PAPER presented by Belgium. Market situation in the inland waterway transport sector

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3 PAPER presented by Belgium Market situation in the inland waterway transport sector

4 Brussels, 11 October 2013 Analysis of the market situation in the inland waterway transport sector - Final draft 1 Introduction. For some time now the Belgian inland waterway sector has been launching cries of alarm about the evolution on the national and international inland waterway transport market. During the last month of April this has lead to actions on the field and caused temporary disruptions of the transport system at several strategic points of the IWT network. At the origin of these actions is the decline of economic growth that started at the end of 2008 with the general economic and financial crisis in the world economy. Since the end of 2008 the slowing down of the economy together with an increase of the costs and an overcapacity of tonnage have put the prices under such pressure that for a large amount of companies it is no longer possible to cover the fixed and variable costs necessary for a healthy exploitation. This also causes a lack of financial means necessary for the maintenance of the vessel and the investments related to safety. 1 This problem has already been subject to an announcement of a structural disturbance of the market by the Netherlands at the end of The analysis of the situation by the committee installed by Directive 91/672/EC and the report presented to this committee following discussions in a sub-working group, lead to the conclusion that the expected recovery of the demand for transport would allow the sector to overcome the financial problems and lead to a return to the expected path of annual growth. In Figure 1 a global overview is given of the evolution of the transport performance on inland waterways and the fleet capacity (EU-27). This figure already shows that there is a disturbance of the balance between transport performance and fleet capacity.

5 Figure 1 Source : Eurostat, CCNR At this moment we have to admit that the expected recovery did not take place, or at least not in a sufficient way. Furthermore, in the years the fleet capacity still increased thus complicating the return to a normal market situation. Following the negotiations between the Belgian authorities and the sector it was agreed that Belgium would start up the procedure to announce a serious market disturbance at the European level according to Directive 96/75/EC, since it is clear that suitable measures will essentially have to be taken at that level. On the 26 th of April Belgium formally asked the European Commission to organize as soon as possible a meeting of the committee founded by Directive 91/672/EC in order to take up this issue. This has led to two meetings of this committee and a hearing of the sector. 2 In the meantime Belgium has further analyzed the situation and has completed the present document. This final draft supports the position of Belgium that the inland waterway transport sector in North-West Europe is dealing with a serious disturbance of the market situation. In the following points we give a more detailed analysis of the situation in order to get a clear view of the difficulties and we also make some suggestions of measures to be taken.

6 2 Evolution of the transport demand 2.1 Development of transport volumes in Belgium In the Figures 2 and 3 data are presented about the evolution of the yearly volumes of goods loaded and unloaded on Belgian waterways for the period These data contain national as well as international transports with origin or destination in Belgium. Loaded and unloaded volumes are presented separately in order to avoid a double counting of the transport within Belgium. The evolution clearly shows that there was a very serious decline in 2009, but the following years a recovery was noted, although a return to the growth trend of the years until 2008 is not yet the case. Figure 2 3 Source : ITB - inland waterways managers and Ports

7 Figure 3 Figure 4 4

8 In Figure 4 the evolution of the volumes is presented on a quarterly basis. The first quarter of 2013 shows a better result for the loaded volumes (+ 4 %) compared to the first quarter of 2012, but this is mainly thanks to a much higher transshipment in the port of Antwerp. The unloaded volumes show a further decline (-2,5 %), which means that the transport volumes towards the Belgian hinterland continue to decrease. More detailed data can be found in Annex I (pp ) 2.2 Development of transport volumes in Europe According to the statistical data from Eurostat (Statistics in focus 42/2012) after the serious drop in inland waterways transport in 2009, a recovery was observed but of a fragile nature taking into account the quarterly registered ups and downs. In Figure 5 the yearly registered transport performance for the EU-27 are presented for the years It shows that the recovery of the performance in 2010 did not continue in 2011 (-4,9 % compared to 2010). Figure 5 5 Source : Eurostat The economic survey presented by the CCNR for the transport activity on the Rhine is also an important indicator, since the Rhine River is a central artery in the IWT network.

