Liverpool 2 aerial

My initial reaction to the news that the UK port of Liverpool was building a new deepsea terminal capable of handling ships of up to 13,000teu was simply: “too far north!”

Liverpool might once have been second only to London as the country’s – one of the world’s, in fact – most important ports, but the age of containerisation washed away the old order.

London was supplanted by Felixstowe and the north of the UK lost the vast majority of its deepsea calls. The box economies of scale demanded minimum sailing distances.

So I was surprised to see almost $500m being spent on Liverpool-2 to create a terminal with 854 metres of quay, patrolled by eight giant quay cranes capable of working 60 metres out and a semi-automated yard. It would also boast a 16.5 metre-deep berth pocket, some 62 metres wide, but… with an approach channel depth of only eight metres, Chart Datum (CD).

Surely some mistake? Will it really be capable of handling 13,000teu vessels?

It transpires not. The tidal rise above CD is a minimum of 7.5 metres (at high-water). With 10% under-keel clearance, it could accommodate a ship with a draught of 14 metres, and due to its northerly location it would likely need to be either first or last port of call in a European rotation – and therefore the vessel would likely always be at its deepest draught.

I would suggest that, conservatively, 10,000teu will be the “Liverpool2-max”.

What about the economics of operating such a large vessel in the port?

Assuming that a call would only make economic sense if it were to exchange 2,000 containers and, additionally, that ports in Europe usually struggle to achieve more than 27 moves per quay crane per hour sustainably, then it would take six cranes to turn it within one tide. A vessel of this size should probably budget for 23-hour port stays, as well as expect some delays on arrival such as waiting for sufficient tidal rises, which may be up to six hours.

With these considerations in mind, is Liverpool “too north”? Vessels crossing the North Atlantic with calls at other major North European ports on their schedules would need one additional day of “slow-steaming”. In contrast, for vessels entering the Channel from the south, this would increase to one and half days, with the result that several days are now being added to the round-trip rotation.

However, in these days of slow-steaming and “flexible” transit times, coupled with huge schedule buffers, let’s wildly assume that for some services this is possible without adding ships or other massive costs. The cost to the shipping line will increase simply based on additional fuel consumption.

The Irish Sea is presently outside of the North European emission control area (ECA), so vessels can still burn the cheap and dirty oil, but in reality this is not sustainable, so better to assume the use of low-sulphur oil in calculations, at the higher costs for “premium” fuels.

However, the cost to the shipping line is merely one element of the total supply chain cost, and like all UK container ports, Liverpool claims to be closer to key hinterlands than others.

If “Liverpool is too north”, then surely “Southampton is too south”!

If “independent” consultants truly are impartial when analysing Felixstowe versus London, then Felixstowe is the port against which we should benchmark relative and  average intermodal costs.

Some 70% of imports into Felixstowe (mainly from Asia) appear to end the containerised leg of their journey somewhere in the triangle formed by South Midlands, Leeds and Manchester. For every rumour of a new distribution centre being built in the South, it seems as if three are actually being built in this golden triangle. So for imports from Asia, the UK distribution might look something like Fig 1, and the relative road distances are captured in the adjacent table:

The assumption here is that containers to and from the “real” north of the UK are more often than not transhipped onto feeder vessels in North European ports and do not travel on the UK domestic road or rail network. We also know that roughly 25% of all containers in and out of Felixstowe travel by rail, where this makes economic sense, and where capacity is available to accommodate it. The large scale rail mode is a genuine competitive advantage for Felixstowe.

Export origins are weighted more towards the north but, essentially, every import container heading north will ultimately need to travel back south again, whether it is laden or empty. With a few assumptions in terms of truck triangulation ratios, and present trucking costs (ever increasing) coupled with modality differences between ports, the total cost of inland distribution can be established.

These calculations show that just about every additional dollar spent by the shipping line in calling at Liverpool is then mitigated through the port having some proximity advantages over the present – and assumed – future primary hinterlands. And, never to be underestimated, this will have some major positive impacts for the environment (which may or may not be recognised by the government).

In conclusion, 10,000teu vessels on the Asia-Europe trade might have some end-to-end cost advantages by calling at Liverpool as opposed to elsewhere, and certainly 6,000-8,000teu vessels on transatlantic routes will have.

