantic Arc: Developing Ports 42
  • The port is 4 miles from the intermodal rail freight terminal at Wentloog (more details on the terminal are in section 6 of this report). For container traffic, there appear to be options for feeder services to Cardiff from other EU ports. There is good potential for the Coastal Container Terminal to service Welsh and English coastwise feeder services from Southampton without the need for major investment. The port have recently invested in upgrading the container facility to meet international security standards. A major expansion would require further investment in crane facilities. The port is in competition with Bristol, a larger port about 45 miles away which takes container and car traffic in particular. The port has recently developed a cruise berth. This is seen as likely to bring benefit to the Cardiff area, as well as the immediate business for the port. Cardiff is a possible restocking point, as well as having a number of day trip destinations nearby and so has potential as both a turnaround point, and as a port of call. Cardiff currently handles both deep and short sea shipping and is a good option for shippers and receivers located in the English midlands and M4 corridor, in addition to its role as a gateway to South Wales. The port has a 40 acre brown field site which offers opportunities for development of both rail and port related cargo services. The port is well positioned to cater for an increase in short sea shipping as the increasing costs of road haulage of both conventional and containerised cargo makes sea freight more attractive. 5.3.4 Potential employment impact and possible economic generation ABP have taken the strategic decision to focus on their core port operations. In the last 4-5 years nationally the company has disposed of 250 million pounds of property which was 'non-core'. Where there are non shipping development opportunities, ABP prefer to let a third party do the development work and take the associated risk. The cruise business will bring economic benefit beyond the port. ABP have recently (June 2004) commissioned research by the Welsh Economy Research Unit (WERU) at Cardiff Business School to examine the role of ABP within the Welsh economy. The research found an economic impact much beyond the direct employment at the port, and extending to tenants and into the local economy. More details of this are given in section 8 of this report. 5.3.5 Potential infrastructure and equipment needed There is scope to develop the hard standing areas at the dockside. There are also warehouses on site which could be redeveloped. Options for using this in relation to cruise traffic are currently being explored. However, infrastructure development also has to meet the 15% rate of return requirement by ABP. The rail access is limited to a single track, accessed via a freight terminal owned and operated by EWS. EWS would charge any other operator a relatively high charge for access via their infrastructure. The rail facilities within the docks area are basic, but include sufficient sidings space for the loading and discharge of trains. Pathing of freight trains into and out of the docks at Cardiff is not believed by the port to be an issue although congestion in the Newport area and the ongoing track maintenance Wales and the Atlantic Arc: Developing Ports 43
  • programme are a constraint. A modest increase in traffic can be accommodated on the existing infrastructure. 5.3.6 Conclusions on the development of Cardiff Table 6 SWOT analysis - Cardiff Strengths Weaknesses Part of ABP with access to specialist support ABP will not fund speculative developments Mixed facility can handle a variety of traffic No deep / large berths?? Can work in close partnership with customers to develop facilities and traffic Capacity to double traffic Range of port services available 24 hour operations available 35000 ton DWT vessel size Opportunities Threats Joint East/ West marketing with other ABP ports Increased environmental constraints on development in Severn Estuary [this is also a strength since what exists now is a scarce resource & difficult to add to. Dredging constraints are probably more significant threat Land & rail available for intermodal development Container berth is well equipped Further growth of port at Bristol Scope for investigating potential services to other European destinations. Well positioned to cater for short sea shipping trends The opportunities for Cardiff are similar to those for Swansea, although Cardiff is locate closer to the markets of the English midlands. Container services have scope for further development. A step change, such as the creation of a major retail distribution centre in the port area, would probably be needed to make a significant difference to traffic levels through the port. 5.4 Holyhead 5.4.1. Port facilities Summary The port is the main port in north Wales and primarily serves the market to and from Ireland. It is owned by Stena Line, which also operates services from the port. The port is situated within the town of Holyhead so freight development options are constrained by the lack of storage space, and the need to take traffic through the town to leave the area. Wales and the Atlantic Arc: Developing Ports 44
  • Ownership Stena Line, who own and operate Holyhead, also own and operate Fishguard in south west Wales. Both ports have a core role to service traffic to and from Ireland rather than other destinations. Stena Line is a wholly owned subsidiary of Stena AB, a private company owned and managed by the Olsson family. The company operates a variety of sea routes in north west Europe, particularly Scandinavia and have expanded the business largely through acquisitions. Stena Line has invested in additional ships to increase their Irish sea capacity by about 25% in the last 2 years. Traffic The port is potentially in competition with the port of Liverpool, but that is 100 miles and 6-7 hours away. Liverpool is a busier port and has less scope for land development in the port area. Freight traffic is traffic to and from Ireland. Services are operated by both Stena Line and Irish Ferries. The services take both accompanied and unaccompanied Ro-Ro traffic. Freight traffic is carried on the high speed services as well as the conventional ferries. Stena have invested to expand the capacity on the Holyhead - Dublin route with the Stena Adventurer, commencing service in July 2003, 3400 lane metres, this vessel is a large conventional ferry and represented an increase in capacity for the route of almost 70 per cent. The vessel also offers improved flexibility by featuring drive through loading. No freight traffic is currently conveyed to / from Holyhead port by rail. Passenger traffic remains significant despite a reduction following the loss of duty free trade within the EU and the increase in low cost airlines operating between the UK and Ireland. There are about 500,000 foot passengers a year between the two ferry companies. The majority of these foot passengers also travel by rail (275,000 pa). There are about 1.5 million car passengers. Port equipment and facilities The port has five separate berths and a jetty, conventional refit berth and a public quay. The tidal range is small. Terminal 1, situated in the inner harbour, is dedicated to the high speed craft which operate to Dun Laoghaire near Dublin. Cruise ships often use the refit berth, also located in the inner harbour. This is 5 metres deep and cannot accommodate the larger vessels which have to stay at anchor, requiring tenders to bring passengers to and from shore. A ship at anchor is not usually supplied through the port. Of the 12 cruise ships at Holyhead from January to September 2004, 7 had to stay at anchor. This is seen as a major disadvantage. Terminals 2 through 5 are for Ro Ro traffic and have depths of 4.5 for the smallest to 8 metres for the deeper ones. Terminal 4 is located on the sea side of the main port facility and is a tanker berth as well as a Ro Ro berth. There is a separate “AA jetty” 189 metres in length and 13.5 metres deep which is a private deep water bulk facility. Port Services and Staffing The port and shipping services based from the port employ just over 800 staff. This figure includes about 325 ferry crew and also call centre staff who handle passenger bookings and services such as police and immigration required largely due to the passenger services rather than the freight services. The majority of these are permanent staff although some use is made of seasonal temporary staff. About 150 people are directly employed on port operations between Stena Line and Irish Ferries with a further 50 on security and maintenance type duties. Wales and the Atlantic Arc: Developing Ports 45
  • 5.4.2. Current infrastructure connections between ports and markets Rail There is currently no rail freight to or from Holyhead, although services have operated in the past. The infrastructure is available should any new traffic be presented. The north Wales main line is not electrified, and operates mostly at 90 mph. The track geometry, as in much of Wales, is constrained by local geology and geography. The track is used by passenger services to Chester and Manchester, as well as services direct to London. Services connect with the ferries to Ireland. The current objectives for the route of Network Rail, the owner, are very much based on maintaining the existing track and structures such as cuttings, bridges and viaducts from the impact of weather and tides. Erosion and flooding are issues at various points along the line. Road The A55 dual carriageway connects Holyhead with towns along the north Wales coast and then to the motorways (M56 / M62) to Manchester and Liverpool within 2 hours. There is potential constraint with the Britannia Bridge over the Menai Straits at peak times. However the immediate access to the port is currently constrained. A new scheme is planned which will address the access issues, and alter the check in arrangements for departing Ro Ro passengers and freight. New facilities will be directly accessed from the A55 dual carriageway. This is due to be completed by 2008. 5.4.3 Potential market opportunities There seems to be scope to develop the freight business. The port has capacity to handle a range of products and appears willing to invest in equipment and facilities to serve new flows. The best opportunities are probably in expanding on existing traffic. The port does not appear likely to experience a massive expansion (such as seen at Sines in Portugal) For example, the port handles some car traffic on behalf of Seat. They have cranes to deal with containers (in relatively small numbers). There is also some storage and handling space available. Specialised warehouses can be available for handling high value or time sensitive goods. The port sees a potential role in traffic from other areas of Europe to then feed to both Ireland by sea and to the north west of England by road. This could be for time sensitive cargoes in particular, and also to avoid the congested ports and roads of south east England. Without expanding the facilities, there is significant spare capacity at the port for additional ships to berth. The cruise services are a potential market that the both the port and the county council are keen to develop. They bring funds to the port and to local businesses. Larger ships currently have to stay at anchor which reduces the ease of restocking them with supplies and access for passengers. Cruise ships are good for the development of tourism, typically with organised excursions by coach to Snowdonia in addition to local visits to Holyhead itself. There is scope to link in to sporting activities such as golf or surfing as well as the classic tourism locations. Wales and the Atlantic Arc: Developing Ports 46