9 Figure 6 shows that the recovery of the transport volumes after the problematic year 2009 is rather slow and the volumes registered before this crisis year are not yet reached. Figure 6 Rhine traffic between Rheinfelden and the German-Dutch border (in Mio. t) Source : CCNR - Destatis + calculation by CCNR-Secretariat 6 3 Evolution of the fleet capacity 3.1 Belgian fleet In Figure 7 the evolution of the Belgian dry cargo fleet is presented for the period It is clear that the development of the global capacity of this fleet is not at all unreasonable compared to the positive trend in transport volumes that we could see after In fact, the growth rate of the fleet capacity stayed below the growth rate of the transport volumes on the Belgian market. The efforts of the Belgian authorities to encourage a transfer from road transport to IWT, for instance through the cay wall program of the Flemish government, did not lead to a disproportionate investment tendency in new tonnage. What we do however see in the data is a further disappearance of the smaller vessels and an increase of high tonnage ships.

10 Figure 7 Source : ITB Market Observation 2013 FPS Mobility and Transport The situation is slightly different for the tanker fleet, where an increase of the global capacity was registered (Figure 8). This is for a large part due to the replacement of single hull by double hull tankers, while in the meantime, at least until 2018, the first category still stays on the market. 7 Figure 8 Source : ITB Market Observation 2013 FPS Mobility and Transport

11 Taking into account that Belgium is a small country with an open economy it is difficult to compare at a Belgian level if there is a balance between the transport volumes on the Belgian waterways and the Belgian fleet capacity. We can indeed see that a large part of the transport volumes on Belgian waterways are carried by vessels that do not sail under a Belgian flag. When we look at the data of the foreign fleet that is participating in domestic transport on the Belgian market (transport between two points within Belgium) we notice that the capacity for the dry cargo fleet has developed from a capacity of tonnes in 2004 to tonnes in For the tankerfleet this evolution went from tonnes in 2004 to tonnes in If we take into account national transport within and international transport to and from Belgium in volumes (tons), the market share of the Belgian fleet decreased from an average of 46 % in 2008 to an average of 38 % in More details on the Belgian fleet can be found in Annex II (pp ). 3.2 European fleet In Figures 9 and 10 you can find the evolution of the European fleet for the period More details of the European fleet in Annex III (pp ). Figure 9 8 Development of the European Dry cargo fleet Capacity (Tonnes) Number Years 0 (Source : CCNR ) NL D B F Others NL D B F Others

12 Figure 10 Capacity (Tonnes) Development of the European Tanker fleet Years Number (Source : CCNR ) NL D B F Others NL D B F Others 3.3 Estimation of new built ships Table 11 9 Source : CCNR DG MOVE Market Observation

13 In table 11 you can find an estimation of the new capacity that came into the European fleet since It shows that the fleet capacity continued to grow after the top year 2008, although the market started to shrink. We also received information from our sector representatives that about 200 vessel hulls of more than 2000 tonnes are still waiting in West-European shipyards to be finished. If this information is confirmed we can fear that a slight recovery of the market might quickly lead to a further disproportionate increase of the fleet capacity. 4 Evolution of the financial situation and perspectives for the future 4.1 Evolution of the financial situation According to the information obtained from the sector organizations there is a strong decrease in freight prices since 2009 with only a temporary recovery in 2011 thanks to the low water levels on the Rhine. The decrease of freight prices continued in 2012 and the first half of 2013 with the consequence that the fixed and variable costs are no longer covered. This situation is going on for more than 4 years now and an increasing number of transport operators have payment problems. In Figure 12 the evolution of the book profits (EBITDA index 2006/2007 = 100) since 2006 is given for dry cargo ships in the category > 1500 tonnes, on the basis of the average results for a representative sample of concrete accountancy files. 10 Figure 12

