Intraport versus Interport Competition in the Container Handling Industry of the Port of Rotterdam

Since the early 1990s, the port of Rotterdam is confronted with a continuous decrease of its container throughput market share in the Hamburg-Le Havre range as this figure declined from 38,3 percent in 1990 to 26,1 percent in 2008. According to the scientific literature, the main reasons for this trend are: (1) law of diminishing progress; (2) container handling is not a specialized business anymore; (3) lack of container capacity at Rotterdam; (4) in the past intraport competition was nonexistent at the container sector of Rotterdam; (5) the port of Rotterdam is relatively expensive; (6) structural market elements favoring rival ports; (7) the ‘best in class’ mentality at the port of Rotterdam; (8) arrogant attitude of the port of Rotterdam and (9) unlevel playing field for European ports. In 2009, there was a discussion in the Dutch media between the two main terminal operators at the port of Rotterdam, i.e. ECT and APM Terminals, about the aspect of intraport competition as a possible measure to regain container throughput market share in the Hamburg-Le Havre range. Holding a strong position in the container handling sector of Rotterdam, ECT claimed that competition takes place between ports and not within a port. As a challenger at the port of Rotterdam, APM Terminals argued that interport competition is not sufficient as also the submarkets of the Hamburg-Le Havre should be characterized by competition among the locally active terminal operating companies. Interestingly, the introduction and stimulation of intraport competition is being supported on a national as well as on a European level. According to a report written by the Dutch Ministry of Economic Affairs in cooperation with the Rotterdam Port Authority, the lack of internal competition among terminal operators in the port of Rotterdam is an important reason for the continuous decline of its container throughput market share. In the past, the European Commission tried to establish a legal framework for market access of port services on two occasions, but both proposals were eventually rejected. The hypothesis of this thesis states that the entrance of new global terminal operators in the port of Rotterdam will increase competition within the port. This will have a positive effect on intraport competition and therefore on the quality of services and tariffs/costs of their container operations, and in the end on interport competition. As a result, the port of Rotterdam will be able to increase its market share of container throughput in the Hamburg-Le Havre range again. According to the scientific literature, intraport competition prevents monopoly pricing and leads to flexible adaptation, innovation and specialization. However, it is also claimed that it is unnecessary to introduce intraport competition in Rotterdam due to the current fierce interport competition in the Hamburg-Le Havre range. In order to see whether the statements as made in the scientific articles correspond with the actual container handling industry a comparative analysis of European container ports has been carried out. The results of this analysis show that the aspect of intraport competition is actually a minor factor. Antwerp and Hamburg were able to increase their container throughput market share in the Hamburg-Le Havre range in spite of a lack of intraport competition. Bremerhaven has been facing problems to enhance its container throughput but the lack of intraport competition was only one of several factors contributing to this struggle. Also in Rotterdam and Felixstowe the fact that intraport competition was nonexistent was just a minor factor as actually a number of aspects have led to a decrease of container throughput market share in the Hamburg-Le Havre range respectively in the UK market. In addition, a number of people who are currently working in or directly involved with the European port terminal industry have been interviewed to ask their opinion about the major reasons for the decrease of Rotterdam’s container throughput market share in the Hamburg-Le Havre range, measures to reverse this downward trend of Rotterdam’s container throughput market share in the Hamburg-Le Havre range and the introduction and stimulation of intraport competition as a possible solution to enhance Rotterdam’s container throughput market share in the Hamburg-Le Havre range. From these interviews it became clear that one group argues that it is unnecessary to stimulate intraport competition because of the current fierce interport competition at the Hamburg-Le Havre range which will prevent that dominant market players will show monopolistic behavior. The other group claims that the introduction and stimulation of intraport competition could be beneficial to the container throughput market share of Rotterdam. However, they also emphasized that intraport competition is only one of a variety of factors which could enhance Rotterdam’s market share again. This group of interviewees also states that intraport competition may have some influence on the port choice of shipping lines, but that their decision for a certain port of call depends on a range of criteria. Taking into consideration all relevant scientific literature, the results of the comparative analysis of European container ports and the main findings of the interviews, it is concluded to refute the hypothesis. Intraport competition is only a minor aspect of the container handling industry of the Hamburg-Le Havre range where interport competition prevails.