  • 5.4.4 Potential employment impact and possible economic generation The balance between passenger and freight traffic results in greater scope for employment opportunities in the local area. Passengers, typically, need refreshments and shopping opportunities whether passing through or stopping on a day visit. As has been seen at Milford Haven, leisure facilities can potentially generate greater employment than the traditional freight traffic. The traffic to and from Ireland also leads to related activities by police, customs and immigration services. New freight traffic, possibly car imports or other products could generate a small number of additional jobs. There may be other opportunities with other businesses basing themselves in the port area, even if not directly port related (as with the packaging facility at Cardiff port). 5.4.5 Potential infrastructure and equipment needed The port has taken a lead in looking to future expansion option. These plans are being developed with the Isle of Anglesey County Council. Plans being currently implemented to improve the road access and re-organise port facilities including check in and customs by 2008. Under these arrangements the HGV and passenger check in area is relocated, as are the police and customs activities. Pedestrian access between the town and the port is improved. Plans have also been prepared to expand the port with a major new quay wall (costing approximately £15 million) and an extension of the existing dockside area. This proposal also has an option to extend and improve the rail freight facilities at the port. This development is seen as improving the environment and access for the town of Holyhead, as well as for port traffic. There has been extensive work done in the past to explore options for improving the rail connections along the north Wales Coast. A major rail freight upgrade study was completed in 1997, commissioned by the North Wales Economic Forum on behalf of the county councils, with additional funding from Railtrack and the European Regional Development Fund. This looked at a range of options including electrification of the line and enhancing the loading gauge to take piggy back traffic. The study identified costs of approximately £233 million (at 1997 prices). A second review of the proposals by MDS Transmodal, on behalf of the North Wales Economic Forum, identified potential changes to the infrastructure proposals and produced a revised cost of £157 million. The market analysis for both reports is limited. The MDS report conclusions are based on the assumption that freight traffic will develop (for containers in particular) generating commercial and environmental benefits worth £22m and £16m respectively. Passenger benefits of £180m are deduced from the costs (at that time) of upgrading the West Coast Main Line (WCML) and the option of avoiding slower passenger trains from north Wales taking up expensive train paths on the modernised WCML. Given the current situation with rail infrastructure costs increasing, and potential container traffic increasing sharply at the major ports such as Felixstowe and Southampton, and the growth of passenger traffic using low cost airlines to reach Ireland, it seems unlikely that the level of investment required for this electrification rail scheme will be justified in the near future. The Strategic Rail Authority made investment elsewhere to clear routes for 2.9m high containers, the additional gauge clearance required for piggyback operations seems unlikely to be justified at any stage in the foreseeable future. Wales and the Atlantic Arc: Developing Ports 47
  • 5.4.6 Conclusions on the development of Holyhead Table 7 SWOT analysis - Holyhead Strengths Weaknesses Mixed facility can handle a variety of traffic Limited deep / large berths Balance of passenger and freight traffic Remote from main market areas. Capacity available to increase traffic No rail service at present. Port security is good Limited ability to handle containers. 24 hour operations available Not well known within Europe Opportunities Threats Continued growth of Irish economy driving traffic Developments at Liverpool Expansion plans for port £ / € exchange rates Development of cruise business for north Wales. Slowdown in the Irish economy European short sea shipping services Holyhead is very much linked to the Irish market and trade between Ireland and Britain and the rest of Europe. Road infrastructure improvements should support the port in retaining and building traffic. There may be scope to build connections to European ports as an alternative to Liverpool. Wales and the Atlantic Arc: Developing Ports 48
  • Section 6 Rail infrastructure and services and access to the ports Section 6.1 Rail strategy for the ports This section takes an overview of development issues. It looks first at the current position for the national UK rail freight strategy, current port related rail services and intermodal terminals, and current position regarding infrastructure development. It then looks at potential barriers to rail developments and reaches some initial conclusions. Rail issues specific to each of the four case study ports (Milford Haven, Swansea, Cardiff and Holyhead) are addressed within the relevant case studies above. 6.1 UK Rail freight strategy - current position Freight strategy for Wales is now the responsibility of the National Assembly. Prior to the Transport (Wales) Act 2006 this lay with the Department for Transport (DfT) following the transfer of responsibilities from the Strategic Rail Authority (SRA) in July 2005. Alistair Darling, the Secretary of State for Transport gave a statement to Parliament on 19 July 2005 setting out the government's objectives: “Our clear policy aim is to see goods being moved in a sustainable way, which maximises benefits to the economy and to society. For instance, because they generally have less impact on society than road transport, rail and water freight can bring substantial benefits. In 2004-05, the rail freight industry moved the equivalent of over 7 million lorry journeys and saved 1.43 billion lorry kilometres, delivering significant reductions in pollution and congestion. We believe rail therefore has a crucial role to play in goods transport alongside other modes, and we wish to see freight travelling by rail instead of road wherever this makes most sense. “This aim can be delivered most effectively by a competitive and dynamic private sector rail freight industry, and this is borne out by the growth since privatisation, which has been driven by real on-rail competition throughout the industry, including several new entrants to the market. We will not dictate to the industry how it should run its business or become involved in operational issues. Where disputes occur with other parts of the railway, they should be resolved through established rail industry dispute procedures." The National Assembly’s draft freight strategy will be published later in 2006. Under the Transport (Wales) Act 2006, the National Assembly retains the powers to provide freight facilities grants, including capital expenditure of sidings intermodal facilities etc. It also has powers to upgrade operational track in agreement with Network Rail (where they are the owners) and the Department for Transport. That the main strategic rail freight routes used in the DfT's business planning process and the major enhancement projects in progress or planned do not include any route in, or into Wales. 6.2 Rail services and terminals in Wales 6.2.1 Services Rail freight services in Wales which service the ports are currently operated by EWS. EWS run regular oil trains from Milford Haven. They also run a daily rail service from the port of Cardiff with traffic Wales and the Atlantic Arc: Developing Ports 49
  • from Coastal containers. Freightliner runs services to and from the intermodal terminal at Wentloog, Cardiff. There are currently no regular rail freight services for Holyhead or Swansea ports. Both these freight train operators were originally part of British Railways: EWS the 'wagonload' intermodal and bulk service and Freightliner, the container service. At privatisation, Freightliner had control of many of the G.B. port facilities, which were not open access. This meant that other operators had to develop their own facilities. Over the last 10 years, Freightliner has developed services in what was previously seen as traditional EWS territory with Freightliner Heavy Haul, which began operations in 1999. The international rail terminal at Wentloog, east of Cardiff is operated by Freightliner. Although privatisation opened up the rail freight network to new operators, the impact has been extremely limited. The main new rail freight operator, GB Railfreight, does not currently run any services in Wales but have demonstrated their ability to win freight service contracts and build their company around the available business. They run some services with new to rail traffic from the port of Felixstowe. GB Railfreight is now part of First Group. The other operator, Direct Rail Services, specialises in nuclear traffic and now also conveys some bulk traffic and has worked to develop new rail freight business. 