If shipping lines can offer differentiated rates between calling at various UK gateway ports they can also start to carve out some “niches” and generate additional profits. It would allow for product differentiation in an otherwise commoditised industry, as well as give UK shippers more choice, which can only be good for all.

So the UK will have a fourth deepsea gateway, although Liverpool is unlikely to become the largest of these, as it was when ships were small, fuel was cheap and people were bold!

DISCLAIMER: This a guest post from Andy Lane, partner at CTI Consultancy, which assists with cost modelling and automated tools for those in the container supply chain. www.cticonsultancy.com

COMMENTS 9


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  • Dr Simon Holgate

    July 17, 2014 at 3:01 pm

    This is a very interesting article that covers many of the arguments around port-centred logistics in the UK. As is pointed out, the controlling depth at Liverpool will be increased by 1.5m to 8m (see the report at: http://www.eib.org/attachments/pipeline/20120101_nts_en.pdf). However, depending on your point of view, the depth constraint is either worse or better than the article suggests.

    The minimum high water in the past year at Liverpool was 6.82m above CD which equates to a total water depth of 14.82m. That in turn gives a maximum draft of 13.47m (assuming that the channel is always kept to that depth!).

    The question that has to be addressed really though is how often a given depth must be met in order for it to make sense for a shipping line to call at Liverpool2? You would imagine that missing one tide a year could be accommodated!

    According to our calculations, Liverpool2 could handle vessels of 15.5m draft on 31% of high waters (including a 10% clearance) and 14m draft vessels on 94% of high waters. Whether this is good enough, only time will tell.

    It is also worth noting that Liverpool2 will be operating new ZPMC cranes and aims for 30 moves per hour – in line with the best in Europe.

    DISCLAIMER: Dr Simon Holgate is the Chief Scientist at Sea Level Research Ltd which provides optimised vessel scheduling using high precision sea level predictions. http://www.sealevelresearch.com.

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  • richard r owen

    July 18, 2014 at 10:10 am

    Andy,

    An interesting article. However, what you fail to mention is that world seaborne logistics will be turned on its head with the opening of the newly widened locks on the Panama Canal 2015/16. The largest container ships in the world will then travel from Asia to Europe via the canal thereby saving the longer route via Cape of Good Hope. At present 80% of imports to southern U.K. end up north of the Midlands. With Peel Holding’s new feeder ports along the Manchester Ship Canal and new rail infrastructure already preceding this should allay any environmental fears. The American CEO of Atlantic Container Line spoke in Liverpool last week to sign a new 10 year contract and confirmed 6 new container ships were on order establishing Liverpool as its main base and increasing their work force by 150 with immediate effect. Southern ports watch out!!!

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  • Andy Lane

    July 19, 2014 at 3:18 am

    Many thanks for your kind words Richard, appreciated. It will be important for Liverpool to establish high quality/capacity rail connections to the primary hinterlands, there will however still be a huge demand for truck distribution. With the cost of inland transportation within the UK ever on the rise, then the supply dynamics will also further change, and for some Lines and some services, Liverpool will be able to produce the lowest end-to-end cost. It will likely not however spell doom for the Southern ports, as it will have limited capacity, and the access channel is not deep enough to serve the really large vessels. For ACL, then this move seems to make perfect sense. The Panama Canal expansion will allow Lines to serve Asia-USEC with larger vessels, capped at around 12,500-13,000 TEU in size. The size of assets deployed on this route will however be driven by demand and market growth, and not merely by infrastructure capability. I would strongly believe that Asia-Europe services will continue to route through Suez, and this is where we will see the largest container ships deployed.

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  • Andy Lane

    July 21, 2014 at 6:23 am

    Dear Dr Holgate. When a few years ago (in Maersk) we were analysing the root-causes of our off-schedule vessels, we found that one large one was that not all pro-forma (long term) schedules could actually be executed 100% of the time! Quite “easy” to fix. So the answer then is that when you optimise the network and create pro-forma schedules, you need to budget with 100% access.

    A lot of the “port congestion” we see globally today is due to late arriving vessels (caused by previous ports “performance”), so a non-executable schedule can have quite some knock-on effects, and then huge costs for Lines and Shippers.

