Life Beyond Brexit

Northern Europe Hopes to Swerve Political Posturing

By Kate Jones

At the time of writing, the soap opera that is Brexit – Britain’s exit from the European Union – was reaching its jaw-dropping cliffhanger.

A long-held scheduled Brexit date of Mar. 29 was off the table, and the revised Apr. 12 deadline came and went with no decisive action and no withdrawal agreement having been approved by the UK Parliament.

Prime Minister Theresa May looked for solace in cross-party negotiations with the Official Opposition to her own political party, as she tried to form a Brexit compromise deal – yet at the time of publication, no such deal had been struck.

However, while the UK and European populace might find it hard to believe, there is life after Brexit. Breakbulk and project cargo shipments will continue to move in Europe, regardless of whether the UK is part of the EU. Indeed, the short-sea sector for breakbulk and project cargoes in Northern Europe cares little for these political machinations.

Deal or No Deal?

The region’s short-sea market is, in fact, “very much customer driven,” according to Tim Reardon, head of UK exit at the UK’s Port of Dover. “The demand for ships is derived from the demand for the cargoes that they carry, so the health of the short-sea shipping market is a reflection of the health of the economy as a whole,” he explained.

Although North European breakbulk and project cargo ocean transport is a given whatever the political circumstances, an important element in determining the short-sea shipping scenario in this region post-Brexit is whether the UK leaves the EU with or without a deal. Bob Sanguinetti, chief executive of the UK Chamber of Shipping, said that opportunities for breakbulk and project cargoes for short-sea shipping are dependent upon the nature of the UK’s Brexit agreement.

“If we leave the EU without a deal and we then have to negotiate on trade deals and so on – with, potentially, imposition of tariffs – then that will affect the market considerably,” he said.

According to Sanguinetti, a no-deal Brexit “just generates further uncertainty, which is not good for business; potentially the introduction of tariffs; [and] potentially the need for documentation for infrastructure, which in turn will create friction at the ports and therefore impact negatively on our business with the EU.

“If there’s an introduction of checks at ports and increased documentation, and the need for infrastructure to support trading with the EU as we go beyond Brexit, then clearly that will cause friction and that will slow down traffic, and that will move away from the seamless flow of traffic that we have at the moment.”

Sanguinetti added that an imposition of tariffs could affect the competitiveness of the UK in the breakbulk sector. More broadly, there is a need for the UK to have continued access to EU markets, for example in the transportation of offshore wind material. “While the [UK government] has, I think, declared that we will remain open for business with the EU, we need to see reciprocal arrangements agreed by the EU for access by UK companies into the EU market,” he said.

Loss of Opportunities

Isabelle Ryckbost, secretary general of the European Sea Ports Organisation, or ESPO, argued that it is unknown to what extent Brexit with or without a deal will impact the market. A similar lack of clarity was felt by Robert Jan Timmers, business manager for breakbulk at the Netherlands’ Port of Rotterdam, who said that there are so many uncertainties that he is unsure whether there are any opportunities post-Brexit for northern European short-sea shipping for breakbulk and project cargo. One of the most serious challenges in his eyes concerns documentation. When the UK is classed as a “third country” post-Brexit, additional documentation will be required, and cargo flows will impact the time taken up on trade volume for individual forwarders.

“The whole Brexit situation, I think … [is] pretty unclear and I’m not sure whether it’s of benefit to anyone – not for the British side, not for the European side nor the Port of Rotterdam side,” Timmers said.

Reardon argued that operationally the short-sea shipping industry in northern Europe for breakbulk and project cargo is anticipated “to look very much like the sector as it is now” following the UK’s EU departure.

“What may change, depending on the nature of the Brexit settlement, is the potential imposition of customs and other controls on cargoes moving between the UK and its European neighbors,” he noted. “Those changes could take one or more of a number of different forms. Firstly, of course, there’s the potential imposition of customs tariffs on goods traded across borders, which, put simply, make the goods more expensive to buy from overseas sources markets, particularly if currency fluctuations mean that the currency that you’re buying in has lost value in relation to the currency you’re paying for the goods with.

“Secondly, of course, there’s the question of whether the imposition of formalities at ports, to ensure that customs declarations are made and customs duties are paid, could have the impact of slowing the movement of goods through the port from the quayside to the dock gate. … We’ll need to see the future shape of a post-Brexit settlement before we can identify what the precise impact will be.”

Advantages Abound

However, Brexit is not all doom, gloom and uncertainty for breakbulk and project cargo on short-sea trades in North Europe. Tim Morris, chief executive of the United Kingdom Major Ports Group, or UKMPG, believed that although it is important not to be complacent about Brexit’s risks, there are also opportunities to the UK’s EU exit. Many ports in the UK, he explained, are actually witnessing more enquiries from potential new clients.

“Brexit seems to be acting as a catalyst for organizations to re-examine their existing logistics chains and routes,” Morris said. “This questioning can lead to the realization that ‘the way we’ve always done it’ might not be the right answer as business changes and evolves.” He explained that different routes and freight modes could now make more sense, both economically and environmentally. “It’s a really interesting prospect that we might be on the cusp of some very interesting reorganization of logistics chains, moving freight off the roads and more onto both water (short-sea and coastal shipping) and rail, with road miles being focused on the delivery over the last few miles.”

Ports in pre-Brexit UK already handle large breakbulk and project cargo volumes without issue from the EU, other northern European countries and further afield. In many locations, the processes and systems exist to handle cargoes from a range of regulatory and customs jurisdictions.

“Part of the Brexit preparations that ports have been doing is working with customers to share their expertise and offer solutions in terms of border processes and handling ‘third country’ cargoes,” Morris said.

He does, however, see some challenges. Speaking to Breakbulk, Morris said he felt that uncertainty exists regarding customs and phytosanitary arrangements with the EU, something he believed is “undoubtedly” having some impact on certain bulk cargoes. For the longer term, structural repositioning of maritime freight with the EU for certain cargoes that have become dependent on short-sea roll-on, roll-off, or ro-ro, routes could occur. However, Morris said that “looking into anything other than the short term, we’d anticipate a strong future for the UK in the Northern Europe breakbulk and project cargo markets.”

Furthermore, contrary to the belief that a no-deal Brexit is exclusively bad news, a scenario of this sort may actually offer some perks for short-sea breakbulk moves. Wim Dillen, international development manager at Belgium’s Port of Antwerp, suggests that a no-deal scenario may actually be beneficial for those moves.
“We think that a no-deal or hard Brexit will result in cargo shift from manned transport (ro-ro) to unmanned transport (lift-on, lift-off and others), as the principal idea of Brexit is to ‘take back control’ and stop free movement of people,” he said. “As such, we think that Brexit may favor breakbulk short-sea shipping: larger volumes can be moved across the English Channel more efficiently compared to ferry transport as customs clearance of larger lot sizes is less burdensome.”

Dillen revealed that discussions with breakbulk carriers had reached the conclusion that the current advantages of manned ferry transport may very well be countered by the future advantages of unmanned breakbulk transport.

Pipeline Opportunities

Richard Ballantyne, chief executive of the British Ports Association, saw short-sea breakbulk and project cargo moves post-Brexit could constitute “continuation as we have now.” According to him, a hard Brexit, with new customs controls and border checks being brought in, has the potential to be “particularly problematic” for ro-ro traffic. However, he said that although additional bureaucratic processes will not be particularly welcomed by breakbulk and project cargo, it could be easier to build any new documentation obligations into current processes and systems.

Equally, while Ballantyne said that a Brexit that causes negative economic impact and an economic slowdown could lead to less demand for breakbulk and project cargo, opportunities could surface in the green energy sphere.

“You’re probably looking at an increase in offshore renewables-related equipment,” he said, noting a recently unveiled UK government goal for offshore wind to account for more than 30 percent of British electricity by 2030. Ballantyne cites Aberdeen Harbour in Scotland – a port project connected to offshore oil and gas servicing and decommissioning – as one that has the potential to benefit from rising decommissioning-related work.

UKMPG’s Morris pointed to offshore renewables and offsite or modular construction as two further examples of changes in “end-user” industries which open new, or significantly increased, opportunities for ports and short-sea, or coastal, shippers. For him, boosting value-add is just one of three factors he believed were coming together in the wider environment to make this a very exciting period for UK short-sea shipping markets. The other two factors are policy and environment.

Short-sea Still Relevant

However, it is not only the UK where short-sea shipping can play a crucial role. Timmers claimed that for receiving and distributing cargo, it is “of great importance” to both the Port of Rotterdam and project cargo in general. Rotterdam has recently extended part of the port area set aside for breakbulk cargoes, with plans to designate more area for breakbulk. It has also realized the first steps of extending the port’s project cargo stevedoring business, and is making efforts to connect more with the project forwarding market, even in its hinterland.

ESPO’s Ryckbost added that breakbulk is well-suited to short-sea shipping: “Short-sea, I think, is a very obvious mode of transportation of breakbulk,” she said. “Certainly if you talk about transport of things that because of their size cannot be fitted in containerized units or on bulk lorries, I think it’s fairly good to transport them by sea. It’s a lot more difficult to transport them by road, so I think it’s really one of the transport modes that is very suitable for breakbulk.”

Brexit or no Brexit, it looks like there might be good times ahead for short-sea breakbulk and project cargo shipping in North Europe.  

Kate Jones is a specialist port and shipping reporter based in the UK.

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