Liverpool2 opens for business – but can it compete?

Jon Masters
04 November 2016

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Northern Powerhouse

Peel Ports' new £400m container terminal has been built to attract the big post-panamax ships, but questions remain over whether it can compete on a world stage

Liverpool's standing as a major port for global trade has been boosted with the opening of Peel Ports' £400m Liverpool2 deep water container terminal. The two new berths are capable of handling post-panamax sized ships of 15,000 TEUs and above. At a stroke, they double the handling capacity of the Port of Liverpool to two million TEU standard containers per year.

The opening ceremony on Friday 4 November was attended by Trade Secretary, Liam Fox, who said in a prepared statement: "This investment at Liverpool2 will boost crucial cargo capacity, create local jobs and is yet another sign that the UK is open for business with the world."

The new terminal is expected to create 5,000 jobs directly and indirectly, while increasing Liverpool's share of the UK container market, from its current 8% to between 15% and 20%, stimulating growth in the North West and helping to rebalance the UK economy, Peel Ports says.

The question now is can it do all that? Liverpool is competing with the UK's other deep water ports of Felixtowe, Southampton and Thamesport, all of which already have the capacity to handle the big ships. The UK's biggest port, Felixtowe has a capacity of around four million TEUs. Southampton can handle around two million and Thamesport, while smaller in capacity at one million TEUs, it too already has an existing share of the big ship market.

Liverpool's competitive edge is blunted by constraints in the north's transport system, hampering efficient movement of containers, according to some. Transport for the North's (TfN) Freight & Logistics Report, published earlier this year, found problems to include 80% of freight traffic being carried by road on a congested network – estimated to cost northern freight £500m a year by 2043 – plus transport is dominated by north-south movements. The current picture of planned road and rail investment in the north will not do enough to reverse these problems: TfN's report predicts rail freight will decline under 'do minimum' assumptions while road freight is expected to increase 25%.

The Institute of Public Policy Research thinktank used the findings of TfN's report plus its own research to inform its northern ports strategy, Gateways to the Northern Powerhouse, published in June this year. Co-author, Laurie Laybourn-Langton, said: "We found a lot of constraints and problems with freight transport across the east-west corridor of the north of England. A much better land-bridge is needed, which is particularly relevant post-Brexit for the north to compete in the world."

Among the IPPR's recommendations, a new Northern Ports Association was set up earlier this year. The IPPR report also recommends the ports work more closely with planning authorities and it calls for development of a longer term government strategy for freight and local ports. The existing system of funding grants should be revised to support modal shift from road to rail and to promote more coastal shipping of freight from transshipment hubs, such as Liverpool, the IPPR says.

"There is no mention of freight movement from road or rail to ship in current government policy. The industry needs more clarity and changes to the grant support system for freight feeder services between ports. For improving the efficiency and competitiveness of rail freight, we understand with confidence that the cost of increasing the loading guage of rail from east to west would cost only £100m, which is not a great deal in the grand scale of things. This is the low hanging fruit to be picked," Laybourn-Langton said.

Improvements to inland and costal transport notwithstanding, Peel Ports faces a considerable challenge to get more container traffic through Liverpool2. The shipping industry is going through tough times due to the slow down in global growth. South Korea's Hanjin shipping line collapsed last year and the world's largest, AP-Moeller Maersk has reported its second consecutive quartely loss, according to the Financial Times.

Port operators and authorities are facing rising capital costs to accommodate the new ultra-Large container vessels of up to 20,000 TEUs predominantly coming out of the mega ports of China, Singapore and South Korea. Lloyd's List reports that Maersk has said Liverpool2 needs to prove itself before more traffic can come its way.

Shipping consultant Drewry's senior analyst, Neil Davidson, told Infrastructure Intelligence: "Peel Ports faces more important concerns than the quality and efficiency of connecting transport in the hinterland of Liverpool2. We now have a lot of ports capacity in the UK at a time of slow growth of only 2-3%. Felixtowe and Southampton already have market share secured, of ships that will naturally call there from Asia on voyages that also call at northern European ports, in Rotterdam and Hamburg.

"The bulk of it will always go to the UK's south east ports. Liverpool2 will be looking at getting a greater share of transatlantic and South American trade, but there are many push-pull factors. No one party between customer, shipping line and ports controls the chain," Davidson said.

"The geography is what it is and every port around the world is having to upgrade to accommodate the larger ships. Some cargo owners will always prefer ports in the north west, but Liverpool2 will have to win on price, speed of handling and winning over the shipping lines."