Recovery for Mediterranean Automobile Business

By Helen Campbell

The 2009 financial crisis was brutal, regardless of business type, and the automobile industry certainly did not escape the sharp downturn in financial confidence and investment. With countries such as Spain, Italy and Portugal particularly affected, manufacture and movement of new automobiles in the Mediterranean suffered from a bit of a flat battery for much of the period from the crash until around 2012-2013.

Now, import recovery in Spain and the expansion of existing production there as well as in countries such as Turkey and Morocco are feeding the shoots of recovery in roll-on/roll-off business for new automobiles in the Mediterranean.

In addition, a number of greenfield investments in Central Europe are expected to result in increased movement of new vehicles through Mediterranean ports as the southern terminals attract business that traditionally goes to the north.

One To Watch

“What you see in the automobile market is that it has become much more global, flexible and opportunistic in the choice of location for manufacturing,” said Erik Jensen, vice president for sales for Europe and Africa at Wallenius Wilhelmsen Ocean. “Manufacturers are looking at the currency situation, the trade agreements, price of labor, outbound logistics and, of course, political aspects. With that combination, we have seen Turkey and Spain becoming very competitive for export.”

Demand in Spain increased by about 10 percent in the first half of 2018, and by 4.7 percent in France in the same period, according to the European Automobile Manufacturers’ Association. Sales in Italy were down slightly, by 1.4 percent. Meanwhile, manufacturers in Turkey produced more than 1.7 million cars in 2017, a 14 percent increase since 2016 and a huge recovery from 374,000 back in 2002, according to Invest in Turkey’s Automotive Industry Report.

Growth in car imports is projected to come from Spain – with movements into Barcelona, Valencia and Tarragona – as the country moves further out of recession, while Italian imports are seen as more stagnant in comparison. Morocco’s port of Tangier is expected to feature heavily in exports, while Greece’s Piraeus becomes less important. Meanwhile, ports in Turkey’s Izmir Bay are projected to see an increase in movement, well supported by Turkey’s longstanding strong relations with the “Stan” countries to its east, including Kazakhstan, Uzbekistan and Turkmenistan, which are all import destinations for Turkish production.

“Car movements in Mediterranean ports have been quite volatile in recent years, but hold potential high demand for new cars,” one port operator said. “As a terminal operator, we see a lot of business opportunities within the Mediterranean, especially if the general situation in southern countries becomes more stable.”Largely, the region seems to be one the ro-ro carriers are watching, but with muted confidence.

“We are very clear that the Mediterranean is important for us in the future, and that goes for the whole market, whether it is North Africa or Spain or Turkey,” Jensen said. “On the other hand, our development in the new cars business is coming from our customers and where they build their new production, so we have a very flexible view on this as we look to fill up our network. We need to have sound robust growth.”

Issues At Stake

If the Mediterranean’s ports network is to take advantage of projected growth in ro-ro pure car and truck trade, it will need to meet a number of challenges. Industry sources have said that the fluctuations in vehicle production and flows that come with tentative recovery, coupled with political upheaval, continue to make it hard to determine the exact degree of growth and to therefore plan and invest accordingly.

One of the biggest problems facing Mediterranean ports is that the “stop-start” of fluctuating throughputs has meant many ports in the region have become storage yards, creating congestion and capacity problems. The shifting of car storage facilities away from the ports themselves during leaner times post-crash has meant that the faster-to-recover container business has taken a large proportion of space that would otherwise be available to cars in some ports. This earlier consolidation of storage presents difficulties with rail connections or other means of transportation of new cars from storage to the quayside.

“We have a challenge with the infrastructure at the terminals in the ports because they are rather congested,” said Bjorn Svenningsen, director of sales and marketing for United European Car Carriers, or UECC. “Consequently, from time to time, we have to wait with our vessels before there is sufficient space in the terminal to accept the cargo that we have on board. It seems port facilities are being used for storage, so what we would really like to see is the different port authorities being a little stricter in the way their terminals are being used, in order to have sufficient space for our ships coming in.”

Certainly, any improvements could make a big difference, Svenningsen said, with a typical 35-day automobile ro-ro route for UECC looking like this: load at Bremerhaven; proceed to Zeebrugge, Bristol and Vigo; proceed to Sagunto to offload and Tarragona to load; move on to Livorno and unload and load; move to Piraeus to unload and load; and finish with unloading and loading at three ports in Turkey before looping back to Bremerhaven again.

Uncertainty means the desire to build further new infrastructure remains on hold for most, so investments in yard-management systems and space optimization is preferable while the market finds its feet again. Even if ports and terminals do feel confident about increasing infrastructure, spatial limitations are still an obstacle. Many ports in the Mediterranean are hemmed in by cities, with little or no room for lateral expansion.Upgrade Game

Gregor Belič, car terminal director at Slovenia’s Port of Koper, said the port has enough space for a long-term expansion utilizing flatlands to the east of the port, but that ability is rare. One of the top three automobile-handling ports in the Mediterranean, the port’s 800 meters of quay and four ro-ro ramps handled 741,253 cars in 2017 and 408,855 in the first half of 2018. It already has a multistory storage garage for 8,000 cars, in addition to 40,000 open-air parking spaces.

“A totally new car carrier berth is planned in the Basin 3 area, which will be served by new rail access from the adjacent storage areas,” Belič said. “The beginning of construction of both these projects is expected in 2019. Recently, we also decided to start the construction of a multistory garage for 6,000 cars to join the existing one. Another project, the new truck gate, which will improve the internal logistics of the whole port, should be completed by March 2019.”

A recent upgrade of the Port of Koper’s car terminal operating system has helped to standardize data exchange, enhanced the port’s overview of field operations and speeded up communication between the customer and the terminal, Belič said, adding that steady growth of volumes had encouraged the port to expedite some of its infrastructure projects to increase productivity and capacity of the car terminal.

All carriers really want is a smooth fast in, fast out service at ports. Continued improvements to new car-processing technology and increased digitalization could help improve visibility. Transparency is an assurance for car transporters from the first to the last point of risk.

“Some of the ports in the UK, for example, have installed a system of cameras where the car is driven through and pictures taken from all angles that can be used later in case of damages,” Svenningsen said. “The Med is lagging a bit in this type of technology.”

Electric Overdrive

The drive for an increase in electric vehicles, or EV, presents a valuable opportunity in the push for a lower carbon future. Demand in the EU for electric cars increased by a robust 40 percent in the first half of 2018, according to the European Automobile Manufacturers’ Association. However, the logistics of electric vehicles bring a further challenge for automobile-handling ports and operators, especially from the infrastructure aspect.

“We expect that the majority of EVs, while waiting in the port, will require power supply, which is logical if you want to optimize the whole supply chain,” Koper’s Belič said. “We are already using plug-in stations in our existing garage and have recently built a new electrical substation to meet the increased consumption. The new garage will be built considering the requirements of EV logistics.”

These logistical and technical challenges are all against the backdrop of the incoming International Maritime Organization Sulfur 2020 regulations, which will increase carriers’ cost bases and exacerbate the existing ship-rotation issues caused by congestion, and could lead to shifts in favored routes and ports. While some operators have taken delivery of new dual-fuel pure car and truck carriers in recent years, market players have warned that low margins are already dampening willingness to invest further in more specialized vessels.

So while the Mediterranean is one to watch, car and truck ro-ro movers will need to monitor political and economic developments carefully as a number of variables play out over the next few years.

Helen Campbell is a freelance journalist based in London who has specialized in energy, environment, sustainability and technology for more than 20 years.

Photo: Port of Koper

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