14 Source : ITB Barometer 2012 in collaboration with accountants Taking into account that the given book profits don t include interests, taxes, depreciation and amortization and exclude as well the personal income of the entrepreneur, it is clear that the average financial situation is not brilliant. Furthermore the analysis of the detailed accountancy data and the evolution of certain cost elements show that an increasing number of transport operators try to economize by postponing the necessary maintenance of the vessel or even by sailing with insufficient crew. This is a dangerous evolution since it affects the safety of the transport sector. The financial situation also limits the possibilities of the sector to invest in improvement measures (e.g. greening). Furthermore we also have some information from Belgian banks. Although they are reluctant to give concrete financial data they confirm that more and more operators have problems to pay back their loans, especially in the dry cargo sector. The banks can of course play a supporting role by allowing operators to partially postpone the reimbursement of capital, but it is clear that in so far problems also concern the paying of interests the bank also reaches its limits. Data from the Flemish warranty system indicate that more cases can be registered during the recent years where banks proceed to the selling off. 4.2 Evolution of freight prices As more detailed information on the market situation a survey of the evolution of freight prices since 1998 has been made for several major transport relations for the dry cargo sector (e.g. Upper Rhine, Mosel, Main, Delta). In order to be able to calculate a global average the prices have been expressed in Euro/tkm. Figures 13 and 14 show the evolution of the average prices for the relations ARA Upstream and ARA downstream. 11 Figure 13 Source : ITB based on information from Belgian ship s operators

15 Figure 14 Source : ITB based on information from Belgian ship s operators These data lead to the conclusion that freight prices did not follow the increase of the cost elements and have been rather stable for a long time. 4.3 Evolution of costs As far as the costs are concerned, there is a tendency to a further increase. This is especially the case for the fuel costs, an important element of the variable costs. In Figure 15 you can find the evolution of the fuel prices on the Belgian market. It clearly indicates that the fuel prices were going up during the crisis years. 12 Figure 15 Source : FPS Economy, SMEs, Self-employed and Energy

16 Figure 16 shows the evolution of the global index for consumption prices. The wages for crew approximately follow this evolution, and so also this part of the cost price registers an increasing tendency. Figure 16 Consumption price index (basis 2004 = 100) Source : FPS Economy, SMEs, Self-employed and Energy 4.4 Prognosis Specific forecasts for the evolution of the market situation in the IWT sector for the following years are not so easy to be found. In general the transport market depends on the evolution of the global economy and therefore several sources can be consulted. In Table 17 data are based on the European Economic Forecast made by the European Commission. Other sources can of course give other indications. Anyhow, a high growth scenario for the European economy seems not to be expected for this and next year. 13 Table 17 Source : European Economic Forecast Spring 2013 European Economy 2/2013, European Commission A more specific analyses for the IWT sector is made by the CCNR (see the following page Figure 18).

17 Figure 18 Prognosen für 2014 Bereich Produktion/ Importe Anteil am Gesamtverkehr Landwirtschaft kaum Zuwächse 16,00% Voraussehbarer Einfluss auf die Beförderungsnachfrage (gegenüber dem Vorjahr) 0 Kohle Erhöhung der Importkohlemengen auf Grund der weltweiten + Energiepolitik 19,00% Stahlindustrie: Erze dt. Stahlprod. wird leicht sinken, angesichts der strukturellen - Probleme 20% Stahlindustrie: Eisen, Stahl dt. Stahlprod. wird leicht sinken, angesichts der strukturellen - Probleme 8,00% Baustoffe kaum Belebung in der Bauwirtschaft 27,00% 0 Andere Güter / Container Leichtes Container-Wachstum 10% + Gesamtprognose zur Entwicklung der Nachfrage in der Trockenschifffahrt 0 Erdölprodukte Seitwärts-Entwicklung beim Ölpreis, aber strukturelle sinkende 0 Mengen 60% Chemie Chemische Industrie +2 %; 40% + Gesamtprognose zur Entwicklung der Nachfrage in der Tankschifffahrt + Quellen: Eurofer Euracoal Verein deutscher Kohleimporteure Verband der chemischen Industrie CEFIC Prognosen ZKR auf Basis historischer Entwicklungen und Berechnungen Entwicklung 0 % 0 1 % bis 5 % - / + 6 % bis 10 % / % bis 15 % / % bis 20 % / über 20 % /

