The issue. Times are bad for container throughput and the petrochemical industry, and future projections are negative. It seems the port of Rotterdam may be heading for a fall. However, Professor of Ports Rob Zuidwijk says it is not as bad as all that, provided the port makes the right decisions. ‘It is better to be the smartest than to be the largest.’
The port of Rotterdam is losing its leading position as a container terminal, and must be on the lookout for a new raison d’être, your fellow researcher Klara Paardenkooper stated last month in AD. Is that right?
“Between 1962 and 2004 the port of Rotterdam was the greatest port in the world, but since then we have been surpassed by several ports, mostly in Asia. In addition, the container volume being shipped is decreasing. First the growth rate decreased, then transhipment volumes actually fell somewhat. But it’s very hard to look into the future. Some economists spend their lives doing just that, but they frequently get it wrong. It’s fine to consider a scenario in which the container market may decrease. However, we have seen in the past that growth rates may exceed our most positive prognoses, such as when China was granted the role of the world’s factory and all those products had to be shipped to other places. Things like that may happen once again in the future.”
According to Paardenkooper, it is precisely the developments in China – which has gone from being a producing country to being a consumer nation – which are causing this decrease.
“As far as imports are concerned, this is true. Rotterdam now receives fewer products from China. However, the middle class of consumers emerging over there does afford certain opportunities for our exports. Certain European products are very popular in China. If people continue to get wealthier over there, this may have a significant impact on international logistics, in Rotterdam as elsewhere. There is simply no way of knowing.”
In the last few years, APM and ECT have opened two immense automated container terminals in Maasvlakte 2. Was this a stupid thing to do?
“In the last few years, the port’s growth rate has been less significant than expected. So, in hindsight, maybe it could be said that we should not have erected all these terminals.”
Last month one of the largest container shipping companies in the world, South Koreas Hanjin, collapsed. Is this a sign that the market is shrinking?
“That was caused by something else. For many years now, companies have invested rather extravagantly in increasingly large ships. It’s a competition, not prompted by any real demand or by an expectation of economies of scale. Our explanation, supported by scientific research, is that companies will make excessive investments so as to push other players out of the market. Hanjin’s collapse may be regarded as a logical consequence of the determined manner in which market leaders have acted.”
Does the port of Rotterdam suffer from this sort of thing, too?
“In principle, the port actually profits from this competition, since we can handle these very large ships better than Antwerp and Hamburg. Only this competition does create a lot of turmoil in the market. Due to Hanjin’s financial difficulties, ECT is stuck with a load of containers it can only – and only wishes to – hand over to shippers, under certain conditions. It’s costing them money.”
Is there anything Rotterdam can do about this potential shrinking of the container market?
“It’s about time we stopped measuring our success by our size. We are not going to win that battle any more. It’s better to be the smartest than to be the largest. We can do so by focusing on automation and on the provision of information, so that we know at all times where a particular container is and may prioritise it.”
The port of Rotterdam’s success was also built on the petrochemical industry. We know oil is being phased out. Why doesn’t the Port of Rotterdam Authority, whose shareholders are the Dutch state and the Rotterdam municipal authorities, choose to get rid of its petrochemical component?
“As long as we still have a market share in this field, why would we get rid of it?”
Because that would allow you to make great investments in a new development.
“That would involve opting for one particular scenario, but things may turn out completely differently. Take oil, for instance. We’ve been completely wrong about that for ages. No one believed that in the year 2016, we would still be dependent on oil and that the price per barrel would be so low. If you put all your eggs in one basket, you risk losing them all at once. Politicians may decide to reduce our dependence on oil in the short term. However, the Port Authority wishes to retain both strategies, i.e., the petrochemical and biochemical industries, It will invest broadly, taking into account various possibilities. I think that’s wise.”
Isn’t it just a coward’s way out?
“I think it’s a strategy for our times. Things are extremely insecure from a political and economic point of view. One example from another industry sector. China has recently decided to invest hundreds of billions of euros in robotisation. These are developments of a kind that cannot be anticipated, yet they will have a major impact on the plans of small countries like the Netherlands. In a globalised world with players like that, you must have the kind of knowledge and infrastructure that will allow you to change tack at the drop of a hat.”
You are showing a great deal of admiration and understanding for the Port Authority. Are there any respects in which it has completely dropped the ball, though?
“They have overestimated our hub function. For a long time, people took it for granted that we would receive a large volume because of our position in Europe and because we are one of few ports which can handle these really big ships. In addition, the Port Authority does not focus enough on the rate at which e-commerce is developing. Everyone can see that there are now delivery vans all over town, but there is an immense demand for international logistics, as well. E-commerce companies have no respect whatsoever for the traditional limitations of logistics. They expect products to arrive within three days, even when they have to come all the way from China. So Amazon will simply buy twelve Boeings. The Port Authority has yet to formulate an answer to this development. When I ask them how they are adjusting to people increasingly buying things off the Internet, their eyes glaze over.”
Some believe the future of the port will be in sustainable alternatives, ranging from biochemistry to new ways of manufacturing things. How realistic is it to think that a few 3D printers will make up for our losses in throughput and the petrochemical industry?
“We have a general tendency to overestimate the impact of such new technologies. The idea is that once 3D printing has been completely developed and implemented full scale, we won’t need any international transports any longer. We should be careful with that attitude, because we’re only talking about part of the market. Sure, it will be nice to be able to print spare parts ourselves, but the impact will likely be limited. We are still having Dutch language children’s books printed in China, in 2D, even though we’ve been able to print these books ourselves for a long time.”
Will Rotterdam still be a port city in ten years’ time?
“It will be a different port city from what it used to be. The port has literally disappeared from the city in recent years, but we have a tendency to forget that other things will take its place. These days, what with anti-European sentiments on the rise, it’s not a popular thing to say, but we should be proud that we are increasingly becoming a part of a European network. Ridderkerk used to be a junction in the port of Rotterdam’s hinterland. Duisburg or Amsterdam will now take that place. And it’s not just the scale which is changing. The nature of the work is changing, too. The Port Authority employee of the future will have graduated from Erasmus University or Delft University of Technology and will provide maritime or legal services from an office at Weena. So it could be said that the port will slowly return to the city in this way.”
Rob Zuidwijk is a Professor of Ports in Global Networks at the Rotterdam School of Management. His research focuses on container transports, information provision in ports and sustainable chains. He is affiliated with Smartport, a partnership between Erasmus University, Delft University of Technology, the Port of Rotterdam Authority and companies working in the port of Rotterdam which have united to form Deltalinqs.