UK PORT DEMAND FORECASTS TO 2030 - The National...

UK PORT DEMAND FORECASTS

TO 2030

FINAL REPORT

by

MDS Transmodal Limited

Date: May 2006

COPYRIGHT The contents of this document must not be copied or reproduced in whole or in part without the written consent of MDS Transmodal MDS Transmodal Limited has prepared this report in accordance with the instructions of their client, the Department for Transport, for their sole and specific use. Any other persons who use any information contained herein do so at their own risk. The views expressed in this report are those of the authors and may not necessarily reflect the view of the Department for Transport.

CONTENTS

EXECUTIVE SUMMARY ........................................................................................................ 1 Chapter 1 Introduction .................................................................................................... 1 Chapter 2 Background & Context ................................................................................... 1 Chapter 3 Forecasts for Unitised Port Traffic to 2030 .................................................... 2 Chapter 4 Forecasts for Non-Unitised Port Traffic to 2030 ............................................ 4 Chapter 5 Balance of Supply & Demand to 2030........................................................... 5 Chapter 6 Overall Forecasts of Demand for UK Ports to 2030 ...................................... 6

1. INTRODUCTION ............................................................................................................. 7 1.1 Background .............................................................................................................. 7 1.2 Terms of Reference.................................................................................................. 7 1.3 Scope of Research ................................................................................................... 7 1.4 Outline methodology................................................................................................. 8 1.5 Structure ................................................................................................................... 9

2 BACKGROUND & CONTEXT....................................................................................... 10 2.1 UK Ports ................................................................................................................. 10 2.2 Macro-economic trends in UK trade ....................................................................... 16 2.3 Freight Transport Policy ......................................................................................... 21 2.4 Ports Policy............................................................................................................. 23 2.5 Energy Policy.......................................................................................................... 26 2.6 Recent Trends in UK Port Volumes Summarised .................................................. 28

3 FORECASTS FOR UNITISED PORT TRAFFIC TO 2030............................................ 29 3.1 Introduction............................................................................................................. 29 3.2 GB Unitised Forecast Methodology........................................................................ 35 3.3 Forecasts of GB Unitised Trade ............................................................................. 41 3.4 Forecasts of GB Containerised Traffic ................................................................... 44 3.5 Forecasts of GB Roll-on Roll-off Traffic .................................................................. 46 3.6 Forecasts of Northern Irish Unitised Traffic ............................................................ 48 3.7 Forecasts of Inland HGV Traffic Arising from Unitised Trade Growth .................... 51 3.8 High and Low Scenarios for Unitised Trade Growth .............................................. 53 3.9 Unitised Forecasts Summarised............................................................................. 59

4 FORECASTS FOR NON-UNITISED PORT TRAFFICS TO 2030 ................................ 61 4.1 Introduction & methodology.................................................................................... 61 4.2 Liquefied Gas ......................................................................................................... 62 4.3 Crude Oil & Oil Products ........................................................................................ 71 4.4 Other Liquid Bulk Products..................................................................................... 85 4.5 Ores........................................................................................................................ 90 4.6 Coal ........................................................................................................................ 95 4.7 Agricultural products............................................................................................. 108 4.8 Other Dry Bulk Products....................................................................................... 115 4.9 Forestry Products ................................................................................................. 125 4.10 Iron & Steel .......................................................................................................... 135 4.11 Other General Cargo ........................................................................................... 145 4.12 Import/Export Vehicles......................................................................................... 149 4.13 Conclusion: summary of non-unitised forecasts .................................................. 160

5 BALANCE OF SUPPLY & DEMAND TO 2030 .......................................................... 163 5.1 Introduction........................................................................................................... 163 5.2 Ship Sizes by Trade Route................................................................................... 164 5.3 Supply-Demand Balance...................................................................................... 168 5.4 Conclusion............................................................................................................ 174

6 OVERALL FORECASTS OF DEMAND FOR UK PORTS TO 2030........................... 175

TECHNICAL ANNEX.......................................................................................................... 177 1 Macro-economic Trends in UK Trade ...................................................................... 177 2 Forecasts Developed in 2000 for RSPB and English Nature................................. 2123 3 Trade Forecasts using FORK ................................................................................ 2134

UK Port Demand Forecasts to 2030 Page 1

Our Ref:205024_final report May 2006

EXECUTIVE SUMMARY Chapter 1 Introduction The Department for Transport (DfT) commissioned MDS Transmodal to develop forecasts of UK port traffic to 2030 to assist it in its review of ports policy in 2006. The intention to review ports policy was originally expressed in The Future of Transport White Paper in 2004, with the objectives of reviewing the Government’s policy framework to keep track of wider changes affecting ports and to ensure that the Government continues to have the right basis for the sustainable development of ports. Chapter 2 Background & Context In 2004 the UK ports industry handled around 573 million tonnes of cargo (588 million tonnes including the Channel Tunnel) and the industry has experienced consistent growth since the Second World War, averaging around 1.4% growth per annum. In the period 1994-2004, that growth has been maintained at a mean rate of 1% per annum. Unit load traffic has been growing at a much faster rate than bulk cargoes. Since 2000 the gap between imports and exports in unitised trade in particular has grown significantly and the immediate prospect is for that growth to continue. However, the corresponding increase in the UK trade deficit may not be sustainable and if this translates into lower domestic growth and a weaker pound, there is also a medium-term risk that import growth rates will not be sustained. It is important to distinguish between the overall volume of cargo moving as a consequence of economic drivers and the impact of transport policies or the availability of infrastructure on the routeing and modal choices made for cargo by shippers and their logistics providers. For example, changes in transport policy may lead to road pricing being introduced for all road users. This is likely to have an impact on the routing of cargo in the short sea unit load market and have an effect on the modal split between road and rail for inland distribution from ports, particularly for deep-sea containers. It will not, however, have any significant impact on the total volume of cargo moving. There can be little doubt that non-bulk international cargo is growing at a much faster rate in Britain than is domestic cargo. The recent decisions of the Secretary of State for Transport concerning planning applications and appeals for port developments have not regarded the forecasts of demand made for unit load traffic produced by the developers, which reflect this trend, to be contentious.



Chapter 3 Forecasts for Unitised Port Traffic to 2030 Three forecasting scenarios for unitised traffic have been developed and can be summarised as:

• Central Forecast: import growth dictates the overall growth of unit loads moving through the ports because those units will be ‘re-exported’ whether loaded or empty. Import volumes are based upon the evidence of long run trends and relationships based upon GDP growth and exchange rate change, independently of trends in export growth. The implication is that export volumes will grow to meet any long run balance of payments deficits that might emerge.

• Low Case: growth in imports implied in the Central Forecast inhibited by the slower

rate of growth of unit load exports over the last 5 years, implying that for imports to grow faster would lead to an unacceptable long run balance of payments deficit.

• High Case: growth in imports based upon the higher rates of unit load import growth

over the last 5 years, implying that there will be a rapid growth in exports of goods and (particularly) services to avoid a long run balance of payments deficit.

In each case, growth rates are based upon the observation over the last 25 years that compound growth rates in unit load traffic have been continually falling because the absolute volume (in tonnes) of unit load traffics has been relatively stable. Traffic passing through the Channel Tunnel is included in these forecasts because both the Eurotunnel freight shuttle and through rail freight services compete actively with the ports, and to ignore Tunnel services would be to distort the long term analysis of trends. The table below shows the impacts of these assumptions translated into unit loads. Container traffic is also shown in terms of TEU volumes. In the Central Forecast, import unitised tonnes are assumed to more than double between 2004 and 2030, resulting in a compound annual growth rate of 2.91%. In the High Case, the trade volume triples over the same period, and the CAGR is equivalent to 4.35%. In the Low Case, the 2030 volume is 1.32 fold the 2004 figure, and the CAGR is equivalent to 1.07% per annum. The unit load figures by mode that have been calculated using ratios derived from the Central Forecast do not change according to the scenario. Therefore the scenarios reflect market growth only and not changes in the ratio of tonnes to unit loads or TEU. In the High Case, the forecast is calculated by taking the four-year average growth rate between 2000 and 2004 (4.76%), and gradually converging it towards the Central Forecast growth rate (2.91%). The Low Case growth rate is simply the four-year average export growth rate between 2000 and 2004 (1.07%) applied to imports.



GB Unitised Traffic Growth, Central Forecast, High & Low Cases Thousands 2004 2010 2015 2020 2025 2030 Change

2004-30

CAGR %

Import Tonnes 77,808 Central 93,873 109,108 125,321 143,715 164,160 2.11 2.91% High 107,835 137,269 169,437 202,758 235,179 3.02 4.35% Low 82,927 87,450 92,220 97,250 102,554 1.32 1.07%

RoRo Units 7,637 Central 9,390 10,911 12,640 14,460 16,159 2.12 2.92% High 10,787 13,728 17,090 20,401 23,150 3.03 4.36% Low 8,295 8,745 9,302 9,785 10,095 1.32 1.08%

LoLo Units 4,327 Central 5,881 6,941 8,095 9,505 11,273 2.61 3.75% High 6,756 8,732 10,945 13,409 16,150 3.73 5.20% Low 5,195 5,563 5,957 6,432 7,043 1.63 1.89%

Total Units 11,964 Central 15,271 17,852 20,736 23,965 27,433 2.29 3.24% High 17,542 22,460 28,035 33,811 39,301 3.28 4.68% Low 13,490 14,308 15,259 16,217 17,138 1.43 1.39%

LoLo TEU 7,086 Central 10,009 12,146 14,167 16,633 19,728 2.78 4.02% High 11,497 15,281 19,154 23,466 28,263 3.99 5.46% Low 8,842 9,735 10,425 11,255 12,325 1.74 2.15%

Source MDS Transmodal based on Customs tonnage measurement



The historical and forecast trends can be compared in the figure below. GB Unitised Trade: Forecast Scenarios, Annual Units (Thousands) Chapter 4 Forecasts for Non-Unitised Port Traffic to 2030 The table below provides a summary of non-unitised forecasts for Great Britain and Northern Ireland to 2030. The smaller UK ports, for which no data is available by cargo category and which account for about 3% of total port traffic, have been assumed to handle only dry bulk and semi-bulk cargo; it has also been assumed that their traffic will not grow up to 2030.

Unitised Forecast Scenarios

Central Forecast, High Case and Low Case

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Tota

l Uni

ts



UK Non-unitised Forecasts to 2030, by Broad Category Million tonnes

Broad Category 2004 2010 2015 2020 2025 2030 % Change 2004-2030

% CAGR

“Great Britain “Major Ports” Liquid Bulk 264 256 270 277 283 290 +10% +0.4% Dry Bulk 108 103 109 111 103 110 +2% +0.1% General Cargo (incl. import/export vehicles)

31 34 35 35 36 36 +15% +0.5%

Total GB “Major Ports” 404 393 413 423 422 437 +8% +0.3% “Northern Ireland “Major Ports” Liquid Bulk 3 4 4 4 4 4 +24% +0.8% Dry Bulk 6 6 6 6 6 6 +4% +0.1% General Cargo (incl. import/export vehicles) 1 1 1 1 1 1 +22% +0.8%

Total NI “Major Ports” 11 11 11 12 11 12 +12% +0.4% Other UK ports All categories 15 15 15 15 15 15 - - UK Total 429 419 439 450 448 463 +8% +0.3% % Change p.a. 2004-

10 2010-

15 2015-

20 2020-

25 2025-

30

-0.4% +1.% +0.5% -0.1% +0.7% Source: MDS Transmodal Our forecasts suggest that UK bulk port traffics will grow by 8% up to 2030, at a compound average growth rate of 0.3%. Chapter 5 Balance of Supply & Demand to 2030 An initial modelling exercise to establish the balance between the demand for port infrastructure (based on the forecasts produced for this study) and the supply of port infrastructure, using the MDS Transmodal GB Port Supply and Demand Model, was based on the following key assumptions:

• Berth productivity rises by 1.5% per annum up to 2010 and then remains constant; • If bulk traffics cannot “fit” into a berth, they can switch by up to five Customs ports

along the coast to find a berth with suitable capacity; • If unitised and trade car traffics cannot “fit” into a berth, they can switch by up to 13

Customs ports along the coast to find a berth, reflecting the fact that unit load operators serve wider hinterlands but will generally not transfer to ports which would lead to a change in vessel utilisation. For example, while the Thames may be a substitute (for a ferry operator) for the Haven, the Humber will not be a substitute.

Based on the assumptions included in the model:

• The results for LoLo indicate that continuing growth in traffic would lead to a requirement for additional capacity by 2010 and significant additional capacity may be required in the longer term;



• The results for RoRo indicate that continuing growth in traffic may lead to a requirement for additional capacity by 2010;

• The results for trade cars indicate that, given the space requirements at ports for import vehicles, some increased capacity may be required by 2010;

• The results for semi-bulk traffic indicate that only a relatively small amount of additional capacity might be needed for semi-bulk traffic up to 2030;

• The results for dry bulk traffic indicate that additional capacity might be required on some deepwater estuaries over the next 25 years;

• The results for liquid bulk traffic indicate that additional maritime capacity is unlikely to be required over the next 25 years.

Chapter 6 Overall Forecasts of Demand for UK Ports to 2030 In 2004, GB ports plus the Channel Tunnel handled a total of 565 million tonnes of cargo. Northern Irish ports handled a further 23 million tonnes. Our forecasting exercise to 2030 has taken account of each of the broad categories (modes of appearance) of port cargo. Our overall conclusion is that between 2004 and 2030 container traffic is expected to grow by 178% as measured by TEU and HGV units by about 112%, while bulk traffics are forecast to grow by 8%. Total tonnes for the UK are forecast to grow by 37%. Unit load cargoes are forecast to grow from about 27% of total UK tonnes (including Channel Tunnel traffic) in 2004 to about 42% in 2030. These forecasts are not based upon the extrapolation of compound annual growth rates but on the underlying trends and factors in the domestic economy that drive port traffics. As a consequence, while they reflect many of the forecasts made recently for unitised trades to around 2015 or 2020, forecasts over the longer period tend to be lower. In this respect, it is important to note that the demand for freight transport services within Britain grows at a significantly lower rate than does that of GDP. In the long run, one can expect the demand for international cargo handling to conform to similar underlying trends, once the impact of globalisation on the substitution of domestic production by imports has stabilised. Nevertheless, our forecast growth rate for unitised cargo sectors implies an urgent need for additional port handling facilities, given that there appears little potential to further expand the productivity of existing infrastructure.



1. INTRODUCTION 1.1 Background The Department for Transport (DfT) commissioned MDS Transmodal to develop forecasts of UK port traffic to 2030 to assist it in its review of ports policy in 2006. The intention to review ports policy was originally expressed in The Future of Transport White Paper in 2004, with the objectives of reviewing the Government’s policy framework to keep track of wider changes affecting ports and to ensure that the Government continues to provide the right basis for the sustainable development of ports. The forecasts are intended to inform planning and decision-making by Government. They are based on information available at the date of publication (May 2006) and require judgments to be made about inherently uncertain future events. 1.2 Terms of Reference The Terms of Reference required the development of national port demand forecasts, disaggregated by major traffic/commodity sector. This required a distinction to be made between traffics that are likely to grow significantly up to 2030 and lead to increased pressure on port capacity and inland surface access issues and those that are unlikely to grow to a significant extent or not grow at all. The national forecasts were to be disaggregated by English government office regions, Scotland, Wales and Northern Ireland and the forecasts were to include explanations of how key trends in world trade and other factors determine changes in port demand. 1.3 Scope of Research The following issues affect the scope of the research exercise:

• Forecasts were to be based upon a presumption of ‘unconstrained demand’, which we have interpreted as implying no change in the relative prices charged for port services and the development of sufficient additional capacity to meet that demand up to 2030 so that relative prices remain stable in real terms;

• The exercise was to distinguish between different port market sectors, such as

container and trailer traffic and the principal bulk and semi-bulk sectors. This essentially distinguishes between the main modes of appearance for statistical purposes, with a breakdown of key bulk and semi-bulk trades (such as coal, ores and agricultural products).

• The exercise should consider changes in the mix of ships and in ship sizes, so that

port demand can be matched to port capacity.



• A regional breakdown was to be developed, which was interpreted as being by both “port region” (i.e. the region within which the relevant ports are located) and cargo generating region (the region within which the freight has its origin or destination). The relevant “regions” are the English Government Office regions of the East Midlands, the East of England, London, the North East, the North West, the South East, the South West and Yorkshire and the Humber, plus Scotland, Wales and Northern Ireland. The West Midlands Government Office region contains no ports, but is included within the analysis of inland impacts. We have also included an additional “region” called “GB Islands”, which includes the Orkney Islands, the Shetland Islands and the Isle of Wight, due in particular to the significance of the Northern Isles of Scotland for oil and petroleum flows.

• Forecasts were to be based on underlying causation and not simply trend or

extrapolation of historic trends. 1.4 Outline methodology The unitised forecasts have been developed in three principal stages: • An econometric trade model (called FORK) was used to forecast demand, measured

in tonnes; • A transport model (the MDS Transmodal GB Freight Model) was used to assign

these forecasts to the transport networks, producing demand, in tonnes, by UK region, by sea mode and by route;

• An additional model was used to convert tonnes traded to units handled. The results of the last stage have been validated against the DfT’s Maritime Statistics for 2004, which is the most recent year for which published statistics are available. The non-unitised forecasts have been developed by carrying out market studies on each major cargo category, based on the DfT’s Maritime Statistics categorisation of port traffics. For each cargo category the secondary research sought to establish the key economic drivers affecting the demand for, and supply of, the cargoes. The secondary research was supplemented by discussions with key shippers, trade associations and Government departments. The evidence obtained was then used to develop forecasts for each category of traffic, which involved developing scenarios for the future for a wide range of industries based on judgments about future policy, market and even societal trends up to 2030. Although not strictly required by the Terms of Reference, a forecast of the future balance of supply and demand for GB port infrastructure was completed, using the MDS Transmodal GB Port Infrastructure Supply and Demand Model, which has been developed to ‘explain’ the observed market situation in 2003. For 2003 it ‘fits’ all traffic into the existing infrastructure (as this is what happened in reality) using generic productivity formulae. In practice productivity will vary from port to port because of different equipment employed or



differences in the ships served. The methodology takes account of the balance of supply and demand by port region up to 2030 assuming no increased port capacity and using the port demand forecasts developed during the study. The need for further capacity is then determined by adding further infrastructure to the point where the demand for additional capacity can be satisfied. Impacts on port hinterlands related to the inland distribution of cargo in Great Britain have been modelled using the MDS Transmodal GB Freight Model, which has been used to calculate tonnes lifted and tonne kilometres of transport by inland mode (road or rail) between port regions and origin and destination regions. 1.5 Structure Chapter 2 Background & Context provides some context to the study, briefly describing the structure of the ports industry in the British Isles and historic trends in traffic over the last ten years by broad traffic type. It provides some macro-economic background to UK trade growth (more detail is available in the Technical Annex), considering issues such as the reasons for the increasing imbalance in the balance of physical trade. It also describes the transport and planning policy background to the study and considers the extent to which the policy environment might influence the development of port traffic up to 2030. Chapter 3 Forecasts for Unitised Port Traffic to 2030 describes the unit load forecasts – for containers and Roll-on Roll-off traffic. Chapter 4 Forecasts for Non-Unitised Port Traffic to 2030 describes forecasts for dry bulk, liquid bulk, other general cargoes and trade cars. Chapter 5 Balance of Supply & Demand to 2030 sets out the results of modelling of the balance between the supply of port infrastructure and demand in Great Britain up to 2030, based on the MDS Transmodal’s GB Port Infrastructure Supply and Demand Model. Chapter 6 Overall Forecasts of Demand for UK Ports to 2030 provides some conclusions to the study, setting out overall volumes of demand forecast to pass through UK ports up to 2030.



2 BACKGROUND & CONTEXT 2.1 UK Ports 2.1.1 Structure and history of the ports industry in the British Isles There has never been a single model for the development and operation of ports in Great Britain except that each will at some time have been established through Act of Parliament. Some ports were developed as trust (not for profit) ports under which a board of trustees accept a duty from Government to operate and invest in a port in the interests of users. Belfast, Dover, the Tyne and Poole are surviving examples which play a significant role in cargo handling. Most of the major trust ports are, however, now in the private sector, having been being sold through Government action in the early 1990s. Ports in this category are Clydeport, Tees and Hartlepool and Forth Ports, often themselves the result of Government inspired consolidation exercises at the ‘estuary’ level a generation earlier. Some other ports, such as Portsmouth, Workington and Sunderland are owned by local authorities. Many ports in Great Britain were originally developed by the private sector railways before their nationalization in 1948 and were eventually returned to the private sector as Associated British Ports in the 1980s. Some have a history of commercial independence, such as the Manchester Ship Canal and the Port of Liverpool. After the end of the National Dock Labour Scheme in 1989, a number of take-overs in the industry have led to other port companies developing with ownership or interests on a regional or national scale. These include Peel Ports, Forth Ports, PD Ports, Hutchison UK and the Victoria Group. However, whatever their history or present ownership structure, it has been UK policy and practice that each port should be commercially independent, competing with other ports and investing on the basis of its own forecasts and assessment of commercial risk. With the exception of Larne, Northern Ireland’s ports are trust ports run by boards appointed, in the last analysis, by the Government. Larne is privately owned. Republic of Ireland (ROI) ports, which compete with Northern Ireland’s ports for traffic, are state owned, either directly in the case of the smaller ports or indirectly as state-owned companies that are required to break even on a long run basis. 2.1.2 Long run historic trends in port traffic Detailed statistics have been maintained for the GB ports industry since 1965, shortly after the formation of the National Ports Council. Table 2.1 shows the long-term trends in port traffic between 1965 and 2004 and describes: i) The very slow growth of the non energy bulk trades as UK heavy industry fell into

relative decline; ii) A similarly slow growth in the volume of crude oil landed at refineries and port traffic

in petroleum products;



iii) By contrast, major changes in the volume of crude oil loaded, reflecting the rapid growth and then levelling off of North Sea oil production;

iv) The more or less disappearance of coal loading as GB domestic production declined, eliminating coastal coal traffics but, in parallel, the growth in coal discharged as imports replaced domestic mining;

v) The rapid and remorseless growth in general cargo, reflected in ‘non bulk’ or ‘unitised tonnages’ (goods carried in containers or trailers).

Table 2.1 Long Term Trends in GB Port traffic (including the Channel Tunnel),

1965-2004 Million Tonnes

1965 1980 1994 2004 Non-energy foreign bulk/semi-bulk 76 67 88 90 Non-energy domestic bulk/semi-bulk 12* 37 44 37 Unitised and non bulk foreign (non-bulk in 1965) 12 37 96 146 Of which incremental increase per annum (million tonnes) - 1.7 4.2 5.0 Petroleum products 91 83 88 90 Crude oil discharged 64 69 72 84 Coal discharged 18 12 20 38 Crude oil loaded - 84 106 78 Coal loaded 26 11 5 2 Total 299 400 519 565 Source: Estimates based upon National Ports Council/Department for Transport Port/Maritime Statistics * Excludes one-port traffics While only about 12 million tonnes of foreign non-bulk cargo was identified in 1965, growth in foreign trade in manufactured goods and non-bulk foodstuffs raised this to 37 million tonnes by 1980, more or less all of which was by then unitised. Since then, tonnages of non-bulk cargo have grown at a consistent rate of around 4-5 million tonnes extra each year and trends in unitised cargo reflect closely those of non-bulk cargo overall. The ports industry has invested steadily over this period to handle this growth. Much of the investment was made in the 1965–1980 period, including all but one of the present deep water container terminals, the major bulk handling facilities for coal and iron ore at Hunterston, Port Talbot, Immingham and Redcar, grain terminals at Liverpool and Tilbury and the first stages of most of the RoRo ferry terminals operating today. Since 1980, a process of privatisation and labour market liberalisation has allowed the industry to improve its productivity considerably, and the need for capital investment in new projects has therefore been limited, despite the pressures of globalisation in generating trade growth. Some bulk and semi-bulk facilities have been recycled from their original purposes, as heavy industry has declined (for example, the Hunterston iron ore terminal now imports power station coal and the conventional docks on the Humber now cater extensively for RoRo cargo). The re-emergence of the established deep-water ports such as Southampton, Liverpool, Tilbury and Hull has contributed considerably to these supply side improvements.



Our approach in developing forecasts has sought to take account of these longer run factors in the industry while recognising that some of the underlying trends that have driven the process are no longer relevant. For example, the decline in the loading of coal in British ports is now complete; there is no further trend to follow; the growth in the loading of North Sea oil has now been reversed. The trends that we have focussed upon are those that can be identified in data over the last 10-12 years and the drivers for change that we have sought to identify are those that are relevant to the foreseeable future. 2.1.3 Overview of trends in port traffics 1993 - 2004 The map below shows the location of all ports in the British Isles that handed more than 1 million tonnes of freight in 2004, plus a handful of ports regarded as of sufficiently strategic importance for the DfT to maintain detailed statistics (Fishguard, for example); these are described as “major ports” in Maritime Statistics and this terminology has been used throughout this report. Detailed statistics by commodity type are not collected by the DfT for other UK ports, only total traffic. Given the potential policy importance for all UK ports whatever their size of maintaining comparable statistics, it may be worth reviewing the basis for the collection of maritime statistics in the future and returning to the practice followed by the National Ports Council of surveying all cargo handling ports.



Ports of the British Isles for which detailed statistics are available in 2004

Tonnes handled UK > 1 million tonnes UK < 1 million tonnes Republic of Ireland



Table 2.2 describes the traffic level that the UK ports industry (including the Channel Tunnel) had reached by 2004. While the Channel Tunnel, operated by Eurotunnel, is not technically a port, it acts as a port in the context of the GB-Continent freight market and so has been included in the overview of the market. Table 2.2: Summary of UK Port Traffics in 2004 (including Eurotunnel)

Million tonnes Cargo category Cargo sub-category Traffic (Million

Tonnes) % UK Major Port Traffic

% Total UK Traffic

Total Container & Roll on-Roll off

164 29%

Of which: Container traffic 56 10% Roll-on Roll-off traffic 108 19% RoRo - Ports 93 RoRo - Eurotunnel 15 Liquid Bulk 267 47% Of which: Liquefied gas 7 Crude oil 162 Oil products 86 Other liquid bulk products 12 Dry Bulk 114 20% Of which: Ores 18 Coal 41 Agricultural products 13 Other dry bulk 42 Other general cargo 27 5% Of which: Forestry products 11 Iron & steel products 10 General cargo & containers < 20’ 7 Total UK major ports (including Eurotunnel) 573 100% 97% Other UK ports 15 3% Total UK Ports 588 100% Of which: England 395 67% Wales 60 10% Scotland 110 19% Total Great Britain 565 96% Northern Ireland 23 4% Source: DfT Maritime Statistics 2004 “Major ports” (including the Channel Tunnel) handled some 97% of total UK ports traffic in 2004. Some 29% of this traffic related to non-bulk sectors (i.e. RoRo, and LoLo). 47% of all traffic in tonnage terms related to liquid bulk, while a further 20% was dry bulk. Other general cargo (mainly handled in semi-bulk form) accounted for the remaining 5% of traffic. In 2004 the UK ports industry (including 15 million tonnes through the Channel Tunnel) handled around 588 million tonnes of cargo (573 million tonnes excluding the Channel Tunnel). The industry has experienced consistent growth since the Second World War, averaging around 1.4% growth per annum. Despite short-term fluctuations in total traffic which are mainly due to changes in the domestic movements of crude oil from the North Sea handled at a few deep sea ports, that growth has been maintained since 1993 at a mean rate of 1% per annum. International traffic has led the overall increase in UK port traffic, with imports growing particularly strongly in the last ten years. There have been significant differences between



the performance of the different modes of appearance during the period 1995-2004 as shown in Table 2.3, with unitised cargo (i.e. containers and RoRo) growing more rapidly than the bulk sectors. Table 2.3: Composition of UK Major Port Traffic (including Channel Tunnel), by

Mode of Appearance, 1995 and 2004 1995 2004

Containers 8% 10% Roll-on Roll-off 12% 19% Liquid bulk 56% 47% Dry bulk 19% 20% General cargo 5% 5% Source: DfT Maritime Statistics, analysis by MDS Transmodal Liquid bulk cargo (mainly crude oil and oil products, liquid gas and chemicals) continued to represent the largest proportion of all port traffic in 2004. However, the overall composition of traffic demonstrates the increase in market share of the unitised sector from 20% in 1995 to 29% in 2004. Table 2.4: Geographic orientation of UK Major Ports’ Traffic (excluding Channel

Tunnel), 2004 European Union 38% Other Short Sea 11% Deep Sea 24% Domestic 26% Source: DfT Maritime Statistics 2004, analysis by MDS Transmodal In 2004 almost one-half of total UK major ports’ traffic was orientated towards the European Union and other short sea markets and this proportion is even higher when Channel Tunnel traffic is included. A further 26% of major ports’ traffic is accounted for by domestic coastal shipping, which is mainly crude oil from the North Sea platforms and coastal distribution of refined petroleum products from refineries located on the major estuaries to coastal tank farms; there are also significant coastwise movements of aggregates and “one port traffic” movements of sea-dredged aggregates to ports mainly in the south and east of England. Deep sea trades accounted for about one quarter of all port traffic in 2004. The leading UK ports in 2004 (the “Top 10”) are listed in Table 2.5.



Table 2.5: Top 10 GB major ports by total traffic, by area of load/discharge, 2004 Million tonnes

Region Rank Domestic Short sea

Deep sea

Total Of which: non oil

Grimsby & Immingham Yorkshire & Humber 1 10.0 29.6 18.0 57.6 34.8 Tees & Hartlepool North East 2 15.6 22.2 16.0 53.8 23.5 London London/East of England 3 13.9 29.6 9.8 53.3 34.1 Milford Haven Wales 4 14.1 19.5 4.9 38.5 1.7 Southampton South East 5 10.3 17.0 11.1 38.4 11.9 Forth Scotland 6 10.0 22.9 2.0 34.9 7.8 Liverpool North West 7 6.9 15.0 10.3 32.2 20.6 Felixstowe East of England 8 0.7 9.8 13.9 24.4 23.3 Sullom Voe Scotland 9 6.7 4.3 12.9 23.9 0.1 Dover South East 10 0.3 20.2 0.3 20.8 20.8 Source: DfT Maritime Statistics, analysis by MDS Transmodal The volume of cargo passing through each of the ports is not the only determinant of the physical demands they are required to fulfil. In particular, the physical parameters of ships involved in the deep sea or short sea trades are quite different and have a significant bearing on the requirement for port facilities, as well as on port productivity and overall port capacity. Deep sea vessels require deep water, specialised facilities and significant storage facilities to accommodate large volumes of cargo. Short sea vessels can usually operate into a wider range of ports, with less depth of water and can also be accommodated at ports closer to the inland origin and destination of cargo; the principal exception to this rule are short sea RoRo vessels, which require specialist handling facilities and (usually) large areas of land for the storage of cargo in units. 2.2 Macro-economic trends in UK trade 2.2.1 Introduction The rate of change in demand for port services is clearly driven by economic factors. This section provides a summary of macro-economic trends in UK trade, while a more detailed analysis is provided in the Technical Annex. It concentrates on trends in physical trade rather than by value, as this is most relevant to the ports sector. However, the measurement of trade by value is also important as it affects the balance of payments and, via the exchange rate, potential future trends in imports and exports (i.e. the long run capacity of the UK economy to buy imported goods). 2.2.2 Balance of Payments The headline figure for the UK balance of payments is the current account balance and a deficit of £23 billion was recorded in 2004 (Table 2.6). The current account comprises four categories of cash flow, the largest being the import and export of goods. Approximately half of current account credits and debits relate to trade in goods.



Table 2.6: Summary of UK Balance of Payments in 2004 Credits, £ million Debits, £ million Balance, £ million Goods 190,859 249,473 -58,614 Services 99,100 78,911 20,189 Income 139,656 113,493 26,163 Transfers 12,819 23,532 -10,713 Total Current Account 442,434 465,409 -22,975

Source: United Kingdom Balance of Payments, the Pink Book 2005 The deficit in trade in goods contributes most significantly to the net balance; the £23 billion current account deficit includes a £59 billion deficit related to trade in goods, only partially offset by surpluses in the services and income from abroad items. Table 2.7: UK Current Account Balance, 1960-2003

£ Million 1960 1970 1980 1990 1995 2004 Trade in Goods -404 -18 1,329 -18,707 -12,023 -58,614 Trade in Services 39 455 3,829 4,337 8,481 20,189 Income 166 471 -1,765 -2,979 2,101 26,163 Transfers -6 -89 -1,653 -4,932 -7,574 -10,713 Current Account Balance -205 819 1,740 -22,281 -9,015 -22,975

Source: United Kingdom Balance of Payments, the Pink Book 2005 Between 1960 and the mid 1980s, the trade in goods remained more or less in balance, as did the current account as a whole (Table 2.7). However, since 1985, the goods deficit has steadily increased, peaking at £24 billion in 1989, before falling back to £12 billion in 1997. It has since increased rapidly to the 2004 record level. As the largest and most volatile element in the overall account, the impact has been mirrored in the current account balance. The trend in UK goods trade by value between 1980 and 2004 is shown below. From a stable position in 1980, imports rose more quickly than exports during the decade. Between 1990 and 1996, imports and exports were closely correlated, but thereafter a gap has developed, creating a deficit approaching £60 billion per annum. Although the trade surplus in services has grown from £4.3 billion in 1990 to £20.2 billion in 2004, it has not matched the growth in the visible trade deficit.



UK Trade (£m)

0

50000

100000

150000

200000

250000

300000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Year

Exports (£m)Imports (£m)

Source: Office for National Statistics The chart below shows the pattern of trade volumes measured in tonnes between 1988 and 2004.

UK Trade (Thousands of Tonnes)

-

50,000

100,000

150,000

200,000

250,000

300,000

1988 1992 1996 2000 2003 2004

Year

ImportsExports

Source: HM Revenue & Customs The import and export trends measured in monetary units and tonnes show similar patterns; a gap developing in the late 1980s with imports growing faster than exports, a narrowing in the deficit during the early to mid 1990s, and a new gap arising after 2000, with export



growth flat, and import growth strong. However, growth in the value of cargo is not matched pro rata by tonnage. Since 1988, UK trade in goods has been growing by 5 to 5.5% per annum in value terms and only by and 2 to 2.5% per annum in tonnage terms. Relatively small changes at the margin (less than half a percentage point per annum between import and export growth) have led to a substantial increase in the visible trade deficit, only partially offset by surpluses in the services sector. There has been a marked change in performance since 2000 with an absolute decline in export tonnage, and only low growth in export value, despite higher growth in world output in 2003 and 2004. 2.2.3 Trends in the World Economy The UK Government has declared a commitment1 to reducing international protectionism, and sees the globalisation of trade and industry as a positive driver for domestic growth and competitiveness. The growing importance of trade in goods and services, referred to as ‘real globalisation’ seems to be beyond question, as shown in Table 2.8. Table 2.8: World Trade, Share of World GDP 1997 1998 1999 2000 2001 2002 2003 2004 AverageWorld Output ($ Trillion) 29.77 29.53 30.64 31.46 31.20 32.41 36.33 40.67 Real GDP Growth (%YoY) 4.2 2.8 3.7 4.6 2.5 3.0 4.0 5.1 3.7 World Exports ($ Trillion) 6.90 6.79 7.03 7.83 7.57 7.94 9.22 11.07 Real Export Growth (%YoY) 11.1 4.4 5.2 12.5 -1.4 2.1 2.9 8.6 5.7 Exports as Share of GDP (%) 23.18 22.99 22.94 25.55 24.26 24.49 25.38 27.22 Source: IMF, World Economic Outlook

World output, in real terms has grown at an average rate of 3.7% per annum since 1997. By contrast, world trade has grown at 5.7% p.a.. As a consequence, the ratio of total exports to total output has risen from 23.2% to 27.2%. Total trade (imports plus exports) as a share of the world economy is close to 55% in 2004, compared with 46% in 1997, and only 20% in the early 1970s. The geographical pattern of trade has also shifted towards “Developing Asia”2 and Central and Eastern Europe3. Developing Asia has reported an annual average of almost 13% growth in exports and 10% in imports by value over the last decade, double the global rate. Central and Eastern Europe’s trade has grown by 11% for exports and 10% for imports. As a result of these two zones’ progress, trade growth in the developing world is 2-3 percentage points higher than in the ‘advanced economies’ (i.e. the USA, the Eurozone, Japan and the

1 HM Treasury, May 2004, “Trade and the Global Economy, The role of international trade in productivity, economic reform and growth”. 2 Includes China, India, Indonesia, Malaysia and 19 other Central and Eastern Asian countries. 3 Includes Poland, Turkey, Hungary and 12 other (mostly EU Accession) countries.



UK). By implication, growth in trade within the developing world has exceeded growth with the ‘developed’ world. At an aggregate level the figures suggest that the advanced economies as a whole are stable with balanced levels of import and export growth. However, while this is true for Japan and the Euro area, it is not true for the UK and the USA, both reporting particularly low levels of export growth combined with relatively high rates of import growth. The net result is that the shares of world trade by region have shifted eastwards, with ex-Continental Asian trade increasing from 1.2% of world GDP in 1984 to 2.4% by 2004. Over the same period, ex-Japan trade decreased as a percentage of the world’s GDP. Other zones increased their shares, but by relatively small amounts. 2.2.4 Prospects for UK imports and exports By international standards, the UK’s share of world trade is relatively small, and similar in absolute terms to France and Italy. Levels of trade growth are currently relatively low on the export side and moderate to low on the import side compared to total GDP. However, there is a significant and increasing balance of trade deficit. The main causal factors for the imbalance appear to be:

• Consistently high levels of domestic consumption, driving imports; • Falling levels of competitiveness with respect to consumer prices and labour costs; • A recent decline in industrial output, including key high-tech sectors; • Greater integration within the world economy, favouring lower cost regions,

particularly East Asia and Eastern Europe. Further export growth from the UK depends particularly on UK competitiveness and demand growth in North West Europe. This region has accounted for a third of UK export growth over the last sixteen years, but has declined as an export market in absolute terms since 2000. It is also noticeable that the world’s most dynamic regions are not yet developing into important export markets for UK producers. Exports only grew in value terms by 3% since 2000, mainly due to the poor performance of the chemicals sector. Further import growth depends particularly on consumer spending and mainly affects trade with North West Europe, the Far East, North America, the Mediterranean, and Central and Eastern Europe. Imports from European countries have continued to grow strongly in the last four years. In terms of port traffic growth, the impacts are likely to be felt unequally. RoRo and LoLo markets tend to react to changes in the ‘busy’ direction (imports). Returning ‘empty’ export units have to handled in any event. Imports of manufactured goods in containers from deep sea origins can be expected to continue to grow strongly. Integration of Central and Eastern Europe into the EU is also likely to enhance opportunities in the Continental RoRo sector.



Imports from Ireland, although only 3-4% of total trade have continued to grow as a consequence of integration of the UK and Irish economies in the retail sector. The Mediterranean region is also growing strongly as an import market for manufactured goods to the UK, creating opportunities for intra-European container services, and also long distance rail. Between 2000 and 2004, the UK became a net fuel importer in tonnage terms, but in other bulk sectors such as crude materials, including raw materials such as ores, there have been absolute declines in import volume since 1988, another reflection of the decline of heavy industry. The immediate prospect is that the gap between import and export growth will continue, translating into further unitised growth, but mixed fortunes in conventional traffic. The increase in the UK trade deficit may not be sustainable and if this translates into lower domestic growth and a weaker pound, there is also a medium-term risk that import growth rates will be suppressed. 2.3 Freight Transport Policy 2.3.1 1998 Transport White Paper The Government’s overall transport policy, which underpins much policy related to ports, was first outlined in a White Paper in 1998 entitled A New Deal for Transport: Better for Everyone. The White Paper set out the UK Government’s philosophy towards the future of transport in the United Kingdom. The objectives of transport policy were stated as being the reduction of environmental pollution and road congestion, while maintaining and improving national and regional competitiveness. There was therefore an emphasis on promoting sustainable and integrated transport for both passengers and freight, thereby balancing environmental sustainability with improved efficiency. Although the White Paper concentrated on issues relating to road and rail transport, it contained some important sections on shipping and ports that have set the agenda for subsequent UK policy. Ports, were seen as vital links in the transport chain and UK policy objectives, reflecting the principles of sustainable development, were to:

• Promote UK and regional competitiveness by encouraging reliable and efficient distribution and access to markets;

• Enhance environmental and operational performance by encouraging the provision of multi-modal access to markets;

• Make the best use of existing infrastructure, in preference to expansion wherever practicable;

• Promote best environmental standards in the design and operation of ports, including where new development is justified.



2.3.2 Sustainable Distribution Sustainable Distribution: A Strategy (1999) set out the aim of the Government’s freight policy as being, “to ensure that the future development of the distribution industry does not compromise the future needs of our society, economy and environment”, linking the policy directly to the overall aim of sustainable development. The strategy focussed very largely on seeking to improve the efficiency of the road freight distribution industry, arguing that while the UK distribution industry is already highly efficient there is “still substantial scope for improvement”. The Government’s strategy for a sustainable system of distribution for the UK was summarised as:

• To promote a “Sustainable Market”. The market must function effectively, openly and fairly – not only in the UK but at a global scale.

• To promote integration of the freight transport infrastructure by means of “Strategic Planning”.

• To ensure the freight transport industry achieves the Government’s social and environmental objectives, by “Raising Standards”.

2.3.3 The Future of Transport White Paper The Government had intended to introduce a distance-based charging scheme for lorries in 2008, but the Lorry Road User Charge project, which would have introduced a distance-based system for the taxation of road haulage in the UK, was cancelled in July 2005. This was because the Government is considering introducing a system of road pricing for all vehicles (i.e. not just HGVs) at some point in the future. Apart from the fact that it included a statement expressing the Government’s commitment to a review of ports policy, The Future of Transport White Paper (July 2004) was most notable in the context of this study for its views on road pricing. In the White Paper, the Government stated that it believes a “mature discussion” is required about road pricing and a Government-funded feasibility study has concluded that road pricing is becoming technically feasible and certainly would be in the next 10-15 years. Road pricing is important in the context of this study because it could be used to increase the variable cost of road haulage to users so it would be paying for its full “external” costs (such as environmental pollution, the cost of accidents, the cost of congestion and damage to the road network) as well as the direct costs of fuel, the cost of the driver and finance costs of the vehicle. This may have little impact on the bulk shipping market as most cargoes are tied to facilities at particular ports and so these cargoes are not footloose. However, road pricing could have an impact on the choice of mode for inland distribution from deep sea container ports and lead to changes in routing in the short sea unit load



market, as shippers and their logistics suppliers seek to reduce costs by reducing road mileages. 2.4 Ports Policy 2.4.1 Modern Ports: A UK Policy Modern Ports: A UK Policy (2000) was published by the then DETR in November 2000 and was the first UK ports policy document to be published by Government for 20 years. It applied the principles of the Government’s integrated transport policy in the context of the ports industry and provided a generally market-focussed, non-interventionist approach. The UK Government saw itself essentially as a regulator of some of the activities of the UK ports rather than dictating whether, where and how investment should be made in the ports. The Policy Paper stressed that, wherever possible, existing port capacity should be used more effectively, rather than constructing additional infrastructure. The policy paper also stated that, “Some ports need to increase capacity to meet future demand. This may require substantial new port development in a relatively small number of cases. Where there is a clear need, we will support sustainable port projects, but each case must be looked at in detail on its merits.” At the time, this section of the policy document probably sought to support the need to expand port capacity in the South and East of England. The Policy Paper made it clear that, as a general rule, there should be no public sector investment in UK port infrastructure as this may distort competition between ports. 2.4.2 Results of planning enquiries The Government has announced decisions on six major port-related planning enquiries in the past two years:

• The Dibden Bay deep sea container port development, near Southampton (consent refused);

• The Outer Harbour RoRo Development at Immingham (consent given); • The riverside LoLo development at Hull (consent given); • The London Gateway deep sea container port development (minded to grant

consent;); • The Felixstowe South deep sea container port development at Harwich (consent

given); • The Bathside Bay deep sea container port development at Harwich (consent given);



Dibden Bay, Southampton (April 2004) In relation to the application for a Harbour Revision Order by Associated British Ports for the development of a deep sea container port at Dibden Bay, there was little dispute that deep sea container traffic was likely to grow in the future and thereby create the need for more port capacity. The major issue related to whether there were potential alternatives that might emerge, given the development impact upon a site of environmentally international importance. Planning permission was not granted, essentially on environmental grounds because alternative means of satisfying need might become available. On the issue of demand, the Inspector concluded that, “the UK’s container trade could be expected to continue to expand rapidly and that the Dibden Terminal would provide more than half of the identified additional quay length requirement for container capacity in the South East of England” (paragraph 23 of the Decision Letter, dated 20 April 2004). Paragraph 42 of the Decision Letter states that, “the Secretary of State agrees with the Inspector’s conclusions on need for the project in relation to the port of Southampton, the economy of the South East of England, and the wider economy.” Immingham Outer Harbour (July 2004) In relation to the application for a Harbour Revision Order by Associated British Ports for the development of an Outer Harbour to handle RoRo vessels at Immingham, there was little disagreement that RoRo traffic is likely to grow in the future, with the major issue relating to the extent to which another RoRo facility on the Humber, operated by a competitor, could be an alternative in planning terms. The Secretary of State accepted the Applicant’s statement that, “RoRo traffic through UK ports, particularly on the Humber, has increased and will continue to increase. The Secretary of State notes the Applicant’s statement of predicted growth of 96.7% in RoRo traffic over ten years. The Secretary of State agrees with industry forecasts that the market will continue to grow and that new capacity is required” (paragraph 33 of Decision Letter, dated 7 July 2004). London Gateway Decision (July 2005) The Inspector at the London Gateway enquiry reported that a need for additional container capacity in the UK had been clearly quantified and that the London Gateway scheme would be able to meet that need as well as a need for regional RoRo capacity. In his decision letter the Secretary of State for Transport, agrees with the Inspector on the, “need for the proposed port to provide additional container nationally and RoRo capacity regionally” (paragraph 62).



While the scheme would have an indirect impact on a Special Protection Area (SPA), there was no realistic alternative to meet the identified need and there was an overriding public interest in the scheme proceeding. Furthermore proposed mitigation by the applicant was adequate to meet the requirements of the relevant legislation. The major issues related to the impact of the additional port traffic on the strategic road network. The Decision Letter states that the Secretary of State “accepts that the traffic impacts of the proposed port, and the port and logistics centre in combination, are likely to have detrimental impacts on traffic flows on sections of the existing trunk road network” (paragraph 77). The Secretary of State’s overall conclusion was that, “there is a national need for additional deep sea container terminals and container handling capacity within the next decade or so. He notes in this respect that berths for container vessel traffic, as distinct from RoRo traffic, would permit the onward transhipment of containers by sea with a corresponding absence of pressures on the highway network of the region” (paragraph 121). This implies that deep sea container berths are to be expected to provide capacity for transhipment (including in south-east England). The Secretary of State concluded that he was minded to give the scheme planning permission, subject to him being satisfied that adequate highway improvements would be funded by the applicant. At the time of completion of this report, the final decision on the London Gateway project had not been published by the Department for Transport. Hull Container Terminal (December 2005) In relation to an application for a Harbour Revision Order for the development of Quay 2005 at Hull by Associated British Ports, the Inspector recommended that planning permission should not be granted, while the Secretary of State disagreed with this view. Despite the likely impact of the development on potential European sites of ecological importance, the Secretary of State argued that, “the levelling off of container volumes at Hull in recent years, against the national trend, is not due to a lack of demand but to lack of requisite facilities at the port to meet nationally rising demand” (paragraph 139 of the Decision Letter, dated 21 December 2005). The development was regarded by the Secretary of State as being in the national and public interest and so was granted permission to proceed. Felixstowe South Decision (February 2006) In relation to a Harbour Revision Order for the Felixstowe South deep sea container port development by Hutchison Ports, the Inspector concluded there was a pressing and increasing need for additional deep sea container port facilities in the UK to meet the national need for capacity and Felixstowe was well placed to meet that need. In paragraph 40 of his Decision Letter, dated 1 February 2006, the Secretary of State agreed with this view and the Harbour Revision Order was granted.



Bathside Bay Decision (March 2006) In its Minded to Approve Letter, dated 21 December 2005, the Secretary of State agreed with the Inspector that, ”there is a need for additional deep sea container capacity nationally” (paragraph 57) and, “considers that the evidence presented to the enquiry demonstrates continuing growth in demand for deep sea container capacity” up to 2030 (paragraph 60). He concluded that, ”there is a need for Bathside Bay, in addition to the Felixstowe South Reconfiguration and London Gateway schemes” (paragraph 64). The proposed facility was finally given full approval in March 2006. 2.4.3 Ports Policy Review The Future of Transport White Paper stated that after 2005, “we will take stock of how the ports industry is set to meet the country’s overall needs in the longer term. We will therefore review our policy framework…to take account of issues such as increases in global demand, pressures on port capacity and how to provide adequate inland capacity”. 2.5 Energy Policy Introduction The UK is moving from being a major producer of oil and gas, as well as historically having significant domestic coal reserves, to a position where the UK imports much of its gas and coal for electricity generation and, in the future, a high proportion of the crude oil feedstock for refineries will also be imported. As a significant proportion of these energy imports will pass through UK ports, energy policy has a significant impact on our port forecasts. The 2003 Energy White Paper The Government’s long-term energy strategy was set out in the 2003 Energy White Paper, ‘Our Energy Future – Creating a Low Carbon Economy’. Four main goals were established for UK energy policy:

• The reduction of carbon emissions by some 60% by about 2050, with real progress by 2020;

• The maintenance of reliable energy supplies; • The promotion of competitive markets; • Making energy affordable for the poorest.

The Government’s overall commitment to sustainable development was also reinforced in the document.



Our Energy Challenge – Securing clean affordable energy for the long-term Since the White Paper was published in 2003 a number of factors have combined which have led to a further examination of energy policy being required to determine whether further action should be taken to meet Government goals:

• There is more evidence of the adverse impact of climate change reinforcing the case to cut emissions.

• The UK has become a net importer of gas sooner than expected and there are heightened concerns about energy security. There is therefore a need to consider whether enough is being done to identify and manage potential risks.

• Energy prices have risen sharply, which is affecting the results of measures taken to help people out of fuel poverty.

• Progress in developing truly open energy markets in the EU has been slow. • Although increased energy efficiency is a central public policy goal the pace of

improvements has been slower than needed. The consultation document makes it clear that decisions on the fuel mix for power generation are not for the Government to make and it is for the market to make these decisions within the right regulatory framework. However diverse sources, fuel types and trading routes should be promoted to avoid over reliance on too few sources. In the context of a fall in nuclear generation capacity to around 7% by 2020 and estimates of a reduction in coal powered generation to about 15-20% between 2015 and 2020, the paper presents a scenario of gas making up around 60% of the country’s power generation needs. This may imply an insufficiently diverse range of sources of electricity generation and an implied over dependence on overseas sources. However, no single solution is identified and the document urges the need to consider a range of options to influence the way in which energy is produced and used. This also includes, “looking again at nuclear power as well as other sources of energy”. Most existing nuclear power stations are due to close in the next 20 years and the 2003 Energy White Paper recognised that replacement nuclear build might be necessary if carbon targets were to be achieved, but concluded that the economics of nuclear power at the time made it unattractive. The Review will examine whether recent rises in energy prices have changed that assessment, and will examine all the other issues that would be raised by building new nuclear plants, such as the creation of long-term liabilities related to nuclear waste and how these liabilities should be managed and paid for. Examination of emerging low-carbon technologies is also urged, which would allow continued access to the world’s ample coal reserves and other fossil fuels. The document concludes by examining the implications of the continuation of current trends, and this is the background against which the energy companies with interests in the UK will



make their investment decisions regarding the replacement of existing coal and nuclear plant:

• The UK will become more reliant on gas for electricity generation and heating needs and will continue to rely on oil for transport;

• By 2020 around 75% of the UK’s primary energy is likely to be imported, and much of the world’s proven oil and gas reserves are in Russia, the rest of the former Soviet Union, the Middle East and North Africa;

• Maintaining the reliability of electricity supplies will require very substantial levels of new investment as existing coal and nuclear capacity is retired.