6.2.2 Terminals Each of the ports examined has rail facilities. However they are not extensive and consist only of sidings rather than a regularly staffed facility. Where there are scheduled services, they use the ports to pick up and drop off port specific traffic only. There is no other rail activity. However there is an intermodal terminal at Wentloog to the east of Cardiff, which opened in February 2001. The terminal is operated by Freightliner and its _15 million development was funded by the Welsh Office / Welsh Development Agency, the European Regional Development Fund, Cardiff City and County Council, and Railtrack (now Network Rail) with a modest investment from Freightliner. The proposals to build this facility were based on 'helping companies move their products to key European markets by rail' [from the National Assembly for Wales website] i.e. over land and the channel tunnel rather than by sea. The terminal is located away from the port area at Cardiff. However, in looking at the traffic flows which serve Wentloog, with regular services to and from Southampton, Felixstowe, Seaforth (Liverpool) it appears to be an inland terminal for larger UK ports rather than currently operating as a true intermodal terminal. The majority of traffic is inbound containers on behalf of P&O and OOCL the deep sea shipping companies from original destinations in the Far East, Australia and the USA. Empty containers generally form the traffic for return trains back to UK ports although Sony in South Wales are sending some loaded containers forward. Services are timed so that a container can leave Felixstowe port at about 18.00 on day 1, arrive at Wentloog at approximately 01.00, be lifted onto a trailer by 02.00 and be delivered to destination before 06.00 on day 2. There are no services using Wentloog which operate via the Channel Tunnel although the terminal has all the necessary security arrangements to meet the specific requirements. Non port-related Alcan traffic using the terminal currently is due to end shortly as the activity in Falkirk Scotland comes to an end. Other traffic which was expected to use the terminal has not developed due to the closure of industrial plants in south Wales, such as projected traffic for LG. The terminal is currently operating below capacity at approximately 750 containers or 1,000 teu (twenty foot equivalents, the standard measure of container capacity) per week. The annual traffic is about 40,000 teu, about 30,000 containers. It directly employs about 40 people. Wales and the Atlantic Arc: Developing Ports 50
  • 6.3 Development of infrastructure 6.3.1 Loading Gauge The loading gauge of a railway track determines how wide and high a load can safely travel the route, clear of platform edges, bridges and tunnels, and railway infrastructure installations. The loading gauge needed for freight is not a new issue. However, the increasing use of larger containers makes the gauge issue even more critical (see Figure 6). In the UK only a very few rail routes are cleared to the standard required for the 9ft 6 high 'big boxes'. This gauge (referred to as W12) allows carriage of 9ft 6 high (2.9m), 2.55m wide containers on a standard height (1000mm deck) wagon. It also allows carriage of 9ft 6 high, 2.6m wide refrigerated units (reefer swap bodies) on a 945m deck height wagon. Refrigerated container units are typically wider than non refrigerated units. This gauge will therefore accommodate deep sea and short sea port traffic, Channel Tunnel traffic, including swap bodies and domestic intermodal movements. A slightly smaller loading gauge (W10) gauge allows regular 9ft 6 containers to be carried, but in many instances if a route requires infrastructure work to be cleared to W10, the incremental cost to clear to W12 is low. Figure 6 Railway Loading Gauges Diagram from Joyce's World of Transport Eclectica The first rail route to be cleared to take the larger size containers was from Tilbury to the West Coast Main Line in June 2004, and Nuneaton to Birmingham was cleared in August 2004. There is scheduled and funded work to clear routes connecting Felixstowe, Harwich and Manchester by the end of 2004. The Rail Freight Group (a lobbying organisation) have vociferously argued for spending the £50 million required to clear the route from Southampton to the West Coast Main Line to W12 gauge but as yet no funding is available. ABP who operate the port of Southampton (and a number of south Wales ports) are a potential beneficiary but are currently not making any funding available. The loading gauge on the tracks leading into the ports in Wales is adequate for the majority of traditional freight wagons. It is not suitable for container traffic, for example Cardiff Docks is W6A (although W8 to Cardiff itself), to Swansea is W8, Milford Haven W6 and Pembroke Dock W7. Rail Wales and the Atlantic Arc: Developing Ports 51
  • freight access to south Wales is generally via the Severn Rail Tunnel. Massive work would be required to increase the loading gauge and is extremely unlikely to ever be done. Wentloog international freightliner terminal currently has a very small number of large size containers running in to the terminal. These are carried on special low level wagons, which are of limited availability. The regular daily service from Felixstowe can currently take up to four 9ft 6 containers. It is possible that as further routes are cleared to take 9ft 6 containers on regular wagons, there will be a cascade of lowliner vehicles to services such as those running to Wentloog. There have previously been extensive studies of the north Wales main line to Holyhead, looking at both electrification, and increasing the loading gauge to carry piggy back traffic. This study in 1997, by Railtrack on behalf of the North Wales Economic Forum originally identified the costs as £233 million. A further study by MDS Transmodal and Servant Transport Consultants was commissioned to evaluate the first report. This second study proposed a different approach and came up with costs of £170 million in 1998. Much of the difference was due to spot sections of single line where clearance for two tracks was very expensive due to particular structures or alignments. Even at this reduced cost there seems to be no financial justification or market potential for piggy back operations. There are no recent studies on the costs of improving the loading gauge in south Wales, or to connect between Cardiff and the West Coast Main Line. Significantly there are no current plans to improve loading gauge in Wales. No customer, rail operator or local authority is currently promoting any development. Network Rail will review requirements for gauge clearance only in relation to a firm request from a customer with a specific flow of traffic and type of wagon. They do not undertake 'speculative' survey work. This means in effect that any increase to the loading gauge (or any other infrastructure development) will only be considered for a specific flow of new traffic with an identifiable client prepared to pay for research and development costs. Should a study of loading gauge and track clearance issues be required then there are a number of specialist infrastructure companies who could undertake this. Possible companies include Laser Rail (who have developed the leading software in this field) Tasque and Tritech. 6.3.2 Track capacity and speed Freight only lines in Wales are limited, typically providing a final connection to a coal mine or steel works, rather than as a separate network (as in the USA). Freight traffic therefore shares track capacity with passenger services. Freight services typically travel at lower speeds than passenger services. Newer wagons with speeds of 60-75 can travel as fast as stopping passenger services. Older wagons typically have vehicle speed limits of below 60 mph. Most of the Welsh rail network linking to the ports has line speeds (i.e. the track speed limit) of 75 mph (120kph). However in south Wales there are a number of locations where specific structures or curves impose a lower speed limit. For example, a particular viaduct, or bridge may require a limit of 20 mph or 40 mph for a short distance as the track goes over the structure. The costs are high as such work would normally require the full replacement of the bridge or viaduct concerned (often replacing structures which have been in place since the Victorian era). The benefits of such work are limited due to the short distance over which the increased speed would be possible. Wales and the Atlantic Arc: Developing Ports 52
  • There are no current plans to undertake any work to improve line speeds in Wales. Such work would require a flow of new traffic sufficient to justify the costs, and a client prepared to pay for the research and development costs. The Network Rail priority for the routes in Wales is to work to maintain the existing standards, rather than to improve the infrastructure. Train length can occasionally be an issue. Freight trains are typically longer than passenger services. The DfT has identified that on key routes that trains to a length of 775m should be accommodated, permitting a 750m training length. This is not currently an issue in Wales or expected to become one. Another operating constraint is the 'route availability' which defines the types of wagons which can use a particular route. The north Wales coast and lines to the ports in south Wales have a route availability (RA10) which allows most types of standard rail wagons to be used. In some parts of the rail network capacity pinch points can have an adverse effect on both passenger and freight operations. Freight operations in Wales are at low levels and this is not generally an issue although the combination of local and long distance passenger services through Cardiff can make scheduling an issue. The Rail Freight Group and the Freight Transport Association have recently finished a study of current and forecast rail freight capacity to inform the DfT's work on the High Level Output Specification which will determine which services operate on the UK network. This study which was based on interviews with over 50 different companies concluded that for the currently projected demand there are adequate paths available for freight in Wales. The map of the existing path capacity is shown below. The study also examines future demand and was significant in that one of the key areas of rail freight growth predicted is in maritime containers with tonnage expected to increase from 2003 to 2014 at 5% pa from 11.1 million tonnes per year to 21.1 million tonnes by 2014. A significant increase is also expected in coal, mainly in imports from 46 million tonnes to 53 million tonnes p.a. Some of these coal imports will arrive via the south Wales ports. Nevertheless, the study identified that within Wales the existing paths were adequate for future growth as predicted up to 2014. This is consistent with the approach taken by Network Rail who are able to do minor infrastructure improvements as part of the significant signalling renewals planned between now and 2009 on the South Wales Main Line, but do not have any proposals for track and capacity enhancements. Wales and the Atlantic Arc: Developing Ports 53
