China's strategy in the Mediterranean stands to fundamentally alter Asia-Europe trade patterns
 The longer one looks at the map of the eastern Mediterranean, the advantage of China's choice of the Port of Piraeus, near Athens, becomes clear if not obvious.
While its location is not ideal for "wayporting", that's not so important these days because of US east coast harbour dredging and the Panama Canal's expansion combine to reduce demand for it, though it remains the best way to get Asian boxes to West Africa. The idea involves using big ships through Suez then transshipping them on smaller ships from a Mediterranean base to serve ports from Montreal to Miami - or West Africa.
The bigger advantage the Greek location is the wider access it provides to mature consumer import markets in Italy, Greece and Turkey and to newer emerging markets of the Balkans and Black Sea. Ditto for exports - not to mention a cruise terminal which stands to bring in serious cash given the aging population of the western world.
One might have expected the strategy to bear fruit long before now, given the eight years Cosco Pacific has been running the Athenian port. That is, had all had gone well since the strategy was first devised.
But there was not expected rising global prosperity, no expanding European Union with its infrastructure extending into Eastern Europe, no peaceful and peaceable Russia rising on its own prosperity. Nor would Middle East troubles stay in the Middle East. Nor would a thriving North American economy keep South America and African graph lines upwardly ticking.
Yet, China's eastern Mediterranean train is still on track today; it is just moving more slowly than expected. Of course, the problems have been immense since China decided to set up its Mediterranean base, which has since become a regional hub, which is bound to grow in importance.
Other carriers had done the same, setting up Med bases. CMA CGM had its Terminal Link facility in Malta. Evergreen had joined Hong Kong's Hutchison to set up one in southern Italy at Taranto. And Maersk, through its APMT, was in Tangiers, Port Said, Suez Canal and Algiceras.
These were days when mega ships crowded order books as all were bent on gaining the economies of scale promised by ships of 13,000-TEU, which were the big ones in those days - even though talk was rife of 20,000-TEUers on the drawing boards.
With high oil prices, the fashion was "slow steaming", which saved on fuel far more than a straight speed-to-mileage ratio would indicate. Ships could now be run with as few as 13 men so mega ships could make mega bucks as slot costs plummeted.
Even then, China's idea was to use a back door to Europe with a Mediterranean container terminal and later with inland rail and road infrastructure. Already China-to-Spain trains were being planned through Kazakhstan, Russia and Poland. China also had its eye on Greek railways that ran into Sophia and Belgrade opening up routes to eastern Europe.
The "wayporting" idea was based on serving the North American east coast ports via Suez rather than Panama. Only 4,500-TEUers could transit Panama, and only 6,000-TEUers could access US east coast ports.
But the other idea of short-cutting the traditional cargo routing which counter-intuitively sent cargo from one end of the Med to the other, then out to sea and back again into the English Channel to serve the Northern Range ports from Le Havre to Hamburg.
Why not, suggested Barcelona as early as 2000, turn Asia-Europe ships around at a Mediterranean port, rather than have them circumnavigate the Iberian Peninsula, then brave the fierce Atlantic, when cargo could make a safer, faster, shorter overland trip to where it wanted to go.
But the traditional, and still valid argument still stood. That is, that 85 per cent of the road and rail facilities run along the Northern Range and not through Europe's mountainous, rural and touristy south. But as time went out, that argument was losing ground as infrastructure improved. Spanish rail line, that dashed Barcelona's dream, has since been upgraded to EU standards obviating the need for a costly intermodal transfer at the French border when one gauge changed to another.
Nor was Spain alone in arguing for a southern route for Asia cargo through a Med Port. Genoa-La Spezia, atop the western side of the Italian boot liked the idea just as much as Venice did on the eastern side at the north end of the Adriatic. Both were in reach of metropolitan Milan and the cities of Switzerland, Austria and Hungary. More recently Marseilles has made a pitch for the southern route saying it was ready to spend $424 million on bid to be top Asia-Europe gateway, it being the shortest route to consumer-rich France.
But not all Greeks were happy that the Chinese had come to take over their container operation.
Greeks had long been divided between town and country, in which a dwindling number of rural conservatives were left to battle the leftwing intelligentsia that dominated town life and run the gravy trains of social benefits that had come with EU membership.
But in the end, through strikes and slow-downs, Cosco Pacific beat out rival Hutchison and APMT, winning the Piraeus container terminal concession, though there was still a surviving government dock run by recalcitrant dockers alongside the Chinese operation.
And by the dawn on 2014, Piraeus had become the Mediterranean's third biggest container port, handling 2.52 million TEU at Terminals II and III last year, against an estimated 2.4 million TEU. It ranked fourth in container volume, with Valencia in first place, handling 4.46 million TEU and Algeciras in second while Istanbul's Ambarli ranked third.
And this, at a time when traffic at northern Europe's three biggest ports - Rotterdam, Hamburg and Antwerp - was on the wane.
Soon Piraeus boasted of a ro-ro terminal, which is already showing major growth, as the Mediterranean is a key European gateway for Japanese, South Korean and Indian cars.
By June, China appeared to be preparing to buy Greek transport facilities to build a major EU gateway. What the plan lacked - and still does - is infrastructure, but Chinese negotiators are talking road, rail and air investment as well as maritime access, which they already had and would like to expand. While much of Asian cargo still goes the long way 'round to northern Europe where road and rail links are strong, railway links are superior through Piraeus to central Europe, saving six days of transit.
"China attaches great importance to Greece's geographic advantage as a gateway to Europe and is prepared to intensify cooperation in basic infrastructure such as ports, roads, railways," said the joint statement from the two governments.
China's plan made the southern route via northern Med ports more viable in the minds of shippers and maritime investors. Taken together, China through its Cosco organisation, which has since acquired its erstwhile rival, China Shipping Container Line, is forging several lines in the One Belt One Road initiative, which because of its sheer weight stands to fundamentally alter trade patterns on the Asia Europe route. Perhaps, much much more. |