2.6 Recent Trends in UK Port Volumes Summarised In 2004 the UK ports industry handled around 573 million tonnes of cargo (588 million tonnes including the Channel Tunnel) and the industry has experienced consistent growth since the Second World War, averaging around 1.4% growth per annum. In the period 1994-2004, that growth has been maintained at a mean rate of 1% per annum. Unit load traffic has been growing at a much faster rate than bulk cargoes. Since 2000 the gap between imports and exports in unitised trade in particular has grown significantly and the immediate prospect is for that growth to continue. However, the corresponding increase in the UK trade deficit may not be sustainable, and if this translates into lower domestic growth and a weaker pound, there is also a medium-term risk that import growth rates will not be sustained. It is important to distinguish between the overall volume of cargo moving as a consequence of economic drivers and the impact of transport policies or the availability of infrastructure on the routeing and modal choices made for cargo by shippers and their logistics providers. For example, changes in transport policy may lead to road pricing being introduced for all road users. This is likely to have an impact on the routing of cargo in the short sea unit load market and have an effect on the modal split between road and rail for inland distribution from ports, particularly for deep-sea containers. It will not, however, have any significant impact on the total volume of cargo moving. There can be little doubt that non-bulk international cargo is growing at a much faster rate in Britain than is domestic cargo. The recent decisions of the Secretary of State for Transport concerning planning applications and appeals for port developments have not regarded the forecasts of demand made for unit load traffic produced by the developers, which reflect this trend, to be contentious.



3 FORECASTS FOR UNITISED PORT TRAFFIC TO 2030 3.1 Introduction The market for port services can be segmented according to modes of appearance. At a fundamental level, a distinction can be made between unitised traffic (the subject of this chapter) and non-unitised traffic. The unitised sector consists of traffic flows aggregated into unit loads, trailers and containers, where the shipper is paying for the unit load to be delivered rather than a divisible quantity measured in tonnes. Unitised cargo can be defined as that which is consolidated into secure ‘boxes’ (with or without wheels) which can themselves be lifted or rolled in and out of ships and onto and off HGVs or intermodal railway trains. Table 3.1 provides an analysis of 2004 port traffic volumes for all the categories of container and RoRo traffic included in Maritime Statistics. Table 3.1: UK Containers & RoRo Market Size, Major Ports, 2004

Million Tonnes International Domestic Total Imports Exports Total In-

wards Out-

wards Total Grand

Total %

Traffic Containers 32.5 21.8 54.3 1.1 1.0 2.1 56.4 37.8% Roll-on/roll-off (self-propelled) 23.7 15.8 39.5 4.5 4.4 8.9 48.3 32.4% Of which: Road goods vehicles & trailers 20.7 13.7 34.3 4.4 4.2 8.6 42.9 28.8% Import/export motor vehicles* 3.0 2.0 5.0 0.1 0.1 0.2 5.3 3.6% Live animals on the hoof - - - - - - - - Other mobile self-propelled units** - - 0.1 - - - 0.1 0.1% Roll-on/roll-off (non self-propelled) 19.2 12.1 31.3 6.7 6.5 13.2 44.5 29.8% Of which: Unaccomp. Road goods trailers 14.8 10.2 25.0 6.4 6.3 12.7 37.7 25.3% Unaccomp. caravans, agric. & industrial vehicles** 0.7 0.1 0.8 - - 0.1 0.9 0.6% Rail wagons, shipborne port-to-port trailers and barges*** 3.6 1.9 5.5 - - - 5.5 3.7% Other mobile non-self propelled units** - - - 0.2 0.2 0.4 0.4 0.3% Total UK Containers & RoRo 75.4 49.7 125.1 12.3 11.9 24.2 149.2 100% Source: DfT Maritime Statistics 2004 (Table 2.4)

* Forecast as a non-unitised bulk traffic in Section 4.12 ** Regarded as de minimis, no forecasts produced *** Almost entirely containers carried on trailers on RoRo vessels

Chapter 3 provides forecasts for all the categories of traffic included in this table except:

• Import/export motor vehicles (5.3 million tonnes), for which forecasts were developed in Chapter 4 as this cargo category is not a unitised cargo;

• “Other mobile self-propelled units” (0.1 million tonnes, representing about 0.1% of the traffic included in Table 3.1), “unaccompanied caravans, agricultural and industrial



vehicles” (0.9 million tonnes, representing 0.6% of the traffic included in the table) and “other mobile non-self propelled units” (0.4 million tonnes, representing about 0.3%), which were regarded as de minimis and therefore no forecasts were produced for these cargo categories.

In total therefore Chapter 3 is providing forecasts for cargo categories that amounted to some 142.5 million tonnes of port traffic in 2004. However, port capacity in the unitised sector is most sensibly measured in unit loads rather than tonnes. The unitised modes of appearance (containers, trailers and swopbodies), have generally taken over what was until the 1960s generally regarded as ‘general’ or ‘break bulk’ cargo. ‘Non bulk’ or ‘general cargo’ in the 1960s was limited to only a few million tonnes largely moved through the traditional deep sea ports such as London, Liverpool and Bristol. By the 1980s, the non-bulk sector had grown as UK trade with the Continent and, increasingly, the Far East began to develop. As unitisation developed, ‘non bulk’ and ‘unitised’ trade generally began to correspond to each other. That tonnage had reached 146 million tonnes by 2004 (including the Channel Tunnel) and represented 54% of all non-energy goods cargo through GB ports. Since the 1960s, there has been a massive increase in international trade in manufactured and prepared foodstuffs. While growth in unit load traffic was ‘exponential’ in the earlier years (1965 – 1980), growth has since matured and now appears to be more or less constant in absolute terms. Over the last 10 years of available data (1994 – 2004), unit load traffic grew by around 5.0 million tonnes per annum. The shares that different countries have captured of (particularly) UK imports have changed; an increasing proportion of manufactured goods are now sourced from the Far East. However, it is helpful to be able to establish clear patterns in trade growth and it appears that the rate of change whereby the UK transfers its sourcing of goods from domestic manufacturers to manufacturers abroad has stabilised.



Table 3.2: Historic trends in UK unit load traffic, 1992 – 2004 Thousand units 1992 1995 1997 1999 2001 2003 2004 % Growth

1992-2004 CAGR

% Lolo units* 2,837 3,349 3,610 4,033 4,355 4,321 4,780 68% 4.4% of which: Northern Ireland 166 122 124 135 126 137 148 (11%) (1.0%) GB (units) 2,671 3,227 3,486 3,898 4,229 4,184 4,632 73% 4.7% GB of which: Coastwise 163 132 137 132 218 189 184 13% 1.0% Short sea 1,010 1,230 1,151 1,303 1,605 1,567 1,683 67% 4.4% Deep sea 1,498 1,865 2,198 2,463 2,284 2,368 2,636 76% 4.8% Unspecified - - - - 122 100 129 - - GB of which: Major south east ports

1,747 2,232 2,657 3,042 3,297 3,142 3,474 99% 5.9%

Other GB ports 924 995 829 856 932 1,042 1,158 25% 1.9% Estimated transhipped

(411) (625) (744) (710) (614) (343) (305) (26%) (2.5%)

Net domestic GB LoLo containers

2,260 2,602 2,742 3,188 3,615 3,841 4,327 91% 5.6%

Net domestic TEU 3,254 3,825 4,086 4,910 5,676 6,222 7,086 118% 6.7% RoRo units 4,511 4,888 5,792 6,698 7,715 8,163 8,392 86% 5.3% of which: GB ferries 4,013 3,895 4,894 5,162 5,719 6,163 6,356 n.a. n.a. Eurotunnel - 391 268 839 1,198 1,285 1,281 n.a. n.a. Northern Ireland 498 602 630 697 798 715 755 52% 3.5% GB RoRo units 4,013 4,286 5,162 6,001 6,917 7,448 7,637 90% 5.5% Total GB domestic units

6,273 6,888 7,904 9,189 10,532 11,289 11,964 91% 5.5%

Total NI units 664 724 754 832 824 852 903 36% 2.6% Source: MDS Transmodal, derived mainly from DfT Maritime Statistics * Analysis includes switch of containers classified as LoLo in Maritime Statistics to RoRo; in 2004 this relates to 119,000 units switched from LoLo to RoRo in the table. Table 3.2 describes overall unit load growth in and out of Great Britain and Northern Ireland between 1992 and 2004. Overall growth in and out of Great Britain for domestic units (excluding 3rd country transhipments) has been 91% over this 12 year period. The rates of growth for LoLo containers (91%) and RoRo units (90%) are almost identical. There have, however, been significant fluctuations over the period. These include: • Growth in 3rd country container transhipment as capacity became available through

efficiency gains, followed by a fall as that capacity was used up by domestic traffic. • More rapid growth in deep-sea container traffic (76% over 12 years) than in short sea

container traffic (67%).



• A rapid rise in container traffic in the major South East ports from 1992 to 2001 (+99%) as compared with that to other GB ports over the same period (+25%).

• A reversal of those trends from 2001 to 2004 as growth in South East ports was only

+5% while growth through other ports was +24% • A rise of 90% of RoRo units through GB ports between 1992 and 2004 (almost all

short sea) while short sea LoLo traffic grew by only 67%. However, part of that growth in RoRo traffic involved the carriage of containers on RoRo ships.

• A growth of 36% in unit loads through Northern Irish ports, more closely reflecting

intra-UK traffic flows. • A fall in the number of LoLo containers through Northern Irish ports between 1992

and 1995 followed by a steady growth to 2004 (+21% between 1995 and 2004), which was a similar growth rate to RoRo units through Northern Ireland ports between the same years (+25%).

Unitised traffic occupies the “middle ground” between, on the one hand, the bulk sectors accounting for high volume and low value traffic and, on the other, the air freight sector accounting for much of the low volume and high value traffic. In the case of cargo moving outside of the European Union, detailed Customs data permits these distinctions to be clearly established, as shown in Table 3.3 below. Table 3.3: UK Extra-EU Trade, 2004, Mode Shares

Source: MDS Transmodal

UK Extra EU Imports UK Extra EU Exports UK Extra EU Trade Tonnes

(‘000s) Mode Share

Tonnes (‘000s)

Mode Share

Tonnes (‘000s)

Mode Share

Conventional 147,117 96.1% 41,755 72.2% 188,873 89.5% Lift On/Lift Off 20,746 13.6% 12,422 21.5% 33,168 15.7% Roll On/Roll Off 2,299 1.5% 1,215 2.1% 3,514 1.7% Rail 59 0.0% 150 0.3% 209 0.1% Air 1,108 0.7% 550 1.0% 1,659 0.8% Other 4,556 3.0% 7 0.0% 4,563 2.2% Total Unitised Trade 23,045 15.1% 13,637 23.6% 36,682 17.4% Total Extra-EU Trade 175,885 114.9% 56,100 96.9% 231,985 110.0%



Table 3.4: UK Extra EU Trade, 2004, Value Densities by Mode UK Extra EU Imports UK Extra EU Exports UK Extra EU Trade £

(millions) £/ Tonne £

(millions) £/

Tonne Tonnes

(millions) GBP/

Tonne Conventional 24,432 166 16,717 400 41,149 218 Lift On/Lift Off 37,291 1,798 21,157 1,703 58,448 1,762 Roll On/Roll Off 7,438 3,235 6,138 5,054 13,576 3,864 Rail 309 5,253 1,177 7,852 1,487 7,119 Air 48,203 43,488 37,077 67,398 85,280 51,419 Other 3,224 708 651 88,675 3,875 849 Total Unitised Trade 44,729 1,941 27,295 2,002 72,024 1,963 Total Extra-EU Trade 120,898 687 82,917 1,478 203,815 879


Tables 3.3 and 3.4 show:

• Conventional/bulk traffic accounting for 89.5% of trade by volume with an average value per tonne ratio of £218 in 2004.

• Unitised traffic accounting for 17.4% of trade by volume with an average value per tonne ratio of £1,963 in 2004. As this table only looks at UK extra-EU trade, the unitised sector is dominated by container traffic. Roll-on/roll-off traffic has a higher value per tonne than containerised traffic.

• Air freight accounting for less than 1% of non EU trade by volume but 41.8% by value, with an average value per tonne ratio of £51,419.

• Export value densities in all categories except containerised traffic are higher than the import equivalents.

When intra-EU trade is added to reflect total UK trade, the unitised share of total trade rises to an estimated 25% by volume. Within the unitised sector, it is generally sufficient to describe the demand made of the port sector in terms of total unit throughput per annum, rather than subdivide it by overseas origin and destination or product sectors. However in order to arrive at a forecast it is necessary to understand which world regions, which product sectors and therefore which economic activities are accounting for underlying demand and changes in demand. The breakdown of unitised traffic in 2004 by world region is shown in Table 3.5



Table 3.5: Estimated GB Unitised Trade in 2004 by World Region Imports Exports Total Tonnes

(‘000s) Share

% Tonnes (‘000s)

Share %

Tonnes (‘000s)

Share %

Ireland 6,242 8.2% 10,851 24.4% 17,093 14.2% NW Europe 35,348 46.6% 15,459 34.8% 50,808 42.3% Nordic 4,823 6.4% 1,454 3.3% 6,276 5.2% Mediterranean 10,840 14.3% 6,011 13.5% 16,851 14.0% E Europe 1,357 1.8% 612 1.4% 1,969 1.6% Africa Excl Med 1,382 1.8% 758 1.7% 2,141 1.8% N America 3,211 4.2% 2,004 4.5% 5,215 4.3% C&S America 2,270 3.0% 615 1.4% 2,885 2.4% W Asia 1,831 2.4% 1,715 3.9% 3,546 2.9% E Asia 7,786 10.3% 4,591 10.3% 12,378 10.3% Oceania 708 0.9% 340 0.8% 1,048 0.9% Total 75,798 100.0% 44,410 100.0% 120,208 100.0%

Source: MDS Transmodal The first five geographical categories (Ireland, the Nordic region, North West Europe, the Mediterranean and Eastern Europe) comprise the great majority of the ferry market for western, north-eastern and south-eastern GB ports respectively. The other world regions form the main part of the container market. The split by commodity sector for 2004 is shown in Table 3.6. It shows the dependence of the sector upon demand for semi-manufactures and consumer goods, including food. Table 3.6: GB Unitised Trade, 2004, Shares by Product Sector

Imports Exports Total Tonnes

(‘000s) Share

% Tonnes (‘000s)

Share %

Tonnes (‘000s)

Share %

Food 16,177 21.3% 6,323 14.1% 22,501 18.7% Beverages &Tobacco 3,473 4.6% 1,792 4.0% 5,266 4.4% Crude Materials 5,295 7.0% 5,603 12.5% 10,898 9.0% Mineral Fuels 746 1.0% 562 1.3% 1,308 1.1% Oils Fats 945 1.2% 316 0.7% 1,261 1.0% Chemicals 12,076 15.9% 10,011 22.4% 22,087 18.3% Basic Manufactures 21,477 28.3% 12,656 28.3% 34,133 28.3% Machinery 8,641 11.4% 5,515 12.3% 14,156 11.7% Misc. Manufactures 7,040 9.3% 1,934 4.3% 8,974 7.4% Commodities n.e.s. 3 0.0% 6 0.0% 9 0.0% Total 75,874 100.0% 44,718 100.0% 120,592 100.0%




By maintaining the product sector and geographic subdivisions it is therefore possible to construct a set of forecasts that can be assigned according to mode and related to the markets of specific groups of ports. As an (extreme) illustration, if the only forecast change in a given year was a doubling of imports in the consumer goods (miscellaneous manufactures) sector, and these were being sourced entirely from Eastern Asia, total unitised imports would rise by approximately 9%, or 7.0 million tonnes. This growth would only be felt in the containerised sector, adding 7.0m tonnes or 28% to containerised imports. As containerised imports exceed exports and therefore dictate the volume of containers moving (including empty return containers), the volume of containers moving through UK ports would also grow by 28%. Growth from Eastern Asia (7.8m tonnes in 2004) would almost double. There are, of course, many other factors to consider, including trends in tonnes per container and the port market shares maintained by English ports in the South East. The methodology set out in this section can be seen as a more detailed extension of this trade-based analysis, so that forecast changes in the economy and in trade relations, can be assigned to transport modes and related to the markets addressed by specific groups of ports. 3.2 GB Unitised Forecast Methodology 3.2.1 Overview There are three principal stages within the forecasting methodology for unitised traffic: • An econometric trade model (FORK) to predict demand, measured in tonnes. The

model uses trade data rather than Maritime Statistics data as trade data is available at a detailed commodity level and by overseas country.

• A transport model (GBFM) to assign these forecasts to the transport networks, producing demand, in tonnes, by UK region, by sea mode and by route.

• A model to convert tonnes traded to units handled. The results of the last stage have been validated against the DfT Maritime Statistics data for 2004. The methodology is summarised in the flow chart (Figure 3.1). Changes in the UK economy and trading partner economies cause changes to occur in the demand for imports and exports and were projected to 2030. Unitised traffics were identified and routed through a transport model, resulting in an assignment by seaport, sea-mode (LoLo and RoRo) and inland mode of transport. The flows were then converted to unit loads and balanced by direction, resulting in a forecast measured in TEUs for container traffic and HGVs/trailers for ferry traffic.



The principal quantities used in the analysis in Tables 3.3 – 3.24 were derived from trade data. They were validated against transport statistics (Maritime Statistics 2004), but there are inevitable differences arising from the definitions used by the two systems. In particular, our unit load forecasts for GB and Northern Ireland based on trade are lower for the base year of 2004 than the weight reported in Maritime Statistics and by Eurotunnel for the following main reasons:

• Maritime Statistics includes third country transhipment containers, which are not related to UK trade, and which amounted to about 305,000 units in 2004; the volume of transhipment traffic handled at UK ports such as Felixstowe is a function of the amount of port capacity and is the subject of a separate study published in parallel with this report;

• HM Customs and Excise are interested only in the weight of the cargo, while DfT Maritime Statistics includes weight of packaging within the units.



Figure 3.1: Overview of Forecasting Methodology

UK Trade Data

1988 Q1 to 2004 Q3

GBFM

Transport Model

Multimodal Path Choice

FORK

Econometric Trade Model

Forecasts of Unitised Traffic

2004 to 2030Estimated HGVs, TEUs

Unit Load Model

Estimation of Unit Loads

Forecasts of UK Trade

2004 Q4 to 2020 Q4Unitised Tonnes

By Product and Country


2004 to 2030Unitised Tonnes

By Product, Country, Mode, Route

Validation

againstMaritime Statistics



Stage 1 – Trade Forecasts The first stage of the process is to use a macroeconomic forecasting model to relate the volume of trade to changes in the world economy. At the aggregate level it is evident that the main drivers for UK trade have been the growth in domestic consumption and the relatively high cost of domestic production. However, changes in trading patterns have been distributed unevenly across product and geographic sectors.

UK Trade Data

1988 Q1 to 2004 Q3

FORK

Econometric Trade Model

The FORK model splits UK trade by direction, trading partner country and by commodity, and attempts to fit the quantity of goods traded to macroeconomic indicators for both the importing and exporting economies. If there is a successful outcome, the trade flow is predicted using forecasts of the indicator variables. The trade data used within FORK is derived from Eurostat, broken down into a quarterly time series with 63 observations between 1988 and 2004. It has been possible to use published forecast values for the indicator variables for the period 2004 to 2006. Between 2006 and 2020, FORK projects the data with constant values. For the UK it implies: • GDP growth at 2.25-2.5 %; • Inflation at approximately 2%; • Exchange rate with respect to the US Dollar at $1.85. Elsewhere values have been derived from OECD and IMF publications. Taken together, this amounts to an optimistic view of how the world economy might develop, with all of the major economies (e.g. USA, Japan, Germany) performing better during the next decade than they have done over the last decade. The trade model therefore does not take into account any potential consequences of the widening UK trade gap, nor does it attempt to predict any medium-term slowdown. The forecasting methodology can be summarised as follows:



Table 3.7: FORK Methodology Input data for dependent variables

Quarterly trade data from 1988 to 2004, sourced from data collated by HM Customs and Excise and published by Eurostat.

Segmentation By 202 trading partner countries, 65 product groups, with volumes measured in tonnes. Bulk flows are separated out using constant factors, the data is tested for outliers and smoothed if necessary.

Input data for predictor variables.

Quarterly or annual macroeconomic indicators for 150 countries: Real GDP, Price Level, and Exchange Rates. Historic and forecast values derived from OECD and IMF publications.

Additional variables Linear Trend Component, Seasonality, Auto-regressive Component and World Trade growth.

Estimation method Multivariate linear regression, with the model specification determined by trial and error to maximize the significance.

Forecast period 2005-2006 – using OECD and IMF indicator forecasts. 2006-2020 – based upon 2006 indicator values.

The output of this stage is a set of growth rates for specific country and commodity combinations up to 2020. 3.2.3 Stage 2, Mode/Route Choice The MDS Transmodal GB Freight Model (GBFM) uses the trade forecasts to set the levels of international cargo and it uses its own routines to assign the traffic to UK region (based on historic relationships by commodity), by mode and by route. The base year results rely upon UK Trade data, for which some mode and route information is directly available. The main volume figures are therefore set as inputs for GBFM, but the level of detail is expanded. No capacity constraints have been used and no additional congestion-related costs have been assumed.

GBFM

Transport Model

Multimodal Path Choice


2004 Q4 to 2020 Q4Unitised Tonnes

By Product and Country

GBFM uses two different approaches for short sea and deep sea flows. The short sea zone consists of Continental Europe and Ireland. The deep sea zone covers the rest of the world.



For short sea traffic, the flows are split by UK and overseas region and port and mode choice are modelled by using GBFM to construct efficient multimodal paths (trip chains) between GB and non-GB regions. RoRo and LoLo services compete for market share within the model. The approach used for deep sea flows was simpler. The RoRo:LoLo split was not required and the rate of containerisation is known from the trade data, as is the UK port of arrival/despatch. GBFM therefore simply adds the UK region and assigns the mode of transport between the port and the GB origin/destination based on transport costs. The model was run for 2004, 2010, 2015, 2020, 2025 and 2030. Even though the fork forecasting only models up to 2020, the GBFM model can extrapolate on a linear basis up to 2030. Each run produced a set of databases covering: • Origin/destination flows by commodity, UK port and sea mode; • Road vehicles by road link; • Railway trains by route and link; • Inland mode split by port, UK region and sea mode. 3.2.4 Stage 3, Unit Loads The final stage converted forecasts expressed in tonnes into unit loads. There are two principal factors: • The imbalance between inbound and outbound cargo;. • The product mix, affecting the average volume to weight ratio.

Forecasts of Unitised Traffic

2004 to 2030Estimated HGVs, TEUs

Unit Load Model

Estimation of Unit Loads


2004 to 2030Unitised Tonnes

By Product, Country, Mode, Route

Validation

againstMaritime Statistics



In the container sector, there were two additional factors: • The container stock, affecting the availability of twenty foot, forty foot and forty five

foot boxes. If fewer twenty foot boxes are in circulation, more consignments will “weigh-out” before they “cube-out”, reducing the weight per TEU on average.

• The international level of containerisation. Over time, as developing countries invest in port infrastructure to handle containers, the degree of containerisation will rise. As the international networks grow and become more efficient, a higher proportion of total trade is attracted.

By modelling container traffic at a global scale it was possible to introduce these factors and to calibrate the changes between 1996 and 2004, relating trade tonnes to containerised TEUs. This process resulted in a set of tonne/TEU factors split by overseas origin/destination and year. Finally, the estimates of unit loads have been validated against DfT Maritime Statistics, adjusting for transhipment, coastal traffic, Northern Irish traffic and the miscoding of certain traffics where containers carried on RoRo services had been classified as LoLo traffic within the Maritime Statistics database (see the notes to Tables 3.2 3.11 and 3.14). 3.3 Forecasts of GB Unitised Trade Our forecasts are that overall tonnages of unitised freight will grow by 25% between 2004 and 2010 and by a further 76% to 2030, equivalent to a long run compound annual growth rate of 3.09%. In absolute terms, the most substantial growth will be in unitised imports from North West Europe (+33.6m tonnes to 2030), followed by the Mediterranean (+14.5m tonnes) and Eastern Asia (+13.6m tonnes). It is important to note, however, that the growth in unit loads (see Table 3.12) is estimated to be significantly greater because of the continuing fall in the ratio of tonnes per unit for the reasons outlined above.



Table 3.8: Forecast GB Unitised Tonnes, 2004-2030, by World Region Thousand tonnes 2004 2010 2015 2020 2025 2030 Growth Exports Ireland 10,851 14,671 16,702 19,773 22,117 24,338 3.16% NW Europe 15,459 19,291 22,878 26,318 30,493 32,953 2.95% Nordic 1,454 1,778 2,046 2,623 2,882 3,161 3.03% Mediterranean 6,011 7,200 8,220 9,530 10,907 12,480 2.85% E Europe 612 884 1,121 1,367 1,615 1,865 4.38% Africa excl. Med 758 924 1,064 1,211 1,395 1,579 2.86% N America 2,004 2,475 2,868 3,270 3,667 4,070 2.76% C&S America 615 824 999 1,182 1,398 1,605 3.76% W Asia 1,715 2,222 2,645 3,373 3,831 4,844 4.07% E Asia 4,591 6,231 7,860 9,483 11,455 13,289 4.17% Oceania 340 400 450 500 556 615 2.31% Total 44,410 56,901 66,853 78,629 90,314 100,797 3.20%

Imports Ireland 6,242 8,145 10,049 11,241 12,083 14,303 3.24% NW Europe 35,348 42,910 49,180 55,789 63,092 68,943 2.60% Nordic 4,823 5,985 6,620 7,818 9,586 11,235 3.31% Mediterranean 10,840 13,519 15,449 18,271 21,134 25,366 3.32% E Europe 1,357 1,870 2,303 3,030 3,711 4,091 4.34% Africa excl. Med 1,382 1,649 1,872 2,107 2,725 2,979 3.00% N America 3,211 3,634 3,986 4,486 5,140 6,198 2.56% C&S America 2,270 2,667 2,997 3,361 3,769 4,152 2.35% W Asia 1,831 2,375 2,828 3,282 3,778 4,242 3.28% E Asia 7,786 10,286 12,883 14,892 17,505 21,344 3.95% Oceania 708 834 939 1,045 1,191 1,306 2.38% Total 75,798 93,873 109,108 125,321 143,715 164,160 3.02%

Total Trade 120,208 150,773 175,961 203,950 234,030 264,958 3.09%

Source: MDS Transmodal The shares by world area change slowly, with Eastern Europe, the Mediterranean and Eastern Asia gaining at the expense of short sea origins. The ‘Ireland’ category includes traffic to and from both the Republic of Ireland and Northern Ireland. An analysis of product mix (Table 3.9) shows that the largest growth sectors in absolute terms are forecast to be imports of ‘basic manufactures’, chemicals and foodstuffs. In 2004, the UK is a net importer in nearly every unitised cargo sector. By 2030, even though relatively high export growth rates are generated by the macroeconomic assumptions, the only category to stay in surplus is ‘crude materials’, (which includes stone, ores and scrap metal). The net imbalance increases from 31.2 million unitised tonnes in 2004 to 63.1 million in 2030.



Table 3.9: Forecast GB Unitised Tonnes (‘000s), 2004-2030, by Product Sector Thousand tonnes 2004 2010 2015 2020 2025 2030 Growth Exports Food 6,323 8,119 9,289 11,076 13,480 15,351 3.47% Beverages/Tobacco 1,792 2,914 3,208 3,506 3,811 4,116 3.25% Crude Materials 5,603 7,003 8,438 10,423 12,231 14,553 3.74% Mineral Fuels 562 741 1,129 1,207 1,331 1,426 3.65% Oils Fats 316 434 532 632 733 833 3.80% Chemicals 10,011 12,908 14,669 18,107 20,621 22,421 3.15% Basic Manufactures 12,656 15,668 18,816 21,233 23,370 25,120 2.67% Machinery 5,515 6,814 7,913 9,024 10,448 11,851 2.99% Misc Manufactures 1,934 2,634 3,222 3,815 4,712 5,575 4.16% Commodities n.e.s. 6 8 9 10 12 13 3.00% Total 44,718 57,243 67,225 79,032 90,748 101,261 3.19%

Imports Food 16,177 20,350 23,256 27,187 31,408 34,103 2.91% Beverages/Tobacco 3,473 4,185 5,014 6,116 6,589 7,067 2.77% Crude Materials 5,295 6,247 6,710 7,356 8,918 10,223 2.56% Mineral Fuels 746 999 1,210 1,421 1,911 2,671 5.03% Oils Fats 945 1,149 1,612 1,739 2,476 2,557 3.90% Chemicals 12,076 15,786 18,182 20,879 23,554 27,869 3.27% Basic Manufactures 21,477 25,568 29,672 33,351 37,176 41,692 2.58% Machinery 8,641 10,778 12,873 15,213 17,535 20,609 3.40% Misc Manufactures 7,040 8,905 10,691 12,186 14,295 17,533 3.57% Commodities n.e.s. 3 4 5 6 6 7 3.40% Total 75,874 93,971 109,224 125,456 143,868 164,331 3.02% Total Trade 120,592 151,214 176,449 204,488 234,616 265,592 3.08%

Source: MDS Transmodal Note that these forecasts imply that the ‘trade gap’ in value between unitised imports and exports will rise from £32 billion in 2004 to £73 billion by 2030, even though the rate of growth in value terms is almost identical for imports and exports. The deficit is approximately 24% of the value of unitised imports throughout (see Table 3.10). It reflects the relatively stable macro-economic conditions adopted within the forecasting model sourced from the IMF and OECD, rather than recent trends in manufacturing output. Essentially, the UK has to generate an additional £200 billion in export earnings, much of it in the services sector, to eliminate the deficit by 2030.



Table 3.10: Forecast of UK Unitised Trade by Value £ million 2004 2010 2015 2020 2025 2030 Growth Exports 101,501 130,744 152,823 177,934 204,977 229,265 3.18% Imports 133,572 166,381 195,688 226,184 259,417 301,972 3.19% Deficit -32,071 -35,637 -42,865 -48,250 -54,440 -72,707 3.20% Source: MDS Transmodal 3.4 Forecasts of GB Containerised Traffic Table 3.11 forecasts the volume of unitised trade expected to be carried in containers (and not in trailers). This split of ‘sea mode’ is based upon existing practice. We do not anticipate any significant change in mode; LoLo container services entirely dominate deep sea trades and RoRo trailers dominate the Near Continent and Irish Sea trades. There may be further switching of RoRo traffic on the North Sea from trailers to containers, but these units will remain on the same ships and pass through the same RoRo terminals. Export tonnages are forecast to grow more strongly than import tonnages, but to still remain much lower overall, so that the actual number of containers moving will continue to be dictated by imports. Table 3.11: Forecast GB Containerised Tonnes, 2004-2030, by World Region Thousand tonnes 2004 2010 2015 2020 2025 2030 Growth Exports Ireland 1,178 1,874 2,160 2,492 2,721 2,850 3.46% NW Europe 1,661 2,299 2,781 3,333 3,822 4,056 3.49% Nordic 122 385 435 547 598 665 6.73% Mediterranean 1,610 2,075 2,378 2,673 3,007 3,410 2.93% E Europe 28 44 56 68 81 94 4.72% Africa excl. Med 758 924 1,064 1,211 1,395 1,579 2.86% N America 2,004 2,475 2,868 3,270 3,667 4,070 2.76% C&S America 615 824 999 1,182 1,398 1,605 3.76% W Asia 1,715 2,222 2,645 3,373 3,831 4,844 4.07% E Asia 4,591 6,231 7,860 9,483 11,455 13,289 4.17% Oceania 340 400 450 500 556 615 2.31% Total 14,623 19,753 23,695 28,133 32,529 37,075 3.64%

Imports Ireland 498 725 942 1,028 1,109 1,290 3.73% NW Europe 3,400 4,641 5,445 6,043 7,100 7,765 3.23% Nordic 1,503 2,157 2,225 2,616 2,359 2,626 2.17% Mediterranean 2,003 2,529 2,867 3,323 3,994 4,930 3.52% E Europe 95 138 166 224 254 279 4.25% Africa excl. Med 1,382 1,649 1,872 2,107 2,725 2,979 3.00% N America 3,211 3,634 3,986 4,486 5,140 6,198 2.56%



2004 2010 2015 2020 2025 2030 Growth C&S America 2,270 2,667 2,997 3,361 3,769 4,152 2.35% W Asia 1,831 2,375 2,828 3,282 3,778 4,242 3.28% E Asia 7,786 10,286 12,883 14,892 17,505 21,344 3.95% Oceania 708 834 939 1,045 1,191 1,306 2.38% Total 24,687 31,635 37,152 42,408 48,924 57,114 3.28%

Total Trade 39,310 51,388 60,847 70,540 81,453 94,189 3.42%

Source: MDS Transmodal Table 3.12 converts container tonnages into TEU. We have taken into account the recent and continuing trend of a decrease in the number of tonnes carried per unit, partly through the mix of cargo carried and partly because shipping lines are tending to switch to 40’ and 45’ container units. We anticipate that these trends will have stabilised by 2015. Overall, we anticipate that to 2010, overall growth in LoLo TEU will grow by 6% per annum, but growth will be higher with some countries. Between 2004 and 2030 the long run compound annual growth rate equivalent is 4.02%. Beyond 2015 we forecast a gradual fall in growth rates as the underlying demand trend is essentially linear and there are no additional factors foreseen beyond 2015 which affect the relationship between tonnes carried and the number of units or TEU employed contributing to higher than market growth. Table 3.12: Forecast GB Containerised Traffic, TEU, 2004-2030, by World Region Thousand TEU 2004 2010 2015 2020 2025 2030 Growth Ireland 120 190 253 281 308 362 4.34% NW Europe 907 1,328 1,597 1,808 2,155 2,380 3.78% Nordic 350 543 575 692 635 713 2.77% Mediterranean 519 734 855 1,013 1,241 1,548 4.29% E Europe 73 115 142 190 219 244 4.77% Africa Excl Med 349 469 546 627 810 896 3.69% N America 830 1,035 1,165 1,338 1,555 1,894 3.23% C&S America 523 681 780 886 1,006 1,115 2.95% W Asia 539 765 931 1,101 1,283 1,454 3.89% E Asia 2,722 3,944 5,063 5,960 7,108 8,774 4.60% Oceania 153 206 238 271 314 348 3.22% Total TEU 7,086 10,009 12,146 14,167 16,633 19,728 4.02% Container Units 4,327 5,881 6,941 8,095 9,505 11,273 3.75%

Source: MDS Transmodal Note: The above analyses includes switch of 119,000 containers (195,000 TEU) classified by DfT Maritime Statistics as LoLo to RoRo and the addition of 15 million tonnes of goods through the Channel Tunnel (13% by rail, 87% by accompanied trucks). Tables 3.11 and 3.12 both indicate that geographically the market is shifting towards the East and the South. The shift from Western Europe to Eastern Europe and Asia has



implications for the fleets carrying the cargo and the ports handling it. This can be seen in Table 3.13, with the container flows assigned (unconstrained) to GB ports. Table 3.13: Forecast GB Containerised Traffic, TEU, 2004-2030, by GB Port Ranges Thousand TEU 2004 2010 2015 2020 2025 2030 Growth North East 166 242 272 323 406 442 3.84% Yorks. & Humber 634 693 817 1,043 1,207 1,369 3.00% East Midlands 0 0 0 0 0 0 East England 2,696 4,084 4,993 5,822 6,920 7,934 4.24% South East 1,966 2,764 3,399 3,964 4,623 5,884 4.31% London 759 1,002 1,185 1,325 1,532 1,697 3.14% South West 123 177 216 248 279 357 4.18% North West 472 649 766 878 1,028 1,247 3.81% Wales 105 155 197 217 239 367 4.95% Scotland 165 236 289 318 368 404 3.51% Total 7,086 10,001 12,135 14,138 16,602 19,702 4.01% Container Units 4,327 5,877 6,935 8,079 9,487 11,258 3.75%

Source: MDS Transmodal The results shown in Table 3.13 are based upon trade data definitions of ports, so ‘London’ includes the PLA terminals that happen to be in Essex and Kent. Using this methodology, the highest growth rates will be forecast in the ports currently handling traffic from the most buoyant markets. The table is therefore indicative of how the market for container handling might evolve in Britain without capacity constraints. It shows that if the market grows by approximately 12.6 million TEU between 2004 and 2030, 80% of this growth would occur in the ports in the regions of the East of England, the South East and London. 3.5 Forecasts of GB Roll-on Roll-off Traffic RoRo trailer traffics are limited almost entirely to the short sea trades. Overall tonnages are expected to grow by around 23% between 2004 and 2010 and by a further 72% to 2030. Table 3.14: Forecast GB Roll-on/Roll-off Tonnes, 2004-2030, by World Region Thousand tonnes 2004 2010 2015 2020 2025 2030 Growth Exports Ireland 9,673 12,797 14,542 17,281 19,396 21,489 3.12% NW Europe 13,798 16,992 20,097 22,985 26,672 28,897 2.88% Nordic 1,331 1,393 1,611 2,076 2,283 2,496 2.45% Mediterranean 4,401 5,125 5,843 6,856 7,900 9,070 2.82% E Europe 584 841 1,065 1,299 1,534 1,771 4.36% Total 29,787 37,148 43,157 50,496 57,785 63,722 2.97%



2004 2010 2015 2020 2025 2030 Growth Imports Ireland 5,744 7,420 9,107 10,213 10,974 13,013 3.20% NW Europe 31,949 38,269 43,735 49,746 55,992 61,178 2.53% Nordic 3,320 3,828 4,395 5,201 7,228 8,609 3.73% Mediterranean 8,837 10,990 12,582 14,948 17,141 20,436 3.28% E Europe 1,262 1,732 2,137 2,805 3,457 3,812 4.34% Total 51,111 62,238 71,956 82,914 94,792 107,047 2.88%

Total Trade 80,899 99,386 115,114 133,410 152,576 170,769 2.92%

Source: MDS Transmodal North West Europe remains the most important origin and destination in terms of total traffic volume, but higher growth rates are to be found in Eastern Europe and Ireland (for imports and exports), the Nordic region (for imports) and the Mediterranean (for imports). Eurotunnel’s traffic is included in these tables. While the Channel Tunnel is not a seaport, it provides capacity that competes directly with maritime RoRo services on the busiest short sea routes and is therefore fundamental to the development of the market for port services. In Table 3.15, the traffic flows have been converted into estimates of unit loads (accompanied and unaccompanied trailers) carried on RoRo services. Table 3.15: Forecast GB RoRo Units, 2004-2030, by World Region Thousand units 2004 2010 2015 2020 2025 2030 Growth Ireland 1,388 1,818 2,135 2,475 2,728 3,110 3.15% NW Europe 4,353 5,290 6,137 6,996 7,982 8,689 2.69% Nordic 447 496 572 699 890 1,030 3.26% Mediterranean 1,274 1,540 1,759 2,079 2,388 2,799 3.07% E Europe 176 247 308 391 472 532 4.35% Total 7,637 9,390 10,911 12,640 14,460 16,159 2.92%

Source: MDS Transmodal Note: includes switch of 119,000 units of LoLo traffic to RoRo for some traffics through London and Immingham, plus Eurotunnel traffic, at 10.15 tonnes per unit.

Table 3.16: Forecast GB Ro-Ro Units, 2004-2030, by GB Port Ranges Thousand units

2004 2010 2015 2020 2025 2030 Growth North East 204 302 358 428 478 539 3.81% Yorks. & Humber 959 1,261 1,458 1,699 1,984 2,232 3.30% East of England 720 904 1,080 1,259 1,459 1,625 3.18% South East 3,575 4,024 4,635 5,346 6,145 6,796 2.50% London 637 884 1,019 1,177 1,377 1,525 3.42% South West 120 149 167 190 218 256 2.96% North West 682 956 1,123 1,312 1,464 1,635 3.42%



2004 2010 2015 2020 2025 2030 Growth Wales 456 600 718 797 869 988 3.02% Scotland 284 311 353 432 466 564 2.68% Total 7,637 9,390 10,911 12,640 14,460 16,159 2.92%

Source: MDS Transmodal In absolute terms, the growth in RoRo traffic (8.5 million additional trailers by 2030) is heavily concentrated in the regions comprising the East of England, London and the South East, but their relative share declines from 65% in 2004 to 62% in 2030. This reflects slower expected growth in the core North West European market. 3.6 Forecasts of Northern Irish Unitised Traffic Within this study, Northern Ireland has been treated separately as in many respects the data resources and models used to analyse the UK’s international freight do not cover Northern Ireland adequately. Whereas British ports generally handle cargo going to or coming from British regions, Irish ports North and South of the border compete for traffic in both Northern Ireland and the Republic. Trade statistics tend not to provide information about the transport routes, and transport statistics tend not to reveal the ultimate origins and destinations. Consequently, a separate model has been constructed to combine Republic of Ireland trade statistics, UK trade statistics (the subset that records a Northern Irish port) and outputs from the GB Freight Model with port statistics from both sides of the border. Table 3.17: Irish Unitised Traffic by origin/destination, tonnes, 2004-2030 Thousand tonnes 2004 2010 2015 2020 2025 2030 Growth Landed Tonnes

NI-Continent 313 356 411 474 548 632 2.74%NI-Deep Sea 114 135 162 194 232 278 3.50%NI-GB Domestic 4,776 5,409 6,153 6,999 7,961 9,056 2.49%ROI-Continent 3,842 4,419 5,104 5,894 6,807 7,861 2.79%ROI-Deep Sea 2,249 2,731 3,284 3,949 4,749 5,711 3.65%ROI-GB 4,208 4,762 5,416 6,160 7,007 7,970 2.49%Total Landed 15,502 17,812 20,519 23,639 27,233 31,373 2.75%Loaded Tonnes NI-Continent 147 168 195 226 262 304 2.82%NI-Deep Sea 143 174 214 263 323 397 4.01%NI-GB Domestic 3,229 3,223 3,293 3,366 3,440 3,516 0.33%ROI-Continent 3,290 3,801 4,406 5,107 5,919 6,861 2.87%ROI-Deep Sea 1,448 1,809 2,230 2,750 3,391 4,181 4.16%ROI-GB 3,684 3,672 3,754 3,838 3,924 4,011 0.33%Total Loaded 11,941 12,848 13,998 15,251 16,616 18,103 1.61%

Total Tonnes 27,443 30,659 34,486 38,790 43,631 49,076 2.26%



Tables 3.16 and 3.17 present the modelled forecasts broken down by two Irish zones, Northern Ireland (NI) and the Republic of Ireland (ROI), and three overseas zones, Britain (GB), the Continent and deep sea countries. As the NI-GB flows are UK domestic traffic, and NI-ROI trade flows have been excluded, the terms ‘imports’ and ‘exports’ have been replaced by ‘landed’ and ‘loaded’ respectively. Overall Irish unitised tonnages are expected to grow 79% to 2030 in tonnage terms, with the growth fastest with deep sea origins and destinations. Table 3.18: Irish Unitised Traffic by origin/destination, units, 2004-2030 Thousand units 2004 2010 2015 2020 2025 2030 Growth

Units Landed NI-Continent 20 24 27 31 35 40 2.67%NI-Deep Sea 8 9 11 13 15 18 3.42%NI-GB Domestic 342 387 440 501 569 647 2.48%ROI-Continent 274 315 364 421 487 563 2.80%ROI-Deep Sea 162 197 237 285 342 412 3.64%ROI-GB 295 333 379 431 490 557 2.48%Total Landed 1,102 1,264 1,457 1,678 1,934 2,228 2.75%Units Loaded NI-Continent 20 24 27 31 35 40 2.67%NI-Deep Sea 8 9 11 13 15 18 3.42%NI-GB Domestic 342 387 440 501 569 647 2.48%ROI-Continent 274 315 364 421 487 563 2.80%ROI-Deep Sea 162 197 237 285 342 412 3.64%ROI-GB 295 333 379 431 490 557 2.48%Total Loaded 1,102 1,264 1,457 1,678 1,934 2,228 2.75%

Total Units 2,203 2,529 2,914 3,357 3,868 4,456 2.75%Source: MDS Transmodal Tables 3.18 and 3.19 show the same forecasts split by the nationality of the ports handling the cargo, and whether the traffic is domestic (NI port – GB port) or foreign. All Republic of Ireland port traffic is foreign, being to either Great Britain or the Continental mainland (including RoRo traffic landbridging Britain) or deep sea.



Table 3.19: Irish Unitised Traffic by Port Group, Tonnes, 2004-2030 Thousand tonnes 2004 2010 2015 2020 2025 2030 Growth

Tonnes Landed NI – Domestic 5,920 6,711 7,643 8,705 9,913 11,290 2.51%NI – Foreign 427 491 572 667 778 907 2.95%ROI – Foreign 9,156 10,609 12,306 14,274 16,556 19,203 2.89%Tonnes Landed 15,502 17,812 20,519 23,639 27,233 31,373 2.75%Tonnes Loaded NI – Domestic 4,414 4,446 4,580 4,718 4,860 5,006 0.49%NI – Foreign 290 343 409 488 582 694 3.41%ROI – Foreign 7,238 8,059 9,040 10,140 11,375 12,760 2.20%Tonnes Loaded 11,941 12,848 13,998 15,251 16,616 18,103 1.61%

Total Tonnes 27,443 30,659 34,486 38,790 43,631 49,076 2.26%Source: MDS Transmodal Table 3.20: Irish Unitised Traffic by Port Group, Units, 2004-2030 Thousand units 2004 2010 2015 2020 2025 2030 Growth

Units Loaded NI – Domestic 423 480 546 622 708 806 2.51%NI – Foreign 28 32 37 43 50 58 2.86%ROI – Foreign 650 753 874 1,014 1,177 1,366 2.89%Units Loaded 1,102 1,264 1,457 1,678 1,934 2,228 2.75%Units Landed NI – Domestic 423 480 546 622 708 806 2.51%NI – Foreign 28 32 37 43 50 58 2.86%ROI – Foreign 650 753 874 1,014 1,177 1,366 2.89%Units Landed 1,102 1,264 1,457 1,678 1,934 2,228 2.75% Total Units 2,203 2,529 2,914 3,357 3,868 4,456 2.75%

Source: MDS Transmodal The higher growth rates anticipated in the ROI leads to higher forecast volumes through ROI ports. Overall growth of unit loads through Irish ports is forecast to be 2.02 fold between 2004 and 2030.



Table 3.21: Irish Unitised Traffic by Port Group and Mode, Units, 2004-2030 Thousand units 2004 2010 2015 2020 2025 2030 Growth

LoLo Units NI Ports 148 167 191 219 250 287 2.58%ROI Ports 530 627 739 870 1,024 1,206 3.21%Total LoLo Units 678 794 929 1,088 1,273 1,490 3.08%RoRo Units NI Ports 755 857 976 1,111 1,266 1,442 2.52%ROI Ports 771 878 1,009 1,159 1,332 1,530 2.67%Total RoRo Units 1,525 1,735 1,985 2,270 2,597 2,971 2.60% Total Units 2,203 2,529 2,914 3,357 3,868 4,456 2.75%Source: MDS Transmodal 3.7 Forecasts of Inland HGV Traffic Arising from Unitised Trade Growth Table 3.22 provides forecasts of inland modal split for GB unitised traffic to 2030 and shows the impact of the forecast unitised trade growth upon the GB road network, based upon the assignment routines within the GBFM. The results have been split by the region in which the traffic occurs (including transiting traffic). We have assumed that the volume of containers carried per train remains constant into the future. This implies that the rapid growth in 9’6” containers, forecast to reach 50% of all TEU by around 2010, will be addressed by loading gauge upgrade on high volume routes. On low volume routes, a wagon-based solution may well be more cost effective. In the base year (2004), the estimates imply that unitised traffic at GB ports (ferry and container traffic) accounts for 25,130 million tonne kilometres, some 16% of all GB HGV freight traffic. The high share is related to the fact that the average length of haul is approximately double the average for overall GB road haulage. Approximately half of this demand for road capacity occurs within and across the South East, the East of England and London.



Table 3.22: Forecasts of GB port* Unitised Traffic by Mode and Region crossed Annual Tonne Km (millions)

2004 2010 2015 2020 2025 2030 Growth

BY MODE RoRo – Total (all by road) 18,849 22,033 25,375 29,240 33,069 36,924 2.62% LoLo – total 9,766 12,487 14,735 16,948 19,651 23,055 3.36% Of which: by road 6,282 8,113 9,556 10,971 12,655 14,666 3.31% Of which: by rail 3,471 4,314 5,080 5,868 6,834 8,138 3.33% Total Unitised Port Traffic – by road 25,130 30,147 34,931 40,210 45,724 51,589 2.70% Total Unitised Port Traffic – by rail 3,471 4,314 5,080 5,868 6,834 8,138 3.33% Total Unitised Port Traffic 28,601 34,460 40,011 46,078 52,558 59,727 2.87%

ROAD TONNE KM BY REGION CROSSED North East 482 592 689 825 929 1,017 2.81% Yorks. & Humber 2,062 2,529 2,911 3,372 3,883 4,375 2.82% East Midlands 2,175 2,443 2,824 3,239 3,723 4,201 2.47% East of England 4,905 5,848 6,826 7,830 9,020 10,217 2.76% South East 6,288 7,458 8,600 9,942 11,392 12,738 2.65% London 1,104 1,352 1,572 1,787 2,090 2,332 2.81% South West 932 1,186 1,378 1,571 1,809 2,099 3.05% West Midlands 2,465 3,050 3,546 4,047 4,488 5,108 2.73% North West 2,157 2,633 3,034 3,496 3,874 4,361 2.64% Wales 995 1,266 1,483 1,659 1,845 2,073 2.76% Scotland 1,564 1,790 2,068 2,444 2,671 3,068 2.53% Total Unitised Port Traffic – by road 25,130 30,147 34,931 40,210 45,724 51,589 2.70% Total GB HGV** 158,596 171,403 180,152 190,379 201,528 212,557 Unitised Port Traffic/GB HGV 16% 18% 19% 21% 23% 24% Average length of haul, unitised port traffic km 209 200 199 197 195 195

Source: MDS Transmodal GB Freight Model * Including Channel Tunnel ** Including non port traffic The forecast shows the road traffic related to the given port sectors growing in proportion to the underlying growth in tonnes. This assumes that port capacity is available to maintain current regional port shares. There is a slight decline in average length of haul from 209 km to 195 km. This is explained by the higher rate of growth in the LoLo sector. Because all the major container ports are rail connected, assuming market share between ports remains constant, we anticipate an increase in the rail market, reducing the volume of long distance road haulage. The forecast increase in the international unitised (i.e. port-related) share of total GB unitised HGV tonne kilometres (both domestic and international) is also significant. Unitised port traffic rises from 16% of total freight traffic moved in Great Britain in 2004 to 24% in 2030, an additional 26.5 billion tonne kilometres, approximately 2.5 billion vehicle kilometres.



However, given that transport costs (inland and overseas) will only account for around 5% of the value of unitised cargo (approximately £22,000 per HGV), it is reasonable to assume that even if transport costs rise sharply due to fuel costs, labour costs and pressure on capacity, the impact on consumer demand of the consequent increases in transport costs will be negligible. 3.8 High and Low Scenarios for Unitised Trade Growth We have demonstrated that domestic growth in consumer spending, coupled with a strong currency and a downturn in domestic manufacturing has been driving import growth for consumer goods, which in turn has led to substantial increases in unitised freight, aided by a general trend towards lower weight to volume ratios in containers. The ultimate limit to growth therefore appears not to be a saturation of demand, or excess congestion in the transport network, but the ability of the UK economy to generate the export earnings with which to pay for the import growth. The forecasts provided in Sections 3.4 to 3.6 represent our Central Forecasts for unitised port traffic to 2030. This argument has been extended in order to set out a plausible range of values either side of the Central Forecasts and to therefore develop High and Low Cases. Historically, the UK maintained a constant gap in the volume between imported and exported goods until 1998, at which point imports started to grow faster than exports. This pattern is also reflected in the volume (weight) of unitised trade, as shown in Table 3.23.