18 5 Evaluation of the origins of the market disturbance and conclusions On the basis of the data presented in the preceding points we think that there clearly is a serious disturbance of the European IWT market of a structural nature. The development of the fleet capacity after the crisis year 2009 is such that a recovery of the freight prices cannot be expected in the short term, even when the transport volumes are again increasing. So the first important problem that the sector is confronted with is the overcapacity of the European fleet. Furthermore we may fear that a further growth of the fleet might occur in the short term. Secondly, when in 2010 we came to the conclusion that the recovery of the economy would allow the sector to overcome its problems, this would only be possible if a high growth scenario would be realized (cf. Report to the committee established under Directive 91/672/EC on possible measures to combat the crisis in the IWT sector 15/09/2010). We have to admit at this moment that there was no high growth scenario for the period and such a scenario seems to be rather improbable for the next years. Furthermore there is the increase of the costs, especially the fuel costs, for which the operators weren t able to compensate this through the freight prices. Another element that plays an important role in the determination of market prices is the lack of market transparency, allowing intermediaries or brokers that operate in the market between shippers and IWT operators, to make use of the weak position of the latter, especially independent operators, to obtain the lowest possible prices. This also is a structural problem that regularly appears on the IWT market, and is aggravated in periods of overcapacity. In fact it limits the freedom of the transport operator to obtain a reasonable price for his transport performance, since refusing to accept these prices might put him out of the market. The Belgian IWT sector is of the opinion that Directive 96/75/EC should take into account that the objective of a free market is not to allow dumping prices. The basis for this opinion can be found in article 94 of the consolidated version of the treaty on the functioning of the European Union. This article determines that any measures taken within the framework of the Treaties in respect of transport rates and conditions shall take account of the economic circumstances of carriers. 15 As far as the operation of intermediaries or brokers is concerned, we can also underline that in some countries (e.g. Belgium, France) the profession of these intermediaries is regulated and depending on a license. In some other countries this profession is not regulated at all and anyone can start up a company with an intermediate activity in freight forwarding and try to obtain a position on the market by dumping prices, even when the real transport activity is taking place in another country. This aspect should also be examined at the European level. In our view the activity of these intermediaries should be regulated like the other transport professions.

19 All in all different elements together have consequences for the financial position of the transport operators and their survival capacities for the coming years. This brings the sector to ask questions about the European policy for the future. In the white paper objectives were formulated for the role of the IWT sector in the coming years. An important growth tendency and an increase of the modal share were forecasted. Initiatives for the greening of the fleet are expected. All these goals depend on the financial stability and prosperity of the sector. The actual evolution threatens to form a serious obstruction to reach them. For all those reasons Belgium is of the opinion that measures should be taken at an European level to help the sector survive this problematic period and to ensure that it can fulfill the role that is expected in the future. In the following point some suggestions are made on the basis of our discussions with our Belgian IWT sector. 6 Proposals for possible suitable measures at European level to strengthen the market mechanism. 6.1 Permanent measures 1) Measures concerning the coverage of costs anti dumping measure and transport conditions. Ensure that an operator works at prices that allow him to cover his costs, eventually on a periodical basis. Directive 96/75/EC could be modified and completed by a disposition in that sense. 2) Measures supporting the modernization of the fleet, especially when it comes to greening, with sufficient attention also for the smaller existing fleet. 3) Install a performing market observation system that can predict the capacity development, but also with the necessary means to adjust in order to prevent further structural overcapacity. One of the possibilities is to give a real substance to the wording of Regulation 718/99 that stipulates that new built ships have to be announced 6 months beforehand. This has not really been used. 4) Creation of a harmonized framework not only in the field of technical or manning prescriptions and implementation, but also in the fiscal and social field. 5) Review of technical prescriptions for the existing fleet. Especially the transitional provisions of the technical prescriptions for the Rhine seem to be an important problem for the existing fleet. 6) Analysis of the financing instruments. The lever that causes disproportionate investment tendencies should disappear Crisis measures limited in time Suitable measures that adjust the capacity. Support for all forms of cooperation to improve the market mechanism..