  • Figure 7 Paths available for freight 2005 6.3.3 Terminal infrastructure and facilities Wentloog is a purpose-built intermodal terminal. When DRS and Exel logistics were looking at possible new rail freight traffic for Burton Biscuits, the Wentloog terminal was their preferred choice. However the costs of using the terminal, which included a third party access charge by Freightliner, were thought by DRS to be too high. Other rail terminals examined by DRS did not necessarily have the right infrastructure for the traffic. DRS also looked at options of using Cardiff Port as the rail terminal, with traffic that would come in by road, and then leave by rail. The current rail infrastructure at the docks is not adequate to do the handling operation safely. New traffic would have required an additional rail line to be installed sufficient to take a full train. Hard standing next to the siding would also have been necessary to enable the loading and unloading operations to be done safely. ABP Cardiff worked with DRS to develop options for this new infrastructure although the traffic did not develop. New traffic is likely to need the improvement of existing facilities at rail terminals. Wales and the Atlantic Arc: Developing Ports 54
  • 6.4 Potential barriers to development 6.4.1 Costs, grants and start up support It was seen in section 3.1 how transport mode is decided primarily on price. Rail, particularly in Wales is generally much more expensive than the equivalent road transport. Estimates on the amount vary but other than high volume bulk products with direct rail access (such as coal), it is thought that costs can be two to ten times more expensive than using road (authors' estimate). Not all end locations are rail linked so there needs to be some local transport arrangement at both ends of a rail journey, usually with a transfer to road. This will involve handling costs as well as provision of the road transport itself. It has been estimated by Exel Logistics that for every £1,000 of rail costs, another £1,000 is incurred in costs at each end of the journey, thus increasing the rail cost by a factor of three. The higher cost of using rail is acknowledged, but not quantified in both EU and Welsh transport policy. The policy approach Wales/UK is to award grants on the basis of social and environmental benefits, rather than challenge the costs of providing a rail service or new rail infrastructure. The Freight Facilities Grant (FFG) is available to help offset the capital costs of providing rail freight handling facilities. It is also available to help companies re-invest in existing rail freight facilities. It is used typically for the provision of sidings at private companies, such as a factory, to link it to a main line, or for wagons or loading equipment. Grants in Wales are administered by the National Assembly for Wales. These grants are for capital expenditure, and are made on the basis of a high level of certainty on traffic forecast. They are not made speculatively. However, it should be noted that capital costs for infrastructure improvements can be very high. Safety regulations can mean that an apparently simple piece of additional infrastructure comes with a very high price due to the rules of working safely on the railway and the need to link in to the main network for track and signalling operated by Network Rail. There is often no scope to negotiate on some of the costs quoted. A new rail freight grant scheme was launched in February 2004, the Company Neutral Revenue Support (CNRS) scheme. The scheme is designed to “further support and secure growth in the market for the movement of intermodal containers by rail in Great Britain, and applies to deep-sea, short-sea and domestic intermodal rail freight” (DfT press release). The scheme was given a budget of £22 million for 04/05 with funding for 2005/06 and 2006/07 is anticipated to be broadly similar at around £20-£25 million per annum. The scheme was originally administered by the SRA and has now reverted to the DfT. The grant scheme has been approved by the European Commission for a duration of 3 years, to 31 March 2007. The DfT have said they are now looking at what the successor regime should be. Experience with the company neutral revenue support (CNRS) indicates that the scheme has been oversubscribed for the allocated budget so any new applications will not be funded. There is some anecdotal evidence that the initial grants have been awarded to the bigger freight operators, with the result that funds were not available for the newer smaller companies. The scheme has been a disappointment to one applicant interviewed for this report because regardless of the merit of the application, funds were no longer available. They were told by the SRA that they were entitled to about a 75% revenue grant on a traffic flow from Wales, only to learn that the Department for Transport (DfT) no longer had funds available. The lack of revenue support suggests that the traffic, (10 containers daily), will stay on road because the service is too expensive to justify the switch to rail. Wales and the Atlantic Arc: Developing Ports 55
  • The CNRS scheme would appear to be one with real potential to support switching traffic from road to rail. It is based on specific and real flows of traffic, not future possibilities. As such the Welsh Assembly Government may wish to look at options of supporting the scheme, possibly in a revised form, within Wales and to explore these options for the future with the DfT. There may be an option of specific support for port related rail traffic. The EU supports a system of “Marco Polo” grants for intermodal traffic can be used throughout the EU. They are for research or start up operations only (see section 1.1). However, from the first set of grants awarded in September 2004, none has been awarded to services in the UK or to Wales. There appear to be no other grants currently available to support a start up operation. It is a UK government objective to ensure that grant funding is targeted to deliver the maximum benefits in terms of reducing congestion, pollution and accidents. From 2007-08, the funding programmes for rail freight, will be incorporated alongside water and road freight grant programmes into a cross-modal Sustainable Distribution Fund. Concern has been expressed within the rail freight industry about the reduction in the size of the funding available where the combined scheme is projected to have significantly less than the overall funding previously available for rail freight schemes 6.4.2 Open access to rail Following policy developments in the EU as well as in Wales/UK, the principle of open access to the rail network in Wales has now been firmly established. However, in looking at rail terminals which are also 'open access', the picture appears to be more complex. Rail terminals, whether at a private location such as a factory or a major intermodal terminal such as Doncaster or Wentloog, are all operated by private companies. Access and its timing and price, has to be negotiated and agreed. There is some anecdotal evidence that where a terminal is owned and operated by one company, and another company is seeking access, then the price quoted may appear unreasonably high, or access at the preferred times has not been possible in order to give precedence to the operators own traffic. Some of these issues resolve themselves in the course of negotiation. The International freight terminal at Wentloog is owned and operated by Freightliner. All the services using the terminal are currently rail services operated by Freightliner. Other operators can use the terminal, but would have to pay an access charge, that is not charged to Freightliner. In effect this means that other rail freight operators have to pay a higher overall charge to use the facilities. This additional charge can also apply to terminal facilities adjacent to ports, which also have private operators. For example, to access Cardiff Port, rail traffic has to transit a terminal operated by EWS. Any other freight train operator (i.e. a competitor) would have to pay for rail access to the docks, owned by ABP and rail access through the terminal, owned by EWS [who do not own any land or rail facilities within Cardiff docks] as well as the onward track access charges to Network Rail. In looking at the port access, it should be noted that just as ports charge for ships entering the port and using facilities, so ports also charge for rail access and handling arrangements. There is some anecdotal evidence that port operators charge a higher rate for handing rail based traffic, than for identical road based traffic. Charging is obviously a commercial decision for the companies involved. However, practices such as differential pricing for rail will reduce the opportunities for developing rail based traffic. Wales and the Atlantic Arc: Developing Ports 56
  • 6.4.3 Complexity Rail privatisation has increased the complexity for new customers seeking to put traffic on rail. Even the DfT says the following: “Rail Freight operates in a complex environment. The successful conversion of freight from road to rail brings together a network of commercial and operational relationships, which have to work together for common objectives.” There is no 'one stop shop' although many would claim they can provide the relevant service and groups such as the Rail Freight Group do their best to support new traffic. There are four freight operating companies who could transport the traffic by rail. Wagons may be owned by the operating company, or may need to be leased. Terminals may be owned by the chosen freight company, or a competitor, or a third party. Train scheduling is managed by Network Rail, and the contractual nature of relationships makes it very difficult to fit in new services at short notice. Although end customers, such as the supermarkets use logistics specialists to manage this for them, the logistics companies themselves do not necessarily have a simple task. This complexity adds to the barriers to access. Some customers have described the process as being 'hurdle after hurdle' as negotiations are successfully completed on one part of the process, only to have to start again with a another party for the next stage of the transit. 