Table 3.23: GB Unitised Traffic Growth, 1994-2004 (‘000s) 1994 1996 1998 2000 2002 2004 Change

1994-2004

CAGR %

Change 1998-2004

Volumes Import Tonnes 46,168 48,265 58,486 64,610 70,245 77,808 1.685 5.36% 1.33 Export Tonnes 33,001 36,430 40,110 40,861 40,048 42,579 1.290 2.58% 1.06

Gap (imports minus exports) 13,167 11,835 18,376 23,749 30,197 35,228

RoRo Units 4,206 4,477 5,646 6,817 7,303 7,637 1.816 6.15% 1.35 LoLo Units 2,633 2,619 3,071 3,404 3,654 3,841 1.459 3.85% 1.25 Total Units 6,840 7,096 8,717 10,221 10,957 11,478 1.678 5.31% 2.43

LoLo TEU 3,845 3,876 4,653 5,242 5,882 7,086 1.843 6.31% 1.52 Compound Annual Growth Rates

Import Tonnes 2.25% 10.08% 5.10% 4.27% 5.25% Export Tonnes 5.07% 4.93% 0.93% -1.00% 3.11%

RoRo Units 3.16% 12.30% 9.88% 3.50% 2.26% LoLo Units -0.28% 8.29% 5.28% 3.61% 2.53% Total Units 1.85% 10.84% 8.28% 3.54% 2.35%

LoLo TEU

0.41% 9.56% 6.14% 5.93% 9.76% The gap between unitised import and export tonnes was approximately 12 million tonnes per annum up to 1996. Since then it has grown rapidly to reach 35 million in 2004. The divergence between these trade flows appears to reflect the underlying divergence in the economy between consumption, which has grown steadily, and manufacturing output which has been static since 2001. In turn, these developments suggest two alternative growth patterns that the unitised sector might follow; a High Case in which consumption and imports dominate, and a Low Case constrained by manufacturing output and export growth. The forecasting scenarios can be summarised as:

• Central Forecast: import growth dictates the overall growth of unit loads moving through the ports because those units will be ‘re-exported’ whether loaded or empty. Import volumes are based upon the evidence of long run trends and relationships based upon GDP growth and exchange rate change, independently of trends in export growth. The implication is that export volumes will grow to meet any long run balance of payments deficits that might emerge.

• Low Case: growth in imports implied in the Central Forecast is inhibited by the

slower rate of growth of unit load exports over the last 5 years, implying that for



imports to grow faster would otherwise lead to an unacceptable long run balance of payments deficit.

• High Case: growth in imports is based upon the higher rates of unit load import

growth experienced over the last 5 years, implying that there will be a rapid growth in exports of goods and (particularly) services to avoid a long run balance of payments deficit.

In each case, growth rates are based upon the observation over the last 25 years that compound growth rates in unit load traffic have been continually falling because the absolute volume (in tonnes) of unit load traffics has been relatively stable. Traffic passing through the Channel Tunnel is included in these forecasts because both the Eurotunnel freight shuttle and through rail freight services compete actively with the ports and to ignore Channel Tunnel services would be distort the long term analysis of trends. Table 3.24 shows the impacts of these assumptions translated into unit loads. Container traffic is also shown in terms of TEU volumes. In the Central Case, import unitised tonnes are assumed to more than double between 2004 and 2030, resulting in a compound annual growth rate of 2.91%. In the High Case, the trade volume triples over the same period, and the CAGR is equivalent to 4.35%. In the Low Case, the 2030 volume is 1.32 fold the 2004 figure and the CAGR is equivalent to 1.07% per annum. The unit load figures by mode have been calculated using ratios derived from the Central Case, and which do not change according to the scenario. Therefore the scenarios reflect market growth only and not changes in the ratio of tonnes to unit loads or TEU. In the High Case, the forecast is calculated by taking the four-year average growth rate between 2000 and 2004 (4.76%), and gradually converging it towards to the Central Forecast growth rate (2.91%). The Low Case growth rate is simply the four-year average export growth rate between 2000 and 2004 (1.07%) applied to imports.



Table 3.24: Annual unitised traffic growth, Central Forecast, Low and High Case (000s) Thousands 2004 2010 2015 2020 2025 2030 Change

2004-30

CAGR %

Import Tonnes 77,808 Central 93,873 109,108 125,321 143,715 164,160 2.11 2.91% High 107,835 137,269 169,437 202,758 235,179 3.02 4.35% Low 82,927 87,450 92,220 97,250 102,554 1.32 1.07%

RoRo Units 7,637 Central 9,390 10,911 12,640 14,460 16,159 2.12 2.92% High 10,787 13,728 17,090 20,401 23,150 3.03 4.36% Low 8,295 8,745 9,302 9,785 10,095 1.32 1.08%

LoLo Units 4,327 Central 5,881 6,941 8,095 9,505 11,273 2.61 3.75% High 6,756 8,732 10,945 13,409 16,150 3.73 5.20% Low 5,195 5,563 5,957 6,432 7,043 1.63 1.89%

Total Units 11,964 Central 15,271 17,852 20,736 23,965 27,433 2.29 3.24% High 17,542 22,460 28,035 33,811 39,301 3.28 4.68% Low 13,490 14,308 15,259 16,217 17,138 1.43 1.39%

LoLo TEU 7,086 Central 10,009 12,146 14,167 16,633 19,728 2.78 4.02% High 11,497 15,281 19,154 23,466 28,263 3.99 5.46% Low 8,842 9,735 10,425 11,255 12,325 1.74 2.15%

Source MDS Transmodal



The historical and forecast trends can be compared in Figure 3.2 below. Figure 3.2: GB Unitised Trade: Forecast Scenarios, Annual Units (‘000s) In order to understand the implications of these diverging trends, it is useful to make some international comparisons of the propensity of different economies to trade in unitised goods per head of population.

Unitised Forecast Scenarios

Central Forecast, High Case and Low Case

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Tota

l Uni

ts



Figure 3.3: UK Unitised Trade: Unit load equivalents generated per capita, per annum

Japa

n

Kor

ea

USA Ta

iwan

Italy Fran

ce

UK

203

0L

Irela

nd UK

203

0C

Net

herla

nds

Belg

ium

UK

203

0H

Ger

man

y

UK

0.000

0.200

0.400

0.600

0.800

1.000

1.200

1.400

Figure 3.3 was derived by comparing the quantity of goods we expect to be unitised imports and exports generated per capita in Great Britain with other developed countries. Note that this is based on a conversion from trade tonnes into unit load equivalents and does not include transhipment or transit traffic. Population figures were obtained from the CIA and are either census figures or current (2005) estimates. In 2005, it can be seen that each GB resident accounted for 0.195 of a unit load handled at a British port. France and Italy have similar ratios and the majority of comparable countries have ratios between 0.16 (USA) and Germany (0.26). The countries with the highest ratios are Belgium, the Netherlands and Ireland. Belgium and the Netherlands both have open land borders connecting them to their main trading partners. These countries play a large role in redistributing goods around the Continental mainland. Because of the Schengen Treaty (1985) which ended border controls between these two countries and their neighbours, and the introduction of the Euro in 2001, barriers to trade are virtually non-existent and cost penalties compared to domestic cargo movements are minimal. The two countries also account for a disproportionate share of Europe’s container handling and onward distribution into neighbouring countries. Altogether, these are exceptionally open economies. Ireland has a different profile. Physical barriers to trade are higher than for the Low Countries, but the propensity to trade is still high because there is relatively little traditional



manufacturing industry, with services and new high-tech sectors such as IT equipment and pharmaceuticals gradually replacing agriculture as the main economic activity. On this basis, Ireland’s ranking is understandable and could be regarded as approaching an ‘end state’ where a country becomes more or less dependent on imported goods to satisfy consumer demand as countries become increasingly specialised in producing goods or services where they have a competitive advantage. The ratios for the Low Case, High Case and Central Forecast are superimposed on the graph, labelled “UK 2030L”, “UK 2030H” and “UK 2030C” respectively. In the Low Case, the UK would have reached the level that Germany currently occupies by 2030. In the Central Forecast the UK would have exceeded Ireland’s 2005 level by 2030; and in the High Case the UK would be approaching the Dutch level. In all cases, the population has been assumed to grow at current levels (0.28% per annum). Note that by 2030, the ratios for the other economies are also likely to have risen, so the entire curve is likely to drift upwards over time. Using the Irish forecast (Central Forecast only) calculated in this chapter (See Table 3.17), Ireland’s ratio would increase to 0.524 by 2030, so this would still be higher, as expected, than the GB Central Forecast (0.393). Ireland’s population is expected to grow at 1.16% per annum (source: CIA). Given the trend for all countries to trade more as industries become more international and interconnected across borders, the resulting UK forecast ratios appear reasonable. They indicate that the High and Low cases should be interpreted as limits for the Central Forecast, rather than equally probable alternatives to the Central Forecast. Overall these findings tend to support the Central Forecast, implying a long-term growth rate of between 3% for unitised import tonnes and 4% for LoLo TEUs per annum. 3.9 Unitised Forecasts Summarised Three forecasting scenarios for unitised traffic have been developed and can be summarised as:

• Central Forecast: import growth dictates the overall growth of unit loads moving through the ports because those units will be ‘re-exported’ whether loaded or empty. Import volumes based upon the evidence of long run trends and relationships based upon GDP growth and exchange rate change, independently of trends in export growth. The implication is that export volumes will grow to meet any long run balance of payments deficits that might emerge.

• Low Case: growth in imports implied in the Central Case inhibited by the slower

rate of growth of unit load exports over the last 5 years, implying that for imports to grow faster would lead to a long run balance of payments deficit.



• High Case: growth in imports based upon the higher rates of unit load import growth over the last 5 years, implying that there will be a rapid growth in exports of goods and (particularly) services to avoid a long run balance of payments deficit.

In each case, growth rates are based upon the observation over the last 25 years that compound growth rates in unit load traffic have been continually falling because the absolute volume (in tonnes) of unit load traffics has been relatively stable. For the Central Forecast, import unitised tonnes is assumed to more than double between 2004 and 2030, resulting in a compound annual growth rate of 2.91%. In the High Case, the trade volume triples over the same period, and the CAGR is equivalent to 4.35%. In the Low Case, the 2030 volume is 1.32 fold the 2004 figure, and the CAGR is equivalent to 1.07% per annum.



4 FORECASTS FOR NON-UNITISED PORT TRAFFICS TO 2030 4.1 Introduction & methodology This chapter sets out our forecasts of foreign and domestic non-unitised trades to 2030. The traffic volumes for 2004 for each category of cargo that is considered in this chapter are set out in Table 4.1 below. As detailed data by category is only collected for “major” ports (generally over 1 million tonnes of traffic), the analysis does not include the smaller ports that, almost exclusively, handle non-unitised cargoes and account for around 3% of total tonnes handled at GB ports in 2004. Table 4.1: Summary of UK Non-Unitised Port Traffics, Major Ports, 2004 Cargo category Cargo sub-category Million tonnes % UK Major Port

Traffic Liquid Bulk Liquefied gas 7 2% Crude oil 162 40% Oil products 86 21% Other liquid bulk products 12 3% Total Liquid Bulk 267 65% Dry Bulk Ores 18 4% Coal 41 10% Agricultural products 13 3% Other dry bulk 42 10% Total Dry Bulk 114 28% Other general cargo Forestry products 11 3% Iron & steel products 10 2% General cargo & containers < 20 foot 7 2% Total Other General Cargo 27 7% Total non-LoLo/RoRo traffic through UK major ports

409 100%

Import/export vehicles* 5 Total non-unitised traffic through UK major ports

414

Source: DfT Maritime Statistics 2004 * Included within Roll-on Roll-off traffic within DfT Maritime Statistics The non-unitised forecasts have been developed by carrying out short market studies on each major cargo category, based on the DfT’s Maritime Statistics categorisation of port traffics shown in Table 4.1 above. For each cargo category (e.g. coal, ores, crude oil) the secondary research sought to establish the key economic drivers affecting the demand for, and supply of, the cargoes. Where forecasts have been developed by reliable third parties in particular sectors, we have drawn upon this evidence to inform the port traffic forecasts. Secondary research was supplemented by discussions with key shippers, trade associations and Government departments. The evidence obtained was then used to develop forecasts for each traffic type, which involved developing a scenario for the future for a wide range of industries based on judgments about future policy, market and societal trends up to 2030. Each cargo category is considered in the following sections. Import/export vehicles (technically part of the RoRo cargo category) has also been included in this chapter as,



although it is a RoRo traffic in terms of the technology used, it represents a single homogenous and non-unitised cargo transported mainly in specialised ships and therefore is generally transported in bulk. Chapter 3 only relates to freight carried in unit loads (mainly trailers and containers) and so does not include import/export vehicles. 4.2 Liquefied Gas 4.2.1 Introduction As for all the non-unitised cargo categories, we have developed forecasts for liquefied gas through UK ports up to 2030, based on our understanding of the key economic drivers behind trends in traffic. Forecasts have been produced using secondary sources and analysis of port traffic data. The major movements of liquefied gas through UK ports have historically been of liquid petroleum gas (LPG). However, in the future there are likely to be significant volumes of liquid natural gas (LNG) imported. LPG is mainly butane and propane and is produced as a by product of the refining process; it is used for camping gas, for heating in areas that are not connected to the national gas distribution system and, increasingly, as a transport fuel due to its perceived environmentally friendly properties. LNG is gas that is imported by sea in liquid form; the gas is cooled at source into a liquid so it can be transported safely by ship and then imported through specialised port terminals, before being turned into a gas again for transmission through the pipeline system. This section of the report defines the port traffic market for liquefied gas and describes historic trends. It then describes the factors influencing demand for liquefied gas in the UK and the factors affecting supply followed by our Central Forecast for liquefied gas movements through ports up to 2030. 4.2.2 Market Definition Table 4.2 provides an analysis of the UK port market for the handling of liquefied gas in 2004.



Table 4.2: UK Liquefied Gas Market Size, Major Ports, by Port Region, 2004 Thousand tonnes

International Domestic Imports Exports Total % GB

Port Traffic

In-wards

Out-wards

Total % GB Port Traffic

Grand Total

East Midlands - - - - - - - - - East of England 176 35 211 4.5% 253 3 256 9.9% 467 Gt. London 11 3 14 0.3% 17 - 17 0.7% 31 North East 328 872 1,200 25.6% 247 144 392 15.2% 1,592 North West 20 54 74 1.6% 16 13 30 1.1% 104 Scotland - 2,218 2,218 47.3% - 1,240 1,240 48.0% 3,458 South East 227 369 596 11.0% 33 61 94 4.7% 690 South West 6 - 6 0.1% - - - - 6 Wales 150 156 306 6.5% 484 29 513 19.8% 819 Yorks & Humber 22 188 211 4.5% 45 18 62 2.4% 273 Other Islands - 63 63 1.3% - 16 16 0.6% 79 GB Total 752 4,004 4,756 100.0% 1,092 1,493 2,585 100.0% 7,341 Northern Ireland 13 - 13 56 - 56 69 Grand Total 765 4,004 4,769 1,148 1,493 2,641 7,410 Source: DfT Maritime Statistics, analysis by MDS Transmodal Total movements through UK ports in 2004 amounted to some 7.4 million tonnes. Some 4.0 million tonnes (54%) of these total movements relate to the export of gas, of which a large proportion is liquefied petroleum gas (LPG) derived from oil and its products. The most important region for gas exports is Scotland with approximately 47% of all GB movements, all of which is for export. This reflects the importance of the gas production facilities on the Forth and the liquefied gas export facility at Braefoot Bay. The North East is next in importance with about 22% of GB liquefied petroleum gas movements, 64% of which is exported. Again this reflects the importance of the Tees as a centre for oil refining and gas production and processing. Northern Ireland receives some 69,000 tonnes of LPG, almost all of which is shipped from Great Britain, which reflects the lack of indigenous energy resources in the province. 4.2.3 Historic Trends Tables 4.3 and 4.4 provide an analysis of historic trends in liquid gas traffic during the period 2001-2004. Prior to 2001 DfT Maritime Statistics did not include liquefied gas as a separate category.



Table 4.3: UK Liquefied Gas Market Size, Major Ports, 2001 - 2004 Thousand tonnes

International/Domestic Direction 2001 2003 2004 International Imports 1,232 708 765 Exports 4,500 4,768 4,004 International Total 5,732 5,476 4,769 Domestic Inwards 953 879 1,148 Outwards 1,366 1,188 1,493 Domestic Total 2,319 2,067 2,641 Grand Total Total 8,051 7,543 7,410

Source: DfT Maritime Statistics, analysis by MDS Transmodal Table 4.4: UK Liquefied Gas Market Size, Major Ports, by Port Region, 2001-2004 Thousand Tonnes Port Region 2001 2003 2004 East Midlands - - - East of England 473 449 467 London 31 32 31 North East 1,456 1,446 1,592 North West 149 121 104 Scotland 3,516 3,738 3,458 South East 1,028 690 513 South West 33 25 6 Wales 742 642 819 Yorkshire & the Humber 488 249 273 Northern Ireland 71 67 69 Other islands 63 85 79 Total UK 8,051 7,543 7,410 Source: DfT Maritime Statistics, analysis by MDS Transmodal Given the lack of a time series for data for liquefied gas, only limited conclusions can be drawn from the above tables. The data confirms the view that, during the period 2001-2004, the major flows were from the major refining locations and exports were the dominant flow. 4.2.4 Economic Drivers of Demand Energy Policy Goals A key driver of demand for liquefied gas in the future is likely to be Government energy policy, which has four goals:

• To cut the UK’s carbon dioxide emissions by some 60% by about 2050…with real progress by 2020;

• To maintain the reliability of energy supplies; • To promote competitive markets in the UK and beyond, helping to raise productivity

and the rate of sustainable economic growth; • To ensure that every home is adequately and affordably heated.



Government energy policy states that where the market alone cannot create the required signals (for example on the environment) the Government will take steps that encourage business to innovate and develop new opportunities to deliver the required outcomes. This energy policy was, at the time of publication, under review, given the need for security of energy supply and concern about whether the UK can meet its targets for the reduction in carbon emissions (see section 2.5 above). Energy demand In 2004, gas was the major source of energy for the generation of electricity (40%), compared to coal (33%), nuclear (19%)and other sources such as renewables and oil (8%). It was also a major energy source in its own right. The key determinant of demand in the future is likely therefore to be demand for gas as a domestic and industrial power source and as an energy source for the generation of electricity. 4.2.5 Economic Drivers of Supply UK gas reserves In 2005 the UK held an estimated 582 billion cubic metres (bcm) of proven reserves and production is likely to gradually fall in the future. The reserves are in three geographical areas: 1. Gas fields in the UK Continental Shelf (UKCS), associated with oil fields; 2. The Southern Gas Basin, located adjacent to the Dutch sector of the North Sea; this

contains the largest concentration of reserves with five gas fields; 3. Gas fields in the Irish Sea. The UK has been a net exporter of natural gas since 1997 but most natural gas fields have reached a high level of maturity and in 2004 the UK became a net importer of gas. As reserves are depleted (and subject to the on-going energy policy review), the UK is expected to become increasingly dependent on imports, which may represent some 80% of UK gas consumption by 2020, according to the Department for Trade and Industry (DTI). Transfer of gas ashore The gas is transferred ashore by pipeline. There are four main gas pipeline systems:

• Shearwater–Elgin line (SEAL) transports gas from the Southern Gas Basin to Bacton, on the Norfolk coast between Great Yarmouth and Cromer (annual capacity 17.3 bcm);

• Scottish Area Gas Evacuation (SAGE) transports gas from UK oil fields to the landing terminal at St Fergus in Scotland, North of Peterhead (annual capacity 15.3 bcm);



• Central Area Transmission System (CATS) transports gas from fields in the Graben area of the UKCS to Teesside (annual capacity 14.3 bcm);

• Far North Liquid and Gas System (FLAGS), links gas deposits associated with oil fields in the Brent oil system with St Fergus; this system is also proposed for use as a connection to the Norwegian Statfjord gas field, which is likely to be major source of gas imports in the future (annual capacity 7.8 bcm).

Once the gas is ashore National Grid Transco (NGT) has responsibility for transporting natural gas throughout GB via its 4,200 miles of transmission lines. There is therefore currently no use of shipping or ports for the transfer of gas ashore from UK gas fields. Gas in Northern Ireland Before 1997 Northern Ireland did not have a public natural gas supply. The construction of a pipeline from Portpatrick in Scotland to Northern Ireland in 1996 provided the means of establishing such a system. The main market is Ballylumford power station, which was purchased by British Gas in 1992 and converted from oil to gas firing (with a heavy fuel oil back-up). The pipeline has extended the gas market to include wider industrial, commercial and domestic markets. In 2003 79% of all gas supplies in Northern Ireland were used to generate electricity. Movements of gas by sea to Northern Ireland therefore relate to shipments of LPG from UK and overseas refineries, rather than natural gas. International Pipelines Security of supply is a major concern for Government, but the focus has been on ensuring that markets are liberalised and that a diversity of supply will deliver security to end users. Although increasing quantities of natural gas will be imported from North Africa and the Gulf States by sea as LNG, a large proportion of the UK’s needs are likely to be sourced from Norway and Holland with the possibility of increasing supplies from Russia. There are a number of pipelines between Great Britain and the Continental mainland and Ireland either in existence, under construction or proposed. Existing pipelines are currently used for exports of natural gas, but could be used for imports in the future. Pipelines both planned and under construction will be designed to handle imports of natural gas from the Near Continent and Norway, without any requirement for maritime transport. These pipelines are as follows:

• Bacton-Zeebrugge: This pipeline came on stream in 1998 and export capacity is 53.2 million cubic metres per day, although it will also be capable of importing natural gas to the UK. Import capacity has been upgraded to an annual 16.5 bcm and is planned to reach 23.5 bcm of capacity by 2006-2007.

• Pipeline between Moffat in Scotland (near Dumfries) and Dublin.



• Frigg Pipeline System (proposed): will connect the St Fergus gas terminal with the Statfjord/Frigg gas field in the Norwegian sector of the North Sea. This pipeline will be used for the importation of natural gas and with a planned annual import capacity of 4 bcm via the existing FLAGS pipeline.

• Britpipe/Langeled Pipeline (under construction): This will connect Norway’s Ormen

Lange natural gas field to Easington on the North Sea coast at the entrance to the Humber estuary. Construction is expected to be complete by 2007 and the pipeline will have an annual capacity of 25 bcm. Norway is expected to be a major source of gas imports over the next decade, in particular, and would be regarded as a secure source of supply.

• Balgzad-Bacton Line (under construction): This pipeline between Holland and

Bacton should be completed by the end of 2006. Capacity is planned to be 15 bcm. • North European Gas Pipeline (proposed). This project was approved by the Russian

Government in 2004. The pipeline will stretch for 1,100 miles from Vyborg in Russia to Grieswald in Germany and ultimately the East Coast of the UK. This is expected to come on stream in 2010 with a maximum capacity of 81.2 million cubic metres per day. In September 2005 the Russian President and the German Chancellor signed an agreement for the use of this pipeline indicating strong political commitment to the project. There are, however, still some questions outstanding as to its economic feasibility.

Liquefied Natural Gas (LNG) With the decline in indigenous gas production over the last few years, there has been a surge of activity in the LNG terminal sector. In 2003 National Grid Transco (NGT) received approval for the conversion of an existing natural gas storage facility at the Isle of Grain into an LNG receiving terminal and the first shipment was received at the facility in mid 2005. The terminal has an initial annual capacity of 4.5 billion cubic metres (bcm), with expansion planned to increase capacity to 10 bcm by 2008. Two further facilities are planned at Milford Haven: The South Hook LNG terminal: This will be operated by ExxonMobil and Qatar Petroleum and will receive LNG from the Qatargas II liquefaction project in Ras Laffin in Qatar. The terminal is expected to come on stream in 2007 with an initial annual capacity of 10.5 bcm from early 2008 with additional capacity of 10.5 bcm. The Dragon Project: This project was approved by Ofgem in early 2005 and is a partnership between Petroplus (the Netherlands-based group), Petronas of Malaysia and British Gas (BG). The facility will be sited on an existing natural gas storage facility at Milford Haven. The proposal has been under investigation by the European Commission because the



developers had been granted a waiver to exempt them from the requirement to allow third party access to the facility. Subject to final regulatory approval the facility should be on stream by the end of 2007 with an initial capacity of 6 bcm increasing to 12 bcm by 2010. There are proposals for LNG facilities at Canvey Island and at Amlwch on Anglesey, but no planning application has been made for either facility. According to the Gas Transportation Ten Year Statement 2005 produced by National Grid Gas plc, the Canvey LNG project would be developed by a joint venture between Calor Gas, Centrica and Japan LNG and would provide an additional 5.4 bcm of import capacity from 2010. The Amlwch LNG project would be developed by Canataxx and would provide 15 bcm of import capacity, again from 2010. Conoco Phillips announced in February 2006 that it intends to seek planning permission for an LNG plant on Teesside. In addition, the DTI has announced in January 2006 that it intends to introduce legislation that would allow the storage of LNG offshore in salt caverns. 4.2.6 Central Forecast Given that in 2004 the UK became a net importer of gas, the availability of infrastructure to import gas will be a major factor in determining the volumes of gas imported through UK ports up to 2030. Table 4.5 summarises the major gas infrastructure projects (excluding LNG projects that have not received planning permission), with planned capacities for 2010. Table 4.5: Major Gas Infrastructure Projects, with Planned Annual Capacity, 2010 Project Type Annual Capacity

Billion cubic metres Annual Capacity Million tonnes

NG Isle of Grain Marine LNG Terminal 10.0 7.3 Petroplus, Milford Haven Marine LNG Terminal 12.0 8.8 South Hook/Qatar Petroleum Marine LNG Terminal 21.0 15.3 Bacton-Zeebrugge Pipeline upgrade 23.5 17.1 Balgzad-Bacton (BBL) Pipeline 15.0 11.0 Ormen Lange/Langeled Pipeline Pipeline 25.0 18.3 Statfjord/Frigg (FLAGS) Pipeline Pipeline 4.0 2.9 Total Capacity 110.5 80.7 Source: OFGEM Update, Securing Britain’s Gas Supply Based on 2005 DTI estimates of demand there would appear to be a sufficient capacity to handle imports of gas in 2010. Our Central Forecast is based on the following assumptions:



2004-2010 2010-15 2010-30

UK demand for natural gas or oil products (source: DTI estimates to 2014)

UK demand for natural gas is 95 million bcm in 2004, remaining stable up to 2010

Demand rises to 101 million bcm

in 2015

Demand remains stable at 101 million bcm per annum

UK gas production (source: DTI estimates to 2014)

95 million bcm in 2004, falling to 65 million bcm in 2010, 25 million bcm in 2020 & 5 million bcm in 2030

LNG Imports Assumed to be in proportion to LNG capacity compared to total import capacity LESS any UK gas production

GB domestic movements

No domestic movements of LNG; domestic movements of LPG assumed to be in proportion to UK refinery consumption – i.e. stable, given that no additional refinery capacity is expected to be developed over the next 25 years.

Our forecasts therefore reflect a slight increase in the demand for natural gas for domestic/industrial use and for electricity production over the next 25 years. The UK’s own gas resources are forecast by the DTI to fall to about 65 million bcm per annum by 2010, which means that the emphasis would switch to imports of natural gas by pipeline from the Near Continent and Norway and of LNG by sea. Our forecast assumes that the price per unit of piped gas is the same as LNG and so the volumes of imported LNG are related to the capacity available in pipelines and LNG terminals. The forecast assumes that the maximum amount of gas that can be handled through UK LNG terminals from 2020 is the amount of capacity that the existing planned terminals in Milford Haven and the Isle of Grain would provide. As the LNG terminals would not operate at 100% capacity this assumes that additional LNG capacity would be developed at suitable locations around the UK. It is also possible that additional LNG terminal capacity from, say, 2010 would increase volumes of LNG (at the expense of piped gas from the Continent) beyond the 30.6 million tonnes of LNG imports in our Central Forecast and so there may be some up-side potential for LNG imports in the longer term. The much lower volumes of LPG imports are assumed to remain stable up to 2030 in the absence of any information on the key drivers. LPG exports and domestic movements are assumed to be directly related to the relative changes in consumption at UK refineries as LPG is a by-product of the refining process.



Table 4.6: UK Liquefied Gas Port Forecast to 2030 Million tonnes

Direction 2004 2010 2015 2020 2025 2030 % Change 2004-2030

% Annual Change

Great Britain Imports 0.7 10.7 24.4 30.6 30.6 30.6 +3,970% 15.3% Exports 4.0 4.0 4.0 4.0 4.0 4.0 - - Domestic Inwards 1.1 1.1 1.1 1.1 1.1 1.1 - - Domestic Outwards 1.5 1.5 1.5 1.5 1.5 1.5 - - Total 7.3 17.3 30.1 37.2 37.2 37.2 +407% 6.4% % Annual Change 2004-10 2010-15 2015-20 2020-25 2025-30 +15.3% +12.4% +3.7% - - Northern Ireland - - - Imports - - - - - - - - Exports - - - - - - - - Domestic Inwards 0.1 0.1 0.1 0.1 0.1 0.1 - - Domestic Outwards - - - - - - - - Total 0.1 0.1 0.1 0.1 0.1 0.1 - - % Annual Change 2003-10 2010-15 2015-20 2020-25 2025-30 - - - - - - Source: MDS Transmodal

Great Britain: Liquid Gas Port Traffic Forecast to 2030

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1995 2000 2005 2010 2015 2020 2025 2030

Thou

sand

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Imports Imports fcastExports Exports fcastDomestic Inw ards Domestic Inw ards fcastDomestic Outw ards Domestic Outw ards fcast



4.2.7 Implications for Ports The new LNG port facilities on the Isle of Grain and at Milford Haven will be handling additional LNG volumes, while existing capacity should be able to accommodate volumes of LPG up to 2030. There are likely to be an opportunities for ports to develop additional LNG import capacity at suitable locations, subject to securing planning permission. 4.3 Crude Oil & Oil Products 4.3.1 Introduction Port traffic in crude oil and oil products will not follow the trends of the last 25 years if only because of the run down in North Sea crude oil production. Forecasts are, instead, based upon causation rather than historic trends. While crude oil is the mineral oil extracted from oil fields prior to being refined, petroleum products or oil products cover the entire range of liquid derivatives of crude oil after refining and include gasoline, diesel, kerosene and aviation fuel. A proportion of refining capacity is also geared to the production of feedstock for the petrochemical industry and is used to manufacture products as diverse as synthetic rubber, plastics, greases, waxes and fibres.

Northern Ireland: Liquid Gas Port Traffic Forecast to 2030

0

10

20

30

40

50

60

70

80

1995 2000 2005 2010 2015 2020 2025 2030

Thou

sand

tonn

es




Crude oil is transported in large quantities in bulk liquid form and is carried in specialist tankers to the major refineries. Ultra Large Crude Carriers (ULCCs) are generally employed for the carriage of crude oil from the Arabian Gulf to Europe, the USA and the Far East and have a carrying capacity of 300-550,000 tonnes. The Very Large Crude Carriers (VLCCs) of 200-300,000 tonnes carrying capacity are more popular in the Mediterranean, West Africa and the North Sea. In general once crude oil is refined into oil products it is carried in smaller ships, as smaller parcel sizes are required to feed tank storage at coastal locations. 4.3.2 Market Definition Tables 4.7 and 4.8 provide an analysis of crude oil and oil products respectively through UK ports in 2004. Table 4.7: Great Britain Crude Oil Market Size, Major Ports, by Port Region, 2004

Thousand tonnes International Domestic Imports Exports Total % GB

Port Traffic

In-wards

Out-wards

Total % GB Port

Traffic

Grand Total

East Midlands - - - 0% - - 0% 0% - East of England 3,581 4 3,584 3.5% 3,434 - 3,434 5.7% 7,019 Gt. London 326 0 326 0.3% 313 - 313 0.5% 639 North East 329 13,175 13,504 13.4% 566 11,269 11,835 19.5% 25,339 North West 7,692 - 7,692 7.6% 3,714 - 3,714 6.1% 11,406 Scotland 1,548 16,860 18,409 18.2% 1,648 5,608 7,256 12.0% 25,665 South East 8,443 535 8,977 8.9% 6,867 864 7,731 12.8% 16,709 South West - - - 0% - - - 0% - Wales 8,751 - 8,751 8.7% 6,823 - 6,823 11.3% 15,574 Yorks. & Humber 10,021 - 10,021 9.9% 7,622 - 7,622 12.6% 17,643 Other Islands 3,234 26,486 29,720 29.4% 8,656 3,225 11,882 19.6% 41,602 Grand Total 43,925 57,059 100,984 100% 39,645 20,967 60,611 100% 161,595 Source: DfT Maritime Statistics, analysis by MDS Transmodal



Table 4.8: UK Oil Products Market Size, Major Ports, by Port Region, 2004 Thousand tonnes


Port Traffic

In-wards

Out-wards

Total % GB Port

Traffic

Grand Total

East Midlands - - - 0% - - - 0% - East of England 6,561 1,807 8,368 15.3% 1,589 761 2,350 8.4% 10,718 Gt. London 866 238 1,103 2.0% 147 99 246 0.9% 1,349 North East 1,648 1,585 3,233 5.9% 890 1,300 2,190 7.8% 5,423 North West 647 1,885 2533 4.6% 399 739 1,138 4.1% 3,671 Scotland 1,178 2,844 4,022 7.3% 2,391 3,589 5,980 21.3% 10,002 South East 4,454 5,135 9,589 17.5% 756 853 1,609 5.7% 11,198 South West 1,019 - 1,019 1.9% 2,792 - 2,792 9.9% 3,811 Wales 3,915 10,491 14,46 26.3% 4,405 5,448 7,853 28.0% 22,259 Yorks. & Humber 3,795 6,706 10,501 19.2% 1,324 2,544 3,868 13.8% 14,369 Other Islands - - - 0% 33 - 33 0.1% 33 GB Total 24,083 30,691 54,774 100% 12,726 15,333 28,060 100.0% 82,834 Northern Ireland 538 - 538 2,605 - 2,605 3,142 Grand Total 24,621 30,691 55,312 15,331 15,333 30,664 85,976 Source: DfT Maritime Statistics, analysis by MDS Transmodal 162 million tonnes of crude oil and 86 million tonnes of oil products were handled at UK port facilities in 2004. While the majority of the crude oil volumes relate to movements of UK-sourced crude oil, some 24 million tonnes of Norwegian crude was transported ashore by pipeline in the North East and then exported by sea (i.e. GB port providing a transit facility for a 3rd country cargo). The movements of crude oil show the importance of the refining locations at Coryton (East of England), Stanlow (North West), Fawley (South East), Milford Haven (Wales), Immingham (Yorkshire & the Humber) and Grangemouth (Scotland). The North East and Scotland (including the Northern Isles) dominate crude oil exports (accounting for 99% of the 57 million tonnes exported) and reflect the locations of the crude oil shore storage terminals at Sullom Voe, Grangemouth and the Tees, where oil is stored on receipt by pipeline from the North Sea oil fields. Grangemouth, the Northern Isles and the Tees also dominate outward domestic movements of crude oil (accounting for 96% of a total of 21 million tonnes) from the shore storage facilities to coastal refineries. Inward domestic movements of crude oil, amounting to some 40 million tonnes (“one port” movements by sea from the North Sea oil fields to coastal refineries) are handled at the refinery locations that are not connected directly to the pipeline network from the North Sea oil fields. Northern Ireland does not feature at all in the movement of crude oil, reflecting the absence of refining capacity in the province. 25 million tonnes of oil products are imported through UK ports, while 31 million tonnes are exported from the refinery locations. 15 million tonnes of oil products are distributed coastwise from refineries to coastal tank farms. Northern Irish ports imported just over 3



million tonnes of oil products in 2004. 2.6 million tonnes were from UK refineries, 0.5 million from overseas. 4.3.3 Historic Trends Tables 4.9-11 provide an analysis of historic trends in crude oil and oil products traffic during the period 1993-2004. Table 4.9: GB Crude Oil Market Size, Major Ports, 1993-2004

Thousand tonnes Direction 1993 1995 1997 1999 2001 2003 2004 %

Change 1993-04

% CAGR

Imports 42,493 34,120 37,229 28,910 40,989 35,054 43,925 +3% +0.3% Exports 65,536 81,590 70,883 76,395 73,567 64,681 57,059 -13% -1.3% International Total 108,030 115,711 108,112 105,305 114,556 99,734

100,984 -7% -0.6%

Domestic Inwards 29,871 38,368 37,842 49,401 36,745 42,279 39,645 +33% +2.6% Domestic Outwards 20,137 29,206 32,147 31,308 17,256 18,306 20,967 +4% +0.4% Domestic Total 50,008 67,574 69,989 80,710 54,001 60,585 60,611 +21% +1.8% Total 158,038 183,285 178,101 186,014 168,557 160,319 161,595 +2% +0.2% Source: DfT Maritime Statistics, analysis by MDS Transmodal With a decline in crude oil exports since 1995, and the decline in domestic movements of crude oil since about 1999, Table 4.9 reflects the start of the anticipated decline in North Sea oil production. Table 4.10: GB Oil Products Market Size, Major Ports, 1993-2004

Thousand tonnes Direction 1993 1995 1997 1999 2001 2003 2004 %

Change 1993-04

% CAGR

Imports 19,730 16,297 15,956 19,992 24,061 23,893 24,083 +28% +2.3% Exports 27,017 25,942 29,554 28,605 27,958 27,278 30,691 +14% +1.2% International Total 46,747 42,240 45,510 48,597 52,019 51,171 54,774 +19% +1.6% Domestic Inwards 20,642 15,080 13,899 14,448 14,679 13,735 12,726 -29% -3.1% Domestic Outwards 23,265 21,114 20,281 19,568 15,895 15,444 15,333 -34% -3.7% Domestic Total 43,907 36,193 34,180 34,016 30,573 29,180 28,060 -32% -3.4% Grand Total 90,654 78,433 79,691 82,614 82,593 80,351 82,834 -5% -0.4% Source: DfT Maritime Statistics, analysis by MDS Transmodal Table 4.10 shows that, while imports of oil products have risen by some 22% over the period 1993-2004, exports have been more stable. This appears to indicate that refining capacity in Great Britain is close to being fully utilised, with rising demand for oil products being met mainly by increased volumes of imports. At the same time domestic movements of oil



products have declined as regional tank farms can be fed by imported products rather than receiving supplies from UK refineries. Table 4.11: UK Crude Oil Market Size, Major Ports, by Port Region, 1993-2004

Thousand tonnes Port Region 1993 1995 1997 1999 2001 2003 2004 %

Change 1993-04

% CAGR

East Midlands - - - - - - - - - East of England 10,099 10,706 10,894 9,628 6,852 6,711 7,019 -30% -3.3%

London 919 975 992 877 624 611

639 -31% -3.3% North East 19,573 20,370 26,213 25,351 23,619 26,394 25,339 +29% +2.4% North West 12,806 13,674 12,658 11,953 11,247 11,406 11,406 -11% -1.0% Scotland 14,900 38,076 34,234 35,465 29,625 28,863 25,665 +72% +5.1% South East 16,967 17,336 18,013 16,027 15,712 15,241 16,709 -2% -0.1% South West - - - - - - - - - Wales 18,337 17,180 18,135 14,713 14,509 12,843 15,574 -15% -1.5% Yorks & Humber 14,243 14,905 15,310 18,039 17,220 17,708 17,643 +24% +2.0% Other islands 50,193 50,063 41,651 53,963 49,151 40,542 41,602 -17% -1.7% Total UK 158,038 183,285 178,101 186,014 168,557 160,319 161,595 +2% +0.2% Source: DfT Maritime Statistics, analysis by MDS Transmodal The decline in crude oil extracted from the North Sea since 1999 is reflected in Table 4.11 in a reduction in volumes handled on the mainland of Scotland and in the Northern Isles of Scotland. Otherwise reductions in volumes since the peak of 1999 are mainly due to some rationalisation of refining capacity (on the Thames, for example). Table 4.12: UK Oil Products Market Size, Major Ports, by Port Region, 1993-2004


Change 1993-04

% CAGR

East Midlands - - - - - - - - -East of England 12,653 10,458 11,546 11,269 10,166 10,912 10,718 -15% -1.5%London 1,539 1,249 1,411 1,379 1,209 1,322 1,349 -12% -1.2%North East 5,821 5,014 5,131 4,122 6,134 5,146 5,423 -7% -0.6%North West 8,060 6,916 5,735 5,008 4,417 3,152 3,671 -54% -6.9%Scotland 12,409 9,500 10,552 11,941 11,032 9,847 10,002 -19% -1.9%South East 9,219 7,986 6,991 9,381 8,639 9,841 11,198 +21% +1.8%South West 2,928 1,694 1,651 2,111 3,287 3,610 3,811 +30% +2.4%Wales 20,344 18,089 18,890 18,137 18,879 19,504 22,259 +9% +0.8%Yorks & Humber 12,950 14,031 14,434 16,033 15,701 13,854 14,369 +11% +1.0%Other islands 1,101 924 626 469 - 32 33 -97% -27.3%Northern Ireland 3,629 2,571 2,724 2,764 3,130 3,130 3,142 -13% -1.3%Total UK 90,654 78,433 79,691 82,614 82,593 80,351 85,976 -5% -0.4%Source: DfT Maritime Statistics, analysis by MDS Transmodal



4.3.4 Economic Drivers of Demand Demand for crude oil is directly related to the demand for the oil products that can be produced in the refining process. In 2004, total demand for oil products in the UK was about 80 million tonnes and Table 4.13 provides a breakdown of UK demand consumption by product for the same year. Table 4.13: Demand for Petroleum Products, 2004 Oil Product % Total Consumption Gasoline 24% DERV 31% Aviation Fuel 15% Fuel Oils 6% Naphtha 3% Other energy uses 8% Non-Energy Use 13% Total 100% Source: Digest of UK Energy Statistics (DUKES) 2005, DTI Transport Fuels The transport fuel categories of gasoline, DERV and aviation fuel make up the bulk of consumption with 70% of the total. The light sweet crude oil from the North Sea fields lends itself to the production of gasoline. However, recent years have seen an increase in the popularity of diesel-engined cars in the UK and petrol engines have also become more fuel-efficient. As UK consumption of gasoline decreased an opportunity arose for increases in exports and almost 25% of gasoline produced by UK refineries is exported, mainly to the USA. As a substantial proportion of UK refining capacity is geared to the production of gasoline there is a requirement for almost 4 million tonnes per year of diesel to be imported. Aviation fuel is also being increasingly imported as not enough of this fuel can be manufactured in the UK to meet demand. Demand for gasoline and DERV up to 2030 is likely to be driven by the demand for travel in the UK, which will be related to increases in car ownership and use, which in turn is likely to be related to general increases in prosperity and the relative cost of travel by road. The market share of fuel for land transport is likely to be affected by relative pricing and fuel economy. Aviation fuel demand should be driven largely by the demand for international travel, at a time when the number of air passengers in the UK is forecast to double between 2002 and 2020.



Non-energy uses Naphtha and non-energy uses of oil products amounted to 16% of total consumption in 2004 and they supply the feedstock for the petrochemicals industry. The non-energy use of petrochemical products is characterised by its diversity and the fact that no single category or sub-category dominates use (for example, synthetic fibres for the textile industry, plastics for the car industry, synthetic rubber, sealing wax). Demand for the products themselves is likely to be driven by changes in relative prosperity and therefore changes in GDP. Oil for electricity generation Total consumption of petroleum products has fallen from a peak of 106 million tonnes in 1974 to 80 million tonnes in 2004, although energy consumption in the transport sector has doubled over the same period. This has been mainly due to a decline in the use of fuel oil in industry, for heating and especially for electricity generation. Between the late 1960s and the early 1970s the use of oil for electricity generation grew at the expense of coal and peaked at 29% of total fuels used in 1972. This trend was reversed by the late 1970s, following the “oil shock” in 1973. By 2004, fuel oil accounted for only 6% of the total oil product demand. This sector comprises a very small proportion of overall demand and is unlikely to affect overall demand for crude oil and petroleum products for the foreseeable future. 4.3.5 Economic Drivers of Supply UK Oil Reserves The UK is the largest producer of oil and natural gas in the EU. However after years of being a net exporter of both fuels, production peaked in the late 1990s and has declined steadily as the discovery of new reserves has not kept pace with the maturation of existing fields. Much of the remaining reserves are held in small and remote fields that are more difficult to exploit. Although the oil fields become less profitable for the larger oil companies as they mature, smaller specialist companies are successfully taking their place, particularly as the price of oil has risen. The most recent forecasts of UK oil production have been produced by the DTI and the UK Offshore Operators’ Association (UKOOA) in 2005, which indicate that production is likely to decline to about 55% of 2003 production in 2010, to 25% of 2003 levels in 2015 and to about 10% of 2003 volumes by 2020. However, UKOOA also believes that production could be significantly higher if the UK retains a competitive environment for investment. Transfer and storage of crude oil In 2003 the UK produced 106 million tonnes of crude oil of which 23 million tonnes was transported by sea from offshore production platforms to coastal terminals and the remaining



83 million tonnes was transported by pipeline to intermediate storage at one of five crude oil intermediate shore terminals from where it is transported by tanker to the main refineries or shipped to refineries in Britain or abroad. These intermediate storage shore terminals are located at Sullom Voe (Shetland Islands), Cruden Bay (near Peterhead), Flotta (Orkney Islands), Nigg Bay (Cromarty Firth) and Teesside. In 2003, therefore, almost 80% of crude was transferred ashore by pipeline from the oil fields and the major pipeline systems are summarised below in Table 4.14. Table 4.14: Major UK Offshore Pipeline Systems

Intermediate Storage Shore Terminal

Field Length (miles)

Cruden Bay Bruce Forties

110 150

Sullom Voe (Shetland Islands) Ninnian Cormorant

110 93

Flotta (Orkney) Piper 130 Nigg Bay (Cromarty Firth) Beatrice 37 Teesside* Ekofisk 220 Source: US Department of Energy * This is the UK’s only international crude oil pipeline and links Norwegian oil fields in the Ekofisk system with the Teesside oil loading terminal and refinery. . The Ekofisk pipeline transfers about 24 million tonnes of Norwegian crude oil from North Sea platforms to GB for storage and then export. In addition to the above there are numerous small pipelines that connect North Sea platforms to these major backbones. Location of refineries The movement of crude oil from the UK’s intermediate crude oil storage shore terminals and imports from other oil producing regions of the world is related to the location of refining capacity in the main estuarial locations. There are nine major oil refineries in the UK with a capacity of around 87 million tonnes per year, as shown in Table 4.15.



Table 4.15: Major UK Oil Refineries

Refinery Estuary Operator Estimated annual production

capacity (million tonnes)

Coryton, Essex Thames BP 9.6 Grangemouth, Stirlingshire Forth BP 10.1 Fawley, Southampton Solent Esso 15.6 Cleveland Petroplus Tees Petroplus 5.0 Stanlow, Cheshire Mersey Shell 11.5 Pembroke Plant, Pembrokeshire Milford Haven Texaco 10.1 Milford Haven, Pembrokeshire Milford Haven TotalFinaElf/Murco 5.3 Lindsay Oil Refinery, Immingham, North Lincs Humber TotalFinaElf 10.0 Humber Refinery, North Lincolnshire Humber Conoco 9.4 Total 86.6 With refineries apparently running at close to maximum capacity there is likely to be limited scope for substantial increases in UK production and increases in demand for oil products are most likely to be satisfied mainly from abroad. There would therefore appear to be no indication that these refineries will lose any of their importance in the period under review and, as far as we are aware, there are no plans for further refining capacity in the UK. Exchange deals between the major oil companies and a delivery system by rail, pipeline, or coastal tankers link the refineries to major tank farms at coastal locations as well as inland terminals. There are seven main pipeline systems in the UK, some 4,800 km in length in total, linking the refineries to inland terminals and the major airports. All major grades of product such as gasoline, aviation fuel and diesel fuel can be handled in the same pipeline. 4.3.6 Central Forecast Oil Products Demand for crude oil is directly related to the demand for oil products and to the amount of refining capacity available in the UK. Port demand forecasts for oil products are therefore considered first. In 2004 the SRA published a report by consultants which contained forecasts of production, demand, imports and exports for oil products to 2020 and this has provided useful background for the port forecasts for this market sector. This has been supplemented in the forecast assumptions below by more recent information from the Department of Trade and Industry (DTI). Our Central Forecast is based on the following assumptions:



2004-2010

2010-2015

2015-2020

2020-2025

2025-2030

Gasoline -2.0% p.a. -2.0% p.a.

-1.0% p.a.

-0.5% -0.25%

DERV +2.0% +2.0% +1.0% +0.5% +0.25% Aviation fuel +4.15% +3.0% +3.0% +1.5% +1.5%

UK demand for oil products

Other No change Refinery capacity/production

Constant at about 87million tonnes p.a.; production constant at 85 million tonnes per annum

Exports Assumed to be constant at 30.7 million tonnes p.a. (actual traffic volume in Maritime Statistics in 2004) reflecting the UK refineries’ specialisation in producing gasoline when demand for this fuel is declining.

Imports UK demand PLUS exports LESS production GB domestic movements Related to change in UK demand for oil products

The Central Forecast for oil products, based on the above assumptions, is shown in Table 4.16. Table 4.16: UK Oil Products Forecast to 2030

Million tonnes Direction 2004 2010 2015 2020 2025 2030 % Change

2004-2030 % CAGR

Great Britain Imports 24.1 27.6 31.5 35.7 40.6 46.7 +94% +2.6% Exports 30.7 30.7 30.7 30.7 30.7 30.7 - - Domestic Inwards 12.7 13.1 13.6 14.1 14.6 15.3 +20% +0.7% Domestic Outwards 15.3 15.8 16.4 17.0 17.6 18.4 +20% +0.7% Total 82.8 87.3 92.2 97.4 103.5 111.0 +34% +1.1% % Change 2004-10 2010-15 2015-20 2020-25 2025-2030 +0.9% +1.1% +1.1% +1.1% +1.2% Northern Ireland Imports 0.5 0.6 0.6 0.6 0.6 0.6 +20% +0.7% Exports - - - - - - - - Domestic Inwards 2.6 2.7 2.8 2.9 3.0 3.1 +20% +0.7% Domestic Outwards - - - - - - - - Total 3.1 3.2 3.4 3.5 3.6 3.8 +20% +0.7% % Change 2004-10 2010-15 2015-20 2020-25 2025-2030 0.5% 0.7% 0.7% 0.8% 0.9% Source: MDS Transmodal



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Tables 4.17 provides an analysis of oil products traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2004. Table 4.17: Great Britain: Oil Products Port Forecast by Port Region to 2030

Thousand tonnes Port of Region Market Share 2004-30 2004 2010 2015 2020 2025 2030 East Midlands - - - - - - - East of England 12.9% 10,718 11,290 11,929 12,600 13,390 14,365 Gt. London 1.6% 1,349 1,421 1,501 1,586 1,685 1,808 North East 6.5% 5,423 5,713 6,036 6,375 6,775 7,268 North West 4.4% 3,671 3,867 4,086 4,316 4,586 4,920 Scotland 12.1% 10,002 10,536 11,132 11,758 12,496 13,405 South East 13.5% 11,198 11,796 12,463 13,165 13,990 15,008 South West 4.6% 3,811 4,015 4,242 4,480 4,761 5,108 Wales 26.9% 22,259 23,448 24,773 26,168 27,808 29,833 Yorkshire & the Humber 17.3% 14,369 15,136 15,992 16,892 17,951 19,258 Other GB Islands 0% 33 35 37 39 41 44 Total 100% 82,834 87,257 92,191 97,379 103,483 111,018 Source: MDS Transmodal Our forecasts therefore reflect an expected increase in the use of DERV, with gasoline continuing to lose market share and a significant increase in demand for aviation fuel in line with forecast growth in passenger numbers. Beyond 2020, the forecasts reflect the view that annual growth rates for all fuels will slow as environmental legislation encourages the use of hybrid vehicles and alternative fuels. It also reflects the view that the aviation market is likely to be more saturated after 2020, leading to slower compound annual growth. In the absence of specific information on the longer-term future prospects of products from the petrochemical industry in the UK, we have assumed that demand for these products will remain stable up to 2030. Total production from refineries is assumed to remain constant at 85 million tonnes of oil products per annum, which reflects the view that there will be no additional refinery capacity developed in the UK up to 2030. Total exports are assumed to remain constant at about 31 million tonnes per annum, given the finite refinery capacity available and UK refineries’ specialisation in the production of gasoline, while the volume of imports is related to the requirement to meet UK demand, given available refinery capacity and the size of the UK’s export market. Crude oil Our Central Forecast is based on the following assumptions:



Demand for crude oil from UK refineries

Constant at 85 million tonnes p.a.

UK crude oil from North Sea 106 million of UK tonnes in 2003, falling to 93% of this volume in 2004, 95% in 2007, 55% in 2010, 25% in 2015 & 10% in 2020; assumed stable level of production 2020-30 (based on DTI/UKOOA forecasts to 2020, assumption after 2030); 24 million tonnes of Norwegian crude in 2003, falling to about 5 million tonnes in 2018; falling to 2 million tonnes in 2020 and then stable to 2030.

