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Britain gives berth to world's growing fleet

PORTS - They may be just a blip on the horizon, but a otilla of ports-related projects is set to head to UK shores over the next 10 years; it just has to negotiate choppy planning waters, writes Andrew Barker

PORT developers are set to splash out up to £4 billion over the next 10 years, the equivalent in cost to building the Terminal 5 project at Heathrow all over again. The expansion is principally to accommodate increased activity in the burgeoning deep sea container shipment industry.

Not all schemes are certain to come through.

Around the UK coastline developers are currently steering their schemes through the complicated planning channels. The highest concentration of schemes is located in the south-east, the would-be home to the biggest project of all, London Gateway, on the former Shell Haven site.

In what is a market-driven industry with no Government subsidy, the race is on for ports to try and secure valuable customers. 'The people who get them up first will get the best contracts, ' says Richard Clarke, a divisional development manager for marine engineering specialists Halcrow. The new generation of deep sea terminals has been a long time coming and, he says, port authorities and their partners are in a less than ideal position having to 'chase the market'.

Mr Clarke believes there are plenty of ports-related opportunities for consultants such as Halcrow and that the market is robustly buoyant at the moment.

'We've got work coming out of our ears and can afford to be picky. Out of all our port consultants I don't know of one not turning work away, ' Mr Clarke says.

From the contractors' camp, the expanding state of the sector will mean a raft of big-money contracts coming up for tender. Richard Stephens, a divisional director for Mott Macdonald says: 'My perception is that there is a large volume of business out there for consulting engineers which will translate in due course to construction projects.'

The breadth of the new generation vessels will necessitate the dredging of deep water channels, building of addit ional quayside space and the installat ion of longer-armed cranes.

However, Mr Stephens believes that there is an insufficient stock of specialist contractors to carry out the jobs. 'The challenge at present is the shortage of resources to tackle the volume of work , ' he says.

'This shortage is mostly of experienced mid-career engineering staff and seems to be reflected across the entire civil engineering spectrum. The shortage however, is exacerbated in the ports sector, where the pool of staff is smaller when compared to other civil engineering sectors.'

A study for the Department for Transport, completed earlier this year, highlights the demand for more deep water container ship access and storage in order to cope with rising global traffic. It est imates year on year grow th in UK container shipping at between 4 and 5 per cent, a figure John Dempster, executive director of the United Kingdom Major Ports Group thinks is 'if anything, on the low side'.

There are two reasons for the heightened demand for deep water facilities. Firstly, there's what Mr Dempster terms 'the China Effect': an increase in traffic of manufactured goods from the Far East.

Dominic Edridge, a transport analyst for UBS investment bank also notes ' the cascading effect of the n See page 24 n From page 23 high order book from the Asian trade lanes' as a factor.

Secondly, there's the increasing size of container ships. Currently most of the large, deep sea container ships can hold up to 6,000, 20-foot equivalent units (TEU) - the term for a standard container. But there are some vessels in operat ion that hold up to 9,000 TEU and there is talk of ships capable of carrying up to 12,000 TEU. This dwarfs the size of the 4,000 TEU panamax (those that can pass through the Panama Canal) vessels that have kept the North Atlantic routes isolated from the mainst ream of world container shipping. Unsurprisingly, plans to widen the 92-year-old canal are afoot.

But Mr Edridge advises that the building of bigger ships will come at a price. He says: 'We can expect to see post-panamax ships in the coming years, but given the high unit cost benefits of such ships, ship size growth may well slow as unit cost benefits decline.

Also, practical considerations like transiting the Suez Canal and terminal constraints will come to the fore.'

Bearing in mind the lack of deep water docks, Mr Dempster acknowledges the fact that port authorities are playing catch-up. 'There are not that many facilities in the UK at present that can handle them.'

The study also noted that although deep sea ports in the south-east may be the most cost-efficient strategy in terms of existing infrastructure and transport facilities, it will be of greater benefit to the environment if throughput in this already congested area is minimised.

Mr Dempster, careful not to show favour towards any par t icular scheme, is well aware that each has its advantages. He says: 'The ports in the north say all this development is taking place in the overheated south-east, where the roads are congested and unemployment is low; that it's much better to have them in places like Teesside, where it is said that the economy is not so overheated, the labour costs are cheaper, roads are less congested.'

Liverpool, he adds, is more interested in transatlantic traffic and is well placed to attract traffic from the Far East. Bristol's strong point is that it is very well located in relation to the motorway network and has a good rail link, is close to the Midlands and not far from London.

The average distance from port to destination is quite low in Bristol, compared with even Felixstowe.

'But in terms of proximity to centres of population, ' says Mr Dempster, 'Felixstowe is well placed.'

The issue is whether the big ships coming up the channel want to go up as far as Bristol and back.

'There's obviously a trade-off because there would be a saving in the land distribution costs but there will be an increase on steaming time. And there are different views about that. It's the big deep-sea shipping operators who really call the shots, ' Mr Dempster says.

Environmental groups also wield increasing influence. Associated British Ports spent four years and nearly £50 million developing a scheme for a new container terminal at Dibden Bay near Southampton.

But the then transport secretary Alastair Darling blocked the proposals in April 2004 on environmental grounds. This contradicted previous Government statements supporting the development of deep-water container ports.

But, as the Bathside Bay scheme demonstrates, there are ways, albeit costly ones, of jumping the environmental hurdle. Its plans include, not only a compensatory habitat for wildlife at Hamford Water, but a new wetland area alongside the A120, providing an attractive approach to the port facility. There is also a new landscaped small boat harbour, and public amenity area at Gas House Creek, extending the recreational resource for local residents and providing additional attractions for tourists.

In spite of these compensatory measures 11 lobby groups opposed the development that the Office of the Deputy Prime Minister announced that he was minded to approve at the end of last year.

These addit ional projects th rown up by Bathside Bay are small potatoes compared to the natural gas plant at the port of Tees and the residential and leisure complexes in the ports of Tees and Hartlepool.

Mr Dempster is apprehensive about what lies ahead for the sector bearing in mind the marine bill that Defra is planning, which will include more stringent measures for marine conservation.

'I don't want to give the impression that ports are environmental vandals because they do their best to minimise damage to the environment. But the environmental pressure groups are ever stronger and I think there is concern in the industry that the pendulum has swung too far towards environmental consideration. I don't see any sign that that's going to abate, ' he says.

Looking internationally, Mr Edridge says that a lot of investment is required in the ports sector, as there is no sign of container trade slowing down significantly as globalisation continues. The danger, he warns is that the UK does not get its act together, it could be left behind by the Continent. 'Rotterdam and Antwerp are growing their capacity fast and the UK could lose direct volumes if capacity does not rise, ' he warns.