6.4.4 Rail performance and reliability Choice is driven by both positive and negative factors. A lower cost has been seen to be a key positive driver of modal choice (section 3.1). Reliability problems are a key negative factor that puts customers off using rail freight services as identified from interviews for this report. As businesses have integrated just in time systems, the business risk of reliability problems becomes higher. Orders tend to be placed late on day 1 for early day 2 delivery in fresh produce. For other products orders are the evening of day 1 for early morning on day 3 delivery. Handling arrangements at depot or final destination can mean that a load arriving 15 minutes late may be rejected and re-ordered for the following delivery. With say 15 loads a day which are taken by truck, there are options for the truck driver if they experience congestion, or mechanical difficulty. If one truck experiences a major issue, then 1 load out of 15 may be affected, but the majority of the traffic is successfully carried. With those same 15 loads taken by rail, any incident will affect the entire load, and options for the company to mitigate delays are non existent. A timetable for the rail journey has to be met throughout. There are not options, as with a truck, to delay departure or leave early. The risks to the customer in using rail are much bigger. A train might convey orders for 30 or more individual locations, all of whom are affected by reliability issues. End customers, such as supermarkets operate on very tight retail margins and there is an impact on their sales if shop shelves are empty due to a rail delay the previous day. Wales’ rail freight performance is generally good, and significantly better than the perceptions of non- users. However, performance and reliability remain as negative issues, particularly for winning new traffic. 6.5 Conclusions for rail - Options for a future rail freight strategy for ports in Wales Rail services, like ports, operate in a commercial market place. Particularly given the changed responsibilities resulting from the abolition of the SRA, there are a number of points which could be Wales and the Atlantic Arc: Developing Ports 57
  • considered for future transport policy for Wales. Although a detailed strategy for rail freight is outside the scope of the current report on ports, a number of options are given below: 6.5.1 Network infrastructure There are currently no projects for improving the rail freight infrastructure in Wales. The Railways Act 2005 provides powers for the NAfW which recognise the complex structure of rail freight operations. The act allows the NAfW to now take a lead in developing any future proposals which improve rail infrastructure and freight facilities (road and rail) in Wales. In some instances this can be built onto existing infrastructure renewals programmes. However, this report has not identified a need for major infrastructure work for freight purposes at this time. The NAfW may wish to consider the principle of whether it is better to give financial support to a specific flow, with quantifiable environmental and economic benefits, rather than support speculative improvements to track infrastructure. It should be noted that many infrastructure schemes (such as the late1990’s proposals for the north Wales main line) do not have full or validated revenue and traffic forecasts and there is a history of overstated traffic forecasts behind many major infrastructure development schemes. It should also be noted that some infrastructure improvements could also require work in England as well as Wales to get any benefits. For example, loading gauge clearance for improved access to intermodal terminals would need to connect to a relevant destination, such as the West Coast Main Line rather than just the border with England. 6.5.2 Open access to terminals The European Commission has proposed a Directive on market access to port services (14 February 2001). The aim is to establish clear rules and to set up an open and transparent procedure for access to these services. The proposal also set out the Commission's view on public financing and charging practices in Community ports and rules on transparency of public money flows into and within seaports and of state aids to seaports. “Ports play a crucial role in intra and extra Community trade. They will be called upon to play an increasing role in attempts to transfer more goods and passengers to the environmentally less damaging and less congested sea transport mode, encouraging intermodal transport and making it less costly” European Commission DG-TREN (Transport and Energy). Is 'open access' sufficiently open when terminal operators are able to charge a premium to their competitors? Does each rail operator need to develop their own network of terminals to avoid high charges at competitor terminals? Given the experience that terminals appear to be used solely by the owner (as at Wentloog), consideration could be given to pursuing this issue with the DfT to investigate whether the situation in Wales is unique or the lack of open access is widespread. The current practice would appear to mean that the full potential from previous grants to improve infrastructure may not have been realised. 6.5.3 Terminal infrastructure What improvements could be made in rail infrastructure at ports to take non-port originating freight? Terminal infrastructure may need improvement in the light of new traffic flows. Is it appropriate to design and make improvements ahead of new traffic? Who should fund any development? Or is it preferable to support rapid development (via planning regulations, grant approval etc.) at the appropriate time may be necessary? Wales and the Atlantic Arc: Developing Ports 58
  • 6.5.4 Grant schemes Could and should the company neutral revenue support grant (CNRS) for Wales be adopted by the NAfW? Is revenue support for identified traffic the correct way forward to develop freight from ports onto rail? If funding for Freight Facilities Grants is available should port-related schemes be given priority? Concerns have been expressed that the current grant systems have helped the larger companies which already dominate the rail freight sector, rather than the newer freight operators. Should this aspect be reviewed? Grants have traditionally been awarded for ongoing, long term flows. If grants are to be revenue based then should they also be considered for one off flows? It would appear timely for a full review of freight grants in Wales to see whether the intended benefits have materialised and to identify any lessons learned for future grants systems. Any review ought also to examine the EU grants, and relevant overseas examples as well as UK ones. The freight revenue grant system could also be considered for transfers from road to sea as well as from road to rail. See section 7.2.2 below. Wales and the Atlantic Arc: Developing Ports 59
  • Section 7 Road infrastructure and access to the ports 7.1 Current position The greatest amount of travel in Wales is in an east / west direction, along the north and south coastal regions with significant cross-border movements to destinations beyond Wales. The road network in Wales reflects this, although there have been recent recommendations for local improvements to the north - south road links in Wales. Roads currently carry the vast majority of passengers and freight. Traffic growth in Wales is expected to reflect the general trends for the UK. The growth expected in the ten years to 2010 is for total traffic to grow by 17%, and urban congestion by 15% (Transport 2010). Past growth in the south east and north east of Wales has been higher than average growth for Great Britain. The reliance on the car is greater in Wales than for other areas of Great Britain. There are constraints of topography, and environmental and heritage constraints throughout Wales. The National Assembly's Transport Framework for Wales notes: “Movements through the ports in the west and over our eastern border, particularly in the north east and south east of Wales, make significant demands on our network.” For freight the report concludes that although past efforts have gone into transferring freight from road to rail, it there is also a need to concentrate on the quality and efficiency aspects of road freight. From the Atlantic arc work there is currently no evidence that the road network is a deterrent to using Welsh ports. However, knowledge of the Welsh ports among other port and shipping companies seems to be low. From interviews conducted for this project among other RTA/ ATN members, knowledge of a port may not extend beyond knowing where the place is on a map. As a consequence, judgements may be made on perceived journey time to markets, (i.e. it looks like 150 km away) rather than on a detailed analysis of the road infrastructure and capacity. The Atlantic arc ports are diverse enough to include major ports with direct motorway access, such as Bilbao and Santander, as well as ports like Bordeaux container port, which has a lengthy single carriageway road to connect to the motorway. From the early research, road infrastructure does not appear to be a decisive factor, if there are other reasons for choosing a particular port. Specific road infrastructure issues are examined in the case study section (section 5) of this report. Of the ports examined all except Swansea have some issues with their road access. The access issues relate to road use generally, not just in relation to port specific traffic. Due to the nature of the shipping services, port traffic can generate short term peaks of traffic following docking. This is particularly true for RoRo services which carry both trucks and cars. For the RoRo services, the ferry links can be seen as a link in the road infrastructure as well as a shipping link. Milford Haven Milford Haven is located in a relatively remote area in west Wales which means that port traffic has an extensive road journey to or from the port particularly to reach markets in the midlands or south east England. The port is accessed via a lengthy distance of single carriageway road. Although some increases in traffic can be accommodated on the road's current capacity, there may be a need to do spot improvements at particular points. This could be to create an additional 'crawler' lane on uphill stretches of the road, or straightening or widening in some instances. Some improvements have been announced by the National Assembly to the A40 west of St Clears (Dec 2004). A significant growth in freight traffic might justify further improvements. Wales and the Atlantic Arc: Developing Ports 60