UK crude oil transported from oil fields by sea

19% in 2004, rising by 1% p.a. up to 2015 (30% in 2015 transported by sea); stable 30% transported by sea 2015-2030

Exports 33% of UK North Sea oil production in each year PLUS Norwegian exports UK refinery consumption of crude oil Crude oil inwards PLUS imports LESS exports

Imports UK refinery consumption LESS crude oil inwards PLUS crude oil exports Domestic inwards movements Movements from storage to refineries (assumed to be constant at 21 million

tonnes per annum), plus movements direct to refineries from oil platforms by sea

Domestic outwards movements Movements from storage to refineries, assumed to be constant at 21 million tonnes per annum

These assumptions reflect the most recent forecasts of UK oil production published by the DTI and the UKOOA in 2005, which suggest that oil production is likely to decline gradually to about 10% of the 2003 level by 2020. As more peripheral fields that are not connected to the pipeline network become a more significant proportion of total production, the proportion transported ashore by sea will gradually increase. They also reflect the view that, as North Sea oil is particularly suitable for the manufacture of gasoline, a significant proportion of production will be exported even though the reserves of UK crude oil are gradually declining. Table 4.18: Great Britain: Crude Oil Forecast to 2030


2004-2030 % CAGR

Imports 43.9 46.0 67.3 77.9 77.9 77.9 +77% +2.2% Exports 57.1 35.7 5.9 5.9.5 5.9 5.9 -90% -8.42% Domestic Inwards 39.6 35.5 28.9 24.1 24.1 24.1 -39% -1.9% Domestic Outwards 21.0 21.0 21.0 21.0 21.0 21.0 - - Total 161.6 138.1 133.2 128.9 128.9 128.9 -20% -0.9% % Change 2004-

10 2010-

15 2015-

20 2020-

25 2025-2030

-2.6% -0.7% -0.7% - - Source: MDS Transmodal



Table 4.19 provides an analysis of crude oil traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2004. Table 4.19: Great Britain: Crude Oil Port Forecast by Port Region to 2030

Thousand tonnes Port of Region Market Share

2004 2004 2010 2015 2020 2025 2030

East Midlands - - - - - - - East of England 4.3% 7,019 6,000 5,787 5,600 5,600 5,600 Gt. London 0.4% 639 546 527 510 510 510 North East 15.7% 25,339 21,660 20,892 20,215 20,215 20,215 North West 7.1% 11,406 9,750 9,404 9,100 9,100 9,100 Scotland 15.9% 25,665 21,938 21,161 20,476 20,476 20,476 South East 10.3% 16,709 14,283 13,777 13,330 13,330 13,330 South West - - - - - - - Wales 9.6% 15,574 13,313 12,841 12,425 12,425 12,425 Yorks & Humber 10.9% 17,643 15,082 14,547 14,076 14,076 14,076 Other GB Islands 25.7% 41,602 35,561 34,301 33,190 33,190 33,190 Total 100% 161,595 138,132 133,238 128,922 128,922 128,922 Source: MDS Transmodal

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4.3.7 Implications for ports Oil products The implication from the forecasts is that a significant increase in storage capacity for oil products is likely to be required by 2030 due to the forecast increase in imports. There are no indications from the ports industry that this target cannot be achieved and it is likely that the requirement will be met by a combination of reductions in ‘dwell time’ and increases in capacity at port terminals (i.e. additional tank storage), probably without the need for additional berths. Crude oil Given that the UK refining industry is approaching capacity there is unlikely to be a need for further import facilities for crude oil unless further refining capacity is built and although there is an apparent worldwide shortage of refining capacity there are no indications at present that further investments in refineries are planned in the UK. Movements of crude oil are very unlikely to exceed the requirements of the UK’s present refining capacity and so although imports of crude oil may increase to feed the refineries that previously used UK-sourced crude, overall movements are likely to remain very similar. As the UK fields reach maturity and yields fall the major intermediate storage locations will be receiving less crude oil by pipeline from the maturing offshore fields. There will, however, still remain ample storage capacity to receive imported crude oil by tanker from other oil producing regions of the world. This could see the terminals at Sullom Voe and Flotta, acting as transhipment points for the holding of crude oil prior to the shipment of the imported crude oil to the main estuarial UK refineries. As the UK would no longer be a producer of oil, it would have to hold higher levels of stocks under European law and this would make tank storage on Orkney and Shetland more attractive, it is possible that some 20% of UK refinery input could pass through intermediate tank storage at these locations. Overall, we believe the present crude oil transport infrastructure should suffice for the period up to 2030. 4.4 Other Liquid Bulk Products 4.4.1 Introduction The objective of this section is to develop forecasts of demand for “other bulk liquids” through UK ports up to 2030, based on an understanding of the key economic drivers behind trends in traffic. The “other liquid bulk” category covers the range of liquids carried in bulk form that are not crude oil, petroleum products or liquefied gas and therefore includes a wide range of chemicals such sulphuric, acetic and phosphoric acid, liquid sulphur, vinyl chloride, vinyl



acetate monomers and caustic soda liquor. Vegetable and edible oils are also included in this category, as well as fats and molasses. Due to the value of the commodities involved, these products are carried in smaller size tankers specially designed to carry chemicals or devoted to the carriage of edible oils. These are generally known as ‘handy size’ tankers and are generally up to 50,000 tonnes carrying capacity, although the majority are much smaller with edible oil tankers in particular being up to 5,000 tonnes carrying capacity range. 4.4.2 Market Definition Table 4.20 provides an analysis of port traffic in 2004, by port region. Table 4.20: Other Liquid Bulk Market Size, Major Ports, by Port Region, 2004

Thousand Tonnes International Domestic Imports Exports Total % GB

Port Traffic

In- wards

Out- wards

Total % GB Port

Traffic

Grand Total

East Midlands 10 - 10 0.1% - - - 0% 10 East of England 338 53 390 3.9% 98 48 146 6.6% 536 Gt London 241 37 278 2.8% 22 48 70 3.1% 348 North East 1,952 1,911 3,863 38.4% 194 596 790 35.5% 4,653 North West 1,221 738 1,959 19.4% 121 136 257 11.5% 2,215 Scotland 415 3 418 4.2% 75 361 436 19.6% 854 South East 5 - 5 - 0% 1 - 1 0.1% South West 66 - 66 0% 115 13 128 5.7% 194 Wales 108 19 127 1.3% 46 - 46 2.0% 173 Yorks. & Humber 1,630 1,324 2,954 29.3% 289 66 355 15.9% 3,309 GB Total 5,986 4,084 10,070 100% 960 1,267 2,227 100% 12,297 Northern Ireland 130 - 130 24 - 24 155 UK Total 6,116 4,084 10,200 985 1,267 2,252 12,452 Source: DfT Maritime Statistics, analysis by MDS Transmodal Total traffic volumes were some 12.5 million tonnes in 2004. The sector is dominated by the North East, the North West and the Yorkshire and Humber regions, which reflects the location of major refinery and petrochemical complexes on the Tees, Mersey (including the Manchester Ship Canal) and Humber estuaries. The most important region for international movements is the North East, which has a heavy concentration of petrochemical industry on the Tees, based around North Sea oil, and accounts for 38% of the UK’s imports and exports. Yorkshire and Humber handles 29% of the UK’s international movements of “other liquid bulk products” due to the substantial refinery capacity on the Humber (almost 20% of total UK refinery capacity), the location of the BP acetic acid plant at Saltend and a concentration of edible oil processors in Hull. The North West region is the next most important with 19% of the UK’s import and export trade. This is due to the importance of the port of Liverpool, which handles substantial quantities of edible oils and molasses, and the Manchester Ship Canal, which services a number of petrochemical complexes based around the Shell oil refinery at Stanlow.



Northern Ireland has no refining capacity of its own and is very largely dependent on imports, which amounted to 130,000 tonnes in 2004, as well as smaller volumes of chemicals shipped from Great Britain. 4.4.3 Historic Trends Tables 4.21 and 4.22 provide analyses of historic trends in “other liquid bulk” port traffics over the period 1993-2004. Table 4.21: Great Britain: Other Liquid Bulk Market Size, Major Ports, 1993-2004

Thousand Tonnes 1993 1995 1997 1999 2001 2003 2004 %

Change 1993-2004

% CAGR

Imports 6,600 6,370 6,703 6,474 7,499 6,229 5,986 -5% -0.5% Exports 4,063 3,782 3,899 5,276 4,124 3,907 4,084 +1% - Total International 10,663 10,153 10,602 11,750 11,623 10,137 10,070 -3% -0.3% Domestic Inwards 1,443 806 1,001 705 1,269 1,050 960 - - Domestic Outwards 10,292 9,865 9,654 1,008 1,441 900 1,267 -78% -12.8% Total Domestic 11,735 10,671 10,655 1,713 2,710 1,950 2,227 -69% -10.1% GB Total 22,398 20,824 21,257 13,464 14,333 12,087 12,297 -37% -4.2% Source: DfT Maritime Statistics, analysis by MDS Transmodal Table 4.22: Other Liquid Bulk Traffic, Major Ports, by Port Region, 1993-2004 Thousand Tonnes

Port Region 1993 1995 1997 1999 2001 2003 2004 % Change 1993-04

% CAGR

East Midlands 2 - - - 12 10 +546% +18.5% East of England 2,912 2,706 2,947 587 597 523 536 -82% -14.3% London 2,634 2,527 2,737 430 402 321 348 -87% -16.8% North East 3,633 3,577 3,397 4,504 3,622 4,279 4,653 +28% +2.3% North West 4,295 4,192 4,141 2,176 2,309 2,076 2,215 -48% -5.8% Scotland 2,643 2,707 2,883 1,116 1,882 900 854 -68% -9.8% South East 25 21 10 8 1,299 8 6 -76% -12.1% South West 721 326 296 288 269 213 194 -73% -11.3% Wales 1,810 579 665 579 301 222 173 -90% -19.2% Yorks & Humber 2,987 3,568 3,618 3,435 3,138 3,367 3,309 +11% +0.9% Northern Ireland 724 619 561 336 348 166 155 Other islands 14 - 1 4 165 - - Total UK 22,398 20,824 21,257 13,464 14,333 12,087 12,452 Source: DfT Maritime Statistics, analysis by MDS Transmodal Table 4.21 above shows very little change in international movements of “other liquid bulk” products over the last ten years, although domestic movements outwards have declined substantially since 1997. This was mainly due to the introduction of environmental legislation preventing the dumping of sewage sludge at sea. Since 1999, there appears to have been a decline in domestic movements of products such as chemicals.



4.4.4 Central Forecast There is no single key economic driver that can be used to determine demand as various chemical products, cooking oils and molasses used in animal feedstuffs will have completely different demand drivers. In the absence of suitable drivers, and an accurate breakdown of the products that are included with other liquid bulks, we have assumed the following:

• GB and Northern Ireland imports and exports are the average of the previous five years traffics (2000-2004) in 2010 and then remain stable up to 2030, as there is no clear trend; this is approximately 6.3 million tonnes for GB and 227,000 tonnes for Northern Ireland for imports and 4.0 million tonnes for GB exports;

• GB and Northern Ireland domestic inwards traffics in 2010 are assumed to be the average of the previous five years’ traffics and then remain stable up to 2030; this is approximately 1.2 million tonnes through GB ports and 35,000 tonnes through ports in Northern Ireland;

• Domestic outwards traffic for Great Britain is assumed to be the average traffic for the period 1999-2004 (following the end of the dumping of sludge at sea), remaining constant up to 2030 (1.8 million tonnes per annum).

Table 4.23 shows the Central Forecast to 2030 for the whole of the UK. Table 4.23: UK Other Liquid Bulk Port Forecast to 2030


2004-2030 % CAGR

Great Britain Imports 6.0 6.3 6.3 6.3 6.3 6.3 +6% +0.2% Exports 4.1 4.0 4.0 4.0 4.0 4.0 -3% -0.1% Domestic Inwards 1.0 1.2 1.2 1.2 1.2 1.2 +23% +0.8% Domestic Outwards 1.3 1.8 1.8 1.8 1.8 1.8 +41% +1.3% Total 12.3 13.3 13.3 13.3 13.3 13.3 +8% +0.3% % Change 2004-10 2010-15 2015-20 2020-25 2025-30 -1.1% - - - - Northern Ireland Imports 0.1 0.2 0.2 0.2 0.2 0.2 +75% +2.2% Exports - - - - - - - - Domestic Inwards - - - - - - +46% +1.5% Domestic Outwards - - - - - - - - Total 0.1 0.3 0.3 0.3 0.3 0.3 +70% +2.1% % Change 2004-10 2010-15 2015-20 2020-25 2025-30 +9.3% - - - - Source: MDS Transmodal



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Table 4.24 provides an analysis of “other liquid bulk” traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2004. Table 4.24: Great Britain: Other Liquid Bulk Port Forecast by Port Region to 2030

Thousand tonnes Port of Region Market Share 2004 2004 2010 2015 2020 2025 2030 East Midlands 0.1% 10 11 11 11 11 11 East of England 4.4% 536 579 579 579 579 579 Gt. London 2.8% 348 376 376 376 376 376 North East 37.8% 4,653 5,028 5,028 5,028 5,028 5,028 North West 18.0% 2,215 2,394 2,394 2,394 2,394 2,394 Scotland 6.9% 854 923 923 923 923 923 South East 0.1% 6 6 6 6 6 6 South West 1.6% 194 210 210 210 210 210 Wales 1.4% 173 187 187 187 187 187 Yorkshire & the Humber 26.9% 3,309 3,576 3,576 3,576 3,576 3,576 Other GB Islands 0% - - - - - - Total 100% 12,297 13,289 13,289 13,289 13,289 13,289 Source: MDS Transmodal 4.5 Ores 4.5.1 Introduction Forecasts for ores have been produced using secondary sources and analysis of port traffic data and have also been informed by discussions with Corus, the UK’s major steel producer. The major ore traffic is the import of iron ore, which is a key raw material in the manufacture of steel in the integrated steelworks operated by Corus at Scunthorpe (Yorkshire and Humber), Teesside and Port Talbot (South Wales). Other major imports of ore are bauxite and alumina, which are the key raw materials for the manufacture of aluminium. Bauxite is the unrefined raw material for aluminium manufacture, while alumina is a higher value semi-refined product used to make aluminium. The UK’s primary aluminium plants are located at Holyhead (North Wales), Lynemouth (North East) and Fort William (Scotland). There are no economically viable domestic sources of iron ore, bauxite and alumina, so all the UK requirements have to be imported. This section of the report defines the port traffic market for ores and describes historic trends during the period 1993-2004; it describes the factors influencing demand for ores in the UK and the factors affecting supply; it provides our Central Forecast for ores traffic movements through ports up to 2030. Ores are generally of low value and transport costs therefore make up a large proportion of the delivered price. The major ore producing areas of the world, such as Australia and Brazil, are relatively distant from the major consuming areas in Europe and Japan and this has driven the demand for large ships to generate economies of scale. This, in turn, has led to the development of large bulk carriers of over 200,000 tonnes carrying capacity. The



larger ships tend to be gearless and therefore depend on the receiving and loading ports to provide discharging and loading equipment. The major users of these ships, such as Corus in the UK, have specialised discharging facilities at their terminals at Immingham, Port Talbot and Redcar on the Tees. 4.5.2 Market Definition Table 4.25 provides an analysis of the UK ores port market in 2004. Table 4.25: UK Ores Market Size, Major Ports, by Port Region, 2004


Port Traffic

In-wards

Out-wards

Total % GB Port

Traffic

Grand Total

East Midlands - - - - - - - - - East of England - - - - - - - - - Gt London - - - - - - - - - North East 5,648 518 6,165 34.6% - - - - 6,165 North West - - - - - - - - - Scotland 56 41 97 0.5% - - - - 97 South East - - - - - - - - - South West - - - - - - - - - Wales 5,229 - 5,229 29.3% - - - - - Yorks & Humber 6,328 1 6,328 35.5% - - - - - Other Islands - - - - - - - - - GB Total 17,261 559 17,820 100% - - - - 17,820 Northern Ireland 6 - 6 - - - - 6 Grand Total 17,267 559 17,827 - - - - 17,827 Source: DfT Maritime Statistics, analysis by MDS Transmodal Total ores handled at UK ports in 2004 were some 18 million tonnes, 97% of which were imports. The major concentrations of ore imports are directly related to the location of import facilities dedicated to the Corus steelworks at Scunthorpe, the Tees and Port Talbot. Apart from these ports, only Holyhead handles significant volumes of ores (bauxite/alumina for Anglesey Aluminium Metal Ltd). There are almost no domestic movements of ores through ports and there are minimal movements to or from Northern Ireland, which reflects the absence of any primary smelting facilities in the province. 4.5.3 Historic Trends Table 4.26 provides an analysis of historic trends in ores traffic during the period 1993-2004. Overall tonnage handled fell by 24% over the 11-year period.



Table 4.26: GB Ores Market Size, Major Ports, 1993-2004 Thousand tonnes

Direction 1993 1995 1997 1999 2001 2003 2004 % Change 1993-2004

% CAGR

Imports 19,286 22,385 24,293 21,821 19,075 17,378 17,261 -11% -1.0% Exports 3,625 2,981 2,884 3,140 481 600 559 -85% -15.6% Total international 22,911 25,366 27,177 24,961 19,556 17,978 17,820 -22% -2.3% Domestic Inwards 355 25 127 234 4 11 - -100% -100% Domestic Outwards 63 16 24 239 - - - -100% -100% Total Domestic 419 40 151 473 4 11 - -100% -100% Total 23,329 25,406 27,328 25,434 19,560 17,989 17,820 -24% -2.4% Source: DfT Maritime Statistics, analysis by MDS Transmodal Table 4.27 provides an analysis of historic trends in ores traffic by port region during the period 1993-2004. Table 4.27: GB Ores Market Size, Major Ports, by Port Region, 1993-2004


Change 1993-2004

% CAGR

East Midlands - - - - - - - - - East of England 485 631 706 904 437 352 - -100% 100% London 86 114 135 165 84 67 - -100% 100% North East 5,735 5,791 5,512 5,740 5,566 6,121 6,165 +7% +0.7% North West 1,461 1,202 1,332 1,384 - - - -100% -100% Scotland 936 743 794 525 392 91 97 -90% -18.6% South East 396 410 444 412 693 98 - -100% -100% South West 291 451 431 466 314 31 - -100% -100% Wales 7,310 8,303 9,782 8,651 5,512 5,018 5,229 -28% -1.8% Yorks & Humber 6,442 7,565 7,988 7,000 6,561 6,209 6,329 -2% -0.2% GB islands 4 - - 3 - - - -100% -100% Total UK 23,147 25,210 27,124 25,249 19,559 17,989 17,820 -23% -2.3% Source: DfT Maritime Statistics, analysis by MDS Transmodal The decline in imports of ore between 1993 and 2004 can largely be explained by the rationalisation of the British steel making industry undertaken by Corus in recent years with a reduction in capacity especially at Llanwern in South Wales. 4.5.4 Economic Drivers of Demand Demand for ores is driven by the demand for the end product. In the UK, this is largely related to the volume of steel and, to a lesser extent, the volume of aluminium manufactured in the UK. The demand for UK-manufactured steel has been considered in section 4.10 below. While competition from the developing economies of the Far East and the emergence of low cost producers in Eastern Europe has caused Corus to rationalise its production facilities in order to maintain its competitiveness, the company is confident that its



present configuration of manufacturing capacity will ensure that it remains a significant producer up to 2030. 4.5.5 Economic Drivers of Supply The major iron ore exporting countries are Brazil, Australia, and India with smaller quantities being exported from Canada and South Africa. The Corus steelworks have dedicated port facilities for the import of their iron ore requirements. Corus has undergone considerable rationalisation in recent years and, despite the recent rises in demand and consequent prices for steel, demand is not thought likely to lead to further investment in facilities. It is likely therefore that imports of iron ore to 2030 will be linked to the level of UK production of steel at their plants at Scunthorpe, Teesside and Port Talbot. The three UK aluminium plants are regarded as being close to their production capacity, which, as requirements for primary aluminium increases, is likely to lead to increases in imports of metal that has been refined abroad. UK aluminium plants are also regarded as sensitive to UK energy prices, which are expected to rise; it is therefore possible that some of the UK plants may not survive through the period to 2030. 4.5.6 Central Forecast up to 2030 Our Central Forecast for ores traffic is based on the following assumptions:

• Ore imports are directly related to the level of UK steel production; • All other movements of ores (the relatively small volumes of exports and domestic

movements) are assumed to remain stable up to 2030. We forecast an overall 10% growth in ore imports to 2030. Table 4.28: Great Britain Ores, Central Forecast to 2030

Thousand tonnes Direction 2004 2010 2015 2020 2025 2030 % Change

2004-2030 %

CAGR Imports 17.3 17.8 18.2 18.5 18.7 18.9 +10% +0.4% Exports 0.6 0.6 0.6 0.6 0.6 0.6 - - Domestic Inwards - - - - - - - - Domestic Outwards - - - - - - - - Total 17.8 18.4 18.7 19.0 19.2 19.5 +9.5% +0.3% % Change 2003-

2010 2010-2015

2015-2020

2020-2025

2025-2030

+0.5% +0.3% +0.3% +0.2% +0.3% Source: MDS Transmodal



The forecasts for ores largely reflect the forecast level of steel production in the UK up to 2030 (see Section 4.10), given the high proportion of ores that are imported for use in the manufacture of steel. Forecast growth is 0.3% per annum on average up to 2030. Table 4.29 provides an analysis of ores traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2004. Table 4.29: Great Britain Ores Port Forecast by Port Region to 2030

Thousand tonnes Port of Region Market Share 2004 2004 2010 2015 2020 2025 2030 East Midlands - - - - - - - East of England - - - - - - - Gt. London - - - - - - - North East 34.6% 6,165 6,365 6,474 6,581 6,650 6,749 North West - - - - - - - Scotland 0.5% 97 100 102 104 105 106 South East - - - - - - - South West - - - - - - - Wales 29.3% 5,229 5,398 5,491 5,582 5,640 5,724 Yorkshire & the Humber 35.5% 6,329 6,534 6,646 6,756 6,827 6,928 Other GB Islands - - - - - - - Total 100% 17,820 18,397 18,713 19,022 19,221 19,507 Source: MDS Transmodal

Great Britain: Ores Port Traffic Forecast to 2030

0

5,000

10,000

15,000

20,000

25,000

30,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Thou

sand

tonn

es




4.6 Coal 4.6.1 Introduction Forecasts for coal have been produced using secondary sources and analysis of port traffic data and have also been informed by discussions with Corus, electricity generators and the DTI. The major coal traffic is imported steam coal for electricity generation (about 80% of the demand for coal in the UK), followed by coking coal, which is a key raw material for the manufacture of steel. While the UK has some reserves of coal for use in electricity generation, the UK’s coal cannot be used for the manufacture of steel and so all coking coal is imported. This section of the report defines the port traffic market for coal and describes historic trends during the period 1993-2004; it then describes the factors influencing demand for coal in the UK and the factors affecting supply; it provides our Central Forecast for coal traffic movements through ports up to 2030. Coal is generally low value and transport costs therefore make up a large proportion of the delivered price. The major coal producing areas of the world, such as Australia, Colombia, South Africa and the United States are relatively distant from some of the major consuming areas, such as Europe, and this has driven the demand for large ships to generate economies of scale. This, in turn, has led to the development of large bulk carriers of over 200,000 tonnes carrying capacity. The larger ships tend to be gearless and therefore depend on the receiving and loading ports to provide specialist handling equipment. The major users of these ships, such as Corus and the major coal-fired electricity generators in the UK, use specialised discharging facilities at terminals on the major deep water estuaries. 4.6.2 Market Definition Table 4.30 provides an analysis of the UK port market for the handling of coal in 2004. Table 4.30: UK Coal Market Size, Major Ports, by Port Region, 2004

Thousand Tonnes International Domestic Imports Exports Total % GB

Port Traffic

In-wards

Out-wards

Total % GB Port

Traffic

Grand Total

East Midlands - - - - - - - - - East of England 1,836 - 1,836 4.8% - - - - 1,836 Gt London 18 - 18 0% - - - - 18 North East 4,617 242 4,859 12.7% - - - - 4,859 North West 2,998 - 2,998 7.9% - - - - 2,998 Scotland 5,126 134 5,260 1.8% - 1,061 1,061 82.9% 6,321 South East 3,560 - 3,560 9.3% - - - - 3,560 South West 3,674 - 3,674 9.6% - - - - 3,674




Port Traffic

In-wards

Out-wards

Total % GB Port

Traffic

Grand Total

Wales 3,284 124 3,408 8.9% 157 - 157 12.3% 3,565 Yorks & Humber 11,846 709 12,555 32.9% 1 61 62 4.9% 12,617 Other Islands 4 - 4 0% - - - - 4 GB Total 36,964 1,208 38,172 100% - - - - 39,453 Northern Ireland 589 77 666 1,197 - 1,197 1,863 Grand Total 37,553 1,285 38,839 1,355 1,123 2,477 41,316 Source: DfT Maritime Statistics, analysis by MDS Transmodal Total coal traffic handled through UK ports in 2004 amounted to some 41.3 million tonnes. The major coal import flow is through ports in the Yorkshire and Humber region (11.8 million tonnes in 2004) and is largely accounted for by the port of Immingham where coking coal is imported for the nearby Corus steelworks at Scunthorpe. There are also new deep water bulk handling facilities for the handling of coal at the Humber International Terminal (HIT) where coal is handled for the various coal fired power stations in the Aire and Trent Valleys. A further deep sea berth, HIT 2, is due for completion in 2006. A smaller proportion of coal was re-exported from the area. Scotland handled 6.3 million tonnes of coal imports for power generation through the Hunterston facility in Ayrshire, about 20% of which is transhipped using smaller ships to Northern Ireland. In 2005, a second feeder route started to Ellesmere Port for the English market, a route expected to handle around 1 million tonnes per annum. The North East handles around 4.9 million tonnes per year and this is made up of steam coal for the power generators and coking coal. It is mostly handled at the Corus facility at Redcar on the Tees. The South West region handles about 3.7 million tonnes, as Bristol can accommodate cape-size vessels and imports coal for the major electricity generating companies. The South East region also handles 3.6 million tonnes of imports, mainly for local power stations on the Thames and Medway. Wales (mainly through Port Talbot) handles 3.6 million tonnes of coking coal for the Corus works. The North West handles just under 3.4 million tonnes of coal per year through Liverpool at its Powergen/E.ON facility, mainly for Fiddlers Ferry power station. Northern Irish ports handled 1.9 million tonnes of inbound coal in 2004 reflecting the lack of indigenous coal. This was all steam coal for electricity generation and coal for domestic use as Northern Ireland has no steelworks and two thirds of this coal was sourced from Scotland (Hunterston), while the remaining third was imported. 4.6.3 Historic Trends Table 4.31 provides an analysis of historic trends in coal traffic during the period 1993-2004.



Table 4.31: UK Coal Market Size, Major Ports, 1993-2004 Thousand tonnes

1993 1995 1997 1999 2001 2003 2004 % Change 1993-2004

% CAGR

Imports 18,988 16,714 21,285 20,548 35,685 33,515 37,553 +98% +6.4% Exports 1,109 911 1,168 623 1,061 1,121 1,285 +16% +1.4% International Total 20,096 17,624 22,453 21,171 36,746 34,635 38,839 +93% +6.2% Domestic Inwards 2,707 2,865 371 53 1,535 1,324 1,355 -50% -6.1% Domestic Outwards 2,440 3,771 1,368 1,194 1,639 1,321 1,123 -54% -6.8% Domestic Total 5,147 6,636 1,740 1,248 3,174 2,645 2,477 -52% -6.4% Grand Total 25,243 24,260 24,193 22,419 39,920 37,281 41,316 +64% +4.6% Source: DfT Maritime Statistics, analysis by MDS Transmodal Growth in coal imports of 98% over the period 1993-2004 has been due to the decline of the UK coal mining industry, in combination with growth in the popularity of coal-fired power stations for the generation of electricity. Domestic flows are dominated by transhipped coal between Hunterston on the Clyde estuary and Northern Ireland. Table 4.32 provides an analysis of historic trends in coal traffic during the period 1993-2004, by port region. Table 4.32: UK Coal Market Size, Major Ports, by Port Region, 1993-2004 Thousand tonnes Port Region 1993 1995 1997 1999 2001 2003 2004 % Change

1993-2004 %

CAGR East Midlands 43 - - - 3 - - -100% -100% East of England 2,555 1,712 1,268 570 1,902 1,881 1,836 -28% -3.0% London 24 17 12 5 19 19 18 -24% -2.5% North East 6,075 5,406 4,135 3,389 4,872 4,646 4,859 -20% -2.0% North West 1,412 1,022 1,560 1,568 2,579 3,032 2,998 +112% +7.1% Scotland 765 2,753 2,712 4,728 6,689 4,989 6,321 +726% +21.2% South East 2,924 2,402 2,518 2,267 2,880 3,676 3,560 +22% +1.8% South West 300 1,527 1,854 1,317 4,691 4,524 3,674 +1125% +25.6% Wales 4,471 3,939 4,741 3,845 4,382 3,102 3,565 -20% -2.0% Yorks. & Humber 4,402 4,225 4,517 4,076 9,445 9,721 12,617 +187% +10.0% Northern Ireland 2,252 1,248 871 650 2,449 1,686 1,863 -17% -1.7% Other islands 20 7 5 3 11 5 4 -80% -13.7% Total UK 25,243 24,260 24,193 22,419 39,920 37,281 41,316 +64% +4.6% Source: DfT Maritime Statistics, analysis by MDS Transmodal The trends in the regional distribution of coal handling largely reflect the competitive nature of the market for handling imported steam coal, with strong competition between ports located on deep water estuaries. Up to about 2001, Hunterston was able to secure a significant market share by capitalising on the economies of scale available from its deep water and rail link to serve power stations in England. However, with the development of new deep water port facilities at Immingham, the Humber has begun to secure additional



market share. Liverpool and Bristol have also been successful in attracting coal traffic to serve inland power stations. Some coal imported through Hunterston is now being distributed to English power stations by coastal shipping and rail via Ellesmere Port. 4.6.4 Economic Drivers of Demand Introduction Table 4.33 below shows the trends in coal usage from 1997 to 2004. Electricity generation is the major user with 84% of coal demand in 2004. The demand for steam coal is therefore dependent on the demand for electricity generally and, in particular, from coal-fired power stations. This, in turn, is determined by the competitiveness of coal for electricity generation compared to other sources such as gas, nuclear and renewables. Coal’s competitiveness for electricity generation is largely determined by its price compared to other sources and this is greatly influenced by Government energy policy, particularly through environmental regulation. The greater diversity in ownership of coal fired power stations and the changes in the relative prices of gas and coal in recent years have seen an increasing demand for coal fired power generation. Following a dip in production prior to 2001 due to the popularity of gas, coal-powered power stations have increased their coal consumption to meet additional demand for electricity. Coking coal accounted for 11% of UK consumption in 2004 and the volumes consumed are directly related to the amount of steel that is manufactured by Corus in their steelworks. Coking coal volumes consumed have fallen from 8.8 million tonnes to 6.4 million tonnes during the period 1997-2004, following further rationalisation of Corus’ operations - the closure of the Llanwern blast furnaces. Table 4.33: Trends in Coal Usage 1997-2004

Thousand tonnes 1997 1998 1999 2000 2001 2002 2003 2004 %

Change 1997-2004

Electricity generation 47,333 48,588 41,827 46,912 51,682 48,738 53,081 51,046 +8% Coke Manufacture 8,750 8,728 8,413 8,685 7,896 6,533 6,611 6,382 -27% Other Solid Fuel l 864 635 646 540 496 436 396 327 -62% Industry 2,993 2,414 2,040 702 1,684 1,113 941 1,482 -50% Domestic 2,587 2,366 2,517 1,900 2,361 1,802 1,206 1,359 -47% Other 545 416 271 83 68 58 62 75 -86% Primary use (collieries) 8 5 10 12 9 9 6 8 - Total Demand 63,080 63,152 55,724 58,834 64,196 58,689 62,303 60,679 -4% Source: DUKES, DTI Demand for coal in industrial processes and for domestic heating has halved during the period 1997-2004.



Energy Policy and the Demand for Coal The DTI published an ‘Updated Emissions Paper’ in November 2004 and this included projections of total UK electricity demand to 2020. These are shown in Table 4.34 below. Table 4.34: Forecast of Electricity Demand to 2020

Terawatt hours Year Electricity Demand Electricity from coal-fired power stations % Coal-fired electricity 2000 346.3 111.9 32.3% 2005 361.0 116.0 32.1% 2010 352.0 90.0 25.5% 2015 359.0 81.0 22.5% 2020 381.0 62.0 16.3% Source: Updated Emissions Paper, DTI, November 2004 The forecasts, which reflect Government energy policy, show electricity demand rising by some 5.5% between 2005 and 2020. The paper also included forecasts of electricity generation by fuel used, which showed electricity generation from coal declining from 116 terawatt hours in 2005 to 62 terawatt hours in 2020. This decline would take coal’s share of electricity generation from 32% in 2005 to just over 16% in 2020. However, the coal fired power generators believe that the decline in coal fired power generation capacity is unlikely to be as rapid as originally envisaged by the DTI and this is borne out by moves to fit flue gas desulphurisation equipment to a number of power stations in response to the EU Large Combustion Plants Directive (LCPD) and substantial further investments being made in coal handling capacity at the Port of Immingham backed by term agreements with the power generating companies. Through fitting flue gas desulphurisation equipment, some of the generators expect to reduce their sulphur dioxide emissions while remaining cost competitive. Of the 18 coal-fired power stations in the UK, 12 are expected to comply fully with the LCPD by fitting flue gas desulphurisation equipment, one may comply in due course and five are going to close, probably by 2008, as shown in Table 4.35.



Table 4.35: Coal-fired Power Stations and Compliance with LCPD, January 2006

Source: DTI, up-dated by MDS Transmodal Power stations that will not be compliant with the LCPD will have to close by January 2016 and will find it difficult to meet environmental restrictions by January 2008, so it is possible that the UK will lose some 6.3 GW of capacity (about 20% of existing capacity) by 2008. LCPD standards will tighten again from 2016 and power stations that is currently compliant will have to decide whether to invest in new plant to meet new standards. Demand for Coking Coal Apart from the electricity-generating sector the next major user of coal is the steel industry, which uses coking coal for the manufacture of steel and pulverised coal for injection directly into blast furnaces. These coals are specialised in nature - they have to be low ash and low sulphur - which virtually eliminates UK coal from the market. Volumes of coking and pulverised coal used in the steel industry during the period 1998-2004 are shown in Table 4.36.

Status Power Station Operator GW of Capacity Aberthaw RWE npower 1.5Cottam EDF 2.0Drax Drax Power 3.9Eggborough British Energy 2.0Ferrybridge 1 SSE 1.0Fiddlers Ferry SSE 2.0Kilroot AES Kilroot 0.5Longannet Scottish Power 2.3Ratcliffe E.ON-UK 2.0Rugeley International Power 1.0Uskmouth Uskmouth Energy 0.5West Burton EDF 2.0

Will comply

Sub-total 20.6Kingsnorth E.ON-UK 2.0May comply Sub-total 2.0Cockenzie Scottish Power 1.2Tilbury RWE npower 1.1Didcot RWE npower 2.0Ferrybridge 2 SSE 1.0Ironbridge E.ON-UK 1.0

Will close

Sub-total 6.3Total capacity 28.9



Table 4.36: Demand for Coking Coal 1998-2004 Thousand tonnes

1998 1999 2000 2001 2002 2003 2004 Coke Manufacture 8,169 7,919 8,229 7,132 5,808 5,732 5,487 Blast Furnaces 559 494 456 764 726 882 895 Total 8,728 8,413 8,685 7,896 6,534 6,614 6,372 Source: DUKES, DTI Coking coal is almost all imported and is used in the steel industry in basic oxygen furnaces (BOS), operated by Corus at Port Talbot, Scunthorpe and Teesside. Therefore the volume of imported coking coal and pulverised coal used in BOS furnaces is directly related to the amount of steel being produced in the UK. Corus estimates that some 7.2 million tonnes of coal will be required each year for steel making up to 2030. 4.6.5 Economic Drivers of Supply The demand for steam coal in the UK is met by domestic mines (both deep mines and open-cast) and by imports. UK coal production is dominated by the companies that took over the assets of the previously nationalised British Coal, namely UK Coal, Scottish Coal and Celtic Energy. There are however a number of smaller producers who mainly concentrate on open cast production. Table 4.37 provides the split between deep mined and open cast production for the period 1997-2004. Overall UK production fell by 48% between 1997 and 2004. Table 4.37: UK Deep-mined and Open Cast Coal Production 1997-2004

Thousand tonnes 1997 1998 1999 2000 2001 2002 2003 2004 Deep Mine 30,281 25,731 20,888 17,187 17,347 16,391 15,633 12,543 Open Cast 16,700 14,315 15,275 13,412 14,166 13,148 12,126 11,993 Total 46,981 40,046 36,163 30,600 31,513 29,539 27,759 24,536 Source: DUKES, DTI Table 4.38 below shows the trend in coal production, import and use between 1997 and 2004. Overall consumption has declined by some 4% over the period and UK production from all sources has declined steadily due to the closure of many uneconomic and exhausted collieries and the difficulty in gaining planning permission for open cast production. Imports over the same period rose by 83%.



Table 4.38: Coal Supply and Consumption 1997-2004 Thousand tonnes

1997 1998 1999 2000 2001 2002 2003 2004 Production (totals) 46,981 40,046 36,163 30,600 31,513 29,539 27,759 24,536 Deep-mined 30,281 25,731 20,888 17,187 17,347 16,391 15,633 12,543 Opencast 16,700 14,315 15,275 13,412 14,166 13,148 12,126 11,993 Other sources 1,514 1,131 914 598 417 450 520 561 Imports 19,757 21,244 20,293 23,446 35,542 28,687 31,891 36,153 Exports -1,146 -971 -761 -661 -549 -537 -542 -621 Stock change -3,683 +1,421 -1,164 +4,681 -2,886 +351 +2,492 +176 Total supply 63,423 62,871 55,445 58,663 64,037 58,490 62,120 60,805 Source: DUKES, DTI We assume that changes in stocks are largely related to the price of coal on the world market, so that power generators build up stocks when the price is relatively low and run down stocks when the price is relatively high. UK Coal Supply – Deep Mines Table 4.39 provides estimates of coal reserves in deep mines and forecasts production to 2030, based on the results of a study for the DTI carried out by Mott Macdonald in association with McCloskey Coal in 2004. Table 4.39: UK Deep Mine Coal Production Forecast

Million tonnes Reserves

and potential

Tonnage extracted by 2016

Remaining reserves in 2016

Years of reserves post 2016

Production in 2020 mt/year

Production in 2025

Production in 2030

Daw Mill 75.5 40.7 34.8 10.2 3.4 3.4 0 Harworth 40.0 20.8 19.2 11.1 1.7 1.7 0 Kellingley 57.1 26.0 31.1 14.3 2.17 2.17 2.17 Maltby 23.5 18.3 5.2 3.4 0 0 0 Rossington 17.7 15.0 2.7 2.2 0 0 0 Thoresby 27.1 18.8 8.3 5.3 1.5 0 0 Welbeck 26.6 20.4 6.2 3.6 0 0 0 Total 267.5 100.0 107.5 50.1 8.77 7.27 2.17 Source: ‘UK Coal Production Outlook: 2004 – 2016’ - Mott Macdonald/McCloskey Coal Based on this analysis of remaining reserves, there is very little scope for the continuation of UK coal supply to the power generation industry beyond 2025. However, there may still be scope for the supply of opencast coal, which represented some 49% of UK coal production in 2004. Coal Production Forecasts for the UK to 2030 Table 4.40 provides low and high forecasts and a mid-point forecast for deep mines and opencast facilities in the UK up to 2030, based on the results of a study carried out for the DTI in 2004, with estimates beyond 2025 provided by MDS Transmodal.



Table 4.40: Forecast UK Production of Coal 2005-2030 Million tonnes

Deep mines Deep mines Open cast

Open cast

Combined Total

Combined Total

Combined Total

Scenario Low High Low High Low High Mid Point 2005 13.05 14.25 10.7 10.75 23.75 25.0 24.4 2010 13.05 16.25 8.0 12.5 21.05 28.75 24.9 2015 10.5 13.1 4.8 8.0 15.3 21.1 18.2 2020 8.77 8.77 N/A N/A 8.77+ 8.77+ 8.77 2025 7.3 7.3 N/A N/A 7.3 7.3 7.3 2030 2.2 2.2 N/A N/A 2.2 2.2 2.2 Source: McCloskey Group, ‘UK Coal Production Outlook: 2004 – 2016’ / MDST estimates for 2025-2030 Figures up to 2015 were based on discussions between Mott Macdonald and the coal producers; beyond 2015 they are based on the potential of deep mines and their reserves beyond 2016. Production from existing opencast facilities after 2015 is regarded as unlikely and has been discounted and estimates of production for 2020-2030 have been derived from reserves used post- 2016. Estimates of UK coal production for the period 2005-2030 suggest that volumes will fall from about 24 million tonnes in 2005 to just over 2 million tonnes in 2030. Any coal-fired power stations would therefore have to be fed, very largely, by imported coal. Forecasts of electricity generated from coal Rather than coal’s contribution to electricity generation falling to a level of 16% by 2020, as proposed in the DTI’s updated Emissions Paper, we therefore forecast that this level will be reached five years later in 2025. This allows for a gradual reduction in coal fired generation capacity rather than the more dramatic decline indicated by Government energy policy. This is largely due to the use of gas flue gas desulphurisation equipment to reduce emissions, which extends the economic life of coal-fired power stations, and the increasing price of gas may also make it more economic to extract domestic coal from reserves that were previously regarded as uneconomic. Table 4.41: Power Generation from Coal Forecast 2000-2030

Terawatt hours Year 2000 2005 2010 2015 2020 2025 2030 Total UK electricity demand 346.3 361 352 359 381 381 381 Electricity from coal 111.9 116.0 105.0 100.0 81.0 62.0 62.0 Coal generation as a percentage of total power generation

32.0%

32.1%

29.8%

27.8%

21.3%

16.3%

16.3%

Source: ‘Updated Emissions Paper, November 2004-Addendum, Projections beyond 2010’ DTI According to the Digest of UK Energy Statistics 2004 (DUKES), in 2000 the major power producers in the UK had a total declared net capability of 72,193 megawatts (MW). Of the conventional steam stations, 24,810 MW of declared net capacity was coal fired, amounting to some 34% of total UK generating capacity. It is reasonable to assume that the declared capacity of 24,810 MW supplied 111.9 TWh to the grid (see Table 4.41) and that in general



terms (i.e. at the same load factors and efficiency) 1,000 MW of generating capacity is capable of supplying 4.51 TWh of electricity. According to the DTI, in 2000 the major power producers used about 45 million tonnes of coal (DUKES 2004) and therefore each MW of generating capacity can be assumed to have used 1,804 tonnes of coal. Table 4.42 below relates the quantity of coal required with the supply of forecast coal fired generating capacity of the major UK power producers, using sources available in mid 2004. It has been assumed that beyond 2025, the electricity generating capacity (of 62 terawatt hours) will remain and the consequent demand for coal will stay at that level for the remainder of the forecast period. Table 4.42: Coal Demand Forecasts for Power Generation to 2030

Thousand tonnes 2000 2005 2010 2015 2020 2025 2030 Forecast TWh produced from coal 111.9 116.0 105.0 100.0 81.0 62.0 62.0 MW of coal fired generating capacity required for forecast TWh

24,810 25,720 23,282 22,172 17,960 13,747 13,747

Millions tonnes of coal required 44.75 46.40 42.00 40.00 32.40 24.79 24.79 Source: ‘Updated Emissions Paper’ DTI plus MDS Transmodal estimates for 2020-30 Table 4.42 shows the volumes of coal that will be required for power generation assuming that all the indigenous coal produced can be sold to the power generators at an attractive price. If this relationship holds then imported coal volumes are likely to decline to 2020. 4.6.6 Central Forecast Coal for Electricity Generation Our Central Forecast for coal for electricity generation reflects increasing demand for electricity up to 2030 and an assumption that the life of existing power stations will be extended, despite the Government’s energy policy to reduce reliance on carbon fuels. However, we have also assumed that other forms of electricity generation (principally gas) will take an increasing proportion of the market. Given that the future of nuclear power is uncertain while the Government’s Energy Review is underway, we assumed that the conclusions of the 2003 Energy White Paper stand and so the development of new nuclear power stations has been discounted. We have assumed that domestic coal would be used in preference to imported coal, assuming therefore that it can be supplied at a cheaper rate per tonne. However, as UK stocks of coal fall over the next 25 years, the UK will become increasingly reliant on imported coal. In line with current Government forecasts of electricity generation by fuel used, coal is expected to decline in importance. The electricity generated from coal is assumed to fall



from 111.9 terawatt hours in 2000 to 62 terawatt hours by 2025 reducing the quantity of coal consumed for power generation to 24.8 million tonnes over the same period. On the basis that the UK coal industry produces the tonnages forecast in the mid-point scenario (see Table 4.40) at the right price then the demand for imported steam coal will average 21 million tonnes per year. Following the final decline in economically viable UK coal reserves and the assumption that coal generating capacity remains at the 2025 level then imports of steam coal are likely to be 17.5 million tonnes in 2025 and 22.6 million tonnes by 2030, as shown in Table 4.43. Table 4.43: Calculation of Steam Coal Requirement to 2030

Million tonnes 2010 2015 2020 2025 2030 Tonnes of steam coal required 42.0 40.0 32.4 24.8 24.8 UK coal production 24.9 18.2 8.8 7.3 2.2 Import requirement 17.1 21.8 23.8 17.5 22.6 Source: MDS Transmodal There were significant changes in energy prices in 2004-5, which appears to have led to some adjustments in the shares of electricity generation by energy source. This probably explains the increase in imports of coal by 4 million tonnes between 2003 and 2004 shown in DfT Maritime Statistics. We have therefore raised our forecasts of coal imports accordingly (see Table 4.45). Coal for Other Uses Our Central Forecast for coking coal traffic is based on the assumptions that coking coal imports are directly related to the level of UK steel production and reflects the fact that coking coal is imported for use in blast furnaces and therefore the volumes of imports will have a close correlation with the volumes of steel produced in the UK. Altogether, coal imports for other than power generation are expected to continue to account for around 10 -11m tonnes per annum. Central Forecast to 2030 The forecasts for coal traffic are largely driven by the extent to which there is a requirement for imported coal for electricity generation up to 2030 and in the context of an assumed gradual fall in the demand for electricity generation from coal over the period (due to UK energy policy), with more emphasis placed on electricity generation from gas. We have assumed that new nuclear power stations will not be constructed, as this not current Government policy. There is also an assumption that domestic coal supplies will be cheaper than imported coal. Given these assumptions, volumes of imported coal fall between 2005 and 2010 as UK domestic consumption is expected to increase. From 2010, domestic production of coal is



expected to start to fall, so that volumes of imported coal increase between 2010 and 2020. Between 2020 and 2025, the decline in the supply of domestic coal is slower than the decline in the volume of coal required for electricity generation and this leads to a reduction in the volume of imported coal during that period. As the demand for coal for electricity generation is assumed to be stable between 2025 and 2030, but domestic supplies of coal are continuing to fall, there is a requirement for increasing volumes of imported coal between 2025 and 2030. Table 4.44: Great Britain port traffic: Coal, Central Forecast to 2030

Million Tonnes Direction 2004 2010 2015 2020 2025 2030 % Change

2004-2030 %

CAGR Imports 37.0 30.6 35.9 38.2 31.0 37.2 +1% +0.0% International Exports 1.2 1.0 1.2 1.3 1.1 1.3 +5% +0.2% Inwards 0.2 0.1 0.2 0.2 0.1 0.2 +1% +0.0% Domestic Outwards 1.1 0.9 1.1 1.2 1.0 1.1 +1% +0.0%

Total Total 39.5 32.7 38.4 40.9 33.2 39.8 +1% +0.0% % Change

p.a. 2004-

10 2010-

15 2015-

20 2020-

25 2025-

30

-3.1% +3.3% +1.3% -4.1% +3.7% Source: MDS Transmodal Table 4.45: Northern Ireland port traffic: Coal, Central Forecast to 2030


2004-2030 %

CAGR Imports 0.6 0.5 0.6 0.6 0.5 0.6 +1% +0.0% International Exports 0.1 0.1 0.1 0.1 0.1 0.1 - - Inwards 1.2 1.0 1.2 1.2 1.0 1.2 +1% +0.0% Domestic Outwards - - - - - - - -


p.a. 2004-

10 2010-

15 2015-

20 2020-

25 2025-

30

-3.0% +3.1% +1.2% -3.9% +3.5% Source: MDS Transmodal



Great Britain: Coal Port Traffic Forecast to 2030

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

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Northern Ireland: Coal Port Traffic Forecast to 2030

0

500

1,000

1,500

2,000

2,500

1990 1995 2000 2005 2010 2015 2020 2025 2030

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Table 4.46 provides an analysis of coal traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2003. Table 4.46: Great Britain Coal Port Forecast by Port Region to 2030

Thousand tonnes Port of Region Market Share 2004 2004 2010 2015 2020 2025 2030 East Midlands - - - - - - - East of England 4.7% 1,836 1,522 1,786 1,901 1,543 1,850 Gt. London 0.0% 18 15 18 19 15 18 North East 12.3% 4,859 4,028 4,727 5,031 4,083 4,896 North West 7.6% 2,998 2,485 2,916 3,104 2,519 3,021 Scotland 16.0% 6,321 5,240 6,149 6,544 5,311 6,369 South East 9.0% 3,560 2,951 3,463 3,686 2,991 3,587 South West 9.3% 3,674 3,046 3,574 3,804 3,087 3,702 Wales 9.0% 3,565 2,955 3,468 3,691 2,996 3,592 Yorkshire & the Humber 32.0% 12,617 10,460 12,274 13,062 10,602 12,713 Other GB Islands 0.0% 4 3 4 4 3 4 Total 100% 39,453 32,706 38,379 40,845 33,151 39,753 Source: MDS Transmodal 4.6.7 Impact on ports For coking coal, Corus has its own port facilities at Immingham (for Scunthorpe), at Port Talbot and on Teesside, which handle iron ore and coking coal for their local furnaces. These facilities have been able historically to handle the volumes that are forecast up to 2030. These facilities also handle some 3rd party power station coal. The power generators have made arrangements at ports such as Immingham, Hunterston, Liverpool and Bristol to handle steam coal imports, but there may be a requirement for additional deep water capacity at specific locations to handle deep sea coal imports. Such a view is supported by the development of Humber International Terminal 2 at Immingham. Although the closure of particular power stations by 2008 may have an impact on some ports more than others, the major deep sea coal import facilities all enjoy deep water, specialist berths and rail connections (all sunk costs) and so the market to supply the remaining power stations is likely to be strongly contested between most of the relevant ports. 4.7 Agricultural products 4.7.1 Introduction Forecasts of demand for traffic though UK ports for agricultural products up to 2030 have been based on our understanding of the key economic drivers behind trends in traffic. ‘Agricultural products’ in the UK cover a range of commodities and include grains, cereals, vegetables, oilseeds and animal feedstuffs. It also includes fresh produce handled in bulk



form. With the exception of fresh produce, these products are generally carried in conventional form in bulk carriers and will make up the majority of the cargoes passing through UK ports that are designated as agricultural products under the Maritime Statistics Directive. Agricultural products, when carried in conventional form, will tend to be carried in the size of ship that allows for maximum economies of scale. Short sea exports from the UK to the Near Continent tend to be carried in smaller vessels to allow access to the smaller UK and continental ports. However, deep sea trades for exports of grain, for example, larger ships are deployed. Imports to the UK of animal feed and similar products tend to be sourced from deep sea destinations and so larger ships up to panamax size (approximately 70,000 tonnes carrying capacity) are used, usually destined for deep water ports such as Bristol, Liverpool and London. The broader definition of foodstuffs used by HM Revenue & Customs in trade statistics includes all food (including meat and meat products), feed and drink, a large proportion of which will be imported or exported in containers or in a RoRo form rather than bulk. Overseas Trade Statistics give the value of food, feed and drink exports in 2003 as £9.9 billion, a rise of 11% on 2002 when exports stood at £8.9 billion. The value of food, feed and drink imports in 2003 was £21 billion which was 9.7% higher than the 2002 figure of £19 billion. The value of exports has fallen by 19 % in real terms from its peak in 1995 due to a combination of the strength of sterling, BSE, lower world commodity prices and foot and mouth disease. The value of imports however has risen by 5.3% in real terms over the same period. As a consequence the trade gap in food, feed and drink has widened by 45% to reach £11 billion in 2003. Self-sufficiency in food in the UK (which is calculated as the value of home production of food and feed as a proportion of the total supply) was estimated to be 63% for all food in 2004, declining from almost 74% in 1994. The principal EU exporters to the UK, by value, in 2003 were (in order of importance) Holland, France, Ireland and Germany, and the principal destinations for UK exports were Ireland, France, Spain and Germany. The main non-EU destinations of food, feed and drink exports were the USA, South Korea, Japan and Canada. The major non-EU countries exporting to the UK were the USA, Brazil, Australia and South Africa. Exports of all food groups, by value, fell between 1994 and 2003 in real terms. However, imports rose over the same period by 28%. Imports of highly processed foods such as confectionery, canned meats, and alcoholic drinks rose by 6.3%, lightly processed food imports such as meat, cheese and butter rose by 6.3%, imports of unprocessed commodities such as unmilled cereals, fresh fruit and vegetables, milk and cream rose by only 2.7%. The unprocessed commodities are most likely to be imported in conventional form and be included within the category of agricultural products under Maritime Statistics data definitions.