    What you might then do here is to amend the rotation, so that Liverpool is the last port in Europe (where maybe 40% of all containers onboard are empty, but you will also have maximum fuel load). Or you plan the head-haul to run with 95% utilisation, which presently very few services actually achieve year round. Both of these can then keep the draft to less than 13.5 meters for a 10,000 TEU vessel. On the weeks (days) when the tidal height predictions (far) exceed 6.82m, then the overall intake capacity of the service can be adjusted upwards, which is always preferred comparing to cutting back.

    The impact of “occasional” cuts against predicted tides might well be mitigated through the right placement of buffers within the pro-forma schedule. Without forgetting that buffers are also a form of waste.

    With one vessel only alongside in Liverpool2, then 6 QC’s @ 30 MPH (or more) could be possible, and therefore a one-tide port stay. When you have tight draft restrictions, then this means that the terminal needs to deliver a very consistent performance. It is usually activities behind the QC which govern its effectiveness, and I have observed both good and bad in semi-automated terminals. So that will need to be a focus for Liverpool2.

    Given the potential positive impact on reducing UK truck miles (road congestion and pollution), then it might then be prudent for the UK government to consider further deepening of the Liverpool approach channel, matching it more to the design capacity of Liverpool2, as it is clearly the bottleneck at CD -8 meters.

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  • richard

    September 14, 2014 at 7:47 pm

    Andy,
    Thanks for you comments, however I wonder why Maersk Shipping have moved their U.K. H.Q. to Liverpool in the last year!

    Reply
    • Andy Lane

      September 15, 2014 at 10:08 am

      Dear Richard, Maersk has always (well since 1988 at least) had an office in Liverpool, as it has always been an important maritime city to be present in. After the acquisition of P&O Nedlloyd in 2006 Maersk re-organised in the UK, with the Liverpool office becoming the single UK office for customer service. Intermodal in Birmingham, Operations in Felixstowe, Documentation largely off-shored but managed from Hainault and with the corporate office in London. After 2008 and 2010 further re-organisations, then the country representative offices had only Commercial responsibilities, since then Marine Operations for the UK has been controlled from Rotterdam. I actually did not realise that Maersk has relocated it’s Commercial office, it is however likely a lot cheaper in Liverpool compared to London, so that is probably the explanation.

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  • keith gregson

    June 03, 2016 at 12:32 am

    Hi, just a quick comment.The berthing pocket for the new Liverpool 2 terminal has been dredged to 16.5 m , suggesting that they are expecting ships a lot bigger than 10,000 teu to be calling !
    best regards
    keith.

    Reply
    • Richard Owen

      June 03, 2016 at 1:58 pm

      Hi Keith,
      I understand the capacity will be 14000 TEU with two vessels alongside at any time. Tests are now being carried out on the new ZPMC cranes which with their sophisticated software should mean that any loading/unloading vehicle would be in port for no more than two hours. Work also commences in the next couple of weeks on a four- mile dual carriageway £25 million upgrade from the Mersey Tunnel to the port. Liverpool has always had the oldest port- main line railway system in the world (150yrs) running three miles under the city to connect with Edge Hill junction (of Stephenson’s Rocket fame) and the west coast line. Millions have been spent upgrading this and it can now carry over twenty movements per day.

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    • Andy Lane

      June 06, 2016 at 10:55 am

      Hi Keith.

      Indeed it is correct that the alongside water depth will be 16.5m, and alongside under-keel clearance required being only 30cms, then indeed Liverpool2 in this respect could in fact handle a fairly fully laden 18,000 TEU ship.

      The restriction however comes from the approach channel, which is only -8m deep at mean low water. Tidal range is high, usually 6.5m+ on all high tides, so that means 14.5m of water depth, less underkeel clearance of 10% or 1.5m allowing ships with draughts of up to 13m access – albeit only at two fairly small windows per day. A fully loaded 10,000 TEU ship would already be close (or even exceeding) a 13m draught, and for this reason this is probably Liverpool-max unless the channel can be further deepened.

      This might rule Liverpool2 out somewhat for the large Asia-Europe services, and also not least due to the additional distance and time (costs) required to call there instead of the deep-sea South Coast ports. Liverpool is excellently placed in terms of close proximity to the “Golden Triangle” to/from which 65% of all UK container originate or destine, and for services such as Trans-Atlantic as well as some Intra-European then it is well place for the future.

      Hope clarifies.

      Best Regards, Andy

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