  • Swansea Road access to the port of Swansea is good and via dual carriageway. Cardiff The road access to the port from the west is good and via dual carriageway. However access to the east is poor. There appears to be limited scope for minor improvements. It is only likely to be improved as part of a major investment in a new link road between the M4 and the east and south sides of Cardiff. A potential toll motorway (the new M4) has been recently announced but is not due to be completed for a further eight years. Traffic forecasts and tolls for such a scheme would need to be justified in its own right, not purely based on the presence of the port. Holyhead It is understood that a new road scheme is planned which will improve access. The port will be directly accessed from the A55 dual carriageway. This is due to be completed by 2008. 7.2 Future road strategy for ports in wales The long term road strategy linking ports to sources and markets is expected to be a part of the National Transport Strategy to be published in January 2006. The need to provide high quality infrastructure and to forecast market developments and therefore traffic flows by road and rail is clear from the WERU report. 7.2.1 Port and road capacity It has been noted that the ports examined all have considerable capacity for increasing traffic within the current available port infrastructure. New traffic is likely to be added slowly, with a small number of new shipping lines, rather than a sudden increase in overall volumes. This position will be reflected with a similarly slow growth in the road traffic as a consequence. (see section 6 above for rail issues). The slow growth presents an opportunity to develop road improvements gradually, in anticipation of continued growth. It has further been noted from the Atlantic Arc research that port choice is often on the basis of habit and existing or traditional traffic patterns (section 3.2) and that infrastructure connections are not a key factor in port choice. Despite this trend, the traffic stress on key routes (A55 Expressway); Existing M4 Motorway) has increased at a faster rate than expected. The traffic stress predictions indicate the development of bottlenecks particularly at peak times in the Wrexham and Cardiff/Newport areas. Some road improvements which will benefit the ports are already scheduled or have been recently announced. Improvements will benefit Cardiff (new M4) Milford Haven (A40 improvements west of St Clears) and Holyhead. In the light of recent announcements it does not appear necessary or justified at this time to make further improvements to the port related road infrastructure even if traffic is to increase. In south east Wales a separately funded stretch of currently four lane M4 is being considered by NAfW as part of the Roads Forward Programme. Wales and the Atlantic Arc: Developing Ports 61
  • 7.2.2 Modal shift from road to sea However, there are other factors in road use, which could be used to benefit the ports. Just as there is a system of revenue grants to benefit rail freight due to the environmental advantages of rail over road, a similar scheme could be introduced to favour traffic which is transported by sea rather than road. This would necessarily benefit the ports. To illustrate this option, consider the work to clear the site of the former coking plant at Abercwmboi in south Wales. To clear the site, approximately 100,000 tonnes of waste has to be removed. Due to contamination, the waste has to be taken to a waste facility in Middlesborough which is the only one equipped to deal with the hazardous material in an environmentally safe manner. The 'environmentally beneficial' option, will create approximately 5,000 additional truck moves for a round trip of about 500 miles a total of some 2.5 million truck miles. The price for the transport by road is thought to be about £20 per tonne. As an alternative, the waste could be transported by sea from Swansea to Middlesborough. This would require a very short road leg of a few miles at each end from port to plant. The sea freight component is thought to cost about £12 per tonne, with the handling, short road haulage and port charges making a total of about £24 per tonne for the total traffic. To transfer this traffic from road to sea would appear to require a subsidy of approximately £4 per tonne, £400,000 of subsidy to remove 2.5 million truck miles. The examination of freight grants referred to above in 6.5.4 could be extended to include road to sea transfers as a way of developing traffic for the ports as well as securing environmental benefits with reduced truck mileage. Wales and the Atlantic Arc: Developing Ports 62
  • Section 8 Economic impact of ports and port development. This section draws on the Wales and European port case studies and other interviews conducted as part of the research. Historically ports have developed and declined in step with the economic activity, and especially the industrial activity of their hinterland. For the ports in Wales, especially Cardiff and Swansea, the decades of the busiest traffic reflect the industrial activity associated with mines and steelworks. Holyhead has been much more dependent on trade between the UK and Ireland, and Milford Haven has developed a niche role for petrochemicals traffic, in addition to the trade to Ireland. Although some opportunities for new traffic have been identified, there is significant underutilised capacity in all of the ports. In considering the hinterland of each port, it should be noted that there is not an absolute boundary. The origin and destination markets can be from quite a wide area. For example, the port of Cardiff has a hinterland which could be considered to be constrained by the close proximity of neighbouring ports in Bristol, Newport, Swansea and Port Talbot. However, with the specialised nature of the refinery activity at Milford Haven, it can draw traffic from further afield. However the economic activity is in fact situated very close to the port. Finished products are then often despatched onward via the port, and so do not penetrate the hinterland. Holyhead is a key connecting point between Ireland and the UK and the rest of Europe. As a consequence it draws traffic from a much larger area than would be considered to be a classic port hinterland. As with the Channel Tunnel, the port of Holyhead can be considered to be a link in the European road infrastructure as well as having its more obvious role as a port. The number of staff employed in the ports has declined significantly over the last 50 years, and in particular since port privatisation in the early 1980s. Flexible employment contracts allow staff to fulfil a variety of different roles, and in some instances to work at more than one port. Such flexibility also means that new traffic may not have a major impact on the number of staff employed at the port. New traffic is likely to be handled in the first instance with extra hours worked by existing staff, rather than by new recruitment. There are also opportunities for transferring staff from other locations. Cardiff stevedores for example, operate at ports other than Cardiff. Staffing levels are kept as low as possible, to keep costs down so the increase in staff may not be proportionate to the increase in traffic. It seems increasingly likely that the ports will have a greater impact on employment opportunities through other activities on port land or related to the port. For example, warehouse and distribution facilities will need a certain level of staffing, to service them. At the port of Swansea options for a rail linked warehouse adjacent to the dock are being studied. The potential employment opportunities that result will be in the handling and distribution activity, not in direct employment at the port. Cruise ships calling at a port will provide opportunities for local businesses in the tourism sector as well as for supply companies. The opportunities come from day excursions from the ship's passengers rather than the port handling. Work in Portugal and the US by cruise specialist Peter Wild has identified that the average expenditure in 2001-2 was US $100 per cruise passenger. Given the relative cost of living, expenditure by cruise passengers in the UK is likely to be £80-100 per day. At Milford Haven there has been some interesting diversification. DV Howells, a subsidiary company of the port, specialises in dealing with pollution accidents, not just as sea but also on the road and rail Wales and the Atlantic Arc: Developing Ports 63
  • network. This business has a direct link to the port and maritime activity, but has been able to grow by reaching out into other business areas, as well as other regions and countries. The economic impact of port activity has recently been studied by WERU on behalf of ABP South Wales. ABP directly employs 212 people in South Wales. Beyond the direct employment at the ABP ports in south Wales the study found that the 335 tenants on ABP property provide 7550 full time equivalents jobs and these were connected to an estimated £1.11 billion of gross output. The report identified that ”each £1m of ABP output supports a further £0.4m of output in the region. Moreover, every £1m of ABP activity directly and indirectly supports nearly 12 jobs in the regional economy.” By looking at the multiplier effects of both ABP activity and tenants' activity the report concluded that in Wales they support over £1.7bn of gross output and over 16,000 full time equivalent jobs. This wider economic impact of ports is particularly important. The report notes that “it is critical that the role of ports in supporting regional economic development is not ignored.” Work by Pablo Cotot, Director of Economics for the University of Cantabria, Spain has been reviewed by the ATN/ RTA project. His work based on the port of Santander in 1993 identified that 18-19% of the regional economy GDP and 11% of employment is due to the port and port activity. Cotot's analysis is based on considering direct employment, indirect employment such as construction workers, suppliers and other third parties. He then factors in what he calls 'induced' employment, based on the spending power of the first two groups. A further study of 1998 identified that there had been a 13% reduction in jobs, but identified that there was a 'greater added value' as the employees were more productive. Cotot's study of 1998 identified that 24% of the regional GDP and 14-16% of the employment was dependent on the port. However it should be noted that his work in Spain reflects a different employment context, and the port handles a wider range of traffic including fishing and significant RoRo and car import traffic than many of the ports examined in Wales. It is thought by the authors that Cotot's calculations of economic dependence would be overstated for a port in Wales. Discussions with the port management teams at all of the case study ports have indicated that new port traffic is likely to have either zero or a low impact on port employment. In many cases new traffic will increase job security rather than increase the number of jobs. This is particularly true where a new service may only call at a port for a few hours a week. The greater impact comes from the other activities which may take place at the port to add value to the traffic. Opportunities for new jobs are in warehousing, packaging and distribution. The Bob Martin packaging plant and warehouse at Cardiff is a classic illustration of this. There are a further set of opportunities from port related industrial use of port land, for example for the repair of containers or ships. Ports may also be an essential transport link for specialised industries in their hinterland. The continued presence of the port helps secure the future of those industrial activities. For example, aircraft wings are manufactured in North Wales and then transferred by barge to the docks at Mostyn. This traffic is too large to be transported by road or air so sea transport is essential. At Mostyn there has been conflict between those needing to dredge the access to the port to allow ships of sufficient size to navigate the port, and environmentalists fearing damage to the tidal marshes. There is potential conflict between economic development and environmental damage. The port management at Milford Haven and Cardiff have indicated that environmental concerns are limiting their dredging activity and development opportunities. Wales and the Atlantic Arc: Developing Ports 64
