Wednesday, February 21, 2024

DP World hailed as “saviours” by business secretary, Vince Cable

DP World’s £1.5 billion super port has been hailed as a saviour by the business secretary, Vince Cable.

He said: “The opening of London Gateway in just two years’ time will transform the UK’s maritime port infrastructure. It will help Britain to maintain its competitiveness, drive productivity, and crucially strengthen our links with Asia and beyond. The importance of this project cannot be overestimated.” reports The Guardian.

But behind the scenes, some industry experts are questioning the wisdom of this grandiose scheme at a time when rival facilities are springing up all over northern Europe and the shipping industry has been tipped into crisis.

DP World, partly owned by a Dubai sovereign wealth fund, has promised to create Britain’s “first 21st-century major deep-sea container port” as well as Europe’s largest logistics park.

But Felixstowe’s container port on the Suffolk coast has just opened two major new berths while Rotterdam, Antwerp and others are also busy building huge amounts of extra cargo-handling capacity. Meanwhile, the big container ship operators expected to use this capacity are squealing with financial pain and cutting back services.

AP Moller-Maersk, owner of the world’s biggest container line, has just announced a 78% fall in third-quarter profits. The current level of liner rates was “totally unsustainable,” said its chief executive, Nils Andersen.

Meanwhile Israel’s Zim has followed Chile’s CSAV and South Korea’s Hanjin in raising new cash in desperate bids to keep their shipping businesses afloat, while MISC Berhad of Malaysia has announced plans to pull out of container transport completely. The Kuala Lumpur company is selling allof its 30 vessels after running up nearly $800m (£510m) of losses since 2008.

Even the Chinese are in trouble. A host of ship owners who have leased vessels to Grand China Shipping have been complaining about how the company, which recently closed a trans-Pacific service on the grounds that rates were too low, has been late in making payments on contracts, something it has promised to rectify.

The liner (container) sector is the victim of a big downturn in world trade due to the latest sovereign debt crisis and soaring fuel costs, but has also brought trouble on itself by ordering too many new ships – many very large – on the back of previous good times when trade between the far east and Europe was booming.

Chinese exports to Europe dropped 9% this October compared with the same period in 2010. Foreign trade director Wang Shouwen told the BBC on Wednesday: “There won’t be fundamental improvement in Europe or the United States, and costs at home will stay as high as this year, so the foreign trade situation will be severe next year.”

Even the rather more genteel cruise-liner travel business has been pulling in its horns, with one of Britain’s most illustrious names, Cunard, putting its fleet of vessels, including the Queen Mary, under the Bermudan flag in an attempt to improve revenues.

You might expect the tanker sector, meanwhile, to be benefiting from increased global demand for oil, especially for supertankers from the Middle East to service emerging economies such as China.

Instead the last few weeks have seen a torrent of bad news, with one of the world’s most flamboyant new tanker owners, Peter Georgiopoulos, seeking protection from bankruptcy for his New York-listed General Maritime Corporation.

This business was once valued at more than $5.3bn, but its shares have plunged by more than 90% this year as the cost of hiring vessels began to fall to well below operating costs.

Frontline, the owner of the world’s biggest tanker fleet, headed by Norwegian billionaire John Fredriksen, is also in trouble, with its shares also down 90% in 2011.

The company admitted it could run out of money early next year and this week announced plans to inject $500m from the Fredriksen-controlled and privately owned Hemen Holdings into Frontline, while hiving off the loss-making side of the business into a new company, “Frontline 2012”.


Torm, a Danish-based tanker owner, said recently that it expected to run up pre-tax losses of up to $210m for the current financial year and was investigating a rights issue.

Statistics from Shipping Intelligence Weekly, a publication by London-based shipbroker Clarkson, show the cost of hiring a 280,000-ton supertanker has plunged in recent years.

Earnings per day in 2010 for vessels moving from the Gulf to Europe averaged $26,000, but have fallen to $3,100 this year so far, and hit $1,500 at the start of November. The cost of building a new 320,000-ton tanker has fallen from $150m in 2008 to $100m by the end of 2010 and has declined further since.

It is not all disaster. Owners of chemical carriers, who have not been ordering massive amounts of new tonnage as have their counterparts in tankers and containers, have seen a 65% surge in freight rates in some trades over the last six months, while operators of offshore vessels serving the oil industry and liquefied natural gas ships are also in good shape.

But the maritime storm hitting the main part of the market is not good for London as a port city, or as a centre for shipbroking, maritime law and shipping finance.

This week ACM Shipping, one of the few shipbrokers quoted on the London Stock Exchange, reported that its profits had tumbled in the first half of the year from £3.2m to £2.3m compared with 2010.

Richard Fulford-Smith, former chief executive of Clarkson and now a director of RS Platou, a Norwegian-owned broker with offices in London, confirmed that many shipowners could not pay their bills and said bad debt levels were rising.

“Financial engineering and an endless supply of debt is now a thing of the past. We are going back to basics and for us sourcing new maritime capital is a nice new challenge – but I doubt much of the money will come from London,” he said.

Meanwhile 25 miles east, down the Thames at the London Gateway, work continues and a steady flow of dignitaries – Prince Philip, Lord (Chris) Smith and others – continue to be shown around.

DP World says the port is different from rivals because it will be able to handle the new generation of enormous container vessels being built by Maersk and others.

A spokesman added that its close proximity to such a large consumer market as London would also “allow both cargo owners and shipping lines a unique opportunity to take significant costs out of their supply chains”.

The facility will not open until late 2013, but critics say that allows little time for the problems besetting its customers – the shipping lines – to float away.


  1. “But behind the scenes, some industry experts are questioning the wisdom of this grandiose scheme at a time when rival facilities are springing up all over northern Europe and the shipping industry has been tipped into crisis.” And the point is? So, because of a few difficulties now and the fact that other countries already have rival facilities we shouldn’t bother? What a nihilistic and wrong headed view that is!


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