4.7.2 Market Definition Table 4.47: Agricultural Products Market Size, Major Ports, by Port Region, 2004


Port Traffic

In-wards

Out-wards

Total % GB Port

Traffic

Grand Total

East Midlands 20 122 142 1.4% 2 29 31 4.2% 173 East of England 836 734 1,570 15.9% 21 95 116 15.8% 1,686 Gt London 1,121 407 1,528 15.4% 35 24 60 8.1% 1,587 North East 29 194 223 2.3% 8 17 25 3.4% 248 North West 2,454 20 2,474 25.0% 11 33 44 6.0% 2,518 Scotland 428 275 703 7.1% 38 94 132 18.0% 835 South East 278 553 831 8.4% 2 84 86 11.7% 917 South West 612 149 761 7.7% 5 61 66 9.0% 827 Wales 26 - 26 0.3% - - - - 26 Yorks & Humber 921 711 1,631 16.5% 7 166 174 23.7% 1,805 GB Other Islands - - - - - - - - - GB Total 6,725 3,164 9,888 100% 129 604 733 100% 10,622 N. Ireland 1,793 - 1,793 498 12 510 2,303 UK Total 8,517 3,164 11,681 627 617 1,244 12,925 Source: DfT Maritime Statistics, analysis by MDS Transmodal Table 4.47 shows the movement of agricultural products through UK ports in conventional form in 2004. The major ports for the handling of agricultural products in the UK are London, Liverpool, Belfast, Grimsby and Immingham, Southampton, Ipswich and Bristol. London handles a large proportion of East Anglian exports through its grain terminal at Tilbury and also provides facilities for the importation of animal feed and grain for mills located in the port area. Liverpool imports a wide variety of grains (including wheat, maize and soya), as well as substantial quantities of animal feed through a number of specialist terminals. About half of Grimsby and Immingham’s agricultural products are deep sea grain exports, while imports are made up of animal feed traffic and fertilizers. Southampton exports grain and imports wheat for local millers, as well as providing import facilities for animal feed and fertilizers. Agriculture in Northern Ireland is of greater relative importance than in the UK as a whole. It accounts for 2.2% of Gross Value Added in the economy compared with 0.8% in the UK. Agricultural employment in the province is 4.5% of total employment, whereas in the UK it is only 1.4%. The importance of feed is illustrated by the fact that cattle and milk production make up 60% of Northern Ireland’s gross agricultural output compared with 29% in the UK; the importance of cattle and the requirement for feed is also demonstrated by the fact that only 4% of agricultural output comes from crops compared to a UK figure of 23%. The port market for agricultural products in Northern Ireland is dominated by the port of Belfast, although Londonderry and Warrenpoint also handle significant traffic volumes. Government targets for increasing the amount of electricity generated from renewable resources has increased interest in the co-firing of biomass, including such products as olive



stones and palm kernels, with coal in coal fired power stations. Ports handling animal feedstuffs are ideally suited for handling these products. 4.7.3 Historic Trends Tables 4.48 and 4.49 provide an analysis of agricultural products port traffic volumes for the period 1993-2004. Table 4.48: Great Britain: Agricultural Products Market Size, Major Ports, 1993-2004

Thousand Tonnes Direction 1993 1995 1997 1999 2001 2003 2004 %

Change 1993-2004

% CAGR

Imports 9,722 8,955 8,793 8,382 8,119 6,835 8,517 -31% -3.3% Exports 5,740 4,697 4,775 4,462 2,766 4,814 3,164 -45% -5.3% International Total 15,462 13,651 13,568 12,844 10,885 11,649 11,681 -36% -4.0% Domestic Inwards 243 175 132 305 178 215 129 -47% -5.6% Domestic Outwards 450 299 282 474 325 796 604 +34% +2.7% Domestic Total 693 474 414 779 503 1,011 733 +6% +0.5% GB Total 16,155 14,125 13,982 13,623 11,388 12,660 10,622 -34% -3.7% Source: DfT Maritime Statistics, analysis by MDS Transmodal Table 4.48 shows a gradual decline in the movement of agricultural products through UK ports. Exports have fallen by some 45%, although there have been some fluctuations in volumes probably due to the quality of the UK harvest compared to other parts of Europe and variations in the world price of cereals. Volumes of imported agricultural products during the period may have been affected temporarily by the BSE and foot and mouth crises, which would have reduced the demand for animal feedstuffs. Table 4.49: UK Agricultural Products Market Size, Major Ports, by Port Region,

1993-2004 Thousand Tonnes

Port Region 1993 1995 1997 1999 2001 2003 2004 % Change 1993-2004

% CAGR

East Midlands 823 - - - 288 427 173 -79% -13.2% East of England 3,028 2,264 2,229 2,272 1,834 2,211 1,686 -44% -5.2% London 1,791 1,920 2,024 2,104 1,928 1,600 1,587 -11% -1.1% North East 480 494 176 316 135 268 248 -48% -5.8% North West 2,762 2,790 3,203 3,082 2,906 2,814 2,518 -9% -0.8% Scotland 1,513 904 741 939 869 766 835 -45% -5.3% South East 1,218 1,818 1,899 1,357 933 1,295 917 -25% -2.6% South West 1,421 1,068 664 999 817 1,055 827 -42% -4.8% Wales 226 312 418 347 57 87 26 -89% -17.9% Yorks. & Humber 2,865 2,555 2,625 2,196 1,620 2,136 1,805 -37% -4.1% Northern Ireland 1,461 1,440 1,238 1,641 1,638 2,092 2,303 +58% +4.2% Other islands 27 - 5 10 - - - -100% -100% Total UK 17,617 15,566 15,220 15,264 13,026 14,752 12,925 Source: DfT Maritime Statistics, analysis by MDS Transmodal



4.7.4 Economic Drivers of Demand Table 4.50: Agricultural Statistics 1993-2003

Thousands Average

1993-95 1999 2000 2001 2002 2003 % Change

1993-2003 Wheat imports (tonnes) 1,240 1,195 1,176 1,305 1,368 985 -21% Wheat imports (tonnes) 3,455 2,853 3,671 1,626 1,624 3,662 + 6% National herd of cattle 11,887 11,135 10,602 10,345 10,517 10,603 - 11% Cereal land under cultivation (hectares)

3,086 3,348 3,014 3,245 3,059 3,133 + 2%

Other arable land under cultivation (hectares)

2,068 979 1,103 993 1,092 1,129 - 45%

Total arable land under cultivation (hectares)

5,154 4,327 4,117 4,238 4,151 4,262 - 17%

Source: DEFRA, Agriculture in the United Kingdom 2004 Demand for port facilities for agricultural products is driven by a combination of factors. Demand for import and export of cereals is driven largely by the amount of land under cultivation, the quality of the harvest and world cereal prices. A poor harvest in the UK will reduce the quantity of grain available for export and is more likely to encourage imports to make up any shortfall. Both imports and exports volumes can therefore vary considerably and average import volumes during the period 1993-2003 were 1.21 million tonnes while average export volumes were 3.1 million tonnes. Animal feed requirements will be driven largely by the growth or decline of the dairy and beef farming industry (i.e. the size of the national herd) in the UK. The size of the herd has fallen by 21% since 1993 and is in long-term decline. However global market prices compared with UK prices will dictate how much material is imported. In 2003 the UK exported animal feed to the value of £330.5 million; the value of imports in the same year was £902.7 million, almost three times as much. In general over the last 8 years import value has been between two and three times export values. In 2003 just over 21 million tonnes of animal feed was purchased by the farming industry with a value of £2,365 million. The volume of fertilisers imported is likely to be related in general terms to the total amount of arable land under cultivation, which has declined by 17% since 1993. 4.7.5 Central Forecast up to 2030 Our Central Forecasts shown in Tables 4.51 and 4.52 assume that grain imports and exports will, in the long term, be the same as the average of flows in the period 1993-2004 (although in reality there will be significant fluctuations, particularly depending on the quality of the harvest). The forecast for Great Britain also reflects the long-term decline of the British herd, while the forecast for Northern Ireland reflects a slight increase in the size in its herd.



Table 4.51: Great Britain: Agricultural Products, Central Forecast to 2030 Million tonnes

Direction 2004 2010 2015 2020 2025 2030 % Change

2004-2030

% CAGR

Imports 6.7 6.6 6.4 6.3 6.2 6.1 -10% -0.4% International Exports 3.2 3.2 3.2 3.2 3.2 3.2 - - Inwards 0.1 0.1 0.1 0.1 0.1 0.1 -10% -0.4% Domestic

Outwards 0.6 0.6 0.6 0.6 0.6 0.6 +6% +0.2% Total Total 10.6 10.5 10.4 10.2 10.1 10.0 -6% -0.2%

% Change p.a.

2004-10

2010-15 2015-20

2020-25

2025-30

-0.2% -0.3% -0.3% -0.2% -0.2% Source: MDS Transmodal Table 4.52: Northern Ireland: Agricultural Products, Central Forecast to 2030

Million tonnes Direction 2004 2010 2015 2020 2025 2030 %

Change 2004-2030

% CAGR

Imports 1.8 1.9 1.9 1.9 1.9 1.9 +6% +0.2% International Exports - - - - - - - - Inwards 0.5 0.5 0.5 0.5 0.5 0.5 +6% +0.2% Domestic Outwards - - - - - -


p.a. 2003-

10 2010-

15 2015-

20 2020-

25 2025-

30

+1.0% - - - - Source: MDS Transmodal



Great Britain: Agric Products Port Traffic Forecast to 2030

0

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4,000

6,000

8,000

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1990 1995 2000 2005 2010 2015 2020 2025 2030

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Northern Ireland: Agric Products Port Traffic Forecast to 2030

0

200

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Table 4.53 provides an analysis of agricultural products traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2004. Table 4.53: Great Britain Agricultural Products Port Forecast by Port Region to 2030

Thousand tonnes Port of Region Market Share 2004 2004 2010 2015 2020 2025 2030 East Midlands 1.6% 173 171 169 167 165 163 East of England 15.9% 1,686 1,665 1,643 1,623 1,603 1,585 Gt. London 14.9% 1,587 1,567 1,547 1,527 1,509 1,492 North East 2.3% 248 245 242 239 236 233 North West 23.7% 2,518 2,486 2,454 2,423 2,394 2,367 Scotland 7.9% 835 824 814 804 794 785 South East 8.6% 917 905 894 883 872 862 South West 7.8% 827 817 806 796 786 777 Wales 0.2% 26 26 25 25 25 24 Yorks & Humber 17.0% 1,805 1,782 1,759 1,737 1,716 1,697 GB Islands - - - - - - - Total 100% 10,622 10,487 10,352 10,223 10,101 9,984 Source: MDS Transmodal 4.8 Other Dry Bulk Products 4.8.1 Introduction This section describes our forecasts of demand for traffic though UK ports for “other dry bulks” up to 2030, based on an understanding of the key economic drivers behind trends in traffic. This category covers a wide range of dry bulk commodities of which the most important in terms of volume are scrap metal and aggregates. Aggregates are used largely in the construction industry and this accounts for a high proportion of the “other dry bulk” imports and almost all domestic movements in this cargo category. Scrap metal accounts for about 65% of UK exports of “other dry bulks”. This section of the report defines the port traffic market for “other dry bulks”, concentrating on scrap metal and aggregates and describes historic trends during the period 1993-2004; it then describes the factors influencing demand for “other dry bulks” and factors affecting supply; it concludes by providing our Central Forecast for “other dry bulks” up to 2030. 4.8.2 Market Definition Table 4.54 provides an analysis of the UK port market for the handling of “other dry bulks” in 2004.



Table 4.54: UK “Other Dry Bulks” Market Size, Major Ports, by Port Region, 2004 Thousand tonnes


Port Traffic

In-wards

Out-wards

Total % GB Port

Traffic

Grand Total

East Midlands 15 - 15 0.1% - - - - 15 East of England 1,121 206 1,328 6.6% 2,214 122 2,336 11.7% 3,664 Gt London 917 249 1,166 5.8% 3,884 111 3,995 20.0% 5,161 North East 454 1,021 1,475 7.3% 949 458 1,406 7.0% 2,881 North West 1,176 2,773 3,949 19.5% 363 117 479 2.4% 4,428 Scotland 676 3,356 4,031 19.9% 618 2,081 2,698 13.5% 6,730 South East 1,414 250 1,665 8.2% 6,168 562 6,730 33.7% 8,394 South West 847 2,223 3,070 15.2% 643 217 860 4.3% 3,930 Wales 944 10 954 4.7% 919 227 1,146 5.7% 2,099 Yorks & Humber 2,409 162 2,571 12.7% 303 14 317 1.6% 2,888 GB Islands 8 - 8 0.0% 5 4 9 0.0% 16 GB Total 9,982 10,249 20,231 100% 16,064 3,911 19,976 100% 40,207 Northern Ireland 667 346 1,012 230 673 904 1,916 UK Total 10,648 10,595 21,243 16,295 4,585 20,879 42,122 Source: DfT Maritime Statistics, analysis by MDS Transmodal Total “other dry bulks” traffic handled through UK ports in 2004 amounted to some 42.1 million tonnes. About 21.2 million tonnes of this traffic relates to international traffic, with a roughly 50:50 split between imports and exports. The majority of exports were of scrap metal in bulk form, with significant volumes exported through ports such as Liverpool, Cardiff, Newport, Port of Tyne and Southampton. Only small volumes of scrap metal were imported in 2004, with some imports of aggregates (crude granite) from Norway for sea defences. About 20.8 million tonnes of traffic relates to domestic traffic, of which 16.3 million was inwards and about 4.6 million was outwards; this imbalance reflects the importance of the flows of aggregates dredged from the seabed, mainly off the south and east coast of England, which amounted to some 14 million tonnes in 2004. Other important domestic flows include the movement of aggregates from the coastal “super quarry” at Glensanda on the west coast of Scotland to the South and East of England. The regional distribution of movements of “other dry bulk” commodities as shown in Table 4.54 above reflect the movements of a wide variety of commodities of which scrap materials and aggregates form the major part. Major volumes of scrap exports from Liverpool are reflected in the dominance of the North West region for exports. Scotland’s export totals are dominated by aggregate exports from Glensanda. Exports of scrap from the ports of Tyne and Sunderland are reflected in the figures for exports from the North East region. 4.8.3 Historic Trends Table 4.55 provides an analysis of historic trends in “other dry bulks” during the period 1993-2004.



Table 4.55: GB Other Dry Bulks Market Size, Major Ports, 1993-2004 Thousand tonnes

Direction 1993 1995 1997 1999 2001 2003 2004 % Change 1993-2004

% CAGR

Imports 8,375 7,849 7,663 8,302 9,608 10,060 9,982 +19% +1.6% Exports 8,021 5,107 4,859 5,260 9,908 10,801 10,249 +28% +2.3% International Total 16,396 12,956 12,522 13,562 19,515 20,861 20,231 +23% +1.9% Domestic Inwards 17,277 16,807 14,174 15,161 17,754 17,524 16,064 -7% -0.7% Domestic Outwards 5,427 3,171 2,998 3,120 3,435 3,920 3,911 -28% -2.9% Domestic Total 22,704 19,978 17,72 18,281 21,188 21,444 19,976 -12% -1.2% Grand Total 39,099 32,934 29,694 31,844 40,704 42,305 40,207 +3% +0.3% Source: DfT Maritime Statistics, analysis by MDS Transmodal The main area of growth has been in international exports reflecting the increasing global demand for scrap from the UK. Table 4.56: UK Other Dry Bulks Market Size, Major Ports, by Port Region, 1993-2004

Thousand tonnes Port Region 1993 1995 1997 1999 2001 2003 2004 % Change

1993-2004 %

CAGR East Midlands 56 - - - 14 20 15 -73% -11.4% East of England 2,797 2,737 2,513 3,103 3,693 3,718 3,664 +31% +2.5% London 3,111 4,260 4,264 4,736 5,687 5,273 5.161 +66% +4.7% North East 3,615 2,101 2,480 2,129 2,589 3,005 2,881 -20% -2.0% North West 2,028 1,451 1,622 1,763 3,864 4,657 4,428 +118% +7.4% Scotland 6,513 6,086 5,383 6,336 7,132 6,853 6,730 +3% +0.3% South East 9,742 10,197 7,775 8,092 10,244 10,306 8,394 -14% -1.3% South West 4,648 1,024 889 1,023 3,766 3,951 3,930 -15% -1.5% Wales 2,807 1,568 1,566 1,438 1,554 1,599 2,099 -25% -2.6% Y’shire & Humber 3,477 3,474 3,154 3,187 2,114 2,909 2,888 -17% -1.7% Northern Ireland 1,409 828 909 1,079 1,777 2,103 1,916 +36% +2.8% Other islands 304 36 48 36 48 13 16 -95% -23.5% Total UK 40,509 33,762 30,603 32,923 42,480 44,407 42,122 +4% +0.4% Source: DfT Maritime Statistics, analysis by MDS Transmodal 4.8.4 Economic Drivers of Demand Ferrous Scrap Demand for ferrous scrap is driven by the demand for steel produced by electric arc furnaces (EAF) in the UK and overseas. Table 4.57 below gives UK import and export volumes for the period 1999-2003.



Table 4.57: Imports and Exports of Scrap Metal 1999-2003 1999 2000 2001 2002 2003 % Change

1999-2003 Imports 151 190 164 118 140 -7% Exports 3,573 4,382 4,817 5,555 7,219 +102% Totals 3,724 4,572 4,981 5,673 7,359 +98 Source: International Iron and Steel Institute Table 4.57 shows that exports are by far the dominant flow, with volumes more than doubling since 1999. Between 1994 and 1999 export volumes were stable at around 3.5 million tonnes per year, but increasing demand, especially in the Far East, has seen prices and export volumes rise. Although the main driver of demand worldwide is currently China, the majority of UK scrap is exported to less distant locations where shipping costs are still competitive, such as Europe, Turkey, Egypt, Malaysia, Indonesia, India, Pakistan and the Middle East. The demand in China itself has tended to draw in scrap arisings worldwide, causing a ‘knock-on’ effect that has increased demand for UK scrap. The main feature of the so-called ‘China effect’ is the considerable volume of manufactured goods being exported to Western Europe from China in containers. Because of the imbalance in trade between the West and China, once discharged these containers have to be sent back to China for further exports. There is, as a consequence, an opportunity to fill these containers with less traditional cargo to be exported to China in containers that would otherwise be empty. Despite its low value, there is strong evidence of ferrous scrap now being shipped to China in containers to take advantage of very low ‘backload’ freight rates. Estimates of volumes moved in this way are around 20,000 TEU per year, which equates to almost 400,000 tonnes and this traffic is taken into account in our deep sea container demand forecasts (Chapter 3). Given that the scrap fills containers that would otherwise be moved empty, its impact on port capacity is negligible. Aggregates The construction industry is the main user of aggregates in the UK. Although increasing quantities of alternative/recycled materials (approximately 65 million tonnes per year) are being used, large amounts of primary materials (248 million tonnes in 2002) are also required. These include sand and gravel for concrete, crushed rock (limestone, igneous rock and sandstone) for road construction and maintenance and clays for brick and tile manufacture.



Table 4.58: Construction Aggregates – End Uses End Use Percentage of Total Aggregates Roads (construction) 24% Roads (repair and maintenance) 8% Housing (construction) 20% Housing (repair and maintenance) 8% Private (commercial) 12% Private (industrial) 11% Other public 13% Other uses 4% Total 100% Source: SRA Aggregates Market Study, Summary Report, 2005 From Table 4.58 it can be seen that road construction, repair and maintenance is responsible for 32% of aggregate use closely followed by housing construction, repair and maintenance at 28%. These two areas provide 60% of total demand and the movements of aggregates within the UK will be highly related to expenditure in these two areas. By the end of World War II aggregate production in the UK was 51 million tonnes and following the war there was a steady increase in demand reaching a peak of 256 million tonnes in 1973. The latter part of the 1970s and early 1980s saw a rapid decline due to the worldwide recession but the mid 1980s saw a period of recovery during the housing boom leading to another peak in 1989-90 of 300 million tonnes. This was relatively short lived and aggregate demand declined to 215 million tonnes in 1996. Following this period demand has remained more or less steady. 4.8.5 Economic Drivers of Supply Ferrous scrap The worldwide supply of steel scrap comes from demolition waste from industrial plant, ships and post-consumer waste. In the UK, the International Iron and Steel Institute has estimated the apparent domestic supply of scrap in the UK as 11.9 million tonnes per annum. Prior to 1999, approximately two thirds of UK scrap arisings were consumed in the UK with approximately one third being exported. This ratio has now changed with one third of arisings being used in the UK and the remaining two thirds being exported. The International Iron and Steel Institute estimated scrap consumption in the UK in 2003 as 4.8 million tonnes and the apparent domestic supply of scrap in the UK as 11.9 million tonnes, leaving 7.1m tonnes as available for export. The nature of the arisings has also now changed; whereas previously they were largely made up of demolition waste from derelict industrial plant and redundant factories, present day arisings come from post consumer waste such as end of life vehicles and white goods which produce ‘shredded scrap’. This



change in the source of scrap is seen as creating a limit on future UK arisings, which are expected by the trade to remain at approximately current levels for the foreseeable future. In the UK, therefore, the key economic driver of supply of steel scrap is the volume of post-consumer waste – of which the most important in terms of volume is likely to be cars and other vehicles. Aggregates Sand and gravel are quarried throughout the UK, but significant tonnages are also dredged from the seabed. Hard rock suitable for use as crushed rock aggregate has an uneven distribution in the UK, and southern and eastern England are largely devoid of such resources. Consequently significant quantities of crushed rock are imported into South East England from the Mendips and the East Midlands and from the UK’s only ‘super quarry’ at Glensanda on the west coast of Scotland. Only modest quantities of crushed rock are imported from Europe. Table 4.59 shows the breakdown of primary aggregates by broad type of material in 2003. Primary or natural aggregate extraction in the UK in 2003 amounted to about 204 million tonnes, 40% of which was sand and gravel from quarries and the sea-bed and 60% was crushed hard rock. Table 4.59: Primary Aggregates Extraction in the UK, 2003 Material Million tonnes Percentage of total Sand and gravel (land won and sea dredged) 81.0 40% Crushed rock 123.0 60% Totals 204.0 100% Source: The Role of Imports to UK Aggregates Supply, British Geological Survey The UK is a net exporter of primary aggregates, mainly due to landings of marine dredged sand and gravel from the UK sector directly at Continental ports (so that these exports are not landed at a UK port and are not included in DfT Maritime Statistics) and also exports of crushed rock from Glensanda. In total these exports amounted to about 12 million tonnes in 2004. Primary aggregates are increasingly being supplemented by alternative materials, such as recycled construction and demolition waste, and secondary aggregates such as industrial by-products (slag and mineral waste from other workings, for example). Small quantities of primary aggregates (about 2 million tonnes per year) are also imported, mainly primary aggregate imports of ‘crude granite’ from Norway used for sea defences. Crushed rock is also transported by sea to destinations in England, the majority of which comes from the Glensanda quarry. The quarry can produce up to 15 million tonnes per year but is currently producing about 6 million tonnes per annum. Aggregate is loaded at



Glensanda direct into self-discharging ships of up to 97,000 tonnes carrying capacity. Material for the South East of England is discharged at Foster Yeoman’s ‘virtual quarry’ on the Isle of Grain from where it is processed by crushing and screening and delivered to other ports and end users in southern and eastern England by barge or rail. Glensanda also serves other terminals at Liverpool, Greenock, Southampton and Great Yarmouth. However, the majority of Glensanda’s output is exported to Europe through facilities in the Netherlands, Germany, France and Poland. Sea Dredged Aggregates In 2003 the UK marine aggregates industry dredged approximately 22 million tonnes of sand and gravel from UK waters. Of this total 14.37 million tonnes of aggregates were landed in the UK. These are regarded as one-port traffic. The table above shows 17.7 million tonnes of domestic inward movement of other dry bulk goods. The majority of this tonnage will be made up of aggregates, a large proportion of which will be sea dredged. Almost 14 million tonnes of the total is moved into the South East, Greater London or the East of England. This pattern of movement not only reflects the major areas of demand in terms of population density and construction activity, but also the main producing areas for sand and gravel in the southern North Sea and the English Channel. The British Marine Aggregates Producers Association has estimated that at present rates of extraction there are sufficient reserves for another 50 years. Northern Ireland Northern Ireland has no steel manufacturers using electric arc furnaces, so all scrap metal is exported, mainly to the UK but also to Spain. There are also exports of roadstone. Imports under the “other dry bulk” category consist mainly of aggregates. 4.8.6 Central Forecast The Central Forecast for steel scrap imports and exports is based on the following assumptions:

• The volume of scrap steel arisings in the UK is directly related to the number of new cars purchased in the UK;

• The consumption of steel scrap by UK steelmakers is directly related to the volume of steel manufactured in the UK;

• Steel scrap imports are directly related to the volume of steel manufactured in the UK, which implies that the manufacturers of steel using electric arc furnaces will continue to use the same proportion of imported steel compared to UK arisings;

• The rate of containerisation of steel scrap increases from 6% to 13% by 2010, remaining constant thereafter.



The Central Forecast for aggregates is based on demand forecasts for GB for primary aggregates contained in ODPM’s National and Regional Guidelines for Aggregates Provision in England 2001-2016 Second Monitoring Report (November 2005). Appendix A to these Guidelines provides forecasts to 2016, based on demand modelling by consultants. These forecasts estimate that GB demand for primary aggregates will increase from 202 million tonnes in 2003 to 247 in 2011 and that from 2011-16 demand will remain stable. Appendix A also indicates that the results of the Barker Review of housing supply (published March 2004) was partly reflected in the ODPM forecasts published in November 2005, but the forecasts would be monitored as work by the government on the Barker Review proceeds. The Central Forecast for aggregates is therefore based on the following assumptions:

• The volume of aggregates imports (essentially from Norway) is directly related to forecast growth in primary aggregates for GB published in the Office of the Deputy Prime Minister’s National and Regional Guidelines for Aggregates Provision in England 2001-2016 Second Monitoring Report; from 2016 onwards, the volume of imports of aggregates is assumed to remain stable.

• The volume of domestic movements of aggregates is directly related to forecast growth in primary aggregates for GB published in the Office of the Deputy Prime Minister’s National and Regional Guidelines for Aggregates Provision in England 2001-2016 Second Monitoring Report. From 2016 onwards, the volume of domestic movements of aggregates is assumed to remain stable.

• Exports of “other dry bulks” through UK ports (i.e. excluding sea-dredged aggregates which are exported without being handled or stored at a UK port) are assumed to remain stable at just over 10 million tonnes per annum during the forecast period, given the lack of information on demand for steel and construction activity overseas.

All other dry bulk imports are assumed to remain stable. Our forecast is that “other dry bulks” traffic will grow by 5% by 2030. Table 4.60: Great Britain: Other Dry Bulks, Central Forecast to 2030


2004-2030 %

CAGR Imports 10.0 10.1 10.2 10.2 10.2 10.2 +2% +0.1% International Exports 10.3 10.3 10.3 10.3 10.3 10.3 - - Inwards 16.1 17.1 17.4 17.4 17.4 17.4 +8% +0.3% Domestic Outwards 3.9 4.2 4.2 4.2 4.2 4.2 +8% +0.3%


p.a. 2004-

10 2010-

15 2015-

20 2020-

25 2025-30

+0.6% +0.2% - - - Source: MDS Transmodal



Table 4.61: Northern Ireland: Other Dry Bulks, Central Forecast to 2030


2004-2030 %

CAGR Imports 0.7 0.7 0.7 0.7 0.7 0.7 +2% +0.1% International Exports 0.4 0.4 0.4 0.4 0.4 0.4 - - Inwards 0.2 0.2 0.2 0.2 0.2 0.2 +8% +0.3% Domestic Outwards 0.7 0.7 0.7 0.7 0.7 0.7 +8% +0.3%

Total Total 1.9 2.0 2.0 2.0 2.0 2.0 +5% +0.2% % p.a.

Change 2004-

10 2010-

15 2015-

20 2020-

25 2025-

30

+0.6% +0.2% - - - Source: MDS Transmodal

Great Britain: Other Dry Bulks Port Traffic Forecast to 2030

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Thou

sand

tonn

es




Table 4.62 provides an analysis of other dry bulks traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2004. Table 4.62: Great Britain Other Dry Bulks Port Forecast by Port Region to 2030

Thousand tonnes Port of Region Market Share 2004 2004 2010 2015 2020 2025 2030 East Midlands 0% 15 16 16 16 16 16 East of England 9.1% 3,664 3,788 3,832 3,832 3,832 3,832 Gt. London 12.8% 5,161 5,335 5,398 5,398 5,398 5,398 North East 7.2% 2,881 2,978 3,013 3,013 3,013 3,013 North West 11.00% 4,428 4,578 4,631 4,631 4,631 4,631 Scotland 16.7% 6,730 6,957 7,039 7,039 7,039 7,039 South East 20.9% 8,394 8,678 8,779 8,779 8,779 8,779 South West 9.8% 3,930 4,063 4,110 4,110 4,110 4,110 Wales 5.2% 2,099 2,170 2,195 2,195 2,195 2,195 Yorkshire & the Humber 7.2% 2,888 2,986 3,020 3,020 3,020 3,020 GB Islands 0.0% 16 17 17 17 17 17 Total 100% 40,207 41,565 42,020 42,020 42,020 42,020 Source: MDS Transmodal

Northern Ireland: Other Dry Bulks Port Traffic Forecast to 2030

0

100

200

300

400

500

600

700

800

900

1,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Thou

sand

tonn

es




4.8.7 Implications for ports With the relatively recent shift in UK scrap arisings to post-consumer material and end of life vehicles, the scrap market in general is regarded as in a ‘steady state’ with the present volume of UK arisings unlikely to vary significantly for the foreseeable future. In terms of the effects on port facilities, there are no indications that export volumes are likely to increase substantially given the finite volume of arisings in the UK. The only likely increase in export volume will come from a lack of UK demand caused by the closure of UK-based electric arc furnaces. This appears to be unlikely as all the independent producers have recently been taken over by new owners who have made investments in their facilities with a view to the longer term. There is also further scope for the export of scrap material to the Far East and especially China in empty containers and, if this method of transport becomes more popular, the potential pressure on ports handling scrap in bulk will be eased. The effect on ports handling containers will be negligible as the previously empty containers would have to be handled anyway. 4.9 Forestry Products 4.9.1 Introduction Our forecasts for forestry products seek to identify the volumes of forestry product cargo moving conventionally, and not carried in unit loads (containers and trailers). Forecasts for unitised forestry products are included in the analysis in Chapter 3. The forestry products sector covers the entire range of products produced from timber and includes roundwood, sawnwood, wood based panels such as particle board, fibreboard and plywood, veneers, pulp and paper products, wood pulp and recovered paper. Total annual UK consumption has been estimated as over 50 million cubic metres. The different products are as follows:

• Roundwood: felled trees, stripped of branches and cut to length for transport.; • Sawnwood: timber, usually sawn into square or rectangular cross section, cut to

length and packaged into regular shaped bundles for transport. • Woodpulp: debarked wood, crushed and ground mechanically and/or chemically to

separate out its cellulose fibres. The resultant material is dried and baled for transport to paper mills.

• Panel products: includes chipboard, fibreboard, strand board and is formed by compressing and bonding wood particles, wood fibres, shavings or wood chips into sheets or panels.

• Paper products: the most important paper product that is carried in semi-bulk form is newsprint on reels;



• Plywood: panels formed by gluing thin sheets of wood together with the grain of adjacent layers at right angles;

• Recovered paper: used paper, collected and baled for recycling and re-use for the manufacture of new paper.

Timber can be regarded as high volume and low value and, although sawn timber can be containerised, it is far more common to carry it in a packaged semi-bulk form. Roundwood is also usually carried in bulk, while panel boards are also generally carried in packaged bulk form, as is pulp. Paper is another product that is often carried in bulk form in specialised ships, particularly newsprint. However, a substantial quantity of higher quality paper and sanitary/household paper is containerised. Although packaged timber in bulk can be handled using the most basic port facilities, the majority is handled through ports that specialise in this particular traffic and have substantial undercover storage. The pulp and paper trades require specialised equipment and facilities and so tend to be concentrated in ports that have made substantial investments in handling equipment and storage. Forestry products is the most important semi-bulk sector to the ports industry and to successfully serve a forestry products business a port needs to provide large areas of storage, preferably covered; and if the higher value materials, such as paper products, are to be handled then specialised equipment is required. Demand for forest products is of particular importance to the ports sector because, when carried in conventional semi-bulk or packaged form, it represents a labour intensive cargo with a need for substantial numbers of staff to discharge the ships, sort and stack the cargo in storage areas and deliver to final customer. This sector is also notorious for allowing timber importers to take advantage of quayside storage space as large volumes of timber can be imported unsold. This occurs when market prices and shipping costs are low and timber bought in the expectation of higher prices in the future can remain unsold on quayside storage areas for many weeks, taking up valuable space. As demand increases, timber clears port areas more quickly, reducing ‘dwell’ times and allowing for increased throughput. 4.9.2 Market Definition Table 4.63 provides an analysis of total trade in forest products in 2003, including products handled in unit loads (i.e. in containers or trailers).



Table 4.63: UK Import and Exports of Forestry Products in 2003 Thousand tonnes Imports

2003 %

Imports Exports

2003 %

Exports Roundwood, Sawnwood 5,383 32% 533 12% Wood-based Panels 2,124 13% 325 7% Pulp and Paper 7,490 45% 1,697 37% Wood Pulp 1,622 10% 2,016 44% Total 16,619 100% 4,571 100% Source: HM Revenue and Customs/UK Overseas Trade Statistics While total forestry product trade was about 21 million tonnes in 2003, the traffic handled in semi-bulk form through UK ports in 2004 was reported as being only some 10.6 million tonnes (Table 4.64), which suggests that about 50% of UK forestry products trade is unitised. Table 4.64: UK Forestry Products Market Size, Major Ports, by Port Region, 2004


Port Traffic

In-wards

Out-wards

Total % GB Port

Traffic

Grand Total

East Midlands 170 - 170 1.7% - - - - 170 East of England 2,208 21 2,229 22.8% 10 - 10 5.1% 2,239 Gt London 298 5 303 3.1% 2 - 2 1.2% 305 North East 124 - 124 1.3% 10 1 11 5.7% 135 North West 714 4 718 7.4% - - - - 718 Scotland 898 44 942 9.6% 3 88 91 47.7% 1,033 South East 2,221 73 2,294 23.5% 10 67 77 40.2% 2,371 South West 269 4 273 2.8% - - - - 273 Wales 276 131 407 4.2% - - - - 407 Yorks & Humber 2,285 14 2,299 23.6% - - - - 2,299 GB Total 9,463 296 9,759 100% 35 156 191 100% 9,950 Northern Ireland 605 - 605 - 3 3 608 Grand Total 10,068 296 10,364 35 158 194 10,558 Source: DfT Maritime Statistics, analysis by MDS Transmodal In the semi-bulk forestry products trades, imports dominate and represent 95% of total traffic. The pattern of forestry product flows shows the dominance of the eastern regions with Yorkshire & Humber, the South East, the East of England and Greater London accounting for almost 73% of GB traffic due to their proximity to the major exporting areas of Scandinavia and the Baltic. Despite having a population of just 1.6 million or 2.7% of the UK population, in 2004 Northern Ireland imported almost 6% of total UK imports of forestry products. This is likely to be due to the increase in construction activity, following the movements towards a peace settlement in the province, and the lack of any significant indigenous sources of forest products.



4.9.3 Historic Trends Tables 4.65 and 4.66 provide an analysis of GB and UK forestry product flows between 1993-2004. Table 4.65: GB Forestry Products Market Size, Major Ports, 1993-2004

Thousand tonnes 1993 1995 1997 1999 2001 2003 2004 % Change

1993-2004 %

CAGR Imports 9,036 7,428 7,878 8,111 9,119 9,831 9,463 +9% +0.8% Exports 117 116 229 128 142 157 296 +160% +9.1% International Total 9,153 7,544 8,107 8,239 9,261 9,988 9,759 +11% +0.9% Domestic Inwards 54 29 13 22 21 36 35 -18% -1.8% Domestic Outwards 25 - - - 124 225 156 +3088% 37.0% Domestic Total 79 29 13 22 144 261 191 +302% +13.5% Total 9,232 7,573 8,120 8,261 9,405 10,249 9,950 +12% +1.0% Source: DfT Maritime Statistics, analysis by MDS Transmodal Table 4.66: UK Forestry Products Market Size, Major Ports, by Port Region,

1993-2004 Thousand tonnes Port Region 1993 1995 1997 1999 2001 2003 2004 % Change

1993-2004 %

CAGR East Midlands 60 - - - 220 258 170 +183% +9.9% East of England 1,742 1,688 1,825 1,998 2,226 2,242 2,239 +29% +2.3% London 312 331 345 391 319 299 305 -2% -0.2% North East 757 108 85 184 142 162 135 -82% -14.5% North West 755 632 703 508 536 455 718 -5% -0.5% Scotland 1,018 402 441 532 1,042 787 1,033 +1% +0.1% South East 2,236 2,078 1,997 2,106 2,049 2,481 2,371 +6% +0.5% South West 351 362 556 412 339 270 273 -22% -2.3% Wales 329 113 91 93 210 354 407 +24% +2.0% Yorks. & Humber 1,311 1,498 1,698 1,632 1,994 2,456 2,299 +75% +5.2% Northern Ireland 359 362 380 405 328 483 608 +69% +4.9% Other islands 2 - - - - - - -100% -100% Total UK 9,232 7,573 8,120 8,261 9,405 10,249 10,558 +14% +1.2% Source: DfT Maritime Statistics, analysis by MDS Transmodal Overall the trend in the movement of forest products has been up, following a decline between 1993 and 1995. There has been a clear movement towards increasing throughput on the east coast and especially in the Yorkshire and Humber region, where throughput has increased by about a million tonnes since 1993. 4.9.4 Economic Drivers of Demand In the long term change in demand for wood products in the UK is related to economic growth, which is largely determined by population growth, capital investment and technological progress. However, in Europe as a whole, consumption of sawn wood has



been growing slightly slower than the economy. Wood products also compete with alternative materials and relative changes in prices and preferences are important in determining demand. In the shorter-term fluctuations in economic conditions such as changes in consumer spending, business investment and government expenditure will influence demand for wood products. Demand for primary wood products and timber is derived from the demand for the final products that are produced from it and therefore economic activity in end-use sectors is the key influence on demand for forest products. These key end use sectors are housing construction, joinery, shipping containers and packaging and industrial wood use. Relevant determinants of timber demand will therefore be GDP growth, housing starts and industrial production. Essentially, however, the key economic drivers for each products type are as follows:

• Demand for sawnwood is related to growth in the main sectors of construction and, in

particular, house building. • Consumption of wood based panels is related to the demand for panel products – for

new kitchens, decorative mouldings, doors and other internal uses - in construction and house building.

• Paper and paperboard demand is driven by the newspaper industry, the packaging industry and increasing use of hygiene/household papers.

• Pulp is driven by demand from the paper industry and recycled paper products are a substitute for wood pulp.

Demand for recovered paper for export is driven by a lack of recycling capacity in the UK and demand in the Far East where labour costs are low and surplus recycling capacity exists. Most of the recycled paper is handled in containers, due to the number of empty containers returning to the Far East. 4.9.5 Economic Drivers of Supply UK production accounts for around a quarter of the UK sawnwood market and around one half of the UK wood-based panel and paper markets. Only a small proportion of UK produced material is exported and the bulk of UK demand is met through imports which makes the UK the fourth largest importer of forestry products in the world after China, the USA and Japan. The majority of forest products imported into the UK come from Scandinavia and the Baltic region. Table 4.67 below gives the major sources of forestry products for the UK.



Table 4.67: Main sources of UK imports of forestry products

Product Major Sources Sawn Softwood Sweden, Latvia, Finland Sawn Hardwood Latvia, Estonia, United States Plywood Brazil, Indonesia Particleboard and Fibreboard European Union, Especially France and Germany Wood Pulp Canada, United States Paper and Paperboard Sweden, Finland, Germany

Source: Forestry Facts and Figures 2004, Forestry Commission Sources for imported forest products and especially sawn softwood have changed substantially since the early 1990s and have switched from Canadian imports to the Baltic States. This has caused a change in both the type of ships in use and the ports used for these cargoes. Canadian imports, from both the east and west coasts of Canada, were carried in ships of up to panamax size (up to approximately 50,000 tonnes carrying capacity) to reap the maximum economies of scale possible, and tended to use the larger UK west coast ports such as Bristol, Newport and Liverpool. The shift towards sources in Eastern Europe and Scandinavia drove the demand for smaller ships (up to approximately 5,000 tonnes carrying capacity) that are most economic in the short sea trades and drove the demand for port facilities on the east coast of the UK such as on the Humber, the Thames and the Medway. International wood supply is dependant on both fixed and variable factors. Fixed factors include growing stock, growth rates, age classes and site productivity. Variable factors include regeneration methods and spacing of planting, expectations of present and future prices and harvesting costs as well as a range of forest management objectives. In Scandinavia, and to some extent in the UK, the bulk of forest harvesting is undertaken to supply the pulp and paper industries and if the pulp and paper price is strong then forests are harvested. As well as supplying the pulp and paper industries, there will be a substantial proportion of timber available to be sold as sawn timber. The production of timber will therefore not necessarily be related to the market demand for sawn wood at that time. Once a forest reaches maturity there is a 5-10 year window for harvesting which allows the owner to decide when to harvest to get the best price. The growing stock and the harvesting window will not necessarily determine what quantity of material reaches the market. In Finland, for example, there are many small independent forest owners who may have reasons for harvesting that are not necessarily related to the market price; harvesting decisions could be dictated by family needs, such as the need to establish a pension fund or to provide an inheritance. 4.9.6 Central Forecast Our forecast is based on the results of a major study carried out under the auspices of the UN on consumption of forestry products in Europe. The European Forest Sector Outlook



Study (EFSOS) presented long term trends to 2020 for supply and demand of forestry products and services for Western and Eastern Europe and the four major CIS countries including Russia. The study was based on a major collaborative effort by experts in the countries covered in the study, under the auspices of the United Nations Economic Commission for Europe (UNECE) Timber Committee and the FAO European Forestry Commission. These forecasts are to 2020. However, it would seem reasonable to assume that, in the absence of further information, the growth rates given to 2020 could still be used to make assumptions about trends to 2025 and 2030. The study derived the following growth rates for consumption for the UK (Table 4.68). Table 4.68: Forecast Growth in UK Consumption 2000-2020

Product Type Compound Annual Growth Rates Sawnwood 0.7% Wood based panels 1.2% Wood pulp -2.7% Paper and paperboard 2.3%

Source: European Forest Sector Outlook Study 1960-2000-2020 The reasons for these trends are as follows:

• Demand for sawnwood is related to expected growth in the main sectors of construction and, in particular, house building;

• Consumption of wood based panels is expected to grow at a faster rate than sawnwood due to the replacement of sawn timber by manufactured panels and the increasing popularity of panel products – for new kitchens, decorative mouldings, doors and other internal uses - in construction and house building;

• Paper and paperboard growth is driven by the newspaper industry, the packaging industry and increasing use of hygiene/household papers.

• Pulp usage is expected to fall as increasing use is made of recycled paper products in the UK.

Maritime statistics for 2004 shows that UK forestry products trade handled in conventional form amounted to 10.4 million tonnes, made up of 10.1 million tonnes of imports and only 0.3 million tonnes of exports. Given the imbalance in trade and the fact that there is unlikely to be any significant increase in domestic supplies, we have made the assumption that growth in consumption of timber products will be directly reflected by the growth in imports. In order to relate the EFOS growth rates to the forestry products sector, we have used the HM Customs and Revenue trade statistics in Table 4.63 above and estimated the total quantity handled in semi-bulk form (rather than in unit loads) in Table 4.69, based on our experience of the sector. The growth rates developed for the EFOS study were then applied to the Maritime Statistics data to forecast future volumes of forestry products



handled in semi-bulk form in the UK. In the absence of any further published studies the same growth rates as given in the EFOS analysis have been used to give growth rates to 2025 and 2030. Table 4.69: Estimated UK Imports of Forestry Products, by Mode of Appearance,

2003 Thousand tonnes Imports

2003 % Handled in Semi-bulk Form % Total Semi-bulk Movements

Roundwood, Sawnwood 5,383 93% 51% Wood-based Panels 2,124 94% 20% Paper & paperboard 7,490 18% 14% Wood Pulp 1,622 88% 15% Total 16,619 59% 100% Source: MDS Transmodal, based on HM Revenue & Customs data Table 4.70 shows the forecast growth in international import traffic carried in conventional form forecast over the period from 2004 to 2030. The EFOS rates have been used up to 2020, but from 2020 the growth rates have been reduced by 50% to reflect increasing saturation of the market. Exports have been assumed to grow at similar rates given that the growth in both exports and imports will be directly related to the level of demand for forest products as a whole. Domestic movements both inwards and outwards have also been assumed to grow in relation to general levels of demand in the sector. Our forecast is that forest product traffic through GB ports will rise by 24% by 2030. Table 4.70: Great Britain: Forestry Products, Central Forecast to 2030


Change 2004-30

% CAGR

International Imports 9.5 10.4 10.8 11.2 11.5 11.7 +24% +0.8% Exports 0.3 0.3 0.3 0.4 0.4 0.4 +24% +0.8% Domestic Inwards - - - - - - +24% +0.8% Outwards 0.2 0.2 0.2 0.2 0.2 0.2 +24% +0.8% Total Total 10.0 11.0 11.3 11.8 12.0 12.3 +24% +0.8% % Change

p.a. 2003-10 2010-15 2015-20 2020-25 2025-30




Table 4.71: Northern Ireland: Forestry Products, Central Forecast to 2030


2004-2030 %

CAGR International Imports 0.6 0.7 0.7 0.7 0.7 0.8 +24% +0.8% Exports - - - - - - - - Domestic Inwards - - - - - - - - Outwards - - - - - - - - Total Total 0.6 0.7 0.7 0.7 0.7 0.8 +24% +0.8% % Change

p.a. 2004-

10 2010-

15 2015-

20 2020-

25 2025-

30


Great Britain: Forest Products Port Traffic Forecast to 2030

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

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Table 4.72 provides an analysis of forestry products traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2004. Table 4.72: Great Britain Forestry Products Port Forecast by Port Region to 2030

Thousand tonnes Port of Region Market Share 2004 2004 2010 2015 2020 2025 2030 East Midlands 1.7% 170 187 194 202 206 210 East of England 22.5% 2,239 2,467 2,554 2,654 2,710 2,769 Gt London 3.1% 305 336 348 362 369 377 North East 1.4% 135 149 154 160 163 167 North West 7.2% 718 791 819 851 869 888 Scotland 10.4% 1,033 1,138 1,178 1,224 1,250 1,278 South East 23.8% 2,371 2,613 2,704 2,810 2,870 2,932 South West 2.7% 273 301 311 324 330 338 Wales 4.1% 407 449 464 482 493 503 Yorks & Humber 23.1% 2,299 2,534 2,622 2,725 2,782 2,843 GB Islands - - - - - - - Total 100% 9,950 10,966 11,349 11,795 12,043 12,307 Source: MDS Transmodal

Northern Ireland: Forest Products Port Traffic Forecast to 2030

0

100

200

300

400

500

600

700

800

1990 1995 2000 2005 2010 2015 2020 2025 2030

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4.9.7 Implications for ports Since the late 1980s there has been a substantial shift in the UK’s sourcing of imported forestry products. Prior to this time a major quantity of forestry products was being sourced from Canada, peaking in 1988 at over 4.6 million cubic metres. Since 1988 UK sourcing has shifted to the east with Sweden, Latvia and Finland capturing much of the UK’s demand due to a combination of factors, the most important of which are:

• Concerns about plant health because the majority of Canadian timber was not kiln dried. There could be no guarantee that the Canadian pinewood nematode (which causes pine wilt disease) would not be imported into Europe and become established.

• Exchange rates proved favourable to UK importers from Eastern Europe in the early 1990s, just as the export markets of the former Soviet States were starting to open up.

This shift to Eastern Europe has seen the development of timber port facilities (for relatively small ships) at ports on the East Coast and a decline in the importance of timber to the larger and deeper water ports on the West Coast of the UK. As EU expansion has moved east and now includes the Baltic States the importance of this region is likely to continue, making it unlikely that the present pattern of trade in forestry products will change appreciably in the foreseeable future. 4.10 Iron & Steel 4.10.1 Introduction As in the case of forestry products, this section seeks to identify steel cargo handled conventionally as semi-bulk cargoes and not in unit loads. The analysis has been informed by discussion with Corus, as the major steel manufacturer in the UK. Steel is an alloy of iron and carbon, which is used in the UK principally for the manufacture of cars, machinery and metal goods as well as within the construction industry. New steel is made either by smelting iron ore, limestone and coal in very large plants or is manufactured from scrap steel in electric arc furnaces. This section of the report defines the port traffic market for steel (handled as semi-bulk cargoes) and describes historic trends during the period 1993-2004; it then describes the factors influencing demand for steel in the UK and the factors affecting supply and provides our Central Forecast for steel traffic movements through ports up to 2030. We believe that about 50% of steel exports and 25% of steel imports are handled in unit loads between the UK and the Continent, mainly via ports but also to a more limited extent



through the Channel Tunnel for trade with Southern Europe. However, trade in conventional vessels carrying steel in semi-bulk form accounted for some 10 million tonnes of traffic through UK ports in 2004. The size of vessels used in the conventional steel trades varies considerably, depending on the parcel size and the route. Deep sea trades might use vessels of 25-30,000 deadweight tonnes, while short sea trades typically use vessels of about 4,000 dwt. As the majority of imports come from Europe and the Mediterranean, east and south coast English ports tend to handle the most steel. As steel imports require careful handling and storage, specialist facilities have been developed at ports such as Hull, Boston and Sunderland. Exports are generally handled through ports close to the major steel mills on the Humber, on the Tees and close to Port Talbot. 4.10.2 Market Definition Table 4.73 provides an analysis of the UK “iron and steel” market in 2004, although all the movements relate to steel in practice. Table 4.73: UK Iron & Steel Market Size, Major Ports, by Port Region, 2004


Port Traffic

In-wards

Out-wards

Total % GB Port

Traffic

Grand Total

East Midlands 250 - 250 2.6% - - - - 250 East of England 27 20 46 0.5% 1 - 1 0.3% 47 Gt. London 223 13 237 2.5% - - - - 237 North East 568 1,073 1,642 17.3% 1 25 26 10.8% 1,668 North West 27 21 48 0.5% - - - - 48 Scotland 224 230 454 4.8% 58 82 140 57.4% 594 South East 516 399 915 9.6% - 11 11 4.6% 926 South West 246 46 292 3.1% - - - - 292 Wales 1,392 1,070 2,462 25.9% - 59 59 24.3% 2,521 Yorks & Humber 2,491 679 3,170 33.3% - 6 6 2.5% 3,176 GB Islands - - - - - - - - - GB Total 5,965 3,550 9,516 100% 60 184 244 100% 9,760 Northern Ireland 197 - 197 101 - 101 298 Grand Total 6,162 3,550 9,712 161 184 345 10,057 Source: DfT Maritime Statistics, analysis by MDS Transmodal Total steel movements through ports in semi-bulk form amounted to some 10.1 million tonnes in 2004, with 97% of this traffic relating to international movements. The UK exported some 3.6 million tonnes of steel in semi-bulk form, very largely from the regions where the major steelworks are located (Wales, Yorkshire and the Humber and the North East). GB import volumes of some 6.0 million tonnes are distributed evenly between a number of regions, reflecting the small parcel (and therefore ship) sizes that can be accommodated at a large number of ports around the coast. Northern Ireland has no steelworks and relies on imports of some 0.2 million tonnes, plus 0.1 million tonnes of steel shipped to the province through Scottish ports.



