The shipping industry has been consolidating over the years, with the global downturn forcing shipping lines to consolidate – much as airlines code share. The Freeport recently announced that ships from two new alliances – called 2M and 3Ocean – would be calling in Malta, but the alliances also have an impact on those which do not.
“It is not feasible for every line to have a ship visiting every port, so alliances allow them to extend their reach in a sustainable way. This has had a positive impact on choices for the Maltese, as it means the options go well beyond the actual lines which call in Malta,” the sales and marketing director of Sullivan Shipping, Chris Sullivan, said.
Sullivan Shipping represents South Korean line Hanjin Shipping which does not operate to Malta but it recently acquired slots with UASC, which is in turn one of the lines in the 3Ocean alliance calling in Malta.
“We are hoping that this will encourage them to consider coming to Malta through the alliance,” he said.
Over its 126-year-history, Sullivan Shipping has added various services, including air freight and introducing trucking services through French-owned Vectory two years ago.
“The economy has become more complex and you no longer have manufacturers who only use one type of freight. We wanted to make sure that we cater for all their needs,” he said, referring to the recent rebranding which put the focus on the customer, rather than the various services.
The number of cargo vessels calling in Malta has declined over the past 10 years. In 2004, 3,719 vessels called here, compared with 2,762 in 2012, according to Transport Malta. However, the amount of TEUs handled at the Freeport has almost doubled during that time, from 1.5 million in 2004 to 2.8 million in 2013. This is partly due to the fact that ever-larger vessels resulted in an increase in the gross tonnage from 123 million tonnes to 208 million tonnes.
The industry is still besieged by complaints that it is more expensive to get merchandise from the port to one’s warehouse than from Europe to Malta
In spite of the consolidation and improved accessibility, the industry is still besieged by complaints that it is more expensive to get merchandise from the port to one’s warehouse than from Europe to Malta. Joe Gerada, the managing director at Thomas Smith, said this is often due to the fact that the price for moving cargo is wrongly perceived to be related to distance covered.
“Think of food in a restaurant or the price of clothes: are they related to the material used in their production? Has anyone found that taxes, airport charges and the taxi to the hotel end up being more expensive than a cheap flight?
“So is it with shipping. The ultimate price is influenced by the kind or mode of transport, the handling in various terminals, depots and ports, as well as the equipment used. The price is, like anywhere else, ultimately dependent on supply and demand. And where there is competition and efficiency, it works one way, and where there is protection of old practices or inefficiencies, it works in a different way,” he said.
He also warned that ‘freight’ was a vague term not always fully appreciated.
“It means moving the cargo once loaded on a vessel from port A to port B, discharging the container from the ship utilising heavy equipment many times, shifting, loading on to a truck, transporting to customer premises, placing a container on ground at customer premises (again by heavy equipment), unpacking that container, returning the empty box to a port terminal by truck, placing it on the ground at the terminal, renting the container for extra days. All this adds up. Probably the actual voyage – sailing on the sea – is the most straightforward part of the exercise, and given large vessels with large economies of scale gives results in cheaper unit cost.”
Joe Bugeja, the general manager of Sullivan Maritime, also had something to say about the port, insisting that the port reform of 2006 did not create the ideal changes and improvements.
“We believe that there is always room for improvement in the current port charges systems and practices. Valletta Grand Harbour still suffers from a number of bottlenecks such as, old practices, lack of discipline and procedures, gate limitations and lack of quay space to organise professional cargo operations. The bottlenecks are also directly related to the lack of will from entities who are responsible for changes.
He also believes that these changes would affect prices, noting that Sullivan Maritime, as agents for Grimaldi Group, ensured that the freight rates from Europe to Malta for roll on/roll off cargo were kept very competitive.
“It is unfortunate that the regime of port tariffs and procedures applicable at our ports in terms of port regulations is not applicable to all operators and this is causing a very clear ‘unlevel playing field’ as well as ‘unfair competition’,” he said.
