Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

REVENUE: Revenue Use from Transport Pricing Interurban Case Study: Rotterdam Port

L. Rudzikaite, H. Visser, J. Kiel

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Presentation Contents

Research scope of the Study CaseLevel Playing FieldPolicy schemes analyzedModelling approachCase Study OutcomeConclusions

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Research Scope Existing and planned practices on pricing,

investment & revenue use at competing ports of Rotterdam and Antwerp

Testing theoretical trade-off alternatives towards optimizing efficiency, equity and acceptability

Focus exclusively on: Container Transport (most rapidly growing branch)

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Why Container Transport?

Double volumes in 10 year time - capacity shortage threaten both ports!

Container throughput at the ports of Rotterdam and Antwerp1995-2004

0123456789

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 years

TEU

(mln

)

RotterdamAntwerp

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Coastal map

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Level playing fieldBoth competing ports are driven by:» rapid growth of container transport» threatening infrastructure capacity problem:

• Rotterdam: reclaiming sea-land for Maasvlaakte 2 terminal• Antwerp: building Deurganck terminal, ensuring/improving

access for bigger (container) vessels, minimizing tide-dependence)

» Competition pressures (pricing/investment trade-offs)

» Legal obligations (Dutch leg of the access to Antwerp) versus environmental threats

» Sustainable welfare targets

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Elements Scrutinised Port infrastructure capacity

(port access for container vessels, container terminal)

Pricing policy (port dues policy for container vessels, navigation charging policy on waterway network)

Investment policy (of port authority, local authority, government :

infrastructure expansion, nature damage compensation)

Environmental concerns/legal obligations (Interstate obligations Netherlands –Belgium)

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Policy Schemes Analysed» Status quo situation (2004-2006)

• Ownership status (port authority-local authority-government)• Current pricing/taxation policy (harbor dues for container vessels 2004)• Ongoing infrastructure investment financing (new infrastructure at ports,

hinterland access)» Adopted policy for the future (2004-2012)

• Launching new infrastructure (sea land reclamation Maasvlakte 2, Deurganck container terminal)

• Sea-wall for Rotterdam • Obligation to maintain necessary depth on the Westerschelde access route

» Negotiated trade-off policy for the future (2004-2012)• Launching new infrastructure (Maasvlakte 2, Deurganck)• Sea-wall for Rotterdam• Obligation to maintain necessary depth on the Westerschelde access route• Negotiated further deepening of the Westerschelde access route • Nature/flood protection on the Westerschelde access route

Low acceptability by the Dutch society

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Regulation schemes: Theoretical option “User Pays”

Although navigation on waterways is free of charge, make an exception on Westerschelde route by applying a “User Pays” principle => i.e. assuming Belgium, as a major user of the Westerschelde route, pays a contribution to the “Westerschelde Investment Fund” of the Netherlands

Arguments:• maintenance/deepening and nature protection costs are beared by

the Netherlands, the major benefits go to Belgium• Indirectly supporting the biggest competitor

In fact, the Dutch and the Flemish governments

concluded a political trade-off: – Netherlands fully bear the costs of deepening the Westerschelde– Belgium facilitates the operation of a high-speed train service

“Amsterdam-Paris”

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

ApproachMolino model Abstraction towards two port competition only (third option is

ignored) Artificial inclusion of passenger transport (to make model running) Simplification of port ownership relations (to trace revenue flow) Operator’s concept is replaced with Resultant Operator concept

(resultant shipper) Overcoming dual government problem Costs related to tide-waiting are assumed as infrastructure

capacity restriction costs

Having in mind the complexity of the port system and the restrictions of the model, the outcome should be considered as TENTATIVE

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Regime variants (as suggested by MOLINO)

» Reference (actual port dues)» