Examination of Witnesses (Questions 8920
- 8939)
8920. LORD BERKELEY: Perhaps we could
have slide 8 please, and we will try and get through this as quickly
as possible. Could you introduce your company and tell us what
your own qualifications and experience are?
(Mr Cann) I
work for Hutchison Ports UK which is an arm of Hutchison Whampoah
Ltd. Hutchison Ports is the largest operator of ports in the world
and we operate in 44 countries. I am a project manager for Hutchison
Ports and have been so for two years, but I have actually worked
there since I joined as a graduate trainee.
8921. I just have two or three slides to help
explain the container business in a bit more detail and hopefully
it will help Lord James as well. If we go to slide 9 please, could
you explain the UK container trade?[21]
(Mr Cann) If you look at the blue line across
the top there (indicating), that represents, from the DfT's own
figures, the potential growth in the UK container trade from 2005
through to 2030. Of particular interest is the green line which
shows the growth from the east-of-England ports, those being the
ports of Felixstowe, Bathside Bay, which is yet to be constructed,
but has planning consent, the Port of Tilbury and the London Gateway,
which again has planning permission, but is yet to be constructed.
8922. If we turn to slide 10, can you just explain
the capacity that exists now for importing containers and the
future capacity which has been given permission, and maybe you
could explain what a `TEU' is at the same time?[22]
(Mr Cann) If I deal with the TEU first, the
TEU is an ISO-classification. What it actually means is a 20-foot-equivalent
unit, so a 20-foot-equivalent unit is, as it says, a 20-foot-long
container. A 40-foot container is two TEUs, so it is a measure
of capacity.
8923. LORD JAMES OF BLACKHEATH: What
has not been clear from this morning was that we heard all about
these containers, but nobody ever told us if there was a standard
width to them.
(Mr Cann) Yes,
there is a standard width, Lord James; it is eight foot. All the
containers are in the standard width which, I believe, is eight
foot. The only thing that varies is the length of the container
and the height of the container.
8924. Does that have any implications or change
at all if it goes on to any European network which has a different
standardisation or is that completely compatible with European
standards?
(Mr Cann) Western Europe, yes, but, I
must admit, Eastern Europe I am not that familiar with, but generally
in Western Europe the gauge is wider than that which is available
throughout most of the UK, so it would not be an issue.
8925. LORD BERKELEY: Is it a deep-sea
standard though?
(Mr Cann) Yes,
it is. It is an international standard used across the world.
If we turn to the slide and if you look at four lines from the
bottom, they show the current capacity in the ports east of London,
this is in terms of TEU, those 20-foot containers, so at the Port
of Felixstowe where I work there is capacity for 3.8 million movements
of TEUs per annum, at the Port of Tilbury 0.9, Thamesport 0.7,
which makes a total current capacity east of London of 5.4. Now,
the reason for showing that is to demonstrate how much movement
there currently is, but also to juxtapose that with the four lines
at the top which are the new consented developments that are going
to come on stream which the Secretaries of State have given permission
for. The Port of Felixstowe is to expand by a further 1.5 million
TEUs, Bathside Bay at Harwich, a brand-new container terminal,
by 1.7 million TEUs, the London Gateway at the Thames, a brand-new
container terminal, by 3.5 million TEUs. If you look at the total,
that means that the total capacity for the movement of containers
east of London is going to more than double in developments that
are already consented.
8926. CHAIRMAN: The Thames Port is on
the Medway, is it?
(Mr Cann) That
is right, yes.
8927. Will it affect Crossrail very much?
(Mr Cann) No, it will not.
8928. LORD BERKELEY: The London Gateway
is on the south or north bank of the Thames?
(Mr Cann) It
is on the north bank.
8929. So that is affected by Crossrail?
(Mr Cann) Yes, it is.
8930. If we could move on to slide 11, could
you explain the number of containers from these different ports
which might go by rail, or would go by rail, as part of the planning
conditions?[23]
(Mr Cann) In the previous slide I demonstrated
the planned consent for the increase in capacities of terminals.
Now, with that will come more trains and this slide attempts to
graphically demonstrate how many more trains we are actually talking
about in terms of the containers on the railway. If you look at
the bar on the left, 2005, it is about 0.4 million containers
moving from two ports, the Port of Felixstowe and the Port of
Tilbury, which are currently on the trains, and through to 2010
you will see there is some growth there and that is due to the
organic growth mainly at the Port of Felixstowe. Then, if you
look further outwards towards 2030, you see the effect of both
the new developments of Bathside Bay and London Gateway and further
growth at the Port of Felixstowe coming on stream. That is both
growth in terms of the capacity of the ports themselves, but also
in terms of the improvement in the percentage share, the modal
split, if you like, of the current trade as well.
8931. LORD JAMES OF BLACKHEATH: In putting
these figures together, how far has one been allowing for the
possible replacement trade effect because, if you look at the
2030 effect, is it really correct that that is all going to be
incremental trade coming in? Surely it is going to substitute
for a lot of trade that is already here in the United Kingdom
and, therefore, it is not a growth, that figure, but it is actually
a substitution of UK freightage?
(Mr Cann) Well,
as you are aware, Lord James, in granting planning permission,
all of the ports that have been granted planning permission have
to show that there is a need, they have to show that there is
an overriding public interest. In demonstrating that, the Secretaries
of State have accepted the evidence that we have provided, that
there is the requirement for that capacity to provide for the
demand that is there, so yes, I do not accept what you are saying.
That growth will come and it is coming. It has been demonstrated
over the last few years that the growth in containers at those
ports already that are there has been considerable and will continue,
and the DfT's own figures say so.
8932. What is the reaction time to creating
the capacity to deal with this? For example, if you start off
in 2010 with the figure that you have got there and the markets
do develop in line with 2030, how far ahead do you have to create
the infrastructure to cope with it and what reaction time do you
have available to do it? In other words, are you sure you do not
have to build the capacity before you nearly know you have got
the market? Which comes first—the chicken or the egg?
(Mr Cann) Well, if you lived in Suffolk,
you would find that people are already saying that they feel that
the capacity is not there, both Hutchison Ports and our competitors,
DP World, who are promoting the London Gateway.
8933. LORD JAMES OF BLACKHEATH: People
who live in Suffolk are not all running a freight company, but
you are, so it is not the people in Suffolk that we want to know
about.
8934. LORD BERKELEY: Perhaps I can help
you by asking a completely specific question before you go back
to Lord James because that may come out further on in our examination.
He is quite right to ask questions about a four-times growth between
2010 and 2030. Could you confirm that the growth is in line with
the Government's own forecast, but it is also because of conditions
put on by the Government and the planning authority as to what
proportion of containers go by rail?
(Mr Cann) Yes.
8935. Has that changed?
(Mr Cann) As I said, in proving the overriding
public interest we had to demonstrate that the capacity is needed
to come on stream in order to deal with the growth the Government
itself is saying will come. We demonstrated that case; that is
why ourselves and our competitors have actually got our planning
permissions. However, in with those permissions there were a number
of commitments, and one of the commitments that is common to both
of Hutchison's schemes is the need to grow the modal share—the
number of containers that are going on rail rather than road.
So, for instance, in the Bathside Bay scheme, we are required
for 22 per cent of movements to be put onto the rail. At the Port
of Felixstowe the minimum requirement is 26 per cent to go on
to the rail. London Gateway is a competitor but I understand that
they have made a commitment that up to 30 per cent of the containers
from that brand new, 3.5 million TEU port will be going on the
rails. So, in a sense, the developers have been making the commitments
but it has been in line with what the Government, through its
various agencies, have actually been requiring. So, in a sense,
they have both been backing each other up.
8936. Mr Cann, if I can just move on to the
next slide, I believe it will answer Lord James's question. Slide
12.[24]
Were you required by the conditions of the planning permission
to invest in extra infrastructure to carry the extra trains that
will come from these forecasts?
(Mr Cann) Yes. Hutchison Ports was working
at a very early stage with the Strategic Rail Authority in order
to identify how we would achieve high rates of modal shift on
to rail. If you look at the slide above, it just shows you two
elements of the quite considerable amounts of money that we are
spending in order to satisfy those requirements. For instance,
at the port of Felixstowe, there are six kilometres of branch
line that are going to be doubled, and gauge and capacity works
all the way up to Doncaster on the East Coast main line that we
have committed to in order to mitigate for our effect in order
to put more of the traffic that is going to come through that
port on to the rail. Those commitments also include freight terminals
at both the port of Felixstowe and Bathside Bay. In addition to
that, DP World, I understand, have committed to up to £100
million in new rail commitments. So we think that the industry
is doing its bit—is mitigating for the growth and the effect
on the roads that would otherwise be there, and that is the way
that normal industry processes work.
8937. LORD JAMES OF BLACKHEATH: I am
very worried about any business which creates capacity before
it has a market. If you draw a line through the last 30 years,
all the major organisations that have gone bust have not gone
bust because they have not got a market; they have gone bust because
they grew a capacity too big for their market at the time when
they had the money available. I have a caution about this particular
situation. You create this capacity and that market does not turn
up and you are all going to put each other out of business.
(Mr Cann) Hutchison
Ports is going to be investing £1 billion in building those
two ports, those railway infrastructures, roads and all the other
commitments we need to make. We build ports in 44 countries around
the world. We are quite confident when we build the port that
growth will come, because that is our industry, my Lord—that
is what we do.
8938. Mr Cann, the banks were saying that about
mortgages a few months ago as well.
(Mr Cann) They may be saying that about
mortgages, my Lord, but we will not be building a port until we
have got the customer signed up—I can tell you that—and
that is the degree of certainty we need internally with our shareholders
in order to make huge investments in this country, and the degree
of certainty we need to give over in terms of our planning permission.
It has to be remembered that at the public inquiries at both of
our developments we had to demonstrate that we had money, that
the demand was there and that the customers required it. Customers
turned up at the planning inquiry and gave evidence to support
that.
8939. If you want to put your real scare hat
on, though, you would look at this and you would say: "Good
gracious, if we are going to have that amount of port activity
going on, it suggests that we are going to blow the Balance of
Payments in this country to pieces because we are going to have
such a flood of imports, just to give you a market, that we will
not be able to afford anything".
(Mr Cann) I have an opinion about that,
my Lord, but I have an opinion about many things.
21 Committee Ref: A52, UK Container trade continues
to grow (LINEWD-34_05-010) Back
22
Committee Ref: A52, East Of England Container Ports Expansion
(LINEWD-34_05-011) Back
23
Committee Ref: A52, More Containers on the railway (LINEWD-34_05-012) Back
24
Committee Ref: A52, Ports paying for rail upgrades (LINEWD-34_05-013) Back
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