  • Although ports have been traditionally seen as a freight facility, it is important to note that the port management teams have also worked to develop the passenger and leisure facilities in the port area. In many cases they have sold land, or facilitated development by third parties. The ports do not generally bear the commercial risk. Leisure developments such as the SA1 marina development in Swansea are likely to contribute significantly more to local employment than the traditional freight activities. However, care should be taken to ensure that leisure developments do not have the result of limiting potential freight developments. Wales and the Atlantic Arc: Developing Ports 65
  • Part III Conclusions Section 9 Conclusions and implications for the development of ports in Wales 9.1. Modal choice and strategy for freight Price is the key factor that drives modal choice. Traffic will not transfer to short sea shipping routes unless the price is right for the traffic concerned. Price needs to be considered in the context of onward transport as well as the port itself. Given the dominance of price as a driver, marketing efforts will need to be aggressive, and also recognise that a modal shift is likely to be a slow decision, require considerable support. Given the difficulty of generating a modal shift, it may be appropriate to look at traffic flows which are already on sea for part of the journey, such as a feeder service from Rotterdam/ Bilbao ports to Dublin could also call at a port in Wales. In this context it may be logical to consider port development strategy as part of an overall freight strategy. 9.2. Port choice and port capacity Port choice is often made on imperfect information and the existing or historical use of ports. This creates an opportunity for ports to correct misunderstandings and demonstrate what they can offer. In comparison with other European ports, the range of services offered by the ports in Wales is extensive and flexible to suit customer needs. The ports examined all have significant capacity available to take new traffic and this is a significant opportunity. Ports elsewhere in Europe appear less constrained by environmental considerations that ports in Wales. 9.3. Marketing research options to develop new business In marketing themselves and their services, it seems clear that ports need to go beyond their existing customer base and origins and destinations in their immediate hinterland. There is scope for more research into 'divertible traffic' which may not be using sea transport now, for example traffic from Southern Portugal to the English midlands. Research could begin with information which local authorities and government bodies may have available on products transported by road. This could include information from intermediate locations, such as the Centre region of France, or areas in central Spain as well as regions with ports. In researching new business, the issue of traffic for the return leg should also be addressed. The ports are net importers, and particularly for traffic to southern Europe it may be difficult to find 'southbound' traffic. Traffic to Ireland is likely to be more balanced. As well as research into potential traffic it appears necessary for the ports in Wales to do some promotional work to raise their profile as the ports in Wales do not seem to be well known within Europe. This is vital as new services will need to be developed in partnership with another port, as well as with shipping companies. Wales and the Atlantic Arc: Developing Ports 66
  • It should be noted that the ports themselves are not doing this level of market research and promotion work currently. This would indicate a reluctance or an inability for the ports to fund it themselves. 9.4. Pricing options to develop the market Given the dominance of price, it is appropriate for both ports, and the NafW to examine options of schemes which would change the relative price of short sea traffic through some kind of freight revenue scheme. The rail industry company neutral revenue support (CNRS) grants may provide a model which could be applied to new short sea traffic transferring from road. Alternatively the model could be applied to new port related rail traffic in Wales. It is significant that revenue subsidy schemes are common in passenger transport but have been more limited for freight. Grants have traditionally been awarded for ongoing traffic but it may be more appropriate to take a funding decision for a single year, or the period of a one off contract. Revised grant arrangements were announced by the UK government in February 2005 bringing together water freight grants and the sustainable road haulage budget into a single pot from April 2005. From April 2007 this will be extended to include rail freight grants. This change has been criticised by industry groups who object to the reduction of the budget available, noting that the UK government is allocating £50 million to rail freight over 2005-7 but that in 2007 the total annual grant for rail road and water grants combined will be below £25 million. The overall level of funding may need to be reviewed. 9.5. Options to develop the infrastructure to ports and on port land The port management teams have been gradually developing their infrastructure and equipment in response to the market and opportunities identified. There is a fundamental issue of whether infrastructure development should be done in advance of traffic growth, or in response to an identified need. In general there are not long term plans for development. Under their privatised structure, the ports generally only develop their facilities in response to the needs of identified good quality long term customer needs. However there is an expectation that other transport infrastructure, whether road or rail, should be developed in advance of traffic growth. From the research for this report, connecting infrastructure quality is a factor but does not appear to be a key driver to port choice or modal choice. It follows that infrastructure development should be market led, rather than being developed speculatively. Some of the port management teams have spoken of ambitious projects for multi- modal terminals and for major distribution centres. Such developments could be part of an overall freight strategy for Wales. The issue of funding such research would need to be addressed and balanced between the parties. It should be noted that the ports can obtain significant revenue from the 'added value' activities such as packaging and warehousing, which may exceed the revenue for the port related handling of the same traffic. 9.6. Economic development and employment opportunities In looking at the history of the ports and their traffic, it is clear that their growth and more recent decline have mirrored the economic development within Wales. Just as Wales' economy is no longer driven by heavy industry, so freight traffic and ports are no longer dominated by the bulk materials to serve those industries and their products. Rather than having one or two big contracts that dominate the port Wales and the Atlantic Arc: Developing Ports 67
  • activity, the business has become more diversified. (This is also true for Milford Haven even though oil traffic is dominant). Rather than major bulk contracts, the business, and the potential growth is based on smaller niche products, and intermodal traffic. Ports also have an impact on the economy in their local area through direct employment, employment in related businesses (such as DV Howells in Milford Haven) and with subcontractors, tenants and suppliers in their local area. There is also an impact from the spending power of those employees. This is demonstrated in the WERU report for ABP. Flexible port services are an attractive feature of the ports in Wales. However, that flexibility means that increases in traffic are not automatically matched by increases in employment. In some instances new traffic will improve job security, or give opportunities for additional hours to be worked, rather than leading to a direct increase in numbers employed. 9.7. Non freight business opportunities All of the ports in Wales used for the case studies are also developing their non freight traffic. Cruise ships are a clearly identified opportunity which is being actively developed. Ports have also taken steps to develop leisure facilities around the port area, whether directly or with commercial developers. Marinas for leisure yachting are being developed, in some instances by the port, in others by the local authority. In many instances it appears that the opportunities for local economic development and employment may be greater from the non-freight business than in the growth of traditional freight traffic. A development such as SA1 in Swansea or the smaller developments at Milford Haven will provide greater employment and economic development opportunities than the traditional freight activities of a port. Wales and the Atlantic Arc: Developing Ports 68
