There is a wide range of tenant groups located in the port of Rotterdam. The following groups are based on a port directory published by HbR:
• “Cargo handling companies”, e.g. stevedores, terminal operators, warehousing and distribution companies, container depots, cargo superintendents, cargo classification companies and cargo surveyors.
• “Transport companies”, representing all transport modes (air, rail, barge, road).
• “Forwarding and shipping companies,” e.g. freight forwarders, shipping lines, shipbrokers, liner agents, inland shipping, and shortsea/feeder shipping companies. • “Supplies-associated industries” (including nautical service providers), e.g. general
industry, container-related companies (sale, rental, lease and repair), bunkering, towage and salvage companies companies dealing with equipment and materials, ship stores, and shipbuilding and repair companies.
• “Finance and consultancy companies”, e.g. banks, insurances, accountants, notaries, lawyers, consulting engineers and IT companies.46
In order to define relevant markets for the leasing of land, it is helpful to distinguish those tenants that are bound to the port and those that could lease or rent land at other sites. With regard to port-bound tenants, one should consider not only tenants that are bound to a port in general, i.e. tenants for whom location at some port as a provider of sea access is crucial to carry our their business, but also tenants that are bound to the port of Rotterdam because they have to be located at the port in order to get access to the users of the port of Rotterdam, e.g. to provide services to cargo flows, passenger flows or companies located on the Rotterdam port territory (providing services to cargo flows may include processing goods coming into the port). Out of the list of company types listed above, the majority can be classified as being port-bound.47
Cargo handling companies are generally port-bound since they require direct physical contact with the cargo they are dealing with and hence need sea access or at least access to sea-going vessels for their business. Clearly, a stevedoring company requires access to an area that is accessible for sea-going vessels. In principle, some cargo handling operations can locate at a
46
HbR “Rotterdam Port Information 2004”, p. 289. 47
Note that the analysis in the following paragraphs is of a general nature. In all tenant groups, there are likely to be exceptions to the general classification. For example, while most cargo-handling companies are likely to be port-bound, some may not be. A comprehensive analysis of the degree to which tenants are bound to the port would require a case-by-case assessment.
distance from the port, like e.g. hinterland terminals, warehousing companies and container depots. However, these are usually complementary to facilities at the port. Thus, while some hinterland terminals and warehouses do indeed exist, a scenario where most or even all cargo- handling companies locate outside the port is highly unlikely. In general, cargo-handling companies can, therefore, be classified as being port-bound and – given that specialisation is common – in addition usually bound to specific (groups of) cargo types.
Transport companies provide transport services from and to the port by a variety of transport modes. They are bound to the port in the sense that they need access to cargo loaded and/or unloaded in the port, but their administrative offices etc. could in theory be located outside the port. However, it seems reasonable to assume that, since their customers are located at the port, many transport companies have a strong incentive to be present in the port area in order to facilitate transactions and to have direct access to the cargo flows going through the port. Hence, we classify transport companies as generally bound to the port.
Forwarding and shipping companies are similar to transport companies in the sense that they do not need port infrastructure or sea access in order to conduct their business. However, they differ from transport companies to the extent that their relationship with cargo flows is mainly administrative and not physical, i.e. they may deal with cargo flows but usually do not touch the cargo itself. This explains why in fact various large forwarding companies and agents doing business in the port of Rotterdam are not tenants of the port authority.48 Hence, we do not classify forwarding and shipping companies as port-bound. Geographic proximity to the port, i.e. locations in the area directly around the port, may be an advantage for these companies in order to enable the necessary communication with port customers and the port authority. Yet, it does not appear that it is crucial for them to get access to the port users.49 The majority of supplies-associated industries require geographic proximity to the port and its customers. While some general industry may not be bound to the port in any shape or form, some may be port-bound if they depend on the cargo flows going through the port and require direct access in order to be able to provide their services to these flows. Nautical service providers like bunkering and towage companies are also clearly port-bound because, in order to do their business, they need access to sea-going vessels, which are in turn bound to the port by physical constraints. The same holds true for shipbuilding and repair companies, container-related companies etc. We therefore classify supplies-associated industries as generally bound to the port. Note that the decisive factor for being bound to the port is not necessarily the need for sea access or physical contact with cargo flows. Consider the case of a car rental company, which can be seen as a supplies-associated industry. While one could
48
Examples include [confidential] and [confidential], two of HbR’s key accounts in the dry bulk segment. Note however that other agencies, e.g. Vopak for liquid bulk, are still located directly in the port of Rotterdam.
49
In fact, Eurokor for example provide ship agency services for the ports of ports of IJmuiden, Velsen, Amsterdam, Rotterdam, Vlaardingen, Schiedam, Dordrecht, Moerdijk and Vlissingen from their office in Ridderkerk close to Rotterdam. This clearly shows the fact that forwarding and shipping companies generally are not port-bound, but can provide their services also to more distant customers.
argue that such a company could provide its services outside the port as well as inside the port territory, one could still classify it as port bound in the sense that – in order to have access to the passenger flows in the port – it needs to be established on the port territory. Otherwise, whenever a car was rented to someone on the port territory, a driver would have to bring this car from the off-site location to the port. Clearly, this would impose significant extra cost on the business. Hence, one could classify such a car rental company as being bound to the port as an economic entity and as a hub where passenger flows are bundled. Finally, finance and consultancy companies are unlikely to be bound to the port territory. In principle, such companies could locate outside the port territory just as well as locating in the direct port area. While it may be more practical for e.g. accountants to be on-site, there is nothing that prevents them from locating in an office in the city centre and drive to the port area as necessary.
