Investment in ports: a key enabler of growth
8 February 2021: ICAEW member Clemence Cheng is Managing Director, Hutchison Ports Europe, and Executive Director, Hutchison Port Holdings. As a major infrastructure operator, he has a bird’s eye view on the impact of infrastructure investment on trade, society and the environment.
“Infrastructure investment is undoubtedly a key enabler of growth – and is rightly prioritised by the UK Government to ensure the country bounces back from COVID and post-Brexit,” says Cheng. “As port operators we need a coherent policy for infrastructure development from government – and successive governments.”
Hutchison Ports invests in container ports – these are not passenger infrastructure investments but an integral part of the international trade network and an enabler of international supply chains. “We deal with global traders and manufacturers and, ultimately, we are looking after the consumer. Ports cannot survive on their own – they are a node in a supply chain,” he says.
In his role as Managing Director, Europe, Cheng looks after a vast swathe of the business. “In the UK, we have three container ports. Felixstowe is the biggest container port in the UK. We also have Harwich International which is a roll-on roll-off ferry port and, mainly for European trade, there is London Thames Port. Throughout Europe, we have two terminals in Rotterdam, one in Barcelona as well as ports in Sweden, Germany, Poland and Belgium. All in all, there are 15 assets operated by the European company,” says Cheng.
Felixstowe has been privately held since 1875 but most major UK ports were privatised in the 80s, points out Cheng. “The private ports model has worked well for the UK and first-mover advantage has encouraged ports to expand ahead of market demand,” he says. “The key thing is for ports to be privately held and for the Government to work in close partnership to ensure public infrastructure investment and priorities – for road/rail for example – to align.”
So, what prompts investment in port infrastructure? “We look for an environment with a clear regulatory framework, providing a level playing field with little intervention,” says Cheng. “This is a prerequisite to encourage private sector participation in infrastructure.”
He continues: “If you look at our spread, as a global port network we have 52 assets in 26 countries. We will tend to invest in countries that have a stable political landscape, a stable government, and a good regulatory regime. At the same time, we look at assets that are mainly an enabler for trade.”
Cheng says the location of the port is one of the most important aspects of the investment decision. “It should ideally be on an existing trade route with good deep-water access. On the landside, it is important to have good road and rail connections.
The Port of Felixstowe has evolved over more than 50 years of container operations. The latest investments include upgraded ro-ro facilities (to handle greater post-Brexit volumes), the expansion of facilities to handle more of the largest container vessels, the upgrading of berths, increased depth and crane outreach, and from Q2 the main channel will be deepened from -14.5m to -16.0m.
Felixstowe, together with Harwich, is also the subject of a Freeport bid. “We have exciting plans, as part of our bid, to drive innovation in digital technology and decarbonisation for our port operations, which could act as a pathfinder for other ports and other industries,” says Cheng. “The UK Government’s Freeport objectives are to boost inward investment by creating global trade hubs, driving innovation and tackling deprivation. These objectives reflect that ports are uniquely placed to drive productivity, jobs and growth. They provide access to raw materials and routes to market for businesses large and small, and they can be magnets for investment in coastal communities, many of which suffer from high levels of deprivation.”
He adds that they can be testbeds for industrial innovation and technology. And all this can be multiplied across the country, leveraging a port’s position as an economic gateway for communities across the country.
“Freeport East (the combined Felixstowe and Harwich bid) is uniquely placed to meet all those objectives,” says Cheng. He lists the advantages as follows:
- Global trade hubs will only be created at ports that are on global trading routes. The Port of Felixstowe is the largest of those by a margin and, with the short sea connections between the Port of Felixstowe and Harwich International Port, has a compelling opportunity to act as a springboard into the EU for overseas investors.
- This region has strong knowledge-based and clean energy sectors. Hutchison Ports is working with both to deliver sustainable solutions in the future. For example, the recently announced 5G project with Cambridge University and Three UK, plus using local nuclear and offshore wind power to advance developments in hydrogen power for maritime, road freight and rail uses, all of which intersect at ports.
- Freeport East offers a win-win for regeneration. The most deprived neighbourhood in the entire country is just outside Harwich, and the Port of Felixstowe is the main port for UK manufacturers in the Midlands and North to access overseas markets, especially the growing markets of Asia. A strong Port of Felixstowe, as part of the UK’s Freeport network, will benefit the whole country.
Cheng points out that ports are, by nature, long term multi-generational investments. “They are also part of a supply chain system. Support from local stakeholders, as well as international shipping lines, shippers and cargo owners, are critical to the success of a port. As the UK seizes post-Brexit opportunities in global trade, ports like Port of Felixstowe will be even more important to future growth,” he says.
“Integrating privately driven port investment with publicly funded connecting infrastructure is a necessity, and we engage closely with the UK Government and the local authorities for the development of regional and national transport strategies.”
As investments align increasingly with the imperative to achieve net zero emissions by 2050, Cheng comments that Hutchison Ports is closely aligned with the 2050 agenda. “Within our industry, we have been contributing to the development of the Green Maritime Plan, as well as investing, ourselves, in green technologies,” he says. “In addition to solar power and a growing electric small vehicle fleet, in a major investment we are changing our mobile yard gantry crane fleet from diesel to electric.”
He points out that Hutchison Ports UK has seen a 20% reduction in carbon emissions in the last five years. It has also invested heavily in rail facilities to help decarbonise inland transport.
“Our Freeport proposal will give us the platform to take this a step further, forming partnerships to exploit developments in hydrogen power as the next big step towards 2050 with alternative fuel for transport,” says Cheng.
Digital investments are also high on the agenda. “The Port of Felixstowe is the first port in the UK, if not in the world, with an integrated port community system – a computer network connecting all the main players in the port – which was developed in the 1980s. We have been refining and improving it ever since – there is no paper involved in moving goods through the port anymore,” he says. “Digital growth and further integration across supply chains is the next step. Our group is a founding member of the Global Shipping Business Network which uses blockchain technology to operate a secure data exchange platform for users.”
The company will also increasingly roll out the replacement of physical connections with digital. For example, there is a trial in place to deploy remote cranes via a private 5G network. The same trial will also look at the potential of the Internet of Things – with remote sensors deployed to monitor the condition of cranes and predict servicing needs, thereby enhancing safety and efficiency. “On the flip-side, cybersecurity is now the number one business continuity risk,” he points out.
Ultimately, what is Hutchison Ports’ ambition and what does world-class port infrastructure look like? “The ambition is to serve the country well and to facilitate trade post-COVID and Brexit,” responds Cheng. “World-class port infrastructure looks very like our flagship ports of Felixstowe in the UK, ECT in the Netherlands and BEST in Barcelona.
“But world-class keeps changing. For example, we had the first post-Panamax equipment in the 1980s, the first 10,000 TEU ships in the 1990s, and the first 20,000 TEU in the 2010s. Who knows how much bigger ships will become – no one thought they would get this big?”
He predicts that, in the future, the focus will be on further digital capability, that is Smartports. “Whatever the future holds, we will be ready for it,” he says.