20 Bibliography 1. Introduction Sources : - Eurostat Statistics in focus Inland waterways freight transport quarterly and annual data, , European Union (b) - Market observation Inland waterways CCNR-DG MOVE Evolution of the transport demand 2.1. Development of transport volumes in Belgium (see Annex 1) Sources : - Instituut voor het Transport langs de Binnenwateren vzw, Marktobservatie - Ladingen en lossingen met binnenschepen op Belgische waterwegen 4de kwartaal 2012, ste kwartaal 2013, , pp 7-10, Bruxelles 2.2. Development of transport volumes in Europe Sources : - Eurostat Pocketbooks «Energy, transport and environment indicators», Edition 2012 (a) - Eurostat Statistics in focus Inland waterways freight transport quarterly and annual data, , European Union (b) - Market observation Inland waterways CCNR-DG MOVE 2012 (Destatis, Secrétariat CCNR) 17 (a) Table (pag ) (b) Figure 1 (p. 1) Table 1 + Table 2 (p. 2) + Table 3 (p. 3) (c) Trafics sur le Rhin (exprimé en millions de tonnes) 3. Evolution of the fleet capacity 3.1. Belgian fleet (see Annex 1I) Source : - Instituut voor het Transport langs de Binnenwateren vzw, Marktobservatie Binnenvaartvloot toebehorend aan in Belgïë gesvestigde eigenaars» Toestand op 31-12, 2004 tot en met 2012, Tableau de l évolution de la flotte de cargaison sèche par catégorie de bateaux en nombre et en port en lourd < à 2.000t ou > 2.000t et tonnage moyen Evolution Tableau de l évolution de la flotte de citerne par catégories de bateaux en nombre et en port en lourd < à 2.000t ou > 2.000t et tonnage moyen Evolution

21 Belgian fleet market share Plan national cabotage ( ) Source : - Instituut voor het Transport langs de Binnenwateren vzw, Tableau d évolution de la flotte appartenant à des entrepreneurs non domiciliés en Belgique Evolution par nationalité en nombre, port en lourd et puissance Port d Anvers Source : - Gemeentelijk Havenbedrijf Antwerpen, Algemene Directie, Bulletin trimestriel de statistiques : navigation intérieure, Allèges entrées, classées selon les principaux pavillons Tableau de comparaison exprimés en nombre et en capacité (m3) Gestionnaires des voies navigables Sources : - De Scheepvaart NV (a) NV Waterwegen en Zeekanaal, 2013 (b) et Service Public de Wallonie (c) 18 (a) Tableau d évolution des tonnages transportés par groupe de marchandises et nationalité du bateau (en nombre et tonnage transporté) - (b) Tableau d évolution des tonnages transportés par nationalité du bateau et 1tr2013 (en nombre et tonnage transporté) (c) Nombre de bateaux de marchandises et tonnage transporté par nationalité au point 4058 (Ecluse d Ivoz-ramet) sur la voie 40 Meuse (en nombre et tonnage transporté) 3.2. European fleet (see Annex 1II) Sources : - Observation du marché européen de la navigation intérieure Etat de la flotte intérieure Années », rapports semestriels 2005-I à 2012-I, CCNR-DG MOVE (Secrétariat CCNR) Tableau de l évolution de la flotte de cargaison sèche par nationalité et catégories de bateaux (à l exclusion des chalands) Evolution en nombre, port en lourd et tonnage moyen Tableau de l évolution de la flotte de citerne par nationalité et catégories de bateaux (à l exclusion des chalands) Evolution Evolution en nombre, port en lourd et tonnage moyen 3.3. Estimation of new built ships Sources : - Market observation Inland waterways CCNR-DG MOVE (Secrétariat CCNR)

22 Tableau du rapport semestriel de l observation du marché : Annexe Nouvelles constructions Evolution of the financial situation and perspectives for the future 4.1. Evolution of the financial situation Source : - Instituut voor het Transport langs de Binnenwateren vzw, Barometer 2012 in cooperation with accountants - Ons Recht/Notre droit aisbl (b) 4.2. Evolution of freight prices Source : - Instituut voor het Transport langs de Binnenwateren vzw, Ons Recht/Notre droit aisbl Evolution average freight prices in /tkm for Dry cargo vessels ( ) 4.3. Evolution of costs Source : - FPS Economy, SMEs, Self-employed and Energy 19 (a) Evolution of fuel prices ( ) (b) Evolution of consumption price index CPI 2004 ( ) 4.4. Prognosis Sources : - European Economic Forecast Spring 2013 European Economy 2/2013, European Commission - Analyse et évaluation des tendances structurelles du marché (Observation du marché 2013 annexe 1, p. 112), Secrétariat CCNR, 1er octobre 2013.

23 Annex I - Loaded and unloaded goods on Belgian inland waterways

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25 Annex II - Belgian Dry cargo and Tank fleet - capacity < or > t ( ) 22

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27 Annex III - Flag share in European Fleet (Dry cargo fleet and Tank fleet in number and in capacity) 24

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