Table 20 summarises our classification of tenant types. Note that all our findings are indicative. A full analysis would require a case-by-case assessment of each individual tenant of the port authority.
Table 20: Categorisation of tenant types
Tenant group Categorisation (bound to the port or not)
Cargo handling companies Port-bound
Transport companies To some extent port-bound
Forwarding and shipping companies Generally not port-bound
Supplies-associated industries (incl. nautical service providers)
Mainly port-bound
Finance and consultancy companies Generally not port-bound
Source: CRA. Note that this categorisation is indicative.
HbR distinguishes between port-bound and non-port bound tenants in its list prices and defines them generally in accordance with our definition:
“A non port-bound company is a company with such a range of products and/or services that it could also be settled outside the port area. In general such a company does not need water access for its raw materials and products and has no relationship with a port-bound company for which it is essential to be established on a short distance.”50
On 1 January 2003, at least 87% of the port area suitable for business and industry was leased by port-bound tenants as defined by HbR. In particular, tenants active in the dry bulk, wet bulk and break bulk (incl. containers) segments held 87% of the total area leased out by the port. The remaining 13% were leased by “other tenants”, which included construction companies, trading companies, industry, and transport. It is very likely that at least some of
50
these other tenants are also bound to the port under HbR’s definition, which means that 87% is a lower bound for the share of land leased out to port-bound tenants.51
Many of the port’s tenants have made significant specific investments on their sites. Examples of such tenants are the oil refineries and storage companies, who have – according to our survey – invested up to € [confidential] in hardware and infrastructure.52 Clearly, at the time of re-negotiation for these tenants the relevant geographic market is the port of Rotterdam, as switching would be prohibitively expensive.53
The CRA questionnaire asked tenants if they felt that their company was locked in in the port of Rotterdam, i.e. if they thought that their company could not easily relocate even after termination of the lease contract. Out of a total of 86 respondents, 57% reported that they felt locked in. Specific investments made in facilities at or near the port were the most important reason given for the lock-in. Next, respondents were asked whether they believed that their company would re-locate if the port of Rotterdam were to increase its lease prices for existing contracts permanently by 10%, while lease prices for all other locations stayed at their current levels, assuming that the lease contract could be terminated easily and without penalty payments. Out of a total of 82 respondents, 68% said that they would not re-locate. Only 32% said that they believed their company would move. Table 21 below presents more details on the respondents who indicated that they would re-locate.54
51 HbR Ruimtebalans 2003, p. 8. 52 CRA questionnaire. 53
Note that we take the specific investment made in the past as an indicator for the investments they would have to undertake (again) if they were to move to a different location today. It is the latter that matters for the switching decision.
54
Table 21: Number of tenants of the port of Rotterdam indicating they would re-locate following a permanent increase in lease prices for existing contracts by 10% in the port of Rotterdam
Cargo type Type of company Number of respondents indicating they would re-
locate
Agribulk Cargo handling 1
Cargo handling 2
Containers
Supplies-associated industries 1
Cargo handling 1
Other dry bulk
Supplies-associated industries 1
Other 1 Other general cargo
Transport company 1
Cargo handling 2
Other liquid bulk
Other 1
Roll-on/roll-off Cargo handling 2
Source: CRA questionnaire. Number of respondents answering “yes” to the following question: ”Suppose that the port of Rotterdam were to increase its lease prices for existing contracts permanently by 10% while the lease prices for all other locations stayed at their current levels. Do you think that your company would re-locate if the lease contract could be terminated easily and without penalty payments?” Note that the total in the table above adds up to more than 26, the total number of companies saying “yes”, due to the fact that some companies are involved in more than one cargo type and/or classified themselves as more than one type of company.
Interestingly, the majority of the companies indicating that they would re-locate are cargo handlers. In particular, the group includes two terminal operators (one for juice and one for roll-on/roll-off) and one storage company (other liquid bulk/chemicals). However, none of the large dry bulk and container terminals said that their company would move away from Rotterdam if lease prices increased.
Despite the evidence reported above, overall our survey results seem to confirm the view that for a large number of port tenants and in particular the most important tenants in terms of lease revenues (oil terminals/storage facilities and container terminals) switching would not be an option and hence the relevant geographic market for lease contracts would be the port of Rotterdam.55
We have not analysed the market for non-port bound tenants, assuming that competition between the port of Rotterdam, other ports and especially non-port locations nearer or further away from the Rotterdam port area is intact. The responses to our survey did not indicate that there are particular competition problems with regard to tenants who are not port bound. Hence, we use the term “tenants” as a shorthand for tenants that are port-bound in the remainder of this report.
55
Note that the total area leased in the port of Rotterdam by the respondents to the CRA survey was 2,859 ha, which corresponds to about 60% of the total area leased out by the port of Rotterdam in 2003 (4,722 ha according to HbR Annual Report 2003, p. 20).