  • Section 10 Recommendations Recommended short term actions (1-12 months) R1. Marketing activity Some basic marketing activities to raise the awareness of ports and their potential (3.2 port choice) should be done. This could link in with the role of the Welsh Development Agency, who particularly in their overseas work can support the development and promotion of the ports of Wales. For example, some standard information could be provided in paper and electronic form, and possibly some 'road show' type activity to promote the ports, particularly in potential Ro-Ro or short sea shipping destinations in Europe. Port information should be included as standard for possible industrial and commercial investors in Wales. This should be done on the basis of improving security of current port and related employment as well as potential growth. R2. Review of freight grants A full review should be conducted to identify the impact of past awards, the delivery of intended benefits, value for money and lessons learned. This should cover general issues from Marco Polo and PACT awards as well as freight facilities grants in Wales. The review should consider whether rail grant systems based on environmental benefit could be applied to short sea shipping (they are currently limited to port facilities not shipping services). It should also consider revenue grants such as the CNRS scheme, and compare their effectiveness in terms of end benefits with the traditional capital grants. Consideration should also be given to awards for one of traffic flows, and short term contracts rather than traffic which is assumed to be ongoing. The announcement in February 2005 of a combined pot for all freight grants whether for road, water or rail makes this review even more essential. The National Assembly has the opportunity to develop a system of freight transport grants which it can directly administer, and which reflects its economic and environmental priorities. R3. Market research for a potential freight only Ro-Ro service between South Wales and the Iberian peninsula This could be an extension of the marketing activity above but would require a more detailed study of potential traffic both north bound and south bound. Such a service might well need some financial support during the start up phase. The active role of the port management at both ends of the service would be vital. A regular service would also help to raise the profile of Wales within the Iberian peninsula. Market research should be done by an independent research partner working with the ports. R4. Promotion and development of cruise shipping The ports are already doing work to develop in this area. Cruise shipping brings benefit to a wider area than just the port through tourism and supply contracts for the ship. Cruise ships require a complete network of related activity. Support may be necessary to promote the ports as cruise destinations as well as to improve their facilities such as baggage handling and security to handle this specialised traffic. There may also be a role to ensure that lessons and best practice from other cruise destinations are shared across the ports in Wales, regardless of their ownership structure. Support from the NAfW and the relevant local council is important to effectively develop this business within Wales. Wales and the Atlantic Arc: Developing Ports 69
  • Recommened longer term actions (1-3 years) R5. A freight strategy for Wales Although port managers would generally resist a 'port strategy' there seems to be a need for an overall freight strategy which sets out objectives and priorities for freight in Wales. Major long term issues such as the provision of multi-modal facilities, or the location of retail distribution centres, or the better handling of containerised freight require a framework for the development of solutions. Particularly with new powers under the Transport (Wales) Act, and a reduced role at UK level for the DfT on rail freight issues it would be timely to address the options for and scope of a freight strategy for Wales. Such a strategy could address some of the major development issues. A key issue is that freight for Wales generally arrives by road from England and the east. A freight strategy could be developed to begin to redress the balance with more goods arriving in Wales by sea or by rail. Potential issues with open access to facilities and potentially discriminatory pricing between modes could be explored. It has been seen that development of ports as leisure areas can be a key driver of economic regeneration. However industrial and commercial usage and freight distribution networks need to be balanced with those leisure developments. A freight strategy could help ensure a balance was maintained and future industrial developments viable. Freight issues also impact on passenger transport issues, whether on funding, or issues such as congestion. A specific freight strategy would help ensure that a balance can be struck between possibly competing demands. R6. In depth market research and analysis for potential short sea shipping for Wales It has been seen from the Atlantic arc work that there is potential to transfer transit traffic to short sea shipping. However, to develop this will require detailed origin and destination analysis for products and traffic and also using product information from transit regions where possible. This market research could follow on from R3 above, but should also address containerised traffic. This could include movements such as a feeder service for empty containers back to major UK/ European ports Wales and the Atlantic Arc: Developing Ports 70
  • Appendix A Bibliography Recent Developments and Prospects at UK container ports Department for Transport July 2001 http://www.dft.gov.uk/stellent/groups/dft_shipping/documents/page/dft_shipping_505265.hcsp Freight Strategy Strategic Rail Authority May 2001 Modern Ports: A UK policy Department for Transport November 2000 http://www.dft.gov.uk/stellent/groups/dft_control/documents/contentservertemplate/dft_index.hcst?n=10 374&l=2 Study on Freight Integrators European Commission September 2003 http://europa.eu.int/comm/transport/logistics/freight_integrators/doc/final_report_freight_integrators.pdf Atlantic Arc Commission - Promoting Short Sea Shipping in the Atlantic Arc Phase 1 report 8 November 2004 Associated British Ports and the Welsh Economy Welsh Economic Research Unit June 2004 Network Rail Freight Route Directory http://www.networkrail.co.uk/freight/routedir.htm Network Rail Business Plan 2005 26 Strategic Route Plans: Route 13 Great Western Mail Line Route 14 South and Central Wales and Borders Route 15 South Wales Valleys Route 22 North Wales and Borders http://www.networkrail.co.uk/companyinformation/BusinessPlans/BusinessPlan2005.htm Rail Freight Group / Freight Transport Association Capacity studies for the High Level Output Specification. Summary published in Modern Railways October 2005. Séminaire CRPM Arc Atlantique/Bordeaux 13-14 janvier 2004, Note technique sur les Autoroutes de la Mer Atlantic Maritime Perspectives 5 July 2005, Short Sea Shipping in Atlantic Europe,Institut Atlantique d'Aménagement des Territoires Associated British Ports, London UK Dredging, Cardiff Wales and the Atlantic Arc: Developing Ports 71
  • Milford Haven Port Authority, Annual Report Business Review and Accounts 2004 Milford Haven Port Authority, Annual Report, Business Review and Accounts 2003 British Waterways, Freight on our Waterways, Watford Ports Handbook 2004, Associated British Ports South Wales Port, Associated British Ports, London Port of Barry, Associated British Ports, South Wales Ports Port Talbot, Associated British Ports, South Wales Ports Port of Cardiff, Associated British Ports, South Wales Ports Port of Newport, Associated British Ports, South Wales Ports Port of Swansea, Associated British Ports, South Wales Ports Coming into Port, British Ports Industry Training Porto de Lisboa, 2003 Relatório Contas, Annual Report Promotion of Short Sea Shipping in the Atlantic Arc, Phase 1 Report 8/11/04 idom Ingenieria Arquilieclura y Consulticia by Bilbao Plaza Maritima; IDOM, prepared for Interreg IIIB 3rd European REALISE workshop papers “Infrastructure and Intermodal Services for Short Sea Shipping” held at Genoa Cruise Terminal 4-5 October 2004 sponsored by European Commission Thematic Network Directorate General for Energy and Transport Commission approves Italian regional aid to restructure the freight market and to develop road-sea combined transport IP/04/1187 Brussels 6 October 2004 Porto Setúbal “at a short distance” from Europe Ports Integrated in the motorways of the Sea Wales and the Atlantic Arc: Developing Ports 72
  • Appendix B People Interviewed for this Report The authors would like to extend their thanks to the following: Wales Ports Ted Sangster, Chief Executive, Milford Haven Port Authority, Milford Haven, Pembrokeshire SA73 3ER Clive Thomas, Associated British Ports - South Wales, Cardiff John Copping, Port Director, Associated British Ports - South Wales, Cardiff Callum Couper, Deputy Port Manager, Associated British Ports - South Wales, Cardiff Captain Wyn Parry, Stena Line, Holyhead Port, Holyhead, Gwynedd Margaret Llewellyn, Managing Director, Swansea Container Terminal plc, Kings Dock, Swansea Local Government Roger Barrett-Evans, Director of Development, Pembrokeshire County Council, County Hall, Haverfordwest Dewi Rowlands, Corporate Director, Transportation, Ynys Mon County Council, Swyddfa'r Sir, Llangefni, Ynys Mon Chris Pike, Head of Transportation, Cardiff City Council, County Hall, Atlantic Wharf, Cardiff Dr John Cordwell, County Councillor, Strategic Planning and Transport Gloucestershire, County Council Jacques Grossi, Director of Urban Council, Bretagne, France Richard Gillingham, Transport Planner, Business and European, Gloucester County Council Rail Developments Susie Northfield, Freight Operations Manager, Strategic Rail Authority, London Peter Willey, Senior Route Freight Manager, Network Rail, Swindon Gordon Edgar, Business Development Manager, Direct Rail Services Mike Fuller, Development Manager, Exel Howard Diment, Operations Manager, South Wales International Freightliner Terminal Wentloog, Cardiff Wales and the Atlantic Arc: Developing Ports 73
  • Gary Gibbs, Logistics Manager, South Wales International Freightliner Terminal, Wentloog Cardiff Ports and Transport in Other EU Member States Patricio Arrate, Santander Port Authority, Port of Santander, 39009 Santander, Spain Amaya Saralosa Azola, Jefe del Departmento Comercial, Bilbao Port Authority, 48007 Bilbao Spain Jean-Luc Pelletier, Director, Port of Brest, 29200 BREST, France Jean-Paul Guegen, Port Operations Director, Port of Brest, 29200 BREST, France Jean-Christophe Hatteville, Sales Executive Port of Brest, 29200 BREST, France Pedro Alexandre Gomes Durao, Assessor Economista, Administracao do Porto de Lisboa SA Doca de Alcantara, 1399-012 Lisboa, Portugal Joana Coelho, Port Authority of Setubal and Sesimbra, 2904-508 Setubal, Portugal Pablo Cotot, Director of the Economics Department, Universidad de Cantabria, E-39005 Santander, Cantabria, Spain M Viardot, Membre de la Conférence européenne des Ministres des Transports M Paul Tourret, Directeur de I'Isemar Wales and the Atlantic Arc: Developing Ports 74