4.10.3 Historic Trends Table 4.74 provides an analysis of historic trends in steel traffic during the period 1993-2004. Table 4.74: GB Iron & Steel Market Size, Major Ports, 1993-2004

Thousand tonnes 1993 1995 1997 1999 2001 2003 2004 % Change

1993-2004 %

CAGR Imports 6,022 5,153 4,505 4,502 5,551 5,126 5,965 -1% -0.1% Exports 5,057 4,606 4,326 3,781 3,288 3,367 3,550 -30% -3.2% International Total 11,080 9,559 8,831 8,282 8,839 8,492 9,516 -14% -1.4% Domestic Inwards 155 48 5 64 209 73 60 -61% -8.2% Domestic Outwards 268 60 46 55 560 163 184 -31% -3.4% Domestic Total 423 109 96 119 769 236 244 -42% -4.9% Grand Total 11,502 9,667 8,928 8,401 9,608 8,729 9,760 -15% -1.5% Source: DfT Maritime Statistics, analysis by MDS Transmodal Steel traffic through GB ports has declined steadily over the last eleven years, with a fall of 15%, mainly due to the rationalisation of the UK steel industry and lower levels of demand from industry. Table 4.75 provides an analysis of historic trends in steel traffic by port region during the period 1993-2004. Table 4.75: UK Iron & Steel Market Size, Major Ports, by Port Region, 1993-2004


1993-2004 % CAGR

East Midlands 292 - - - 277 221 250 -14% -1.4% East of England 504 51 66 56 40 102 47 -91% -19.4% London 237 303 353 316 338 259 237 - - North East 1,630 1,836 1,480 908 1,321 1,339 1,668 +2% +0.2% North West 950 487 757 781 47 72 48 -95% -23.8% Scotland 686 574 836 414 1,244 541 594 -13% -1.3% South East 1,405 876 391 710 1,036 771 926 -34% -3.7% South West 502 52 81 166 186 289 292 -42% -4.8% Wales 1,993 1,741 1,962 1,816 1,916 2,154 2,521 +27% +2.2% Yorkshire & Humber 3,171 3,712 2,967 3,206 3,200 2,978 3,176 - - Other islands 133 36 33 28 3 4 - -100% -100% Northern Ireland 141 104 100 138 210 266 298 +111% +7.0% Total UK 11,644 9,771 9,027 8,539 9,818 8,995 10,057 -14% -1.3% Source: DfT Maritime Statistics, analysis by MDS Transmodal Within the overall decline in steel volumes, there have been significant regional variations.



4.10.4 Economic Drivers of Demand Global steel consumption Given its relatively high value, the relatively low cost of transport and its capital-intensive nature, the UK steel industry is manufacturing for, and competing in, an international market and therefore worldwide demand-side factors are relevant. World steel consumption is estimated to have grown by 8% in 2004 compared with a historical trend of only 2% growth in previous years. The main driver for this growth was China, where steel consumption has grown by an average of 27% over the past four years compared with only 1% per year during the 1990s. Evidence of strong growth has not been limited to China. Consumption is estimated to have grown by some 15% in Central and South America and by around 9% in the NAFTA countries, but with China accounting for some 28% of world steel consumption her impact has been considerable. For the first time in history the world produced over 1 billion tonnes of steel in 2004. Table 4.76: World Crude Steel Production 1950-2004 Million tonnes

1950 189 1960 347 1970 595 1980 717 1990 770 2000 948 2001 850 2002 903 2003 969 2004 1,057

Source: World Steel in Figures 2005, International Iron and Steel Institute UK consumption of steel Although long-term consumption of steel in the UK has been in decline – statistics from the International Steel Statistics Bureau (ISSB) suggest that the consumption of steel has gradually fallen from 19 million tonnes in 1970 to 14.3 million tonnes in 2004 - the UK market remains significant for the domestic steel industry. Table 4.77 provides an analysis of total domestic UK consumption for the period 1996-2004, which suggests that, despite the long-term fall in domestic demand since the 1970s, there has been no clear trend in domestic demand during this eight-year period. It has tended to fluctuate around an average consumption level of some 13.5 million tonnes. While manufacturing in the UK has been in general decline over the period 1996-2004, rising construction demand and vehicle output has tended to drive up demand for steel. Demand has risen significantly in 2004 as demand for steel from China has had a knock-on impact on demand worldwide.



Table 4.77: UK Apparent Steel Consumption Thousand tonnes 1996 1997 1998 1999 2000 2001 2002 2003 2004 Apparent Consumption 12.9 14.0 14.6 13.5 13.4 13.4 13.4 13.3 14.3 Change in consumption +8.3% +4.3% -7.8% -0.7% +0.4% - -0.7% +7.5% Source: ISSB Ltd According to the ISSB, the major sources of demand for steel in the UK are the mechanical engineering sector (24%), the construction industry (22%), the automotive sector (17% of demand) and the metal goods sector (14%). The demand for steel in the UK and overseas is therefore a derived demand, based on the potential future demand for new cars, metal goods, construction and so forth. The key demand side factors affecting domestic demand for steel in the UK up to 2030 are therefore likely to be the level of activity in these key industries that consume steel and the exchange rate between sterling and the euro which has a major impact on the competitiveness of the UK industry and the balance between exports and imports. 4.10.5 Economic Drivers of Supply Despite rationalisation of capacity in recent years, the UK steel industry was still 17th in the world ranking of steel producing countries in 2003, with a total production of 13.3 million tonnes. The UK also ranked 14th in the list of major steel exporting countries with an export volume of 7.3 million tonnes. The UK is also the 13th largest importer of steel with total imports amounting to some 8.1 million tonnes in 2003. Apparent consumption of finished steel was standing at 12.9 million tonnes in 2003, slightly down from 13.3 million tonnes in 2002. This position of the UK as a major producer, exporter and importer of steel demonstrates the extent to which the UK is consuming and producing steel within a worldwide market, which is in stark contrast with the position 35 years ago - data for 1970 from the ISSB shows that, of the 21.3 million tonnes of steel manufactured in the UK, some 18 million tonnes was for the domestic market. The UK Steel market is dominated by Corus, the major producer that was formed from the previously nationalised British Steel Corporation and the Dutch company Hoogovens. Corus accounts for approximately 75% of UK steel production. However only about half of the UK’s steel needs can be met by home production and the remainder is met by imports. Apart from Corus, the other major UK manufacturers are:

• Celsa Steel UK: Celsa (a Spanish steel company) acquired the Allied Steel and Wire Group in 2003 and produces reinforcing bars mainly for the UK market but also exports some product to Ireland;



• Thamesteel Ltd, a subsidiary of the Saudi Arabian Al-Tuwairqi group; the steel produced is exported to the Saudi Arabian market;

• Alphasteel Ltd, based near Newport in South Wales, produces reinforcing bars for the UK market;

• ISTIL (UK) PLC: this finishing mill near Sheerness rolls merchant products from feedstock produced by its Ukrainian parent company;

• Caparo, a steel conversion and distribution business. Steel production in the UK is carried out in one of two ways. The majority of steel (10.5 million tonnes out of a total of about 14 million tonnes) is produced by the basic oxygen method (BOS) in ’traditional’ blast furnaces. In this case the raw materials are iron ore, coking coal/coke (virtually all of which is imported), limestone from UK sources and smaller quantities of scrap. This process is used by Corus at its integrated steelworks located in Port Talbot, Scunthorpe, and Teesside. Corus also produces specialist steels from scrap by the electric arc furnace method at its works in Rotherham/Stocksbridge, which produce about 2 million tonnes of steel per year. All the other UK producers use the electric arc furnace method where the raw material is scrap steel, usually from UK arisings. Total volumes manufactured using this method are 3.5 million tonnes. Table 4.78 provides an analysis of steel volumes manufactured in the UK, both for domestic and overseas markets, as well as the volumes of steel that are imported. Table 4.78: Home and Export Deliveries of Steel, Imports and Apparent Consumption

Thousand tonnes 1999 2000 2001 2002 2003 Home deliveries by UK mills 7,684 7,320 6,823 6,506 6,231 Export deliveries by UK mills 7,414 7,167 6,180 5,612 6,204 Total production by UK mills 15,098 14,487 13,003 12,118 12,435 Imports (net of conversion) 6,078 6,436 6,930 6,754 6,673 Total supply to UK market (apparent consumption)

13,762 13,756 13,753 13,260 12,903

Import share of total UK market 44.2% 46.8% 50.4% 50.9% 51.7% Source: UK Steel Corus Corus is by far the most important steel producer in the context of this study, with its high share of the UK domestic market and its large export volumes. Corus has three integrated BOS steel making facilities in the UK at Port Talbot, Scunthorpe and Teesside, where considerable investment has been carried out to ensure the viability and competitiveness of these plants for the long term (up to at least 2030). Corus intends to serve the UK market and its own manufacturing facilities from its plants at Port Talbot and Scunthorpe, and the export market from Teesside. Corus have indicated that export markets are likely to be mainly in Europe rather than more distant locations due to the need to keep transport costs



as low as possible. Engineering steels (mainly for the UK market) will be produced from electric arc furnaces at Rotherham/Stocksbridge. The Teesside facility has been ‘spun off’ from the main Corus group and is now known as Teesside Cast Products (TCP). Production at Teesside (which currently manufactures around 3.3 million tonnes a year of slab and bloom) is now strongly geared to the export market. In December 2004 Corus announced a long-term ‘take-off’ agreement with a consortium of re-rolling companies (Duferco an Italian/Swiss steel trader and producer, Marcegaglia an Italian re-roller, Imsa a Mexican steel producer and Dongkuk a Korean re-roller). The consortium has agreed to eventually take three quarters of the output from the Teesside facility. As part of its ‘Restoring Success’ restructuring and rationalisation programme Corus announced in 2005 confirmation of major investments in South Wales (approximately £200 million), at Scunthorpe (£200 million), at Teesside Cast Products and Tees Beam Mill (£71 million) and at Stocksbridge (£6 million). The ‘Restoring Success ‘ programme is intended to close the gap in efficiency between Corus and its major competitors by 2006 and this level of investment illustrates Corus’s commitment to maintaining its position in the steel industry for the foreseeable future. As a result of the Corus strategy of consolidating production at their major plants and evidence of investments by other producers in the UK, we believe that UK production may rise over the next few years, given continuing high levels of worldwide demand (especially from China). 4.10.6 Central Forecast Our Central Forecast for international traffic is based on the following assumptions: 2004-2010 2010-2015 2015-2020 2020-2025 2025-2030 Demand for steel Mechanical

engineering -1% p.a. -0.5% p.a. -0.3% p.a. -0.3% p.a. No change

Construction +1.0% +1.0% +1.0% +1.0% +1.0% Automotive Trend in line with Central Forecast for UK car manufacturing in Section 4.2 Metal goods -1% p.a. -0.5% p.a. -0.3% p.a. -0.3% p.a. No change Average long-term exchange rate with €

Unchanged

The assumptions reflect the long-term decline in UK manufacturing output, but long run average growth in construction activity. They assume the exchange rate between sterling and the euro does not change and that there is no change in the proportion of steel imports and exports carried in unit loads rather than semi-bulk traffic. Domestic movements of steel relate very largely to movements from Scotland to Northern Ireland. As Northern Irish demand for steel is most likely to be driven by the level of



construction activity in the province (rather than the level of manufacturing industry that uses steel as a raw material), domestic movements have been assumed to change in proportion to changes in general construction activity in the UK as a whole. Our forecast is for a 5% increase in overall steel traffics through GB ports up to 2030. Table 4.79: Great Britain: Iron & Steel Products, Central Forecast to 2030


Change 2004-2030

% CAGR

International Imports 6.0 6.0 6.1 6.1 6.2 6.3 +5% +0.2% Exports 3.6 3.6 3.6 3.6 3.7 3.7 +5% +0.2% Domestic Inwards 0.1 0.1 0.1 0.1 0.1 0.1 +30% +1.0% Outwards 0.2 0.2 0.2 0.2 0.2 0.2 +30% +1.0% Total Total 9.8 9.9 9.9 10.0 10.1 10.3 5.4% +0.2% % Change

p.a. 2003-

2010 2010-

15 2015-

20 2020-

25 2025-

30


Great Britain: Steel Port Traffic Forecast to 2030

0

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Table 4.80: Northern Ireland: Iron & Steel Products, Central Forecast to 2030 Million tonnes


% CAGR

International Imports 0.2 0.2 0.2 0.2 0.2 0.2 +5% +0.2% Exports - - - - - - - - Domestic Inwards 0.1 0.1 0.1 0.1 0.1 0.1 +30% +1.0% Outwards - - - - - - - - -Total Total 0.3 0.3 0.3 0.3 0.3 0.3 +13% +0.5% % Change

p.a. 2003-

2010 2010-

15 2015-

20 2020-

25 2025-

30

+0.5% +0.4% +0.5% +0.5% +0.5% Source: MDS Transmodal Table 4.81 provides an analysis of iron and steel products traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2004.

Northern Ireland: Steel Port Traffic Forecast to 2030

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1990 1995 2000 2005 2010 2015 2020 2025 2030

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Table 4.81: Great Britain Iron & Steel Products Port Forecast by Port Region to 2030 Thousand tonnes

Port of Region Market Share 2004 2004 2010 2015 2020 2025 2030 East Midlands 2.6% 250 254 255 257 260 264 East of England 0.5% 47 48 48 48 49 50 Gt. London 2.4% 237 240 242 244 246 250 North East 17.1% 1,668 1,693 1,700 1,716 1,733 1,758 North West 0.5% 48 49 49 49 50 51 Scotland 6.1% 594 603 605 611 617 626 South East 9.5% 926 940 944 953 962 976 South West 3.0% 292 296 298 300 303 308 Wales 25.8% 2,521 2,558 2,570 2,594 2,620 2,658 Yorkshire & Humber 32.5% 3,176 3,223 3,237 3,267 3,300 3,348 GB Islands 0.0% - - - - - - Total 100% 9,760 9,903 9,947 10,040 10,140 10,288 Source: MDS Transmodal 4.10.7 Implications for ports TCP on Teesside is now dedicated to exports, which will mean more steel will be exported than previously. There is enough capacity in the port to handle this extra volume. Aside from Tees which is exporting steel in larger (up to 25,000 tonne capacity vessels) there is likely to be more than enough port capacity to handle steel in semi-bulk form up to 2030. There are a large number of ports with adequate depth of water to handle the short sea vessels that are generally used to carry steel in this form and there are already a number of ports that specialise in this trade. Investment is required in undercover storage facilities and in quayside surfaces to take the weight of stacked steel, but these are unlikely to be significant barriers to entry. 4.10.8 Conclusion With construction output expected to grow strongly and the mechanical engineering and metal goods industries expected to decline, a key to potential future variability in steel consumption is considered to be the future of UK automotive output. If the industry continues to boom during the forecast period, as assumed in our Central Forecast for import/export vehicles, then consumption of steel will increase thereby boosting imports. However, if UK car production declines very sharply with production moving to Eastern Europe, for instance, then steel consumption and import port traffic could be lower. Export traffic, on the other hand, may grow, depending on the world steel market.



4.11 Other General Cargo 4.11.1 Introduction The following analysis deals with forecasts of demand for traffic through UK ports for “other general cargo and containers of under 20 foot” up to 2030, based on an understanding of the key economic drivers behind trends in traffic.

This category covers general cargoes not covered within all the other main groups and includes non-oil traffic with the UK offshore installations, which mainly relates to supplies and waste sometimes carried in small, specialised containers to and from oil platforms. Heavy lifts such as power station equipment and generators are likely to fall into this category, as will shiploads of mixed cargoes that cannot be easily categorised into the major cargo groups. A potential growth area is the traffic relating to offshore wind farms. Cargo falling into this category would tend to be carried by smaller ships and, in the case of traffic to oil platforms, would be carried in offshore supply vessels of only a few thousand tonnes carrying capacity. 4.11.2 Market Definition Table 4.82 provides an analysis of UK port traffic in 2004 for this cargo category. Table 4.82: UK General Cargo Market Size, Major Ports, by Port Region, 2004


Port Traffic

In-wards

Out-wards

Total % GB Port

Traffic

Grand Total

East Midlands 3 - 3 0.0% - - - - 3 East of England 304 115 419 8.3% 29 1 30 2.0% 449 Gt London 48 21 69 1.4% 3 - 3 0.2% 72 North East 173 205 378 7.5% 3 11 13 0.9% 391 North West 419 27 446 8.8% 26 66 92 6.0% 538 Scotland 212 185 396 7.8% 266 1,065 1,331 87.6% 1,728 South East 1,738 388 2,126 42.1% 23 3 26 1.7% 2,152 South West 156 - 156 3.1% - 2 2 - 158 Wales 37 118 156 3.1% - - - - 156 Yorkshire & Humber 687 205 892 17.7% 5 8 14 0.9% 906 Other Islands 13 1 14 0.3% 2 7 9 0.6% 23 GB Total 3,788 1,264 5,052 100% 357 1,164 1,521 100% 6,573 Northern Ireland 137 2 139 - 14 15 153 UK Total 3,925 1,266 5,191 357 1,178 1,535 6,726 Source: DfT Maritime Statistics, analysis by MDS Transmodal Scotland dominates in the domestic sector, illustrating the importance of the region in supplying the UK’s offshore oil and gas fields.



4.11.3 Historic Trends Tables 4.83 and 4.84 provide an analysis of historic trends in general cargo port traffics during the period 1993-2004. Table 4.83: GB General Cargo Market Size, Major Ports, 1993-2004

Thousand Tonnes Direction 1993 1995 1997 1999 2001 2003 2004 % Change

1993-2004 % CAGR

Imports 1,911 1,425 1,352 1,433 3,581 3,542 3,788 +98% +6.4% Exports 1,066 892 1,057 693 1,734 1,475 1,264 +19% +1.6% International Total 2,977 2,317 2,409 2,126 5,314 5,017 5,052 +70% +4.9% Domestic Inwards 1,241 692 652 765 476 548 357 -71% -10.7% Domestic Outwards 3,929 2,69 2,353 1,350 921 1,033 1,164 -70% -10.5% Domestic Total 5,169 3,362 3,06 2,115 1,398 1,581 1,521 -71% -10.5% Grand Total 8,147 5,679 5,415 4,241 6,712 6,598 6,573 -19% -1.9% Source: DfT Maritime Statistics, analysis by MDS Transmodal Table 4.84: UK General Cargo Market Size, Major Ports, by Port Region, 1993-2004


1993-2004 % CAGR

East Midlands 364 - - - 1 11 3 -99% -35.4% East of England 1,610 1,368 252 297 648 528 449 -72% -11.0% London 30 18 29 46 34 50 72 +137% +8.2% North East 367 102 233 114 587 246 391 +7% +0.6% North West 277 174 105 81 694 697 538 +94% +6.2% Scotland 3,269 2,099 2,617 1,725 1,532 1,938 1,728 -47% -5.6% South East 680 721 667 896 1,752 1,820 2,152 +216% +11.0% South West 13 2 11 7 104 135 158 +1109% +25.4% Wales 246 176 247 343 146 229 156 -37% -4.1% Yorkshire & Humber 843 968 1,205 674 1,169 913 906 +8% +0.7% Northern Ireland 5 28 48 47 123 151 153 +3063% +36.9% Other islands 447 50 51 57 45 31 23 -95% -23.6% Total UK 8,151 5,707 5,463 4,287 6,835 6,750 6,726 -18% -1.7% Source: DfT Maritime Statistics, analysis by MDS Transmodal The tables show that there has been strong growth in international movements, but a decline in domestic movements, perhaps due to declining activity in the North Sea oil industry. 4.11.4 Central Forecasts There are no indicators of demand that can easily be applied to the general cargo sector as, by its very nature, it is mixed and each constituent will have its own driver. It cannot be assumed, for example, that the expected reduction in production from the North Sea oil fields will reduce domestic general cargo traffic as rig decommissioning could significantly increase traffic movements. The development of offshore wind farms may also lead to additional traffic.



In the absence of distinct drivers, the forecasts to 2010 have been based on trends in traffic during the period 1993-2004 and traffic has been assumed to be stable from 2010-2030. The forecasts are shown in Tables 4.85 and 4.86. Table 4.85: Great Britain: General Cargo, Central Forecast to 2030


Change 2004-2030

% CAGR

International Imports 3.8 4.5 4.5 4.5 4.5 4.5 +45% +1.4% Exports 1.3 1.4 1.4 1.4 1.4 1.4 +10% +0.4% Domestic Inwards 0.4 0.2 0.2 0.2 0.2 0.2 -46% -2.3% Outwards 1.2 0.6 0.6 0.6 0.6 0.6 -46% -2.3% Total 6.6 7.7 7.7 7.7 7.7 7.7 +17% +0.6 % Change

p.a. 2003-

10 2010-

15 2015-

20 2020-

25 2025-

30

2.7% - - - - Source: MDS Transmodal

Great Britain: General Cargo Port Traffic Forecast to 2030

0

1,000

2,000

3,000

4,000

5,000

6,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

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Table 4.86: Northern Ireland: General Cargo, Central Forecast to 2030 Million tonnes


% CAGR

International Imports 0.14 0.20 0.20 0.2 0.2 0.2 +45% +1.4% Exports - - - - - - - - Domestic Inwards - - - - - - - - Outwards 0.01 0.02 0.02 0.03 0.03 0.03 +115% +3.0% Total 0.15 0.22 0.23 0.23 0.23 0.23 +51% +1.6% % Change

p.a. 2004-

10 2010-

15 2015-

20 2020-

25 2025-

30

+6.5% +0.2% +0.2% +0.2% +0.2% Source: MDS Transmodal Table 4.87 provides an analysis of general cargo traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2004.

Northern Ireland: General Cargo Port Traffic Forecast to 2030

0

50

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1990 1995 2000 2005 2010 2015 2020 2025 2030

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es




Table 4.87: Great Britain General Cargo Port Forecast by Port Region to 2030 Thousand tonnes

Port of Region Market Share 2004 2004 2010 2015 2020 2025 2030 East Midlands - 3 4 4 4 4 4 East of England 6.8% 449 527 527 527 527 527 Gt. London 1.1% 72 85 85 85 85 85 North East 6.0% 391 459 459 459 459 459 North West 8.2% 538 632 632 632 632 632 Scotland 26.3% 1,728 2,030 2,030 2,030 2,030 2,030 South East 32.7% 2,152 2,527 2,527 2,527 2,527 2,527 South West 2.4% 158 186 186 186 186 186 Wales 2.4% 156 183 183 183 183 183 Yorkshire & the Humber 13.8% 906 1,064 1,064 1,064 1,064 1,064 GB Islands 0.3% 23 27 27 27 27 27 Total 100% 6,573 7,720 7,720 7,720 7,720 7,720 Source: MDS Transmodal 4.11.5 Implications for ports The forecast growth rate for GB traffic in this cargo category is 17% over the period 2004-2030. Most of the cargoes in this category will be carried in smaller ships which will have the ability to use a wide range of UK ports and will have the ability to choose to load/discharge at all the major ports. In 1993, 8.1 million tonnes of “other general cargo” was handled in the UK. There was therefore sufficient capacity available in that year to handle that quantity of general cargo. The forecast increase to 7.7 million tonnes in 2030 would be less than the 1993 volumes and should present few concerns to the port sector in terms of proving sufficient suitable capacity. 4.12 Import/Export Vehicles 4.12.1 Introduction The following analysis develops forecasts of demand for traffic through UK ports for import/export vehicles up to 2030, based on causation rather than historic trends. Our analysis has been discussed with the major UK industry trade body, the Society of Motor Manufacturers and Traders (SMMT) and the Department for Trade and Industry (DTI). Given the large volumes of cars and commercial vehicles that are transported by sea and the wheeled nature of the cargo, trade cars and commercial vehicles are usually carried in bulk by specialist shipping lines (both deep sea and short sea) using purpose-built RoRo vessels. Scheduled operators of short sea RoRo services on some routes are also increasingly providing capacity to car manufacturers to supplement their general freight traffic, particularly where the ports concerned have extensive areas to store cars. Demand for trade cars, in particular, is important for the ports sector because:



Most new cars sold in GB are imported and are usually stored at ports for several weeks. This means that imported cars can have long dwell times and, in turn, means that a considerable amount of land is required within the port for storage. The ports also generate significant revenue and employment through added value activities such as Pre-Delivery Inspections (PDI).

The UK has significant manufacturing capacity, but most production is exported through ports. The space required for export cars is less than for import cars, mainly because dwell times are lower than for import cars as the cars are “in transit”. It is in the interest of manufacturers to hold cars close to the region of sale so that deliveries can be made rapidly to customers.

Trade cars are transported as RoRo traffic and specialist RoRo berths are required. The demand for import cars is far more significant for port traffic than exports and

therefore our forecast for exports vehicles is less important than that for imports. This is because import cars dwell between one and three months in the ports prior to delivery to dealers, while export cars are likely to dwell for approximately one week.

At present there is little modal competition for ports from rail via the Channel Tunnel. This is largely because ports offer greater flexibility in terms of the areas from which cars can be imported. 4.12.2 Market Definition Import/export vehicles are passenger cars (or “trade cars” in shipping terminology) and commercial vehicles that are either imported or exported through UK ports and there are two main relevant markets in the context of this study:

Exports of cars and commercial vehicles manufactured in the UK, both to short sea and deep sea countries;

Imports of cars and commercial vehicles manufactured overseas, both from short sea and deep sea trade partners.

There are also relatively small domestic flows of trade cars and commercial vehicles between Great Britain and Northern Ireland and between GB and other islands within the British Isles. Table 4.88 provides an analysis of the volume of import/export vehicles (in tonnes) passing through UK ports in 2004.



Table 4.88: UK Trade Car Port Market Size, by Port Region, 2004 Thousand tonnes

Port Region International Trade Domestic Imports Exports Total % GB Port

Traffic Inwards Outwards Total % GB Port

Traffic East Midlands - - - - - - - - East of England 525 222 747 14.8% - - - - London 538 301 839 2.6% - - - - North East 312 257 569 13.0% - - - - North West 2 9 11 0.3% 18 79 97 87.1% Scotland 2 - 2 0.1% - - - 0.3% South East 718 931 1,649 36.0% 1 9 11 9.7% South West 554 98 652 14.6% 1 - 1 0.9% Wales 7 7 14 0.1% - - - - Yorks & Humber 593 277 870 18.4% 1 - 1 1.2% GB Islands - - - - 1 - 1 0.7% Total Great Britain 3,011 2,036 5,046 100% 23 88 111 100% Northern Ireland - - - 89 21 110 Total UK 3,011 2,036 5,046 112 109 221

Source: DfT Maritime Statistics Directive The major traffic flows of trade cars through GB ports relate to 3.0 million tonnes of vehicle imports and 2.0 million tonnes of exports. Domestic flows to and from GB are much less significant at 0.1 million tonnes and mainly relate to the distribution of vehicles from GB to Northern Ireland. 4.12.3 Historic trends 1993-2004 Tables 4.89 and 4.90 provide an analysis of historic trends in import/export vehicle traffics during the period 1993-2004. Table 4.89: GB Import/Export Vehicles Market Size, Major Ports, 1993-2004

Thousand tonnes Direction 1993 1995 1997 1999 2001 2003 2004 % Change 1993-

2004 %

CAGR Imports 1,241 1,422 1,743 2,004 2,334 2,725 3,011 +143% +8.4% Exports 950 1,209 1,479 1,679 1,327 1,885 2,036 +114% +7.2% International Total 2,191 2,630 3,222 3,683 3,661 4,611 5,046 +130% +7.9% Domestic Inwards 33 31 19 31 76 31 23 -31% -3.4% Domestic Outwards 101 102 112 126 143 102

88

-13% -1.2%

Domestic Total 134 133 131 156 218 133 111 -17% -1.7% Grand Total 2,326 2,763 3,353 3,840 3,879 4,744 5,158 +122% +7.5% Source: DfT Maritime Statistics, analysis by MDS Transmodal



Table 4.90: GB Import/Export Vehicles Market Size, Major Ports, by Port Region, 1993-2004

Thousand tonnes Port Region 1993 1995 1997 1999 2001 2003 2004 % Change 1993-2004 % CAGR East Midlands - - - - - - - - - East of England 487 566 594 769 748 718 747 +53% +4.0% London 23 67 90 122 128 126 132 +468% +17.1% North East 281 318 456 466 470 569 658 +135% +8.1% North West 92 110 98 135 153 116 111 +21% +1.8% Scotland 39 4 5 8 3 2 5 -87% -16.9% South East 896 977 1276 1,379 1,156 1,681 1,827 +104% +6.7% South West 212 262 351 416 495 653 739 +248% +12.0% Wales 27 10 24 28 15 7 6 -78% -12.9% Yorks & Humber 265 449 458 516 708 870 931 +251% +12.1% Other islands 4 1 1 2 2 1 1 -87% -17.1% Total UK 2,326 2,763 3,353 3,840 3,879 4,743 5,158 +122% +7.5% Source: DfT Maritime Statistics, analysis by MDS Transmodal The tables show that there has been strong growth in international movements, demonstrating the extent to which the UK is a customer, and manufacturer, for a global industry. 4.12.4 Economic Drivers of Demand Introduction Total demand for new cars (whether manufactured in the UK or imported) is affected by a number of factors:

Relative prosperity (changes in income, changes in employment levels, changes in value of property, changes in interest rates), encapsulated by changes in GDP per head; relatively low interest rates lead to greater disposable income and encourage the purchase of high value items on credit.

Demographic factors (whether population is increasing or decreasing, numbers of households, where people choose to live) and the degree of market saturation.

Tastes and fashions (the trend for four wheel drive vehicles, for example), related in part to the degree of choice available in the market;

Government regulation: taxation policy on car ownership and use; MOT testing for environmental emissions and safety.

Relative prosperity Relative prosperity is generally accepted by the car industry as being the major determinant of changes in the level of demand for new cars and there is a close historical relationship between the economic cycle and fluctuations in the number of new cars purchased. The rate of stock turnover in the UK market is likely to be most strongly correlated with changes



in actual (or perceived) disposable income. Trends in unemployment, changes in interest rates, growth in income, changes in the value of property are likely to have the greatest impact on the propensity of the GB population to buy new cars. These factors are generally encapsulated in the trend in economic growth. Table 4.91: New Car Registrations in UK & EU15, 1999-2003 Thousand cars

UK EU15 1999 2,198 14,633 2000 2,222 14,319 2001 2,459 14,402 2002 2,563 14,008 2003 2,579 13,843 % Change 1999-2003 +17% -6%

Source: Directorate TREN, European Commission It is significant that the UK has seen the greatest growth in the number of cars among comparable European economies at a time when its economy has been growing faster than those in the Euro zone (Table 4.91). Table 4.92: New car and commercial vehicle registrations, 1995-2004

Thousands New car registrations Commercial Vehicles Number % annual change Number % annual change 1995 1,945 250 1996 2,025 +4.1% 257 +3.0% 1997 2,171 +7.2% 274 +6.8% 1998 2,247 +3.5% 295 +7.4% 1999 2,198 -2.2% 288 -2.2% 2000 2,222 +1.1% 298 +3.5% 2001 2,459 +10.7% 313 +5.2% 2002 2,564 +4.3% 322 +2.8% 2003 2,579 +0.6% 364 +12.9% 2004 2,567 -0.5% 390 +7.2% 2005 2,440 -4.9% 382 -2.1%

Source: Society of Motor Manufacturers and Traders (SMMT) Table 4.92 provides an analysis of new car and commercial vehicle registrations in the UK between 1995 and 2004. New car registrations have grown by 25% in the last eleven years and sales of commercial vehicles have increased by 53%. The major impact of increasing relative prosperity might be that consumers will change their cars more often, particularly, if we also assume that the relative cost of cars will fall. While HM Treasury projects that GDP could grow by 71.4% during the period 2003-2025, the cost of cars could fall by 17% (DfT extrapolation of recent trends). However, at the same time cars have become more reliable and so do not need to be replaced so often. In addition, it is possible that cars will not fall significantly further in price following expected rationalisation of



the world’s car industry, reducing what had hitherto been excess capacity in the car assembly industry. Market Maturity & Demographic Trends The market is relatively saturated (i.e. there is a reasonably stable number of cars per household) compared to emerging economies, but there is some potential for growth due to:

• An increase in the number of households due to social trends; • Some population growth, mainly due to immigration; the UK’s population is forecast

to be 8% higher by 2025, according to Government actuaries; • A trend towards suburbanisation, including greater use of out of town retail centres,

where public transport is less likely to be regarded as convenient. However, other factors limit likely growth:

• Almost all sections of society already now regard being able to drive and owning a car as necessities;

• Increasing congestion is likely to limit either the number of cars and/or the use that is made of them.

Table 4.93 shows that, while the number of cars per 1000 inhabitants has increased from 214 in 1970 to 447 in 2002 (109% increase), it has increased by only 6% during the period 2000-2002. However, the table also provides an analysis of the number of cars per 1000 inhabitants during the period 1970-2002 for other comparable EU countries. The UK has a lower number of cars per 1000 inhabitants than economies such as Belgium and the Netherlands, which may imply there is some room for growth, if only at a slow rate. Table 4.93: Number of Passenger Cars per 1000 Inhabitants, 1970-2002 1970 1980 1990 2000 2001 2002 % Change 2000-2002 UK 214 277 360 420 431 447 +6.4% Belgium 213 321 388 457 462 464 +1.6% France 236 355 416 478 486 491 +2.7% Italy 190 314 484 565 575 591 +4.6% Germany 193 331 449 533 540 542 +1.7% Netherlands 198 323 370 412 420 425 +3.2% Total EU15 184 293 394 474 483 491 +3.6% Source: Directorate-General TREN, European Commission



Tastes and fashion While tastes and fashion are generally likely to have a strong influence on the type of car purchased, they may also have some influence on the number of cars purchased in that increased choice may lead to a faster turnover of the national stock (i.e. consumers change their cars more often). There is also a trend towards greater targeting of particular niches by manufacturers and greater choice of models and variants. Greater choice is likely to have some impact on the number of new cars sold as it increases consumers’ propensity to change cars more often. Government Regulation Taxation policy is currently to have quite low Vehicle Excise Duty (VED) to tax the ownership of cars, but high duty on fuel. Use of roads and the impact on society of car use (such as environmental emissions and congestion) are not currently taken into account. A move towards road pricing (and away from fuel duty) is most likely to have an impact on how people use their cars in the short term but in the medium term any taxation policy that has an impact on the total cost of motoring could have an impact on the demand for new cars. Given the environmental impact of car use, VED may be amended to an even greater extent than at present to penalise cars that have lower fuel efficiency and greater levels of environmental emissions. This is likely to have the effect of encouraging the use of cars with lower emissions and may (marginally) increase stock turnover at least for a short period as the stock of cars is adjusted. Stricter MOT testing in the future, particularly for environmental emissions, may lead to people changing their cars more often and would lead to accelerated depreciation. This is likely to lead to increased stock turnover. Conclusion While the UK car market is relatively mature compared to developing world markets and some developed world markets, changes in UK demand for new cars are very largely influenced by relative prosperity and will fluctuate with the economic cycle. Therefore overall demand is most likely to be related to changes in GDP. However, with greater road congestion and the possible introduction of road pricing, it is possible that new registrations will grow at a slower rate than in the past and the market will become even more mature; that is, consumers will effectively replenish their existing stock of cars rather than increase that stock.



4.12.5 UK car manufacturing There is only a weak relationship between UK consumption of cars and their point of production. Some 80% of cars purchased in Britain are imported. Only around 20% of domestic production is consumed in the UK. Car manufacture is carried out on a global scale, with cars manufactured all over the world and usually distributed using cheap maritime transport. There is significant over-capacity in the global industry and there is likely to be further rationalisation in the future. While customers in Europe might be prepared to wait a few weeks for the arrival of a high specification vehicle, most customers expect to receive a new car within a few days. This means that volume car manufacturing for the European market is generally located within Europe, but cars can be manufactured anywhere in the world as long as sufficient stocks are available at suitable locations (often ports) to meet customers’ requirements within a short period of time. Trade flows are, to a large extent, determined by the locations selected by global manufacturers for their plants and the production of particular models. The UK car industry exemplifies the global nature of the industry, with its very largely foreign owned plants and high volumes of exports. With the demise of MG Rover there is no UK-owned volume manufacturer of cars in the UK, but major car plants are operated by multi-nationals such as GM/Vauxhall (Ellesmere Port, Merseyside), Toyota (Burnaston, near Derby), Honda (Swindon), Nissan (Washington, Tyne and Wear) and BMW (Oxford, for the Mini). The Ryton plant is due to close in 2007. In addition, there are manufacturers of high specification vehicles, such as Jaguar at Castle Bromwich and Halewood and Land Rover at Solihull). These companies choose to manufacture in the UK to supply the European market and for manufacturers of high specification vehicles, worldwide markets because of a high quality business environment, low distribution costs to European markets (via shipping services) and, in the past, the availability of Government grants. Table 4.94: Car and Commercial Vehicle Production in the UK, 1995-2004

Thousands Passenger Cars Commercial Vehicles Domestic Export Total % Export Domestic Export Total % Export 1995 787 745 1,532 49% 141 92 233 39% 1996 778 908 1,686 54% 126 112 238 47% 1997 736 962 1,698 57% 134 103 238 43% 1998 728 1,021 1,748 58% 125 103 227 45% 1999 648 1,138 1,787 64% 111 75 186 40% 2000 578 1,063 1,641 65% 96 76 172 44% 2001 98 894 1,492 60% 97 96 193 50% 2002 582 1,048 1,630 64% 77 114 191 60% 2003 511 1,147 1,658 69% 97 103 189 54% 2004 467 1,180 1,647 72% 81 128 209 61% 2005 411 1,185 1,596 74% 77 130 207 63%

Source: SMMT



Table 4.94 shows that, while total production has fluctuated during the period 1995-2005, the proportion of exports has risen from about 50% to 70% for cars and from about 40% to 60% for commercial vehicles. With UK manufacturing being increasingly focused on exports and demand for new cars increasing during the 1990s, a higher proportion of cars were also imported. The fall in production in 2005 was almost entirely due to the demise of MG Rover. The volume car manufacturers have been making significant investments in car plants in Central and Eastern Europe and in Turkey in recent years while older cars plants (Ford’s Dagenham plant, Jaguar’s facility in Coventry, Peugeot’s plant at Ryton) have closed or are planned to close. A significant risk factor for the UK car industry as a whole is that the UK is not within the euro-zone, leading to greater financial uncertainty for manufacturers. 4.12.6 Central Forecast 2004-2030 The Central Forecast for trade cars is based on our judgment of potential domestic demand for cars and an assumption that volume car manufacturing will remain located in the UK up to 2030, given the relatively capital intensive nature of the car industry and an attractive business environment. There are no published sources on the future prospects of the UK car industry that we are aware of, but there would appear to be some significant risks to the industry in the future: while manufacturing of cars for the European market may remain in Europe, car manufacturers are increasingly investing in new plants in Central and Eastern Europe and Turkey (where labour rates are significantly lower) from where the UK can be supplied by both sea and rail. As the UK is outside the euro zone, manufacturers located in the UK have to bear much of the exchange risk, while several Central and Eastern European Union countries are due to join the euro. Assumptions The Central Forecast is based on the following assumptions:

• Trends in all import/export vehicles will be in line with trends in the imports and exports of trade cars (rather than commercial vehicles), as the more significant sector in terms of volumes, value and importance to the ports industry;

• UK demand for cars increases by 2% per annum up to 2010, but then remains stable up to 2030; this assumes that, although there will be an increase in average disposable income, the market will become more mature as increasing congestion and environmental taxation limits the number of cars per household;

• The number of cars manufactured in the UK remains stable up to 2030, based on the assumption that the existing UK car industry will retain its competitiveness;

• 70% of all UK car production is exported. Estimates of UK demand, car production and imports/exports to 2030 These assumptions lead to the following estimates for UK demand, UK car production, exports and imports up to 2030 in terms of cars:



Table 4.95: Estimated UK Demand for Cars, Car Production, Imports and Exports, 2004-2030

Million Cars 2004 2010 2015 2020 2025 2030 A) UK demand for new cars 2.6 3.0 3.0 3.0 3.0 3.0 B) Cars manufactured in UK 1.7 1.9 1.9 1.9 1.9 1.9 C) Production for domestic market 0.5 0.6 0.6 0.6 0.6 0.6 Export production (B-C) 1.2 1.3 1.3 1.3 1.3 1.3 Imports (A-C) 2.1 2.4 2.4 2.4 2.4 2.4

Source: MDS Transmodal, using SMMT data for 2004 Central Forecast The analysis in Table 4.96 above implies that our Central Forecast for GB import/export vehicles up to 2030 is for growth of some 13% over the 25 year period. Table 4.96: Great Britain: Import/Export Vehicles, Central Forecast to 2030


2004-2030 % CAGR

Imports 3.0 3.4 3.4 3.4 3.4 3.4 +13% +0.5% Exports 2.0 2.3 2.3 2.3 2.3 2.3 +13% +0.5% Domestic Inwards - - - - - - +13% +0.5% Domestic Outwards 0.1 0.1 0.1 0.1 0.1 0.1 +13% +0.5% Total GB 5.2 5.8 5.8 5.8 5.8 5.8 +13% +0.5% % Change p.a. 2004-2010 2010-15 2015-20 2020-25 2025-30 2.0% - - - - Source: MDS Transmodal

Great Britain: Trade Cars Port Traffic Forecast to 2030

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Thou

sand

tonn

es




Table 4.97: Northern Ireland: Import/Export Vehicles, Central Forecast to 2030 Million tonnes


% CAGR

Imports - - - - - - - - Exports - - - - - - - - Domestic Inwards 0.09 0.10 0.10 0.10 0.10 0.10 +13% +0.5% Domestic Outwards 0.02 0.02 0.02 0.02 0.02 0.02 +13% +0.5% Total 0.11 0.12 0.12 0.12 0.12 0.12 +13% +0.5% % Change p.a. 2004-2010 2010-15 2015-20 2020-25 2025-30 +2.0% - - - - Source: MDS Transmodal Table 4.98 provides an analysis of general cargo traffic for Great Britain by port region up to 2030, assuming that market shares by port region remain the same as in 2004.

Northern Ireland: Trade Cars Port Traffic Forecast to 2030

0

20

40

60

80

100

120

140

1990 1995 2000 2005 2010 2015 2020 2025 2030

Thou

sand

tonn

es




Table 4.98: Great Britain Import/Export Vehicles Port Forecast, by Port Region, to 2030

Thousand tonnes Port of Region Market Share 2004 2004 2010 2015 2020 2025 2030 East Midlands - - - - - - - East of England 14.5% 747 842 842 842 842 842 Gt London 2.6% 132 151 151 151 151 151 North East 12.8% 658 744 744 744 744 744 North West 2.2% 111 128 128 128 128 128 Scotland 0.1% 5 6 6 6 6 6 South East 35.4% 1,827 2,056 2,056 2,056 2,056 2,056 South West 14.3% 739 831 831 831 831 831 Wales 0.1% 6 6 6 6 6 6 Yorks & Humber 18.1% 931 1,051 1,051 1,051 1,051 1,051 GB Islands 0.0% 1 1 1 1 1 1 Total 5,158 5,809 5,809 5,809 5,809 5,809 Source: MDS Transmodal 4.12.7 Implications for Ports The Central Forecast implies that some additional capacity may be required to handle some increased volumes of both imports and exports and any additional traffic from the Baltic and the Mediterranean would tend to use ports on the east and south coasts, as at present. However, traffic from many parts of Central and Eastern Europe could also provide a potential market for the Channel Tunnel. The impact on port capacity requirements related to increased imports may be significant because imports have a longer dwell time than exports. 4.13 Conclusion: summary of non-unitised forecasts Table 4.99 provides a summary of non-unitised forecasts for Great Britain and Northern Ireland. The smaller UK ports, for which no data is available by cargo category, have been assumed to handle only dry bulk and semi-bulk cargo; it has also been assumed that their traffic will not grow up to 2030.



Table 4.99: UK Non-unitised Forecasts to 2030, by Broad Category Million tonnes

Broad Category 2004 2010 2015 2020 2025 2030 % Change 2004-2030

% CAGR

“Great Britain “Major Ports” Liquid Bulk 264 256 270 277 283 290 +10% +0.4% Dry Bulk 108 103 109 111 103 110 +2% +0.1% General Cargo (incl. import/export vehicles)

31 34 35 35 36 36 +15% +0.5%

Total GB “Major Ports” 404 393 413 423 422 437 +8% +0.3% “Northern Ireland “Major Ports” Liquid Bulk 3 4 4 4 4 4 +24% +0.8% Dry Bulk 6 6 6 6 6 6 +4% +0.1% General Cargo (incl. import/export vehicles) 1 1 1 1 1 1 +22% +0.8%

Total NI “Major Ports” 11 11 11 12 11 12 +12% +0.4% Other UK ports All categories 15 15 15 15 15 15 - - UK Total 429 419 439 450 448 463 +8% +0.3% % Change p.a. 2004-

10 2010-

15 2015-

20 2020-

25 2025-

30

-0.4% +1.% +0.5% -0.1% +0.7% Source: MDS Transmodal Our forecasts suggest that UK bulk port traffics will grow by 8% up to 2030, at a compound average growth rate of 0.3%. The non-unitised traffics that are distributed inland from GB ports (i.e. excluding materials consumed or produced within dock estates such as crude oil and the transfer of coal and iron ore between a port terminal and a steel works located close by) have been assigned to the GB road and rail networks using the MDS Transmodal GB Freight Model to estimate the inland freight transport impacts up to 2030. The analysis, at a summary level for the whole of GB, is provided in Table 4.100 below, which shows, by direction of inland movement, tonnes handled, tonne kilometres of freight transport required and (for road transport) vehicle kilometres. The assignments assume that, for each cargo category, the modal share and inland origin and destinations up to 2030 remain the same as in 2004. The assignments also assume no change in the relative cost of inland transport, so that for any particular cargo category there is no change in the modal split between road and rail. However, if a cargo category that is transported further than the average inland haul in 2004 increases at a greater rate than other categories, the average amount of transport required in 2030 in terms of tonne kilometres increases. The results suggest that some 140 million tonnes of non-unitised cargo were distributed inland from GB ports in 2004 and this is forecast to increase to some 150 million tonnes in 2030 (7% increase). However, this non-unitised traffic would, on average, be transported



further, with a 11% increase in freight transport in tonne kilometres over the same period reflecting continuation of a trend for port hinterlands to extend through increasing competition. Road is by far the most dominant mode, accounting for almost 93% of total tonne kilometres in 2004 and this rises marginally to about 95% in 2030 due to a greater increase in the port throughput of cargo categories where rail has a relatively low market share. Table 4.100 Inland Distribution of GB Bulk Freight, by Mode, 2004 – 2030

Million 2004 2010 2015 2020 2025 2030 % Change

2004 – 2030 Road tonnes 64 65 71 74 72 75 18% Rail tonnes 14 12 13 14 12 14 2% Total tonnes 77 77 84 88 84 89 15% Road tkm 15,152 16,148 19,037 20,561 19,812 20,795 37% Rail tkm 1,336 1,169 1,319 1,388 1,193 1,368 2% Total tkm 16,488 17,318 20,357 21,949 21,005 22,163 34%

In

Road vehicle km 978 1,042 1,228 1,326 1,278 1,342 37% Road tonnes 59 60 59 58 58 58 -2% Rail tonnes 3 3 3 3 3 3 -9% Total tonnes 63 63 62 61 61 61 -2% Road tkm 10,715 10,747 10,593 10,487 10,501 10,531 -2% Rail tkm 524 467 403 364 366 371 -29% Total tkm 11,239 11,213 10,996 10,852 10,867 10,902 -3%

Out

Road vehicle km 1,339 1,343 1,324 1,311 1,313 1,316 -2% Road tonnes 123 125 129 132 130 133 8% Rail tonnes 17 15 16 17 15 17 0% Total tonnes 140 139 146 149 145 150 7% Road tkm 25,866 26,895 29,630 31,048 30,312 31,326 21% Rail tkm 1,860 1,636 1,722 1,753 1,559 1,739 -7% Total tkm 27,727 28,531 31,352 32,800 31,871 33,065 19%

Total

Road vehicle km 2,317 2,385 2,552 2,637 2,591 2,658 15% Source: MDS Transmodal GB Freight Model



5 BALANCE OF SUPPLY & DEMAND TO 2030 5.1 Introduction This chapter sets out the results of an initial modelling exercise to establish the balance between demand for port infrastructure (based on the forecasts produced for this study) and the supply of port infrastructure, using the MDS Transmodal GB Port Supply and Demand Model. The intention of the analysis included in this chapter was to indicate the nature of the analysis that is required to bring an analysis of demand (through the forecasts developed in Chapters 3 and 4 of this report) together with an analysis of capacity to establish the balance between supply and demand for port infrastructure up to 2030. As such, we have presented an analysis of a valid potential scenario for the balance of supply and demand for port infrastructure up to 2030, rather than seeking to present a definitive “answer”. A large number of additional scenarios could be tested using this approach, but this would be beyond the scope of this exercise, which is clearly focussed on forecasting demand through ports. The GB Port Supply and Demand Model has been used by MDS Transmodal to carry out studies for the Royal Society for the Protection of Birds (RSPB) in 1997 and both the RSPB and English Nature in 2002. These studies have been the only attempt we are aware of to model GB port supply and demand since the demise of the National Ports Council in 1980. The starting point for calculating port supply is an up-to-date inventory of existing port facilities. This has been compiled from a number of different reference sources supplemented by MDS Transmodal’s own knowledge and experience of various ports. It provides details of individual berths within a port or port area and classifies each berth according to six cargo handling categories:

• LoLo; • RoRo; • Trade cars; • Specialist dry bulk; • Specialist liquid bulk; • Semi bulk (including multipurpose and general cargo).

Other recorded details include:

• Quay length; • Area (hectares); • Maximum ship size dimensions (i.e. maximum length, draft and beam of vessels able

to be accommodated at the port).



Table 5.1 provides an analysis of GB port infrastructure by type of berth, showing length of berth for all types except RoRo and trade cars, where storage areas are more likely to be a limiting factor. Table 5.1: Summary of GB Port Infrastructure in 2005 Type Length of

Berth (kilometres)

Storage Area (hectares)

LoLo 12 -RoRo - 569Trade cars - 563Multi-purpose: RoRo/trade cars - 36Semi-bulk 46 -Dry bulk 46 -Liquid bulk 44 -Multi-purpose bulk berths 67 -Other 6 -Total 221 1,168Source: MDS Transmodal Excluding RoRo and trade car berths where the length of berth is generally not the critical factor, there are some 221 kilometres of quays in Great Britain, of which about 5% are specialist container berths. There are about 1,200 hectares of storage area available for general RoRo and trade cars. 5.2 Ship Sizes by Trade Route 5.2.1 Introduction The forecasts of demand that were developed during this study were allocated to ships according to the relevant trade route. The world areas are used to introduce assumptions relating to the maximum size of ship involved in different trades. This determines the minimum size of berth that will be required by ships trading on different trading routes over time. The assumptions on ship size differ according to type of traffic i.e. LoLo, RoRo, dry bulk, liquid bulk and conventional. 5.2.2 Trends in size of containerships The size of containerships has grown as trade has increased, particularly on the main Europe-Far East and Trans-Pacific routes. Table 5.2 provides an analysis of the world’s containership fleet between 1990 and 2005, with forecasts to 2008. As well as a long-term growth trend in the size of containerships, it



shows that the largest ships (over 8000 TEU capacity) will represent some 14% of total world capacity in 2008 compared to only 5% in 2005. Table 5.2: Development of the fully cellular fleet, by TEU size band

Table 5.3 provides an analysis of the largest containerships on order (all over 8000 TEU) in May 2006. This indicates that the nominal capacity of the largest ships currently on the order books is 10,000 TEU for Cosco and that there are 149 of the very largest post-panamax vessels on order between 2006 and 2011. It also suggests that vessels of 14.5 to 15 metres draught are likely to be the norm for the foreseeable future, particularly as ship owners want to be able to operate to a reasonably wide range of ports in any world region.

