Financial Times FT.com

Ports aim to profit from supermarkets' business

By Robert Wright,Transport Correspondent

Published: October 4 2005 03:00 | Last updated: October 4 2005 03:00

Container ports may be able to boost their businesses by attracting retailers' distribution centres to their sites in a move that would replicate the success of some US ports.

The latest indication came last week when Teesport, near Middlesbrough, signed a deal under which Asda will build a £20m distribution centre nearby.

The supermarket chain will bring in 70 per cent of its non-food containerised imports through Teesport for 20 years under the deal, which should immediately boost the port's container traffic by more than 10 per cent.

Some US ports - particularly Savannah, Georgia, but also others such as Hampton Roads, Virginia, and Houston, Texas - have increased their traffic by attracting retailers.

Savannah, which had insignificant container volumes 10 years ago, has doubled import volumes within five years. Once the distribution centres opened, shipping lines bringing imports from Asia had little choice but to start serving the port.

The parallels between Savannah's success and the Teesport deal are striking because Asda is owned by Wal-Mart, the world's biggest retailer, whose distribution centre has been particularly important to Savannah. Wal-Mart eventually plans to bring a quarter of its US imports through Savannah annually and another quarter through Hampton Roads.

Observers believe that for UK retailers, distribution centres at ports could prove more effective at moving imported goods than their existing distribution centres, which are mainly near motorways. Goods would need to be moved only once by truck from a port distribution centre to shop. At present, many are taken from a port, usually a large southern port such as Felixstowe or Southampton, to a distribution centre, then to a shop.

B&Q, the do-it-yourself chain, last year became the first UK retailer to open a distribution centre at a port when it set up a site near Immingham, which handles all its imports.

P&O Ports has announced that it plans a logistics park, which may include distribution centres, for its planned container port at Shellhaven on the Thames.

Teesport, which last year handled a comparatively modest 350,000 20ft equivalent units of containers, has already benefited from an increase in services from shipping lines that had long expected the agreement with Asda.

Richard Ellithorne, logistics policy manager for the Chartered Institute of Logistics and Transport, said he thought distribution centres would increasingly be located near the port that received the goods.

Interest in alternative approaches to importing goods grew in 2003 and 2004, when the container ports of Felixstowe and Southampton, which handle most retailers' imports now, both had periods of struggling to cope with fast-growing Asian imports, Mr Ellithorne added.

Immingham and Teesport - the two ports to have attracted distribution centres so far - are small enough to be able to give significant attention to goods for one retailer.

If goods for the north of England were shipped direct to distribution centres at northern ports, there could also be a considerable reduction in motorway truck journeys.

PD Ports claims Asda will save 2m truck miles by distributing from Teesport, which is nearer its predominantly northern stores.

"As more and more stuff is imported into the UK, importers are deciding, 'We can't really put work out to Southampton and Felixstowe'," Mr Ellithorne said.

Small, regional container ports such as Teesport also look set for the foreseeable future to be served only by small feeder vessels that transport the goods from big hub ports such as Rotterdam in the Netherlands.

The process can add cost and complication compared with receiving goods direct from deep-sea vessels, which call only at the south-eastern ports.

Yet Graham Roberts, PD Ports' chief executive, insisted that, as the costs of trucking goods from south-eastern ports had risen, several further retailers had expressed interest in setting up centres similar to the one planned by Asda.

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