2016 PPRC Europe: Looking for a safe harbor

Pictured above, from left: Markus Vaerst, Dimitri van Eekelen and David Mitchell

The goal of the 2016 Paper and Plastics Recycling Conferences Europe was to provide an in-depth look at the trends, opportunities and challenges are driving recycling markets.

One issue that continued to crop up in many presentations and discussions during the events was the uncertainty over transportation, especially offshore shipping. Coming soon after Hanjin’s bankruptcy filing, many exporters have been expressing concern about the direction of shipping lines and freight rates.

With that in mind, the concluding session at the conferences brought together three speakers who focused on transportation issues.

The three speakers, while coming at the situation from different vantage points, all acknowledged that the transportation industry, whether in the ship or rail segments, is under significant upheaval.

The three speakers included Dimitri van Eekelen, a representative from the Port of Rotterdam, who discussed the changing dynamics at the port; David Mitchell, representing the shipping line Maersk, who discussed the container shipping business; and Markus Vaerst, acting secretary general of the European Rail Freight Association (ERFA), who discussed the challenges the rail industry faces.

Van Eekelen noted that while at one time the Port of Rotterdam was the largest in the world, the explosive growth of ports in China arising from that country’s booming economy has pushed Rotterdam to the ninth largest port in the world. It remains the largest port in Europe.

Van Eekelen noted that the volatility of the container shipping industry has created significant challenges to the Port of Rotterdam. Mergers, bankruptcies and the changing nature of shipping alliances have created a tumultuous business for shippers.

The notion of shipping alliances continues to be one of the most widely discussed parts of the container business. With container lines struggled with steep losses, more lines are looking to establish space sharing arrangements with other container companies.

Highlighting the significant changes for shipping alliances, van Eekelen pointed out that in 1996 there were nine shipping alliances servicing the Far East-North Europe trades. That figure, however, will drop to as few as three by next year. The main reason is the consolidation that continues to roil the market.

As an example of the steady move toward consolidation, late last month three Japanese shipping lines – K-Line, Mitsui, and NYK – agreed to merge their container shipping operations. 

Even with the decline in the number of alliances, van Eekelen expressed confidence that more shifts in shipping alliances will occur. “The alliance shakeup is not done yet. Many believe there are more that will take place.”

Despite the decline, van Eekelen was quit to note that the trend now is fewer service calls but much larger companies.

“What does this mean for the Port of Rotterdam?” he asked. “Most likely, the cargo will have to be split over a number of terminals.” And the need for greater cooperation among terminals led Eekelen to point out that better data and a more sophisticated operation is a key for a smooth operation.

“Shippers must find it easy to use the Port of Rotterdam. Sharing data will assist customers,” he said. “We need to have the services or the shippers won’t use the port. We need to attract the lines for competitive services.”

Van Eekelen continued, “We want to work with the alliances, the terminals and the shippers to make them smarter, faster and cheaper.”

Mitchell, representing the shipping line Maersk, acknowledged the significant financial strain the global container industry is under. One of the biggest factors for the difficulties has been overcapacity, which has sent rates spiraling downward over the past several years.

In fact, freight rates by the first half of 2016 were the lowest level in more than four years, with the rate the middle of 2016 down close to 40% from the same time last year.

Mitchell also touched on the ripple effect that Hanjin’s bankruptcy filing has had on the industry. “It has had a much bigger impact than we anticipated,” he noted.

Despite the significant problems the container industry has seen over the past ten years, Mitchell expressed optimism going forward. While the markets are not as healthy as container lines had hoped, “Our forecast for 2017 looks promising. We see a 3% to 4% global growth.”

Helping boost global growth will be the United States and China, which are poised to post stronger growth in 2017.

Although Mitchell expressed optimism for 2017, he noted that markets will remain turbulent and the recent downward trend will last until February at the least.

Rounding out the transportation panel, Markus Vaerst, representing the European railroad industry, discussed the challenges confronting railroads. Like the other panelists, Vaerst said the rail industry needs to improve its information services to better connect with its customers.

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One way the rail industry can improve its position in the transportation sector, he noted, could be linked to an EU white paper on transport, which called for the transportation industry to significantly reduce the greenhouse gases coming from transportation.

With the call for reducing emissions, the white paper called on a significant swing toward greater use of railroads to move material longer distances, as much as 50% of the cargo moving on the roads by 2050.

However, despite these efforts, Vaerst acknowledged that the rail portion of the transportation business on the continent remains stubbornly at around the 18% level, making it difficult to make inroads with other modes of transportation.

A key reason for the difficulties are the operational challenges that the rail industry has yet to solve. In his presentation, Vaerst described one simple example that highlighted the problems with the rail industry: A rail shipment from Northern Europe to Southern Europe would require a number of steps that would lengthen the time and increase the cost of the cargo. These steps would likely include having the equipment be authorized multiple times by different countries on the route, having to change both locomotives and drivers several times during the trip and incurring multiple access charges.

To remedy the problem and increase rail’s share of the transportation sector, Vaerst concluded, the rail industry needs to take a number of steps, including putting together competitive prices, provide consistent and reliable service, reduce the transportation time to allow railroads to compete with road and a seamless service that is as easy to use as the road.

This, he concluded, “can only be achieved when the various actors work together as a team with the same objectives.”

The annual Paper and Plastics Recycling Conferences Europe were held in Rotterdam 2-3 November.