Actual ForecastA) Number of vessels TEU SIZE BAND 1990 1995 2000 2004 2005 2006 2007 2008

<=1000 50% 39% 36% 31% 30% 29% 28% 26%1001 - 2000 30% 32% 31% 28% 27% 27% 27% 27%2001 - 3000 15% 16% 15% 16% 17% 17% 16% 16%3001 - 4000 5% 7% 8% 8% 7% 7% 7% 7%4001 - 5000 0% 4% 6% 8% 9% 9% 9% 10%5001 - 6000 - - 2% 6% 6% 6% 6% 6%6001 - 7000 - - 1% 3% 3% 3% 3% 4%7001 - 8000 - - - 0% 0% 1% 1% 1%8000+ - - - 0% 1% 3% 4% 4%TOTAL 100% 100% 100% 100% 100% 100% 100% 100%

B) TEU capacity <=1000 19% 13% 11% 8% 7% 7% 7% 6%1001 - 2000 35% 30% 25% 19% 17% 16% 15% 15%2001 - 3000 31% 28% 22% 19% 19% 18% 17% 16%3001 - 4000 13% 17% 15% 12% 11% 10% 9% 9%4001 - 5000 1% 12% 16% 16% 17% 16% 16% 17%5001 - 6000 - - 8% 14% 14% 14% 13% 13%6001 - 7000 - - 4% 9% 8% 8% 8% 9%7001 - 8000 - - - 1% 2% 2% 2% 2%8000+ - - - 2% 5% 10% 12% 14%TOTAL 100% 100% 100% 100% 100% 100% 100% 100%

Source: MDS Transmodal Containership Databank (May 2006) Note : fleet forecasts are based on confirmed newbuilding orders



Table 5.3: Containerships of 8000+ TEU on Order, 2006

Table 5.4 provides an estimate of future ships sizes for containerships operating on the Europe-Far East route up to 2030, which has been used within the modelling exercise. Table 5.4: Estimates of Minimum Container Ship Sizes on the Europe-Far East

Route to 2030 Metres

Length Beam Draft 2004 290 39 13.82010 320 40 13.52015 333 40 13.52020 340 42 14.02025 370 50 152030 400 55 15Source: MDS Transmodal 5.2.3 RoRo Vessels Table 5.5 provides an analysis of ship dimensions for scheduled deep sea and short sea RoRo services calling at UK ports in 1995 and 2005. The short sea services include RoRo services between the UK and the Mediterranean, as well from Great Britain to Ireland, Scandinavia, Iberia and the Near Continent.

Operator Ships TEU Boxwidth LOA (m) Beam (m) Draught (m) Speed 2006 2007 2008 2009 2010 2011CMA - CGM 4 8200 17 334.00 43.00 14.50 24.50 4

1 8400 17 334.00 43.00 14.50 24.50 13 9163 17 360.00 42.80 14.50 25.00 38 9700 17 332.00 43.20 14.50 24.50 6 2

Cosco 1 8200 17 334.00 43.00 14.50 24.50 12 9440 17 360.00 42.80 14.50 - 24 10000 18 349.00 45.60 14.30 25.50 1 34 10000 18 348.50 45.60 14.50 25.50 3 1

CSCL 5 8530 17 334.00 42.80 14.65 25.00 3 28 9600 18 337.00 45.60 14.50 25.00 4 4

Evergreen 4 8200 17 - 42.80 14.50 - 4Hapag-Lloyd 5 8750 17 335.00 42.80 14.50 24.50 3 2

4 8750 17 335.10 42.80 14.50 25.00 4Hyundai 8 8600 18 339.00 45.60 14.50 26.00 2 2 4K-Line 8 8120 18 336.00 45.80 13.00 24.50 3 1 1 3Maersk Line 14 8100 17 367.00 42.80 15.00 25.00 3 3 4 2 2

8 8400 17 332.00 43.20 14.50 - 3 3 23 8450 17 335.00 42.80 14.00 24.50 1 25 8600 18 335.00 45.60 14.50 - 54 9100 18 338.00 45.60 15.00 - 3 1

MOL 8 8100 18 316.00 45.60 14.50 - 3 3 2MSC 3 8030 17 324.80 42.80 14.50 25.00 3

2 8400 17 332.00 43.20 14.50 - 29 9200 18 336.70 45.60 14.50 25.00 4 5

NYK 8 8120 18 336.00 45.80 13.00 24.50 6 24 9200 18 334.00 45.30 14.00 24.50 1 3

OOCL 3 8060 17 323.00 42.80 14.50 25.00 1 2Yang Ming 5 8200 17 333.20 42.80 14.00 - 3 2

4 8200 17 335.00 42.80 14.50 25.50 4Total ships 149 36 45 42 22 2 2



Table 5.5: Average dimensions for RoRo vessels operating into UK ports in 1995 and 2006

Dimensions in metres Number of ships Average length Average beam Average draft Deep Sea 1995 44 209 30.2 10.1 2006 85 200 29.9 10.0 Short Sea 1995 117 134 23.0 5.9 2006 180 158 24.2 6.5 Source: MDS Transmodal Containership Databank While deep sea RoRo vessels have not increased in size over the ten year period, the short sea vessels have increased 18% in length, 5% in beam, 10% in draft on average and we expect this trend to continue. Table 5.6 provides an example of the estimates of future ship sizes for short sea RoRo vessels operating between the British Isles and the Continent up to 2030. Table 5.6: Estimates of Minimum RoRo Vessel Size on Routes between the British Isles and Benelux to 2030

Metres Length Beam Draft 2004 168 25 6.42010 180 26 7.02015 180 26 7.02020 180 26 7.02025 180 26 7.02030 180 26 7.0Source: MDS Transmodal 5.2.4 Other Vessels As a general rule, deep sea bulk vessels to carry both liquid and dry bulk cargoes are not increasing significantly in size, partly because trade is not growing rapidly in bulk commodities in the long term, despite short term shortages of dry bulk shipping to feed China’s industrial development in the last couple of years. In short sea bulk markets in North West Europe, the market trend has been for an increase in ship sizes, largely driven by ship owners seeking operational economies of scale rather than trade growth, as well as some demand from shippers for larger consignments. Fewer vessels under 1000 dwt are now available for shippers and there is a trend towards vessels of over 3000 dwt. Ports with significant access restrictions may see their cargo base dwindle over the next 10 years or so.



5.3 Supply-Demand Balance 5.3.1 Methodology In order to be able to forecast the future supply of and demand for GB port infrastructure a model has been developed which attempts to ‘explain’ how existing port traffics can be handled by the available infrastructure using ‘across the board’ generic productivity formulae. In practice productivity will vary from port to port because of different equipment employed or differences in the ships served. The model works by:

• Sorting demand (trade) into world areas and cargo category; • Applying minimum vessel size requirements by cargo mode and world area and

increasing these over time according to the different cargo handling modes and trade route;

• Estimating the productivity of each port terminal on the basis of cargo mode of

appearance, vessel size and the parameters of the berth. The productivity formulae are increased with time.

• Starting with the largest ships’ first, by an iterative process calculating how much the

capacity of a particular port is used up by ships employed on different trade routes. The largest ships are allocated first in order to make the most economical use of infrastructure.

• Where forecasts imply a shortfall in capacity at a given port, the model redistributes

traffic from Customs ports (listed in Table 5.7 below) where there are capacity shortfalls to adjacent Customs ports if available capacity exists. The general assumptions in the model are that dry bulk, liquid bulk and semi-bulk traffic can be re-distributed by up to five Customs ports along the coast. RoRo, LoLo and trade car traffic is redistributed by up to 13 Customs ports. The extent to which traffic of a particular type can switch between ports is based on the consultants’ experience and observation of the market and, in particular, the extent to which traffic is footloose. Bulk traffics are usually relatively low value and will not bear significant inland distribution costs, which tends to lead to their being shipped reasonably close to their inland origin or destination and reduces the number of ports around the coast that might be competitive. In the unit load markets, serving a national market and with higher value cargoes, the traffic may be more footloose and so may be handled, if necessary, through a wider variety of ports.



Table 5.7: Customs Ports included in the MDS Transmodal GB Port Supply & Demand Model

1 London 21 Watchet 41 Whitehaven 61 Sunderland 2 Colchester 22 Bristol 42 Workington 62 Hartlepool 3 Medway 23 Sharpness 43 Silloth 63 Middlesbrough 4 Whitstable 24 Newport 44 Ayr 64 Whitby 5 Ramsgate 25 Cardiff 45 Irvine 65 Scarbro' 6 Dover 26 Port Talbot 46 Ardrossan 66 Hull 7 Folkestone 27 Swansea 47 Greenock 67 Goole 8 Newhaven 28 Milford Haven 48 Glasgow 68 Scunthorpe 9 Shoreham 29 Fishguard 49 Inverness 69 Immingham

10 Portsmouth 30 Llandulas 50 Fraserburgh 70 Grimsby 11 Southampton 31 Holyhead 51 Peterhead 71 Boston 12 Poole 32 Mostyn 52 Aberdeen 72 Wisbech 13 Weymouth 33 Ellesmere Port 53 Montrose 73 K Lynn 14 Exeter 34 Northwich 54 Dundee 74 G Yarmouth 15 Teignmouth 35 Runcorn 55 Methil 75 Lowestoft 16 Plymouth 36 Manchester 56 Kirkcaldy 76 Felixstowe 17 Fowey 37 Liverpool 57 Grangemouth 77 Ipswich 18 Par 38 Fleetwood 58 Leith 78 Harwich 19 Falmouth 39 Heysham 59 Blyth 20 Penzance 40 Barrow 60 Tyne

The model therefore generates a ‘cascade’ effect, whereby as ships increase in size, they require deeper water, migrate to deep water ports and leave capacity at shallow ports If the current port becomes capacity constrained, or the ship is too large, then the model attempts to fit traffic to neighbouring ports by shifting cargo along the coast in either direction before it is classified as unsatisfied demand. A capacity shortfall for that traffic in that port region is then deemed to exist. As the traffic carried in deeper drafted vessels switches ports, so the original infrastructure is freed up and used by shorter distance traffic arriving in smaller vessels. Using this model approach, as the process repeats itself, so the smallest, shallowest port infrastructure eventually becomes obsolete. 5.3.2 Port productivity The productivity formula used by the model to predict future port demand is not static, but is increased by 1.5% per annum up to 2010 according to assumptions on productivity increases relating to the use of larger vessels and improved technology and working practices at the ports. We have assumed that after 2010 these productivity gains through existing facilities have been maximised and no further efficiency gains are possible. This improvement in efficiency is derived from the use of larger ships in the LoLo market, accounting for around 0.5% per annum. given the assumptions we have made (and handled automatically within the model), and a 1% per annum increase through improved technology and working practices. Together, these improvements soak up some of the extra demand.



The overall productivity growth of 1.5% per annum corresponds with the longer-term forecasts which have been made by the promoters of different container port projects. For example, for Bathside Bay, Hutchison has estimated a capacity of 1.7m TEU over 1400 metres of quay. At 90% utilisation, that is equivalent to around 1100 TEU per quay metre, which corresponds closely to the results of our model over a range of deep-sea vessel capacities for 2010 and thereafter. The figure of 1100 TEU per quay metre is a lower figure than that used for the public inquiries for Dibden Bay, London Gateway, Bathside Bay and Felixstowe South. However, these were all new facilities and in each case the promoters sought to demonstrate ‘need’ even if higher levels of productivity were achieved than had yet been experienced in European ports. Our modelling is based upon actual performance so that a central estimate of need can be established rather than ‘best’ or ‘worse’ case scenarios. The productivity formulae that are used for the different types of port traffic are based on long run sustainability. If the ports industry is to retain internal competitiveness then some short-term spare capacity must exist to allow operators to switch ports from time to time. Such switching has been observed recently in container traffic between the ports of Southampton and Felixstowe as a result of congestion at these ports at different times. Our definition of capacity therefore represents around 90% of the maximum capacity that could be achieved by an individual port over a short period. 5.3.3 Results The following tables provide the results for each mode of appearance up to 2030. The analysis does not therefore include Northern Ireland, Orkney and Shetland and other islands off the coast of Great Britain. Key assumptions are as follows:

• Berth productivity rises by 1.5% per annum up to 2010 and then remains constant; • If bulk traffics cannot “fit” into a berth, they can switch by up to five Customs ports

along the coast to find a berth with suitable capacity and capability; • If unitised and trade car traffics cannot “fit” into a berth, they can switch by up to 13

Customs ports along the coast to find a berth. The results are expressed in terms of traffic that is not accommodated at GB mainland ports. This inability to be accommodated can be addressed in two ways: i) Building or enhancing berths; ii) ‘Allowing’ cargo to switch beyond local ports to national ports. For deep sea

container traffic, for example, this could include allowing traffic currently based in South East ports to switch to the Tees, Mersey or Clyde.



Table 5.8: Results of Supply & Demand Modelling: LoLo Million tonnes

Accommodated Not accommodated Total % Not Accommodated 2004 53 - 53 - 2010 59 13 72 19% 2015 59 25 84 30%

GB

2020 61 37 98 38% 2025 62 51 113 45% 2030 63 67 130 52% Source: MDS Transmodal GB Port Supply & Demand Model Based on the assumptions included in the model, which did not include planned new capacity at London Gateway, Felixstowe South and Bathside Bay, the results for LoLo indicate that continuing growth in traffic, with capacity fixed at 2004 levels and productivity improvements of 1.5% per annum up to 2010, would lead to a requirement for additional LoLo capacity by 2010 and significant additional capacity may be required in the longer term. Both the exercise described in Table 6.1 of the accompanying report for the DfT entitled ‘Container port transhipment study’ and the results shown above in table 5.8 have been completed using compatible base year data. They seek to achieve different objectives, however. The transhipment study seeks (amongst other objectives) to establish the gap between supply and demand for GB deep-sea container port capacity to determine how much room is available in GB ports for 3rd country transhipment containers and how much capacity is required in Continental mainland ports for GB deep-sea domestic traffic fed to regional ports. This forecasting exercise is based upon tonnages (not TEU) and unconstrained demand taking the 2004 cargo mix as its base year, and therefore assumes base year (pro-rata) levels of 3rd country transhipment in GB ports remain constant. However, the overall results are very similar because the exercise in the forecasting report attempts to use up every possible element of port capacity available. Scenario 2(b) of the transhipment study shows that in 2030, GB deep sea container port throughput would be 10.831 million TEU as compared with 2004 capacity of 5.259 million TEU, implying a need for extra capacity equivalent to 5.572 million TEU by 2030. Extra feeder port capacity would have to rise from 0.652 million TEU to 5.198 million TEU to satisfy that shortfall – an extra 4.546 million TEU. In Chapter 4 of the transhipment study we also anticipated the need to handle an extra 2.25 million TEU of demand from intra-European LoLo traffic. Taken together 5.572 + 4.654 + 2.25 million TEU equates to a capacity shortfall of 12.3 million TEU excluding transhipment. The port forecasting exercise carried out for this study shows a 2030 shortfall of 67.4 million tonnes of LoLo container freight. In TEU terms this is equivalent to 13.5 million TEU (67.4/mean of 5 tonnes per TEU), a figure which assumes that transhipment traffic rises in line with domestic demand (277,000 TEU x 2.84 = 0.787 million TEU). Net of transhipment, the anticipated shortfall in domestic port capacity would be 12.7 million TEU in 2030, more or



less the same figure as emerges from the approach adopted in the transhipment study. Table 3.11 shows that we forecast 4.8 tonnes per TEU by 2030, which means that 67.6m tonnes corresponds to the same level of shortfall for 2030 of 14.1m TEU (67.6/4.8 = 14.1). Table 5.8 above shows that 52% of a total demand to handle 130m tonnes (67.6m tonnes) in 2030 would not be accommodated. Table 5.9: Results of Supply & Demand Modelling: RoRo

Million “quasi-tonnes” Accommodated Not accommodated Total % Not Accommodated

2004 166 - 166 - 2010 191 11 202 6% 2015 208 18 228 8%

GB

2020 228 26 254 10% 2025 249 31 280 11%

2030 267 37 303 12% Source: MDS Transmodal GB Port Supply & Demand Model Based on the assumptions included in the model, the results for RoRo indicate that continuing growth in traffic may lead to a requirement for additional capacity by 2010 due to increased traffic volumes and an increase in average ship size. This analysis excludes the Channel Tunnel freight shuttle services, which (with 14 shuttles in operation) has capacity to handle up to about 1.4 million HGVs per annum, equating to about 14 million “quasi tonnes” of RoRo freight. Table 5.10: Results of Supply & Demand Modelling: Trade Cars

Million “quasi-tonnes” Accommodated Not accommodated Total % Not Accommodated

2004 378 - 378 - 2010 362 63 426 15% 2015 360 65 426 15%

GB

2020 358 68 426 16% 2025 356 69 426 17% 2030 355 71 426 17% Source: MDS Transmodal GB Port Supply & Demand Model The results for trade cars indicate that, given the space requirements at ports for import vehicles, some increased capacity may be required by 2010. While there is no increase in port traffic demand forecast after 2010, increasing average ship size leads to a gradually increasing shortfall in capacity up to 2030.



Table 5.11: Results of Supply & Demand Modelling: Semi-Bulk Million tonnes

Accommodated Not accommodated Total % Not Accommodated 2004 26.3 - 26.3 - 2010 27.8 0.7 28.5 2% 2015 28.2 0.7 28.9 2%

GB

2020 28.7 0.7 29.4 2% 2025 29.1 0.7 29.8 2%

2030 29.5 0.7 30.2 2% Source: MDS Transmodal GB Port Supply & Demand Model The results for semi-bulk traffic indicate that, given the ability of ships in these trades to use a variety of ports, traffic can switch relatively easily to smaller ports where necessary and so only a relatively small amount of additional capacity might be needed for semi-bulk traffic up to 2030. Table 5.12: Results of Supply & Demand Modelling: Dry Bulk

Million tonnes Accommodated Not accommodated Total % Not Accommodated

2004 108 - 108 - 2010 92 11 103 10% 2015 97 12 109 11%

GB

2020 99 12 111 11% 2025 93 11 103 10%

2030 98 12 110 11% Source: MDS Transmodal GB Port Supply & Demand Model The results for dry bulk traffic indicate that additional capacity might be required on some deep water estuaries over the next 25 years to handle deep sea traffic, particularly coal imports, that can only be accommodated on a few estuaries. Given that the analysis has a base year of 2004, this view is supported by the development of Humber International Terminal Phase 2 at Immingham on the Humber to handle deep sea coal imports. Table 5.13: Results of Supply & Demand Modelling: Liquid Bulk

Million tonnes Accommodated Not accommodated Total % Not Accommodated

2004 222 - 222 - 2010 216 - 216 - 2015 222 - 222 -

GB

2020 225 - 225 - 2025 229 - 229 -

2030 235 - 235 - Source: MDS Transmodal GB Port Supply & Demand Model



The results for liquid bulk traffic indicate that additional maritime capacity is unlikely to be required over the next 25 years. 5.4 Conclusion An initial modelling exercise to establish the balance between demand for port infrastructure (based on the forecasts produced for this study) and the supply of port infrastructure, using the MDS Transmodal GB Port Supply and Demand Model, was based on the following key assumptions:

• Berth productivity rises by 1.5% per annum up to 2010 and then remains constant; • If bulk traffics cannot “fit” into a berth, they can switch by up to five Customs ports up

or down the coast to find a berth with suitable capacity; • If unitised and trade car traffics cannot “fit” into a berth, they can switch by up to 13

Customs ports up or down the coast to find a berth, reflecting the fact that unit load operators serve wider hinterlands but will generally not transfer to ports which would lead to a change in vessel utilisation. For example, while the Thames may be a substitute (for a ferry operator) for the Haven, the Humber will not be a substitute.

Based on the assumptions included in the model:

• The results for LoLo indicate that continuing growth in traffic would lead to a requirement for additional capacity by 2010 and significant additional capacity may be required in the longer term;

• The results for RoRo indicate that continuing growth in traffic may lead to a requirement for additional capacity by 2010;

• The results for trade cars indicate that, given the space requirements at ports for import vehicles, some increased capacity may be required by 2010;

• The results for semi-bulk traffic indicate that only a relatively small amount of additional capacity might be needed for semi-bulk traffic up to 2030;

• The results for dry bulk traffic indicate that additional capacity might be required on some deepwater estuaries over the next 25 years;

• The results for liquid bulk traffic indicate that additional maritime capacity is unlikely to be required over the next 25 years.



6 OVERALL FORECASTS OF DEMAND FOR UK PORTS TO 2030 In 2004, GB ports plus the Channel Tunnel handled a total of 565 million tonnes of cargo. Northern Irish ports handled a further 23 million tonnes. Our forecasting exercise to 2030 has taken account of each of the broad categories (modes of appearance) of port cargo. Table 6.1 summarises those forecasts in tonnes and Table 6.2 summarises the forecasts in units for the unitised cargoes. The forecasting exercise in Chapter 3 is based on Customs tonnes, which excludes the weight of packaging. For compatibility with port returns, these forecasts have been adjusted to be compatible with Maritime Statistics published by the DfT for 2004 at 146 million tonnes, including the Channel Tunnel. A similar adjustment was made for unit load traffic to and from Northern Ireland. Our overall conclusion is that between 2004 and 2030 container traffic is expected to grow by 178% as measured by TEU and HGV units are expected to grow by about 112%. Bulk traffics are forecast to grow by just 8% overall. Total port tonnes for the UK are forecast to grow by 37%. Unit load cargoes are forecast to grow from about 27% of total UK port tonnes (including Eurotunnel) in 2004 to about 43% in 2030. Table 6.1: Overall Forecast Growth in UK Traffic in Tonnes to 2030 Million Tonnes

Mode of appearance 2004 2010 2015 2020 2025 2030 % CHANGE 2004-2030

% CAGR 2004-2030

BULK TRAFFIC GB “major” ports Liquid bulk 264 256 270 277 383 290 +10% +0.4% Dry bulk 108 103 109 111 103 110 +2% +0.1% Other general cargo (including import/export vehicles)

31 34 35 35 36 36 +15% +0.5%

Total GB non unitised 404 393 413 423 422 437 +8% +0.3% BULK TRAFFIC N Irish “major” ports Liquid bulk 3 4 4 4 4 4 +24% +0.8% Dry bulk 6 6 6 6 6 6 +2% +0.2% Other general cargo (including import/export vehicles)

1 1 1 1 1 1 +24% +0.8%

Total NI non unitised 11 11 11 12 11 12 +12% +0.4% Other UK ports All categories 15 15 15 15 15 15 - - Total UK bulk (including import/export vehicles)

429 419 439 450 448 463 +8% +0.3%

Cont’d



UNITISED TRAFFIC GB unit load (including Eurotunnel) 146 183 214 248 284 322 +120% +3.1% NI unit load 12 13 15 16 18 20 +62% +1.9% Total UK unit load (including Eurotunnel)

158 196 228 264 302 342 +116% +3.0%

TOTAL UK (including Eurotunnel)

587 615 668 713 750 805 +37% +1.2%

% Change p.a. 2004-10

2010-15

2015-20

2020-25

2025-30

+0.8% +1.7% +1.3% +1.0% +1.4% Source: MDS Transmodal Table 6.2: Overall forecast growth in UK unitised traffic to 2030

Million Units

Source: MDS Transmodal These forecasts are not based upon the extrapolation of compound annual growth rates but on the underlying trends and factors in the domestic economy that drive port traffics. As a consequence, while they reflect many of the forecasts made recently for unitised trades to around 2015 or 2020, forecasts over the longer period tend to be lower. In this respect, it is important to note that the demand for freight transport services within Britain grows at a significantly lower rate than does that of GDP. In the long run, one can expect the demand for international cargo handling to conform to similar underlying trends, once the impact of globalisation on the substitution of domestic production by imports has stabilised. Nevertheless, our forecast growth rate for unitised cargo sectors implies an urgent need for additional port handling facilities, given that there appears little potential to further expand the productivity of existing infrastructure.

2004 2010 2015 2020 2025 2030 GB ports Containers 4.3 5.9 6.9 8.1 9.5 11.3 RoRo (including Eurotunnel) 7.6 9.4 10.9 12.6 14.5 16.2 N. Irish ports Containers 0.1 0.2 0.2 0.2 0.3 0.3 RoRo 0.7 0.9 1.0 1.1 1.3 1.4 Total UK ports (including Eurotunnel)

Containers 4.4 6.1 7.1 8.3 9.8 11.6

RoRo 8.3 10.3 11.9 13.7 15.8 17.6



TECHNICAL ANNEX 1 Macro-economic Trends in UK Trade 1.1 Introduction Section 1 of this Technical Annex considers the macro-economic factors influencing trade patterns, in an attempt to explain the underlying processes through which a large part of the demand for port services is derived. An overview of the composition of UK trade is provided to highlight the important product and geographical sectors for the UK, by volume and by value. Trends within the UK and the World economy will then be examined in order to understand which processes are likely to be influencing trade. Trends in UK trade will then be considered in greater depth and related to the broader macro-economy, setting out the foundations for a projection of UK trade prospects. In a sense, this analysis departs from conventional approaches to trade economics as it is primarily concerned with physical volumes of trade, and spatial patterns of demand. Conventionally, trade performance can be summarised as a net financial quantity, but in the context of a ports study, changes within the commodity structure, the geographical distribution, and the emergence of imbalances within these sub-sectors need to be identifiable. This exercise is not an attempt to model trade in the conventional fashion, but rather to unravel some of the details within the overall macro-economic picture that have particular relevance for the development of the UK ports sector. Globalisation, interpreted as the external pressure on nation states to move towards open market based systems, is often cited as the catalyst for the structural changes that are driving the growth in industrial out-sourcing and import growth. However, whatever the merits of this process, the scale of change and the specific consequences on the volumes of goods exchanged need to be understood. The primary source of data is HM Revenue & Customs trade statistics, covering:

• Intra- and extra-EU trade; • Imports (arrivals) and exports (dispatches); • Tonnes and monetary value (measured in sterling).



1.2 Composition of UK Trade - Overview Before the trade flows are examined in detail it is useful to set out the headline quantities, starting from the summary statistics quoted regularly in the press. These are derived from the Pink Book4. Table 1: Summary of Balance of Payments in 2003 Credits, £m Debits, £m Balance, £m 1. Goods 187,846 235,136 -47,290 2. Services 89,693 75,076 14,617 3. Income 126,340 104,243 22,097 4. Current Transfers 13,163 23,017 -9,854 Total Current Account 417,042 437,472 -20,430 The headline figure for the UK balance of payments is the current account balance. A deficit of £20,430 million was recorded in 2003. The current account comprises four categories of cash flow, the largest being the import and export of goods. Approximately half of current account credits and debits relate to trade in goods. Moreover, the trade in goods contributes most significantly to the net balance; the £20 billion current account deficit includes a £47 billion deficit related to trade in goods, offset by surpluses in the services and income from abroad items. Table 2: UK Current Account Balance, 1960-2003 2003 1995 1990 1980 1970 1960 Trade in Goods -47,290 -12,023 -18,707 1,329 -18 -404 Trade in Services 14,617 8,481 4,337 3,829 455 39 Income 22,097 2,101 -2,979 -1,765 471 166 Transfers -9,854 -7,574 -4,932 -1,653 -89 -6 Current Balance -20,430 -9,015 -22,281 1,740 819 -205 Between 1960 and the mid 1980s, the trade in goods remained more or less in balance, as did the current account as a whole. However, since 1985, the goods deficit has steadily increased, peaking at £24 billion in 1989, falling back to £12bn in 1997, and then increasing rapidly to the 2003 record level. As the largest and most volatile element in the overall account, the impact has been mirrored in the current account balance. The trend in UK goods trade between 1980 and 2004 is shown in Figure 1. From a stable position in 1980, imports rose more quickly than exports during the decade. Between 1990 and 1996, imports and exports were closely correlated, but thereafter a gap has developed,

4 Office for National Statistics (ONS), 2004, “United Kingdom Balance of Payments, The Pink Book 2004”



creating a deficit approaching £50bn per annum. In Figure 2 it is possible to see the pattern of trade volumes measured in tonnes between 1988 and 2004. Figure 1: UK Goods Trade by Value, 1980-2004

UK Trade (£m)

0

50000

100000

150000

200000

250000

300000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Year

Exports (£m)

Imports (£m)

Source: Office for National Statistics Figure 2: UK Goods Trade by Weight, Tonnes, 1988-2004

UK Trade (Thousands of Tonnes)

-

50,000

100,000

150,000

200,000

250,000

300,000

1988 1992 1996 2000 2003 2004

Year

ImportsExports

Source: HM Revenue & Customs



The import and export trends measured in monetary units and tonnes show similar patterns; a gap developing in the late 1980s with imports growing faster than exports, a narrowing in the deficit during the early to mid 1990s, and a new gap arising after 2000, with export growth flat, and import growth strong. In value terms at least, export volumes did recover in the last three quarters of 2004. However, provisional results for 2005 Q1 show that this deficit is being maintained, with the gains in the oil export sector being offset by lower exports of cars, chemicals and intermediate goods. The following pie-charts show the geographical pattern of UK trade, imports and exports, by weight and by value, comparing 1988 with 2004. Figure 3: UK Trade by World Region, Exports, by Value


1988, UK Exports, Trade by Value£88bn

NW Europe40%

Nordic5%Mediterranean

12%

E Europe1%

Africa Excl Med3%

N America13%

C&S America2%

W Asia7%

E Asia9%

Oceania2%

Unclassif ied1%

Ireland5%

2004, UK Exports, Trade by Value£195bn

NW Europe36%

Nordic4%

Mediterranean14%

E Europe4%

Africa Excl Med2%

N America16%

C&S America2%

W Asia5%

E Asia8%

Ireland8%

Unclassif ied0%

Oceania1%



Figure 4: UK Trade by World Region, Exports, by Weight

Source: HM Revenue & Customs Figure 5: UK Trade by World Region, Imports, by Value


1988, UK Imports, Trade by Value£113 bn

NW Europe43%

Nordic8%

Mediterranean10%

E Europe2%

Africa Excl Med5%

N America11%

C&S America2%

W Asia2%

E Asia12%

Ireland3%

Unclassif ied1%Oceania

1%

2004, UK Imports, Trade by Value£261 bn

NW Europe38%


12%

E Europe4%

Africa Excl Med3%

N America11%

C&S America2%

W Asia3%

E Asia16%

Oceania1%

Unclassif ied0%

Ireland4%

1988, UK Exports, Trade by Weight132 bn Tonnes

NW Europe47%

Nordic6%

Mediterranean11%

E Europe1%

Africa Excl Med1%

N America23%

W Asia2%

C&S America1%

E Asia2%

Oceania0% Unclassif ied

0%Ireland

6%

2004, UK Exports, Trade by Weight183 bn Tonnes

NW Europe44%

Nordic5%

Mediterranean12%

E Europe2%

Africa Excl Med1%

N America18%

C&S America1%

W Asia2%

E Asia4%

Oceania0%

Unclassif ied0%

Ireland11%



Figure 6: UK Trade by World Region, Imports, by Weight Source: HM Revenue & Customs

The World has been divided into eleven geographical regions, and the proportion of UK trade attributable to each group is measured in the pie chart segments. On the left hand side are the patterns observed in 1988, and on the right hand side 2004. Although there has been substantial growth between 1988 and 2004, there has been surprisingly little change in the geographical pattern of trade at this level of aggregation. On the export side this is particularly true. Ireland’s share of UK exports has grown, but North West Europe’s share has declined. Eastern Europe has grown, but from a very low base. North America accounts for a larger share by value, but a smaller share by volume. On the import side, more changes can be seen. North West Europe’s share has declined substantially for both volume and value. Eastern Europe has doubled its share by both measures. North America has remained static in terms of value, but has halved in terms of weight. The regions representing most of the developing world, Western Asia, Central and South America, Africa (excluding Mediterranean Africa) have barely changed by either measure. East Asia has increased its share by value from 12% to 16%, and its share by weight from 2% to 6%. Similar results are obtained when trade by commodity is considered. See Figure 7 to Figure 10.

1988, UK Imports, Trade by Weight180 bn Tonnes

NW Europe26%


12%

E Europe6%

Africa Excl Med4%

N America12%

Ireland3%

Unclassif ied0%

Oceania5%E Asia

2%

C&S America5%

W Asia4%

2004, UK Imports, Trade by Weight271 bn Tonnes

NW Europe21%

Nordic22%

Mediterranean8%

E Europe13%

Africa Excl Med7%

N America5%

C&S America6%

W Asia4%

Ireland3%

Unclassif ied0%

Oceania5%

E Asia6%



Figure 7: UK Trade by Commodity, Exports, Values

Source: HM Revenue & Customs Figure 8: UK Trade by Commodity, Exports, by Weight

Source: HM Revenue & Customs The pie charts show the share of UK worldwide trade by commodity group (one digit SITC definitions). On the export side the pattern of trade has changed very little at an aggregate level, even though the volumes have increased significantly over the sixteen year time period (1988-2004). Looking at exports by value, there has been a shift away from basic manufactures (steel products, for example), and increases in the chemicals and machinery sectors. The machinery sector includes automotive products. By weight, the largest change has been the reduction in the share of mineral fuels (petroleum and coal).

1988 Exports, Trade by Weight130 bn Tonnes

MACHINERY3%

MISC MANUFACTURES

1%BASIC

MANUFACTURES8%

COMMODITIES n.e.s.0%

CHEMICALS7%

OILS FATS0%

MINERAL FUELS65%

CRUDE MATERIALS9%

BEVERAGES & TOBACCO

1%

FOOD6%

2004 Exports, Trade by Weight183 bn Tonnes

BASIC MANUFACTURES

10%

MACHINERY5%

MISC MANUFACTURES

1%

COMMODITIES n.e.s.0% FOOD

6%

BEVERAGES & TOBACCO

1%

CRUDE MATERIALS17%

MINERAL FUELS51%

OILS FATS0%

CHEMICALS9%

1988 Exports, Trade by Value£84 bn

BASIC MANUFACTURES

19%

MACHINERY38%

MISC MANUFACTURES

12%

COMMODITIES n.e.s.3% FOOD

4%

BEVERAGES & TOBACCO

2%CRUDE MATERIALS

2%

MINERAL FUELS7%

OILS FATS0%

CHEMICALS13%

2004 Exports, Trade by Value£195 bn

BASIC MANUFACTURES

13%

MACHINERY41%

MISC MANUFACTURES

12%


CHEMICALS17%

OILS FATS0%

MINERAL FUELS9%

CRUDE MATERIALS2%

BEVERAGES & TOBACCO

2%FOOD

3%



Figure 9: UK Trade by Commodity, Imports, by Value

Source: HM Revenue & Customs Figure 10: UK Trade by Commodity, Imports, by Weight

Source: HM Revenue & Customs Comparing imports to exports, the profiles are broadly similar, so at this level of aggregation it appears that UK imports are more or less the same products that it exports in similar proportions. However, some of the trends are in opposite directions. Whereas exports of chemicals increased by value, imports decreased. Exports of mineral fuels decreased by weight, imports increased. Exports of crude materials (ores, scrap, aggregates etc) increased, and imports decreased. In the higher value added sectors (machinery and miscellaneous manufactures), export shares by weight and value remained more or less constant, but imports of miscellaneous manufactures increased sharply.

1988 Imports, Trade by Value£112 bn

BASIC MANUFACTURES

13%

MACHINERY41%

MISC MANUFACTURES

12%


CHEMICALS17%

OILS FATS0%

MINERAL FUELS9%

CRUDE MATERIALS2%

BEVERAGES & TOBACCO

2%FOOD

3%

2004 Imports, Trade by Value£261 bn

BASIC MANUFACTURES

13%MACHINERY41%

COMMODITIES n.e.s.2%MISC

MANUFACTURES16%

FOOD7%

BEVERAGES & TOBACCO

2% CRUDE MATERIALS2%

MINERAL FUELS6%

OILS FATS0%

CHEMICALS11%

1988 Imports, Trade by Weight180 bn Tonnes

FOOD10% BEVERAGES &

TOBACCO1%

CRUDE MATERIALS21%

MINERAL FUELS41%

OILS FATS1%

CHEMICALS7%


BASIC MANUFACTURES

13%

MISC MANUFACTURES

1%MACHINERY

5%

2004 Imports, Trade by Weight271 bn Tonnes

BASIC MANUFACTURES

14%

MACHINERY5%

MISC MANUFACTURES

3%

CHEMICALS8%

OILS FATS1%

MINERAL FUELS46%

CRUDE MATERIALS12%

BEVERAGES & TOBACCO

1%

FOOD10%




Therefore, as an initial conclusion, the evolution of UK trade and the impact of globalisation need to be put in perspective. The deterioration in the trade balance within the last five years has been dramatic, but this is the absolute difference between two quantities (imports and exports) which are both at or near historical highs. Imports in absolute terms have approximately trebled in these categories since 1988, and exports have only doubled. Most of the dynamism in the world economy is coming from Eastern Asia and Eastern Europe, but neither of these zones are important UK export markets. The overall patterns of trade have barely changed at a macro level between 1988 and 2004, but relatively small disparities have emerged, principally with respect to East Asia and the import of manufactured goods. These changes at the margin have led to substantial and persistent trade imbalances. 1.3 Trends in the UK Economy Freight movements through UK ports depend upon levels of trade. Likewise, trade is closely linked to changes within the economy. In this section, three aspects of the UK economy will be considered:

• UK Industrial Production; • UK Consumption; • Competitiveness.

UK Industrial Production Data has been collected from the Office for National Statistics Index of Production (IOP)5. The IOP measures gross output in constant prices rather value added. The aggregate, long-term trend is shown below:

5 Office for National Statistics, 2005, “Economic Trends, C1, Index of Production by SIC(92) Division, Seasonally Adjusted”.



Figure 11: UK Industrial Production 1948-2004, Constant Prices

All UK Industrial Production

0

20

40

60

80

100

120

19481952

19561960

19641968

19721976

19801984

19881992

19962000

2004

Inde

x (2

001=

100)

The index peaks in 2001, but within the long run context this appears to be a minor cyclical adjustment within a rising trend. However, when individual industries are considered, more diverse patterns are in evidence. The 27 industries have been classified according to their pattern of growth, and three growth rates are shown for each, covering the time periods 1978-2004, 1988-2004, and 2000-2004. Table 3: Industrial Production, Growth Industries

Food&Drink Electricity&Gas Medical &

Precision Instr. Automotive Chemicals 2004/1978 25% 108% 30% 9% 97%2004/1988 15% 53% 8% 21% 58%2004/2000 4% 8% 10% 9% 10%

Source: Office for National Statistics Table 4: Industrial Production, Declining Industries Tobacco Textiles Manuf. Clothing Leather M/c&Equip Coal Mining 2004/1978 -50% -55% -57% -78% -23% -84%2004/1988 -42% -46% -54% -66% -12% -80%2004/2000 -14% -22% -35% -44% 3% -21%

Source: Office for National Statistics



Table 5: Industrial Production, Static Industries

Paper Printed Media

Fabr. Metals

Oth Tpt Eq

Other Mining Furniture

Wood Manuf

Rubber & Plastic

Non-Met Min Manf

2004/1978 13% 36% -15% 45% -3% -14% -7% 49% -3%2004/1988 5% 11% -6% 29% -2% -8% -16% 14% -9%2004/2000 5% -4% -3% 0% 7% -1% 5% -8% 6%

Source: Office for National Statistics Many industries show consistent long-term trends, for example, chemicals (rising), coal mining (declining) and wood manufactures (static). There are no other obvious connections between the industries in the three categories. Perhaps more significantly, seven industries, including three that have enjoyed strong long-run growth (office machinery, televisual and telecoms, and oil and gas extraction), have recorded marked downturns since 2000. Table 6: Industrial Production, Industries in Recession

Water

Supply Office m/c Basic Metals Elec m/c

TV & Telecom m/c

Coke & Petroleum

Oil&Gas Extr

2004/1978 -7% 1348% -23% 2% 120% -5% 135%2004/1988 -11% 249% -25% -14% 69% 4% 20%2004/2000 0% -34% -12% -18% -37% -5% -20%

Source: Office for National Statistics Certain imbalances seem likely to influence patterns of trade. For example, growth in electricity and gas industries is accompanied by a recent decline in oil and gas extraction, and a long-term decline in coal mining. Growth in manufacturing sectors such as chemicals and the automotive industry is not matched by growth in supporting industries such as basic metals, and manufactures of fabricated metals. The issue of imbalances being met by changes in imports and exports is further examined in relation to consumption patterns.

UK Household Consumption Figure 12 shows unbroken year on year increases in consumption patterns across all sectors, with nominal rates of growth very similar to the rates of growth in trade.



Figure 12: UK Household Final Consumption, 1980-2004, Current Prices

UK Household Consumption (£m)

-

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Durable goods Semi-durable goods Non-durable goods Total services

Source: Office for National Statistics In a scenario where consumption of goods is increasing consistently at approximately 5% per annum, but domestic production is in recession, the resulting impact on the trade balance is understandable. Even in sectors where domestic output is in long-term decline such as clothing manufacture, household consumption is increasing rapidly. There appears to be little connection, particularly in the last five years, between domestic consumption and domestic production, and this tendency appears to be closely related to the trade patterns emerging. Competitiveness Having looked at the underlying trends in UK output and consumption, it is useful to examine the kinds of factors that may be influencing the relative attractiveness of domestic and overseas production.



Table 7: Long Term Interest Rates, per Cent per Annum 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004United Kingdom 11.8 10.1 9.1 7.5 8.2 8.2 7.8 7.1 5.5 5.1 5.3 4.9 4.9 4.5 4.9

United States 8.6 7.9 7.0 5.9 7.1 6.6 6.4 6.4 5.3 5.6 6.0 5.0 4.6 4.0 4.3

Euro area 10.8 .. 9.7 7.8 8.0 8.4 7.1 6.0 4.8 4.7 5.4 5.0 4.9 4.1 4.1 Source: OECD Table 8: Nominal Exchange Rates, Currency Units per US$ 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

United Kingdom 0.653 0.634 0.641 0.611 0.604 0.618 0.661 0.694 0.667 0.612 0.546

Euro area Euro .. .. .. .. .. 0.938 1.085 1.117 1.061 0.885 0.805Source: OECD The nominal exchange rate shows the number of local currency units required to purchase a dollar. In 2004, a dollar was worth 54.6 pence, compared to 65.3 pence in 1994. A lower value therefore indicates that the currency is strengthening. Table 9: Effective Exchange Rates, Index, Year 2000 =100 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

United Kingdom 84.9 82.8 76.6 79.0 76.4 78.1 91.1 97.0 97.4 100.0 99.0 100.2 96.3 100.8

United States 67.1 68.3 72.7 76.9 78.5 82.9 88.8 98.0 97.6 100.0 105.3 105.8 99.6 95.1

Euro area 89.4 95.2 94.2 100.8 109.5 111.7 104.6 110.8 109.9 100.0 102.5 106.4 119.4 123.8Source: OECD Table 9 shows effective exchange rates, calculated by the OECD. When the effective exchange rate increases it indicates that the local currency is strengthening, relative to all other currencies, weighted according to their trade volumes. By both currency measures, sterling can be seen to have appreciated by 15-20% within ten years. This has been accompanied by a decline in interest rates, but note that UK interest rates have been consistently higher than the dollar and euro areas. Table 10 and Table 11 show the relative competitive position of the UK. An increase in the index value represents a reduction in competitiveness. If the values for the UK in the early mid 1990s (a time when the import-export deficit was narrowing) are compared with more recent values (corresponding to a widening in the trade gap), there is an obvious contrast. The index of competitiveness with respect to consumer prices ( Table 10) provides a better indication of the attractiveness of a given market to overseas exporters. The index with respect to labour costs indicates the attractiveness of a given economy for producers. They are closely correlated, and both point towards a steep decline in competitiveness over the last ten years. Table 10: Competitive Positions: Relative Consumer Prices



1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

United Kingdom 91.6 88.2 78.7 79.0 76.1 77.3 90.6 97.4 97.2 100.0 98.0 98.5 95.5 100.7

United States 85.7 83.9 85.1 85.2 84.0 86.6 91.0 98.2 97.0 100.0 105.7 105.8 99.6 95.4

Euro area 124.1 128.9 121.2 120.7 125.0 123.8 112.8 115.5 111.5 100.0 101.7 105.5 117.7 121.4 Source: OECD Table 11: Competitive Positions: Relative Unit Labour Costs

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

United Kingdom 82.1 76.1 67.3 68.7 68.4 71.1 86.2 95.4 97.0 100.0 97.1 101.3 96.5 99.9

United States 92.1 88.7 87.8 87.0 82.5 83.3 87.5 95.0 95.4 100.0 102.2 98.7 93.6 89.1

Euro area 117.5 122.7 118.0 115.0 118.9 119.5 108.4 110.6 111.0 100.0 101.3 106.4 119.9 123.8 Source: OECD The pattern emerging appears logical. Over the last decade the two dominant exogenous processes appear to be the strong growth in final consumption, and the deterioration of the UK’s competitive position, linked through the need to keep interest rates high relative to other currency zones. Some domestic industries have responded to the strong domestic demand conditions with growth, but others, including certain key high tech industries have suffered real declines because of the intensified competition from abroad. The net effect has been a downturn in absolute industrial output, and a widening of the trade gap, to meet the divergence between consumption and production. 1.4 Trends in the World Economy Having demonstrated the exposure within the UK to international pressures, the objective in this section is to make some international comparisons so that the trends experienced in the UK can be set in context. The UK Government has declared a commitment6 to reducing international protectionism and sees the globalisation of trade and industry as a positive driver for domestic growth and competitiveness. The growing importance of trade in goods and services, referred to as ‘real globalisation’ seems to be beyond question:

6 HM Treasury, May 2004, “Trade and the Global Economy, The role of international trade in productivity, economic reform and growth”.



Table 12: World Trade, Share of World GDP 1997 1998 1999 2000 2001 2002 2003 2004 Avg World Output ($ Trillion) 29.77 29.53 30.64 31.46 31.20 32.41 36.33 40.67 Real GDP Growth (%YoY) 4.2 2.8 3.7 4.6 2.5 3.0 4.0 5.1 3.74 World Exports($ Trillion) 6.90 6.79 7.03 7.83 7.57 7.94 9.22 11.07 Real Export Growth (%YoY) 11.1 4.4 5.2 12.5 -1.4 2.1 2.9 8.6 5.67 Exports as Share of GDP (%) 23.18 22.99 22.94 25.55 24.26 24.49 25.38 27.22 Source: IMF, World Economic Outlook

World output, in real terms has grown at an average rate of 3.74% per annum since 1997. World trade has grown at 5.67%. As a consequence, the ratio of total exports to total output has risen from 23.18% to 27.22%. Total trade (imports plus exports) as a share of the world economy is therefore close to 55% in 2004, compared with 46% in 1997, and 20% in the early 1970s. The geographical pattern of trade (see Figure 13 and Figure 14) has also shifted towards Developing Asia7 and Central and Eastern Europe8. Developing Asia has reported an annual average of 12.6% growth in exports and 10% in imports over the last decade, double the global rate. Central and Eastern Europe’s trade has grown by 11% for exports and 10.2% for imports. As a result of these two zones’ progress, trade growth in the developing world is 2-3 percentage points higher than in the ‘Advanced economies’ zone. At an aggregate level the figures suggest that the Advanced zone is stable with balanced levels of import an export growth, and while this is true for Japan and the Eurozone, it is not true for the UK and the USA, both reporting particularly low levels of export growth combined with relatively high rates of import growth. The net result is that the shares of world trade by region have shifted eastwards, with ex-Continental Asian trade increasing from 1.20% of world GDP in 1984 to 2.44% by 2003. Over the same period, ex-Japan trade decreased as a percentage of World GDP. Other zones increased their shares, but by relatively small amounts.9

7 Includes China, India, Indonesia, Malaysia and 19 other Central and Eastern Asian countries. 8 Includes Poland, Turkey, Hungary and 12 other (mostly EU Accession) countries. 9 IMF, April 2005, “World Economic Outlook, Chapter III, Globalization and External Imbalances”.



Figure 13: Annual Export Growth, Goods and Servcices, 1997-2004

Annual Export Growth 1997-2004

12.6

11.0

8.9

6.95.9 5.8 5.6 5.6

4.9 4.54.0 3.8

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

Devel.Asia

C&EEurope

TotalDev.

W.Hemi.

Japan EuroArea

TotalAdv.

CIS Mid.East

Africa UK USA

Ave

rage

% C

hang

e Pe

r Ann

um

Source: IMF, World Economic Outlook, April 2005 Figure 14: Annual Import Growth, Goods and Services, 1997-2004

Annual Import Growth 1997-2004

10.2 10.0

8.2 8.1 7.9

6.6 6.5 6.1 6.0 5.95.2

2.4

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

C&EEurope

Devel.Asia

TotalDev.

USA Mid.East

CIS UK TotalAdv.

EuroArea

Africa W.Hemi.

Japan

Ave

rage

% C

hang

e Pe

r Ann

um

Source: IMF, World Economic Outlook, April 2005 However, despite these changes the shares of world trade occupied by advanced economies such as the UK are only changing slowly. (Table 13 and Table 14).



Table 13: National Shares of World Exports, Percentage, 1997-2004 1997 1998 1999 2000 2001 2002 2003 2004 France 5.2 5.6 5.3 4.8 4.9 4.9 4.9 4.7 Germany 8.6 9.1 8.8 8.0 8.6 9.1 9.4 9.3 Italy 4.5 4.6 4.3 3.9 4.1 4.0 4.1 4.1 Japan 6.7 6.2 6.4 6.5 5.7 5.6 5.5 5.6 United Kingdom 5.5 5.6 5.5 5.2 5.2 5.2 5.0 4.8 United States 13.9 14.1 14.1 14.0 13.6 12.6 11.3 10.6

Source: OECD, Economic Outlook, 2005

Table 14: National Shares of World Imports, Percentage, 1997-2004 1997 1998 1999 2000 2001 2002 2003 2004 France 4.7 5.1 4.9 4.6 4.6 4.6 4.7 4.7 Germany 8.3 8.8 8.6 8.0 8.1 8.0 8.4 8.1 Italy 3.9 4.1 4.0 3.7 3.9 3.9 4.1 4.0 Japan 6.2 5.2 5.5 5.7 5.3 5.0 4.8 4.8 United Kingdom 5.6 5.9 5.9 5.5 5.7 5.8 5.6 5.5 United States 15.7 16.6 17.9 18.8 18.4 18.0 16.8 16.3

Source: OECD, Economic Outlook, 2005 It is worth drawing attention to the UK figures. Despite claims that the UK has a more open stance on trade than its neighbours, its share of world trade is in fact broadly in line with France, Germany and Italy. In 1997 there was a balance between the import and export shares at 5.5-5.6%. A gap has opened up in favour of imports, which by national standards, and in comparison with France, Germany and Italy is at unprecedented levels. However, in comparison with US figures, the UK’s position seems unremarkable. The trends are reflected in the current account balances, and the national differences are magnified greatly (Table 15, Table 16) Table 15: Current Account Balances US$ billion 1997 1998 1999 2000 2001 2002 2003 2004 France 37.2 38.9 42.0 18.2 21.0 13.3 7.8 -6.1 Germany -9.2 -11.6 -29.9 -34.4 -0.9 46.2 51.3 105.0 Italy 33.4 22.7 8.0 -5.9 -0.9 -9.9 -19.1 -13.1 Japan 97.2 119.7 114.8 119.1 89.0 112.7 135.3 170.1 United Kingdom -1.6 -6.6 -39.6 -36.2 -32.2 -26.3 -30.8 -47.0 United States -136.0 -209.6 -296.8 -413.5 -385.7 -473.9 -530.7 -665.9

Source: OECD, Economic Outlook, 2005 France and Italy are keeping their current account balances close to zero. Germany is moving from a relatively small deficit to a fairly large surplus in 2004, and Japan is maintaining a permanently high surplus.