Jonathan Vella, CEO of Express Logigroup, also thinks that the charges should be lower.
“Valletta Gateway Terminal charges are, in my opinion as an operator, exorbitant. While appreciating that they provide a service to the RoRo industry, the level of service currently provided does not add up to the rates being charged to the freight operator – who in turn pass them on to the end customer.
“On the other hand, sea freight is deemed more expensive (when also comparing road freight transit time and volume capacity) due to the dollar exchange rate, local port and delivery charges. However, one has to keep in mind that the infrastructure at Malta Freeport delivers an efficient and effective service both for local and transhipment. Moreover, forwarding rates have decreased over the past decade,” he said.
It is unfortunate that the regime of port tariffs and procedures is not applicable to all operators
Looking ahead, Mr Gerada of Thomas Smith believes that Malta could exploit its opportunities as a distribution hub for major retailers/manufacturers, with much of the infrastructure already in place.
“Bureaucracy is sometimes an obstacle but the main problem we have – and will probably always have – is that the local market is too limited to complement the hub, which needs to justify itself purely as hub, with no help from hinterland,” he said.
The distribution hub concept could also be very exciting for road freight, which has more than doubled, from 31,000 trailers to 77,000 between 2004 and 2012.
Kevin Filletti, the sales manager of Attrans, agrees that Malta has considerable potential as a distribution hub: “Malta boasts the third largest port in the Mediterranean and an unrivalled geographic position. This allows Malta to act as a bridge between the EU and North Africa, making it the most compelling candidate for a European distribution hub.”
One of the two main types of warehouses would be a retail distribution hub which would principally distribute goods to retail stores. The other option could be a cross-dock facility whereby goods are stored and made ready for export to other destinations or countries.
“Once you know which type you want, the second – and more important step – would be to identify what products would be placed in the warehouse and whether the building will need to be specialised in any way to accommodate the needs of the retailers or manufacturers.
“A popular infrastructure model used is the spoke-hub distribution model. This is a system of networks, structured like a chariot wheel, in which all traffic will move along the spokes connected to the hub at the centre. The hub will be centralised, and in this way any complicated operations, such as the handling of goods or accounting, can be carried out at the hub.
“The spoke system is simple and new hubs can be created easily. Nevertheless, careful traffic analysis and precise timing are imperative in keeping the hub operating efficiently.
Carmelo Caruana general manager Peter Bonavia was more hesitant, saying Malta had the potential to become a key distribution centre for major retailers and manufacturers – but only if the infrastructure supporting such a hub were constantly upgraded and sustained.
“Malta needs far more dedicated warehousing facilities, scalable technological capabilities, improved transport connectivity and higher quality roads, and a free-trade zone for customs. If the authorities are able to line up these key elements, Malta can be advantageously positioned in the region.”
It is not only sea freight and road freight that have changed. The shift to e-mail has had a profound impact on postal traffic. In the five years between 2009 and 2014, total mail fell from 12.8 million to 10 million.
However, as one door closes, another opens, in this case for parcel post.
With more and more people buying online, the number of parcels almost doubled, from 18,000 in 2009 to 32,500 in 2014, and there has also been a huge increase in the number of mail and parcels dispatched by courier, from 108,000 in 2009 to 174,000 last year.
As they say: if you can’t beat them, join them. Since many online vendors do not ship directly to Malta, Maltapost introduced SendOn, a mail forwarding service which offers delivery from the UK to Malta.
“We’ve seen significant growth in the use of this service and this aligns well to the increase and demand for e-commerce. As the sector is constantly evolving, Maltapost is vigilant through research and customer feedback to ensure that the product we offer continues to meet customer shopping needs.
“We have exciting new enhancements planned for the near future for our customers,” Maltapost chief commercial officer Mark Vella said.
Independent journalism costs money. Support Times of Malta for the price of a coffee.Support Us