The UK and the US are recording deficits in every year, with the UK level at about 2.5% of GDP, and the US at nearly 6% and forecast to go higher. Table 16: Current Account Balances as a Percentage of GDP 1997 1998 1999 2000 2001 2002 2003 2004 France 2.7 2.7 2.9 1.4 1.6 0.9 0.4 -0.3 Germany -0.4 -0.6 -1.4 -1.8 0.0 2.3 2.1 3.9 Italy 2.9 1.9 0.7 -0.6 -0.1 -0.8 -1.3 -0.8 Japan 2.3 3.0 2.6 2.5 2.1 2.8 3.1 3.6 United Kingdom -0.1 -0.5 -2.7 -2.5 -2.3 -1.7 -1.7 -2.2 United States -1.6 -2.4 -3.2 -4.2 -3.8 -4.5 -4.8 -5.7

Source: OECD, Economic Outlook, 2005 In its May 2005 press conference, the OECD raised concerns about the “unsustainable US current account position”, in which “endogenous pressures for correcting existing imbalances will become ever larger. At some point, they may take the form of an abrupt weakening of the dollar with adverse consequences for the OECD area as a whole according to model simulations from the Secretariat. More concretely, a falling dollar would not only curtail net exports but also domestic demand in Japan and Europe where resilience is low and monetary and fiscal room for manoeuvre is limited. Although not the most likely outcome at present, such an unpleasant scenario is gradually looming larger.”10 In essence this is saying that we are moving into uncharted territory, and the underlying financial tension between the different currency zones may induce reactions that are sudden and unwelcome. Because of the UK’s extended position and trading relationships, it is probable that changes like this in the global economy will affect trade volumes to a significant degree. Causes of Real Globalisation The IMF drew attention to three factors facilitating the real growth in world trade:

• Transport Costs – with sea freight rates falling in real terms by 60% since 1930, and air passenger rates falling by 90% per passenger mile.

• Average Tariff Rates – falling from an average of 30% in 1980 to 10% in 1999 for

developing countries, and from about 10% to 5% over the same period for industrial countries.

• Regional Trade Agreements – increasing sharply since 1990. They also note several changes in the composition of trade, including two-way intra-industry trade, and fragmentation in the production of manufactured goods. Today, a high proportion

10 Cotis, J.P., May 2005, OECD Economic Outlook 77, Press Release



of total trade takes place within industries, rather than between industries. Countries may specialize in a particular category of a commodity, or even a single brand. There is also a strong correlation therefore between global trade growth and the ubiquity of multinational corporations (MNCs), with Europe, the USA and Japan being the main sources of foreign direct investment (FDI) in the high-income zone and Asia (excluding Japan) and Latin America being the main recipients in the developing zone. Total FDI increased five-fold between 1980 and 1990, and twenty-fold since 1970. As a result, many industrialized countries import and export similar types of product to each other. While this might seem at odds with the neo-classical notion of trade promoting specialization, it is not necessarily so; the specialization which is taking place occurs within much narrower limits. A car manufacturer in Europe may have four plants in four countries, each producing a different model. However, all four models will be sold in all four countries, so for a given level of domestic output, there is a much higher propensity to trade. At the start of the value chain, the sources of primary products such as oil and coal are fixed geographically. At the end, tastes in final consumption are becoming more uniform worldwide, and better off consumers are demanding novelty and choice. Between these extremes, a falling number of larger producers, organised as companies rather than nation states, are building large, efficient factories with narrow product lines, and the inevitable result is vertical integration across national boundaries and more trade.

1.5 Trends in UK Trade Having examined the trends in the UK economy at a high level, the figures can be examined in more depth.



Table 17 summarises the total volumes traded between 1988 and 2004. Table 17: Summary of UK Trade 1988-2004 1988 1992 1996 2000 2004 Growth%

Exports GBP(m) Total 88,133 101,591 171,827 189,076 195,156 5.1%

Fuels 5,732 6,001 10,910 15,757 16,948 7.0%

Non-Fuel 82,401 95,590 160,917 173,319 178,207 4.9%

Tonnes Total 130,572 124,969 180,489 195,520 183,191 2.1%

Fuels 83,995 67,245 104,618 113,435 93,498 0.7%

Non-Fuel 46,578 57,725 75,872 82,084 89,693 4.2%

Imports GBP(m) Total 112,205 122,442 188,179 224,152 260,489 5.4%

Fuels 5,058 6,989 6,809 9,394 16,260 7.6%

Non-Fuel 107,146 115,453 181,370 214,758 244,230 5.3%

Tonnes Total 179,916 189,543 190,747 206,803 271,566 2.6%

Fuels 75,155 94,074 75,475 80,137 126,161 3.3%

Non-Fuel 104,761 95,469 115,272 126,666 145,405 2.1% Source: HM Revenue & Customs, 1988-2004 Export values (measured in millions of GBP) have been growing consistently over the last sixteen years at a rate equivalent to 5.1% per annum. Export volumes (measured in thousands of tonnes) show consistent growth in the non-fuel sector at 4.2% annual growth, but since 2000, the fuel sector has declined. Import values have also grown steadily, with average import growth rates at 5.4%, exceeding export growth rates, and therefore widening the trade gap. Both the fuels sector and the non-fuels sector are growing faster on the import side. Import tonnes have also grown steadily, with the non-fuels sector growing at 2.1% and the fuels sector growing at 3.3%. Each year’s data (sourced from Customs statistics) is summarised below:

UK Port Demand Forecasts to 2030: Technical Annex Page 197


Table 18: 1988 Exports, (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 550 45 80 324 17 539 723 1,006 684 70 4,040 5% 3,715 5%NW Europe 1,560 524 770 3,041 37 4,554 7,504 11,517 3,675 2,690 35,874 41% 32,832 40%Nordic Countries 103 31 174 206 4 507 758 1,616 574 92 4,066 5% 3,860 5%Mediterranean 454 325 539 377 12 1,474 1,502 4,326 1,038 265 10,312 12% 9,935 12%East Europe 83 28 63 7 3 321 184 427 153 11 1,280 1% 1,273 2%Africa Excl Med 68 107 40 32 2 462 360 1,203 273 62 2,609 3% 2,577 3%N America 160 365 109 1,682 7 1,227 1,592 5,517 1,735 196 12,591 14% 10,908 13%C&S America 60 150 14 13 1 280 143 634 109 37 1,440 2% 1,427 2%West Asia 233 164 60 30 3 681 971 2,586 538 548 5,814 7% 5,784 7%East Asia 146 256 165 18 2 971 1,002 2,034 961 2,072 7,627 9% 7,609 9%Oceania 35 52 16 2 0 308 246 688 311 58 1,716 2% 1,715 2%

Total 3,451 2,046 2,031 5,732 89 11,326 14,985 31,555 10,052 6,101 88,133 100% 82,401 100%Share 4% 2% 2% 7% 0% 13% 17% 36% 11% 7% 100% Table 19: 1988 Exports, Tonnes (‘000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 796 74 489 4,136 43 798 857 171 134 2 7,499 6% 3,364 7%NW Europe 2,782 181 4,306 44,573 84 4,739 3,862 1,259 387 9 62,181 48% 17,608 38%Nordic 226 18 2,166 2,921 10 520 726 194 68 19 6,869 5% 3,948 8%Mediterranean 1,475 142 3,419 5,770 45 962 1,769 562 108 4 14,256 11% 8,486 18%E Europe 1,255 11 92 39 11 151 168 36 7 0 1,770 1% 1,731 4%Africa Excl Med 143 44 102 179 4 411 269 175 31 3 1,362 1% 1,182 3%N America 102 196 597 26,013 3 603 1,426 527 130 3 29,598 23% 3,585 8%C&S America 137 56 23 124 1 174 156 85 10 2 768 1% 644 1%W Asia 793 36 343 138 4 412 609 191 43 5 2,574 2% 2,435 5%E Asia 562 66 395 95 3 736 957 213 45 3 3,075 2% 2,980 6%Oceania 15 21 24 6 0 255 177 78 44 1 620 0% 615 1%

Total 8,287 844 11,956 83,995 208 9,762 10,975 3,489 1,007 50 130,572 100% 46,578 100%Share 6% 1% 9% 64% 0% 7% 8% 3% 1% 0% 100%



Table 20: 1988 Imports, £ million Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,064 94 180 40 9 349 456 1,069 606 16 3,881 3% 3,842 4%NW Europe 3,748 898 1,061 1,156 188 6,363 11,312 18,610 4,940 409 48,685 43% 47,529 44%Nordic 283 2 824 1,910 13 478 2,801 1,767 341 66 8,485 8% 6,575 6%Mediterranean 1,173 241 454 655 13 613 2,268 3,709 2,195 51 11,372 10% 10,716 10%E Europe 65 16 275 393 1 130 793 236 227 16 2,153 2% 1,760 2%Africa Excl Med 722 42 440 88 12 18 346 82 104 3,821 5,676 5% 5,588 5%N America 486 69 1,435 232 8 902 1,342 5,743 1,950 519 12,684 11% 12,452 12%C&S America 650 111 287 159 9 45 370 194 108 794 2,728 2% 2,568 2%W Asia 176 10 62 334 0 51 334 767 358 24 2,116 2% 1,783 2%E Asia 244 18 308 21 82 329 1,215 7,298 3,533 56 13,104 12% 13,083 12%Oceania 454 21 295 71 36 35 182 125 62 41 1,321 1% 1,250 1%

Total 9,064 1,522 5,620 5,058 372 9,313 21,419 39,600 14,423 5,813 112,205 100% 107,146 100%Share 8% 1% 5% 5% 0% 8% 19% 35% 13% 5% 100% Table 21, 1988 Imports, Tonnes ('000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,070 241 1,028 596 42 338 1,060 110 102 1 4,590 3% 3,994 4%NW Europe 7,621 923 3,577 12,730 548 8,368 9,869 3,019 844 44 47,543 26% 34,813 33%Nordic 251 3 4,936 26,718 53 1,207 5,024 310 82 8 38,591 21% 11,873 11%Mediterranean 2,868 276 3,227 9,899 23 1,010 3,305 756 364 105 21,833 12% 11,934 11%E Europe 121 42 1,285 7,183 4 416 827 126 100 1 10,106 6% 2,922 3%Africa Excl Med 1,454 29 4,027 1,374 41 40 249 18 22 1 7,254 4% 5,880 6%N America 1,409 37 9,216 4,972 24 755 1,400 2,893 142 121 20,969 12% 15,997 15%C&S America 1,582 56 3,807 2,968 35 83 509 33 12 2 9,087 5% 6,119 6%W Asia 527 7 118 5,828 0 90 160 26 33 0 6,788 4% 960 1%E Asia 581 14 557 372 350 204 842 849 529 12 4,310 2% 3,938 4%Oceania 584 24 5,336 2,514 133 15 217 17 3 1 8,844 5% 6,330 6%

Total 18,067 1,651 37,114 75,155 1,254 12,526 23,463 8,157 2,234 296 179,916 100% 104,761 100%Share 10% 1% 21% 42% 1% 7% 13% 5% 1% 0% 100%



Table 22: 1992 Exports, (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 777 109 77 197 17 693 1,073 1,483 1,071 47 5,546 5% 5,348 6%NW Europe 2,480 801 660 3,044 30 5,723 8,753 16,839 5,282 226 43,838 43% 40,794 43%Nordic Countries 141 44 131 463 4 557 853 1,575 754 117 4,638 5% 4,175 4%Mediterranean 890 610 425 491 8 1,874 2,082 6,279 1,726 81 14,467 14% 13,976 15%East Europe 117 64 44 273 1 315 178 469 228 15 1,703 2% 1,430 1%Africa Excl Med 99 127 53 21 3 439 391 1,163 347 51 2,693 3% 2,672 3%N America 234 448 112 1,433 5 1,584 1,351 5,264 1,969 82 12,483 12% 11,049 12%C&S America 99 262 15 14 4 396 169 545 139 20 1,662 2% 1,648 2%West Asia 219 178 98 44 4 730 970 1,930 594 93 4,861 5% 4,817 5%East Asia 185 711 224 19 5 1,170 1,112 3,089 1,371 227 8,114 8% 8,095 8%Oceania 38 62 19 2 1 321 235 547 326 35 1,586 2% 1,585 2%

Total 5,279 3,416 1,859 6,001 80 13,803 17,168 39,183 13,808 993 101,591 100% 95,590 100%Share 5% 3% 2% 6% 0% 14% 17% 39% 14% 1% 100% Table 23: 1992 Exports, Tonnes ('000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,257 164 755 1,763 38 939 1,578 220 206 1 6,922 6% 5,159 9%NW Europe 4,021 196 8,523 33,970 65 4,564 6,176 1,885 604 13 60,018 48% 26,048 45%Nordic Countries 230 22 1,517 5,337 8 479 977 148 85 25 8,829 7% 3,493 6%Mediterranean 2,671 196 2,593 5,592 17 1,126 2,605 835 171 3 15,809 13% 10,218 18%East Europe 1,223 63 143 3,147 2 122 68 51 30 0 4,850 4% 1,703 3%Africa Excl Med 316 42 480 76 5 324 280 172 42 8 1,744 1% 1,668 3%N America 114 206 72 16,952 3 559 972 369 118 4 19,368 15% 2,416 4%C&S America 268 67 59 96 12 174 178 80 12 3 951 1% 855 1%West Asia 461 33 811 252 5 365 705 255 48 4 2,940 2% 2,688 5%East Asia 291 101 599 58 7 658 1,065 275 59 3 3,117 2% 3,060 5%Oceania 17 21 18 3 1 145 118 56 42 1 420 0% 418 1%

Total 10,870 1,113 15,572 67,245 163 9,455 14,721 4,346 1,417 67 124,969 100% 57,725 100%Share 9% 1% 12% 54% 0% 8% 12% 3% 1% 0% 100%



Table 24: 1992 Imports, (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,427 135 143 68 11 698 527 1,208 793 9 5,019 4% 4,952 4%NW Europe 4,882 1,079 1,066 1,348 213 6,661 9,909 20,496 6,166 151 51,970 42% 50,622 44%Nordic Countries 399 3 644 2,743 16 495 2,505 1,599 382 70 8,857 7% 6,113 5%Mediterranean 1,458 311 319 569 29 684 2,540 4,411 2,636 38 12,996 11% 12,427 11%East Europe 62 28 141 399 2 209 743 156 245 7 1,992 2% 1,593 1%Africa Excl Med 756 55 243 258 12 34 528 85 176 1,719 3,865 3% 3,607 3%N America 628 126 1,065 244 8 1,084 1,612 5,991 2,615 629 14,003 11% 13,759 12%C&S America 783 180 311 209 13 65 424 176 156 47 2,364 2% 2,155 2%West Asia 230 20 38 992 0 49 416 459 762 35 3,000 2% 2,009 2%East Asia 297 28 249 23 81 403 1,481 9,070 5,035 131 16,796 14% 16,773 15%Oceania 482 62 226 138 38 39 303 183 84 26 1,581 1% 1,443 1%

Total 11,402 2,025 4,445 6,989 423 10,422 20,988 43,836 19,050 2,862 122,442 100% 115,453 100%Share 9% 2% 4% 6% 0% 9% 17% 36% 16% 2% 100% Table 25: 1992 Imports, Tonnes ('000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,269 315 1,031 897 54 423 800 152 146 1 5,086 3% 4,189 4%NW Europe 8,553 1,011 2,933 15,227 619 6,817 9,093 2,737 856 22 47,868 25% 32,641 34%Nordic Countries 302 3 4,182 31,882 65 905 4,610 234 71 8 42,264 22% 10,381 11%Mediterranean 2,745 276 2,789 7,146 29 1,076 2,624 717 366 3 17,772 9% 10,626 11%East Europe 155 49 584 6,315 6 803 709 68 73 1 8,763 5% 2,448 3%Africa Excl Med 1,410 31 3,537 3,429 37 50 184 17 36 1 8,733 5% 5,303 6%N America 1,798 83 5,316 6,377 25 536 1,713 313 183 40 16,384 9% 10,007 10%C&S America 1,996 83 4,538 5,031 55 116 532 29 20 0 12,401 7% 7,370 8%West Asia 852 11 122 13,124 1 30 217 18 80 1 14,456 8% 1,332 1%East Asia 659 18 452 632 322 203 991 885 928 47 5,138 3% 4,506 5%Oceania 575 44 5,635 4,015 146 11 231 16 5 1 10,679 6% 6,664 7%

Total 20,314 1,924 31,119 94,074 1,360 10,970 21,705 5,188 2,765 126 189,543 100% 95,469 100%Share 11% 1% 16% 50% 1% 6% 11% 3% 1% 0% 100%



Table 26: 1996 Exports, (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 997 133 135 468 50 1,190 1,576 2,829 1,540 19 8,938 5% 8,470 5%NW Europe 2,843 1,158 814 5,561 81 8,928 11,861 28,181 7,300 2,646 69,373 40% 63,812 40%Nordic Countries 233 65 160 636 7 916 1,446 3,656 1,070 123 8,312 5% 7,676 5%Mediterranean 1,220 686 715 907 22 3,139 3,160 9,603 2,510 297 22,258 13% 21,351 13%East Europe 210 136 74 377 10 742 581 1,947 583 28 4,688 3% 4,311 3%Africa Excl Med 123 139 76 127 5 574 603 1,808 500 56 4,011 2% 3,885 2%N America 324 497 181 2,633 8 2,770 2,041 10,555 2,956 135 22,100 13% 19,467 12%C&S America 126 358 23 106 2 629 272 1,205 275 43 3,039 2% 2,933 2%West Asia 283 175 124 48 6 958 1,453 3,787 849 1,165 8,848 5% 8,800 5%East Asia 407 948 253 37 11 1,836 2,094 8,168 2,484 1,032 17,270 10% 17,232 11%Oceania 68 64 27 11 2 519 319 1,477 460 43 2,990 2% 2,979 2%

Total 6,836 4,359 2,581 10,910 204 22,201 25,406 73,217 20,527 5,587 171,827 100% 160,917 100%Share 4% 3% 2% 6% 0% 13% 15% 43% 12% 3% 100% Table 27: 1996 Exports, Tonnes ('000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,481 201 1,478 4,285 92 1,344 2,322 294 432 4 11,934 7% 7,649 10%NW Europe 4,161 497 13,373 53,937 140 6,987 6,640 2,494 905 9 89,143 49% 35,205 46%Nordic Countries 308 37 1,770 6,467 8 656 1,373 299 112 24 11,055 6% 4,589 6%Mediterranean 3,668 276 3,581 8,473 43 1,576 2,823 1,054 703 5 22,203 12% 13,730 18%East Europe 407 105 266 3,440 11 262 256 187 88 3 5,024 3% 1,584 2%Africa Excl Med 186 44 107 923 5 312 362 237 58 9 2,243 1% 1,320 2%N America 141 223 317 25,838 4 482 1,294 636 174 4 29,113 16% 3,275 4%C&S America 214 91 61 860 1 293 207 155 26 3 1,912 1% 1,052 1%West Asia 773 41 569 200 5 423 724 259 62 10 3,064 2% 2,865 4%East Asia 381 149 509 96 10 717 1,601 584 114 4 4,164 2% 4,068 5%Oceania 26 23 22 98 2 130 166 118 49 1 634 0% 535 1%

Total 11,746 1,686 22,052 104,618 321 13,181 17,768 6,318 2,723 77 180,489 100% 75,872 100%Share 7% 1% 12% 58% 0% 7% 10% 4% 2% 0% 100%



Table 28: 1996 Imports, (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,621 184 237 75 18 1,305 504 2,069 980 16 7,007 4% 6,932 4%NW Europe 5,527 1,314 1,243 1,199 339 10,599 12,742 32,472 6,693 288 72,417 38% 71,218 39%Nordic Countries 540 18 834 2,962 29 774 3,639 2,734 452 117 12,097 6% 9,135 5%Mediterranean 1,996 490 400 583 63 1,360 3,824 7,054 3,673 39 19,482 10% 18,900 10%East Europe 104 52 419 549 1 406 1,680 698 438 253 4,600 2% 4,052 2%Africa Excl Med 1,058 129 373 257 19 39 2,101 178 282 1,098 5,533 3% 5,276 3%N America 830 208 1,349 351 23 2,310 2,575 13,364 3,874 3,259 28,142 15% 27,791 15%C&S America 1,184 226 529 250 26 141 593 338 206 688 4,181 2% 3,931 2%West Asia 328 22 75 396 5 136 786 968 1,456 61 4,235 2% 3,839 2%East Asia 462 46 391 41 86 1,034 2,267 16,484 7,009 312 28,133 15% 28,092 15%Oceania 635 161 350 145 97 87 335 343 101 95 2,350 1% 2,205 1%

Total 14,283 2,850 6,200 6,809 706 18,191 31,046 76,701 25,167 6,226 188,179 100% 181,370 100%Share 8% 2% 3% 4% 0% 10% 16% 41% 13% 3% 100% Table 29: 1996 Imports, Tonnes (‘000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,106 285 1,231 784 32 492 840 124 148 10 5,050 3% 4,267 4%NW Europe 7,149 1,042 2,509 7,508 710 10,573 8,894 3,598 814 30 42,826 22% 35,318 31%Nordic Countries 368 9 4,086 28,572 76 1,537 5,490 297 83 16 40,535 21% 11,963 10%Mediterranean 2,979 373 2,293 5,667 26 1,903 3,482 1,335 604 3 18,664 10% 12,997 11%East Europe 256 80 1,348 6,747 2 1,760 1,807 133 79 1 12,213 6% 5,466 5%Africa Excl Med 1,589 73 4,589 3,442 43 32 333 36 51 2 10,190 5% 6,748 6%N America 2,243 136 6,593 9,165 54 917 1,649 472 261 57 21,548 11% 12,383 11%C&S America 2,991 105 6,096 4,883 66 210 610 33 30 23 15,046 8% 10,163 9%West Asia 659 17 142 4,340 7 131 362 42 148 1 5,848 3% 1,508 1%East Asia 714 26 478 568 219 405 1,073 1,116 1,010 72 5,681 3% 5,113 4%Oceania 604 89 8,186 3,799 239 10 200 13 5 0 13,145 7% 9,347 8%

Total 20,656 2,235 37,551 75,475 1,474 17,968 24,741 7,198 3,232 215 190,747 100% 115,272 100%Share 11% 1% 20% 40% 1% 9% 13% 4% 2% 0% 100%



Table 30: 2000 Exports, (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,159 195 149 761 34 1,277 1,659 5,351 1,793 21 12,399 7% 11,638 7%NW Europe 2,040 815 669 8,219 56 9,539 11,114 33,631 6,594 548 73,225 39% 65,006 38%Nordic Countries 187 70 164 489 9 873 931 4,046 928 151 7,849 4% 7,360 4%Mediterranean 1,035 843 572 1,121 16 3,612 3,200 11,693 2,379 228 24,699 13% 23,578 14%East Europe 126 87 63 125 3 799 755 2,409 698 17 5,083 3% 4,959 3%Africa Excl Med 121 166 79 148 9 449 519 1,421 364 64 3,340 2% 3,192 2%N America 388 626 220 4,482 9 4,255 2,894 15,281 4,761 265 33,182 18% 28,700 17%C&S America 137 310 19 60 3 666 259 1,544 318 28 3,342 2% 3,282 2%West Asia 223 177 113 245 5 813 1,475 2,913 911 1,023 7,898 4% 7,653 4%East Asia 296 692 357 104 9 1,947 1,580 7,328 1,814 871 14,999 8% 14,894 9%Oceania 83 90 14 2 1 588 240 1,597 395 51 3,060 2% 3,058 2%

Total 5,796 4,071 2,418 15,757 152 24,817 24,625 87,214 20,956 3,268 189,076 100% 173,319 100%Share 3% 2% 1% 8% 0% 13% 13% 46% 11% 2% 100% Table 31: 2000 Exports, Tonnes ('000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,637 320 1,980 5,797 116 1,501 3,443 734 568 2 16,098 8% 10,301 13%NW Europe 3,202 321 12,977 59,079 140 8,649 7,274 3,565 970 4 96,182 49% 37,102 45%Nordic Countries 275 27 1,899 3,484 13 710 988 343 103 20 7,862 4% 4,378 5%Mediterranean 4,271 295 3,561 8,185 37 2,022 3,077 1,354 297 4 23,102 12% 14,917 18%East Europe 375 25 214 829 4 334 578 255 99 1 2,715 1% 1,886 2%Africa Excl Med 261 39 108 893 34 293 220 196 44 12 2,101 1% 1,207 1%N America 165 315 817 32,593 3 510 1,317 817 205 43 36,785 19% 4,192 5%C&S America 209 93 72 425 1 306 181 166 35 3 1,490 1% 1,065 1%West Asia 743 42 782 1,492 5 341 398 203 58 8 4,072 2% 2,580 3%East Asia 693 136 1,190 656 11 701 797 365 104 2 4,655 2% 3,999 5%Oceania 29 37 15 3 1 108 133 87 46 0 458 0% 456 1%

Total 11,860 1,650 23,614 113,435 366 15,474 18,407 8,085 2,529 100 195,520 100% 82,084 100%Share 6% 1% 12% 58% 0% 8% 9% 4% 1% 0% 100%



Table 32: 2000 Imports, (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,414 179 191 61 7 2,302 552 3,621 1,073 17 9,418 4% 9,357 4%NW Europe 5,536 1,351 1,431 1,589 261 11,191 11,999 37,746 8,192 280 79,575 36% 77,985 36%Nordic Countries 525 4 828 4,116 21 744 2,760 3,869 511 128 13,507 6% 9,391 4%Mediterranean 1,839 514 363 875 54 1,810 3,578 8,512 4,566 47 22,157 10% 21,282 10%East Europe 118 41 551 834 0 369 1,602 1,608 839 665 6,628 3% 5,794 3%Africa Excl Med 870 132 339 176 5 48 2,501 419 354 584 5,429 2% 5,253 2%N America 847 228 1,417 245 16 2,912 2,961 19,189 5,521 1,375 34,712 15% 34,467 16%C&S America 1,056 213 447 422 27 126 623 1,153 228 565 4,860 2% 4,438 2%West Asia 371 24 71 860 7 170 827 1,054 1,881 42 5,308 2% 4,448 2%East Asia 517 22 413 32 76 1,351 2,957 23,155 9,723 339 38,586 17% 38,554 18%Oceania 488 312 249 182 56 102 326 394 141 1,723 3,973 2% 3,791 2%

Total 13,580 3,021 6,300 9,394 530 21,125 30,687 100,720 33,029 5,765 224,152 100% 214,758 100%Share 6% 1% 3% 4% 0% 9% 14% 45% 15% 3% 100% Table 33: 2000 Imports, Tonnes ('000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,192 264 807 626 27 657 1,069 182 131 2 4,957 2% 4,331 3%NW Europe 7,976 1,248 3,617 7,166 784 11,520 11,341 5,140 3,749 142 52,684 25% 45,518 36%Nordic Countries 322 2 3,935 28,945 83 1,717 5,444 325 126 11 40,910 20% 11,965 9%Mediterranean 2,988 416 1,535 5,620 47 1,888 4,366 1,871 859 1 19,591 9% 13,971 11%East Europe 151 68 2,163 7,587 1 1,506 2,002 259 207 2 13,946 7% 6,360 5%Africa Excl Med 1,431 101 3,637 5,064 15 35 440 56 78 2 10,859 5% 5,795 5%N America 2,571 162 5,565 5,212 35 818 1,319 626 318 25 16,651 8% 11,439 9%C&S America 3,136 106 4,692 7,910 106 506 660 44 46 9 17,215 8% 9,306 7%West Asia 434 13 658 5,105 10 201 584 61 206 255 7,526 4% 2,421 2%East Asia 838 20 559 552 253 497 1,947 1,772 1,953 62 8,452 4% 7,901 6%Oceania 603 167 6,437 6,352 192 15 216 20 9 1 14,012 7% 7,660 6%

Total 21,642 2,567 33,604 80,137 1,553 19,361 29,388 10,358 7,682 511 206,803 100% 126,666 100%Share 10% 1% 16% 39% 1% 9% 14% 5% 4% 0% 100%



Table 34: 2004 Exports, (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,672 246 251 1,669 48 1,797 2,401 4,133 2,761 30 15,009 8% 13,340 7%NW Europe 2,197 934 873 8,532 109 12,840 9,265 27,913 7,519 628 70,811 36% 62,279 35%Nordic Countries 199 83 143 736 14 1,032 1,254 3,645 919 34 8,059 4% 7,323 4%Mediterranean 1,185 861 859 1,044 11 4,923 3,578 11,440 2,902 174 26,977 14% 25,933 15%East Europe 206 107 108 44 4 1,094 1,188 3,509 974 10 7,244 4% 7,199 4%Africa Excl Med 143 156 94 201 6 495 685 1,787 443 26 4,036 2% 3,835 2%N America 392 687 302 4,510 11 5,203 2,531 13,833 4,515 155 32,139 16% 27,629 16%C&S America 80 263 20 76 2 835 277 1,011 257 156 2,977 2% 2,902 2%West Asia 264 185 240 48 4 921 1,976 4,372 1,115 277 9,402 5% 9,354 5%East Asia 309 528 723 86 6 2,576 1,733 7,320 2,136 215 15,632 8% 15,546 9%Oceania 74 75 17 3 1 761 249 1,130 506 53 2,869 1% 2,867 2%

Total 6,722 4,125 3,630 16,948 215 32,477 25,139 80,094 24,047 1,758 195,156 100% 178,207 100%Share 3% 2% 2% 9% 0% 17% 13% 41% 12% 1% 100% Table 35: 2004 Exports, Tonnes (000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 2,035 395 4,619 6,239 97 1,673 4,012 596 618 3 20,286 11% 14,047 16%NW Europe 2,611 340 12,885 44,868 195 8,783 6,702 3,337 759 5 80,485 44% 35,617 40%Nordic Countries 247 37 1,821 4,647 23 548 1,203 434 84 1 9,045 5% 4,398 5%Mediterranean 3,723 251 4,287 7,070 17 2,168 2,933 1,806 275 2 22,533 12% 15,463 17%East Europe 283 30 316 196 6 431 786 651 132 0 2,831 2% 2,635 3%Africa Excl Med 241 41 133 1,032 15 -136 212 329 55 2 1,925 1% 893 1%N America 150 318 1,792 28,181 3 554 1,035 948 163 1 33,145 18% 4,964 6%C&S America 120 94 49 449 1 361 198 152 24 7 1,455 1% 1,006 1%West Asia 158 47 1,338 191 4 407 948 400 63 5 3,562 2% 3,370 4%East Asia 506 125 3,433 616 4 1,170 969 500 106 1 7,429 4% 6,814 8%Oceania 36 31 22 9 0 105 117 120 53 1 494 0% 485 1%

Total 10,110 1,709 30,693 93,498 366 16,063 19,114 9,274 2,334 29 183,191 100% 89,693 100%Share 6% 1% 17% 51% 0% 9% 10% 5% 1% 0% 100%



Table 36: 2004 Imports, (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 2,143 270 263 187 14 2,360 664 3,711 1,137 11 10,759 4% 10,572 4%NW Europe 7,731 1,782 1,806 1,996 308 15,179 12,092 44,965 11,451 324 97,634 37% 95,638 39%Nordic Countries 543 18 807 7,289 37 823 3,334 3,235 747 59 16,892 6% 9,603 4%Mediterranean 2,674 572 410 856 103 3,008 4,767 11,598 6,916 76 30,981 12% 30,124 12%East Europe 310 43 480 2,811 0 582 2,221 3,197 1,625 418 11,686 4% 8,875 4%Africa Excl Med 1,122 166 351 529 2 58 2,919 688 330 1,354 7,522 3% 6,993 3%N America 727 283 1,257 334 19 3,693 2,655 13,227 4,869 1,069 28,133 11% 27,799 11%C&S America 1,319 211 435 334 38 189 576 1,298 269 754 5,425 2% 5,090 2%West Asia 424 20 92 1,492 5 311 1,045 1,295 2,459 50 7,194 3% 5,702 2%East Asia 617 33 379 183 99 2,881 3,648 20,426 11,765 1,081 41,113 16% 40,930 17%Oceania 515 545 213 247 62 126 315 345 205 577 3,151 1% 2,904 1%

Total 18,125 3,942 6,494 16,260 687 29,211 34,238 103,986 41,774 5,772 260,489 100% 244,230 100%Share 7% 2% 2% 6% 0% 11% 13% 40% 16% 2% 100% Table 37: 2004 Imports, Tonnes ('000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes Total Share Total Non Fuel Share Non FuelIreland 1,726 430 1,614 1,435 54 373 1,528 357 196 1 7,714 3% 6,279 4%NW Europe 10,696 1,653 2,177 6,895 766 12,160 15,348 6,364 2,325 5 58,388 22% 51,493 35%Nordic Countries 343 11 5,507 48,026 102 2,206 5,484 300 185 1 62,164 23% 14,138 10%Mediterranean 3,824 432 1,608 5,502 98 1,969 5,326 2,333 1,401 3 22,497 8% 16,995 12%East Europe 719 88 2,344 26,619 0 1,318 2,823 494 712 0 35,117 13% 8,498 6%Africa Excl Med 1,842 127 3,563 11,578 3 75 503 78 57 2 17,828 7% 6,250 4%N America 2,071 209 3,801 4,058 21 858 1,015 490 309 3 12,835 5% 8,777 6%C&S America 3,619 178 5,478 5,716 123 662 829 73 84 1 16,764 6% 11,047 8%West Asia 463 17 279 7,597 20 324 802 118 353 1 9,974 4% 2,377 2%East Asia 1,298 34 555 2,451 333 545 3,727 2,415 3,572 2 14,933 5% 12,482 9%Oceania 498 296 5,804 6,285 192 12 231 20 14 0 13,353 5% 7,068 5%

Total 27,099 3,476 32,730 126,161 1,713 20,503 37,617 13,041 9,207 19 271,566 100% 145,405 100%Share 10% 1% 12% 46% 1% 8% 14% 5% 3% 0% 100%



Table 38: UK Exports, Absolute Changes, 1988 to 2004, Values (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes TotalIreland 1,122 200 171 1,345 30 1,258 1,678 3,127 2,078 -40 10,969 NW Europe 637 410 103 5,491 72 8,286 1,761 16,396 3,844 -2,062 34,938 Nordic Countries 96 52 -31 530 10 524 496 2,029 345 -58 3,994 Mediterranean 731 536 320 667 -1 3,450 2,076 7,114 1,863 -91 16,666 East Europe 123 79 45 38 1 772 1,004 3,082 821 -1 5,964 Africa Excl Med 75 49 54 169 4 33 326 584 170 -36 1,427 N America 232 322 193 2,827 5 3,976 940 8,316 2,779 -41 19,548 C&S America 20 113 6 63 1 556 134 378 148 119 1,537 West Asia 32 22 180 18 1 240 1,005 1,785 577 -271 3,588 East Asia 163 273 559 68 4 1,604 731 5,285 1,175 -1,857 8,005 Oceania 39 23 0 1 1 453 4 442 195 -4 1,153

Total 3,271 2,079 1,599 11,216 126 21,151 10,154 48,539 13,995 -4,343 107,789 Table 39: UK Exports, Absolute Changes, 1988 to 2004, Tonnes (‘000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes TotalIreland 1,239 321 4,130 2,103 53 875 3,155 424 484 1 12,787 NW Europe -171 159 8,579 295 111 4,044 2,840 2,078 372 -4 18,304 Nordic Countries 20 20 -346 1,726 13 28 477 240 17 -19 2,177 Mediterranean 2,248 110 868 1,300 -29 1,206 1,164 1,244 168 -1 8,277 East Europe -972 19 224 156 -5 279 618 616 126 -0 1,061 Africa Excl Med 98 -3 31 852 11 -547 -57 154 24 -1 563 N America 48 122 1,195 2,168 1 -49 -391 421 33 -1 3,547 C&S America -17 38 26 325 0 187 42 67 14 5 687 West Asia -634 11 995 53 -0 -5 339 209 20 0 988 East Asia -56 58 3,037 521 1 434 13 287 61 -2 4,354 Oceania 21 10 -2 4 0 -150 -60 43 10 -0 -126 Total 1,824 865 18,737 9,503 157 6,302 8,140 5,784 1,328 -21 52,618



Table 40: UK Imports, Absolute Changes, 1988 to 2004, Values (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes TotalIreland 1,080 176 83 148 5 2,011 209 2,642 531 -6 6,878 NW Europe 3,983 884 745 840 119 8,815 780 26,355 6,511 -85 48,949 Nordic Countries 260 15 -17 5,379 23 345 533 1,468 407 -7 8,407 Mediterranean 1,502 331 -44 201 90 2,395 2,499 7,889 4,721 25 19,609East Europe 244 27 205 2,418 -1 452 1,427 2,961 1,398 401 9,533 Africa Excl Med 400 124 -88 442 -10 40 2,573 606 226 -2,466 1,846 N America 241 214 -177 102 11 2,791 1,313 7,484 2,919 550 15,449 C&S America 669 100 148 175 29 144 206 1,104 161 -40 2,697 West Asia 248 10 30 1,158 5 260 711 528 2,101 26 5,078 East Asia 374 16 72 162 16 2,552 2,432 13,128 8,232 1,025 28,009 Oceania 61 524 -82 176 26 91 133 220 144 536 1,830

Total 9,061 2,421 874 11,201 315 19,898 12,819 64,386 27,351 -41 148,285 Table 41: UK Imports, Absolute Changes, 1988 to 2004, Tonnes (‘000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes TotalIreland 656 189 585 839 12 35 468 247 93 -0 3,124 NW Europe 3,075 730 -1,400 -5,835 218 3,792 5,479 3,345 1,480 -39 10,845 Nordic Countries 92 8 571 21,308 48 999 461 -10 102 -7 23,572 Mediterranean 956 156 -1,619 -4,397 75 959 2,021 1,577 1,037 -101 663 East Europe 598 46 1,059 19,435 -4 902 1,995 368 612 -1 25,011 Africa Excl Med 389 98 -464 10,204 -38 35 255 60 35 1 10,574 N America 662 172 -5,415 -915 -3 103 -385 -2,403 167 -117 -8,134 C&S America 2,037 122 1,671 2,748 88 579 320 39 72 -1 7,676 West Asia -63 10 161 1,769 20 234 642 92 320 0 3,186 East Asia 717 20 -1 2,079 -16 341 2,885 1,566 3,043 -10 10,623 Oceania -86 273 468 3,771 60 -2 13 3 11 -0 4,510 Total 9,033 1,824 -4,383 51,006 459 7,977 14,154 4,884 6,972 -277 91,650



Table 42: UK Exports, Absolute Changes, 2000 to 2004, Values (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes TotalIreland 513 51 102 908 14 521 743 -1,218 969 9 2,610 NW Europe 157 120 204 313 53 3,300 -1,849 -5,717 925 79 -2,414 Nordic Countries 12 13 -22 247 5 159 323 -401 -9 -117 211 Mediterranean 150 18 287 -76 -5 1,311 378 -253 523 -54 2,279 East Europe 80 20 46 -80 0 294 433 1,099 276 -7 2,160 Africa Excl Med 22 -10 15 53 -3 46 167 366 79 -39 696 N America 3 61 82 27 2 948 -363 -1,448 -246 -111 -1,043 C&S America -57 -47 2 16 -1 170 18 -533 -61 129 -365 West Asia 42 8 127 -197 -0 108 501 1,459 204 -746 1,504 East Asia 13 -164 367 -19 -3 628 153 -8 322 -656 633 Oceania -9 -15 2 1 -0 174 10 -467 111 3 -191

Total 926 54 1,212 1,191 63 7,660 513 -7,120 3,091 -1,510 6,080 Table 43: UK Exports, Absolute Changes, 2000 to 2004, Tonnes ('000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes TotalIreland 398 75 2,639 442 -19 172 569 -138 50 1 4,188 NW Europe -591 18 -92 -14,211 55 135 -572 -228 -211 1 -15,697 Nordic Countries -28 10 -78 1,163 11 -163 215 91 -18 -20 1,183 Mediterranean -548 -44 726 -1,115 -20 146 -143 453 -22 -2 -569 East Europe -92 5 102 -634 2 96 208 396 34 -1 116 Africa Excl Med -20 1 25 138 -18 -428 -8 133 11 -9 -176 N America -15 3 975 -4,411 -0 44 -283 131 -43 -42 -3,640 C&S America -89 2 -23 24 -0 55 17 -15 -11 5 -35 West Asia -585 6 556 -1,300 -1 66 550 197 5 -3 -510 East Asia -187 -11 2,243 -40 -7 469 172 135 3 -1 2,775 Oceania 8 -6 6 7 -0 -3 -16 33 8 0 36 Total -1,750 59 7,079 -19,937 -0 590 707 1,188 -195 -71 -12,329



Table 44: UK Imports, Absolute Changes, 2000 to 2004, Values (£ million) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes TotalIreland 729 91 72 126 6 58 112 89 64 -6 1,342 NW Europe 2,196 431 375 407 47 3,988 93 7,219 3,260 44 18,059 Nordic Countries 19 13 -22 3,173 16 79 574 -634 236 -69 3,385 Mediterranean 835 58 47 -18 49 1,198 1,190 3,086 2,350 29 8,824 East Europe 191 2 -71 1,976 -0 213 619 1,589 786 -247 5,058 Africa Excl Med 252 34 12 353 -3 10 418 269 -24 770 2,093 N America -120 55 -160 89 3 781 -307 -5,962 -652 -306 -6,579 C&S America 263 -1 -12 -88 11 63 -46 146 40 189 565 West Asia 53 -5 21 632 -2 142 218 242 577 8 1,886 East Asia 100 11 -34 151 23 1,531 690 -2,729 2,042 742 2,528 Oceania 27 233 -35 65 6 24 -10 -49 64 -1,146 -822

Total 4,545 922 194 6,866 157 8,086 3,551 3,266 8,745 7 36,337 Table 45: UK Imports, Absolute Changes, 2000 to 2004, Tonnes ('000s) Food Bev/Tob Crd Mat Min Fuel Oils,Fats Chemicals Basic Mnf Machnry Misc Mnf Comm nes TotalIreland 534 166 807 809 28 -285 459 175 64 -1 2,757 NW Europe 2,720 404 -1,440 -271 -18 640 4,006 1,224 -1,424 -137 5,704 Nordic Countries 21 9 1,571 19,081 18 489 41 -25 58 -10 21,254 Mediterranean 836 16 73 -117 51 81 960 462 542 2 2,906 East Europe 568 20 181 19,032 -0 -188 820 235 505 -2 21,170 Africa Excl Med 411 26 -74 6,515 -11 39 63 22 -21 -0 6,970 N America -500 47 -1,764 -1,154 -14 40 -304 -136 -9 -22 -3,816 C&S America 483 72 787 -2,194 16 157 169 28 38 -8 -452 West Asia 30 4 -379 2,492 10 123 219 57 148 -255 2,448 East Asia 460 14 -4 1,899 80 48 1,781 643 1,619 -59 6,481 Oceania -105 129 -632 -67 0 -2 14 -1 5 -0 -659 Total 5,458 909 -874 46,024 159 1,143 8,229 2,683 1,525 -492 64,763



1.6 Prospects UK trade has been growing by 5 to 5.5% in value terms and 2 to 2.5% in tonnage terms since 1988. Relatively small changes at the margin (less than half a percentage point per annum between import and export growth) have led to a substantial increase in the visible trade deficit, only partially offset by surpluses in the services sector. There has been a marked change in performance since 2000 with an absolute decline in export tonnage and only low growth in export value, despite higher growth in world output in 2003 and 2004. By international standards, the UK’s share of world trade is relatively small, and similar in absolute terms to France and Italy. Levels of trade growth are currently relatively low on the export side and moderate to low on the import side. The main causal factors appear to be:

• Consistently high levels of domestic consumption, driving imports, • Falling levels of competitiveness, with respect to consumer prices and labour costs, • A recent decline in industrial output, including key high-tech sectors, • Greater integration within the world economy, favouring lower cost regions,

particularly East Asia and Eastern Europe. Further export growth depends particularly on UK competitiveness, and demand growth in North West Europe. This region has accounted for a third of UK export growth over the last sixteen years, but has declined as an export market in absolute terms since 2000. It is also noticeable that the world’s most dynamic regions are not yet developing into important export markets for UK producers. Exports only grew in value terms by 3% since 2000, mainly due to the chemicals sector. Further import growth depends particularly on consumer spending and mainly affects trade with NW Europe, the Far East, North America, the Mediterranean, and Eastern Europe. Imports from European countries have continued to grow strongly in the last four years. In terms of port traffic growth, the impacts are likely to be felt unequally. RoRo and LoLo markets tend to react to changes in the ‘busy’ direction (imports). Imports of manufactured goods in containers from deep sea origins show good prospects. Integration of Eastern Europe into the EU is also likely to enhance opportunities in the Continental RoRo sector. Imports from Ireland, although only 3-4% of total trade continue to grow well. The Mediterranean region is also growing strongly as an import market for manufactured goods, creating opportunities for intra-European container services, and also long distance rail. Between 2000 and 2004, the UK became a net fuel importer in tonnage terms, but in other bulk sectors, e.g. SITC-2 (crude materials, including raw materials such as ores), there have been absolute declines in import volume since 1988, another reflection of the decline of



heavy industry. On the energy side, demand has switched strongly towards Eastern European and the Nordic regions, and away from American sources. The immediate prospect is that the gap between import and export growth will continue, translating into further unitised growth, but mixed fortunes in conventional traffic. The increase in the UK trade deficit does raise concerns however, and if this translates into lower domestic growth and a weaker pound, there is also a medium-term risk associated with import growth rates. 2 Forecasts Developed in 2000 for RSPB and English Nature This section provides a short summary of container forecasts produced by MDS Transmodal for the Royal Society for the Protection of Birds (RSPB) and English Nature in 2002. This study adopted 2000 as its base year. It forecast that LoLo container traffic through GB ports would grow as follows: Units(‘000s) Index Index revised 2000 4,148 100 1002010 6,542 158 1502015 8,474 204 1942020 11,171 269 256

Forecasts to 2006 were based upon the same econometric model (FORK) that has informed this study. Beyond 2010, it was assumed that the implied exponential rate of growth from 1988 – 2006 would be extended. That assumption has now been changed in the light of evidence that ‘growth’ tends to be ‘absolute’ rather than exponential increments. The absolute volumes of containers were described as ‘boxes’ (or units) and not ‘TEU’, and were calibrated against DfT statistics, excluding containers through Northern Irish ports. However, also included were a number of flows of containers carried on North Sea RoRo services that we have now excluded. It was also assumed that the proportion of containers transhipped at GB ports for third countries included in the total would rise from 16% to 20% from 2010 onwards. The revised index above removes that increase and therefore reflects our forecast at that time for GB domestic trades. The following table compares these forecasts with those described in this report, taking account of the increase recorded in DfT statistics for container TEU of + 8.8% between 2000 and 2003.



RSPB/English Nature report: Revised index

2005 forecast report index*

2000 100 1002003 - 1092010 150 1642015 194 1962020 256 2372030 - 338

*based on TEU The differences can be simply explained by noting that traffic growth measured in TEU is running more quickly than if measured in units and this is reflected in the higher forecast to 2010. Forecasts for 2015 are more or less identical. Beyond that date, the fact that growth is being forecast in absolute rather than exponential terms explains the difference. 3 Trade Forecasts using FORK 3.1 Introduction MDS Transmodal has developed an econometric model for forecasting world trade volumes. It calculates detailed forecasts, disaggregated by country of dispatch, country of origin, and commodity (SITC 2 Digit). This section of the Technical Annex describes the methodology used within the model, using an example demonstrating the detailed steps involved. The forecasting model is designed to use an extensive database of trade flows, gathered over the last sixteen years, sourced from the customs authorities of all the major world economies. The database provides detailed historical time series of world trade by value and by volume, and the purpose of the forecasting model is to harmonise these resources, measure the trends in the trade flows and attempt to relate the fluctuations around the trends to wider changes in the macro-economy. The key feature of the model is that it automates the selection of explanatory variables for each trade flow, so it is possible to build up the forecast, using over two million separate trade flows. In this way, each combination of sending county, receiving country and commodity is specified individually, and the aggregate forecast is built from the bottom up. The time series are based on quarterly historical data starting from the first quarter of 1988. The most recent point in the time series used within the port forecasting study is the third quarter of 2004. Data for the final quarter was available, but excluded due to reasons of data quality. Thus, it is possible to analyse time series containing 63 observations. Forecasting trade with this system depends upon being able to relate the calculated elasticities to forecasts of macroeconomic indicators. In general it is possible to use published forecasts of these indicators for two to three years into the future, for example



2007, but for longer term forecasts it is necessary to project the growth rates for example until 2020. Because of these limitations, the dependence upon accurate forecasts of macroeconomic indicators has been reduced, so that in practice, the forecasts will primarily reflect recent trends. The fundamental assumption is therefore that trade in the unitised sector has a long-term trend component which can be measured but is not related to external factors. The macroeconomic variables create fluctuations around that trend which can be quite strong, depending upon the specific trade flow, but which tend not to be for UK unitised trade at an aggregate level. 3.2 Modelling Methodology – Individual Trade Flows The methodology can be exemplified by considering a single trade flow between two countries (A and B), for a single commodity (C). The flow is categorised as unitised tonnes, exported by A and imported by B. The time series is 1988 quarter 1 to 2000 quarter 4.

The historical pattern is shown below. Note that it is often possible to observe the same trade flow by considering data reported by each country. Both series are shown, and in this example they are closely correlated, with no serious outliers.

Unitised Trade (Quarterly Tonnes):Country A to Country B, Commodity C

0

400000

800000

1200000

1600000

2000000

1988

-1

1988

-4

1989

-3

1990

-2

1991

-1

1991

-4

1992

-3

1993

-2

1994

-1

1994

-4

1995

-3

1996

-2

1997

-1

1997

-4

1998

-3

1999

-2

2000

-1

2000

-4

Reported by Country B Reported by Country A



Having isolated a trade flow, the model selects possible predictor variables from the following set:

• Country A GDP • Country B GDP • Country A Exchange Rate (per US$) • Country B Exchange Rate (per US$) • Country A Consumer Price Index • Country B Consumer Price Index

The exchange rates and consumer price indices are then combined into two new series:

• The Cross Exchange Rate • The Relative Price Index (B CPI/ B Xrt)/(A CPI/A Xrt)

A number of extra independent variables are then added:

• Three quarterly dummy variables • Lagged dependent variable

Regression analysis, using a multivariate linear model, is used to relate these variables to each trade flow. However, linear differencing is carried out in advance to subtract the trend component from the data if it is significant. In this example, the linear component is strongly significant:

Coefficient Std. Error t Sig.Constant 841049.17 25575.11 32.89 0.000Slope 14867.51 839.77 17.70 0.000R Squared (adj) 0.8597 F Statistic 313.44 0.000

Once the linear differencing has been applied, the macro-economic model is applied. The system tries different combinations of variables in an attempt to drop the least significant ones. For this example the results are:

Coefficient Std. Error t Sig.Constant 63693.095 132597.23 0.480 0.633B GDP 14009.610 4052.002 3.457 0.001A GDP -15850.699 4490.499 -3.530 0.001RELPRIND 20774.434 9973.379 2.083 0.043Q1DUMM -70026.604 21264.253 -3.293 0.002Q3DUMM -42657.377 21273.374 -2.005 0.051LAGDV (t-1) 0.335 0.128 2.621 0.012R Squared (adj) 0.546 F Statistic 11.242 0.000



The R squared and F statistics suggest that the model fits fairly well, and the partial regression coefficients are also significant at the 90% confidence level, with the exception of the constant term. The signs on the coefficients are also intuitively sensible. They suggest that these imports (for country B) are positively related to country B’s GDP, negatively related to country A’s GDP, and positively related to the relative price index, which rises when country B’s prices, translated though the exchange rate, are rising faster than country A’s prices. There is a degree of seasonality, and positive serial correlation. 3.3 Implications The forecasts are then generated by attaching these regression parameters to forecasts of the macro-economic indicators. The linear trend is added back in, and all the individual trade flow series are combined. The combination of all these steps produces a result in which recent history has a far greater impact on the aggregate forecast than the predicted values of the macroeconomic indicators. This is illustrated below.

UK Unitised Imports

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Year

Tonn

es '0

00s 2000 base

2005 base



The graph (above) compares known volumes up to 2005 with the values that would have been forecast in year 2000. The forecast tends to underestimate the volumes between 2001 and 2004, and does not account for the unusual levels of variability in 2004. The next graph (below) shows the impact of changing the macroeconomic variables for the UK, on unitised imports. Note that trading partner country variables have not been changed, and that different trade series may react in opposite directions to given variables. In the high case, UK GDP is assumed to grow at 3.5% per annum, instead of 2- 2.5% between 2006 and 2020, and in the low case it is assumed to grow by 1.5%. UK price levels are assumed to rise by 1.2% in the low case, and 3.2% in the high case, compared to 2.1% in the central case. The sterling dollar exchange rate is assumed to appreciate by 0.8% per annum in the high case, to depreciate by 2% in the low case, and remain constant in the central case.

UK Unitised Trade

15,000

17,000

19,000

21,000

23,000

25,000

27,000

29,000

31,000

2005 2010 2015 2020

Tonn

es CentralLowHigh

Combined, these changes make very little difference to UK imports of unitised trade, as predicted by the model with only a 4% margin in traffic by 2020. The forecast is more heavily influenced by the linear trend component, which is strongly significant for a large number of individual trade flows, the seasonal components, changes overseas, and recent history.

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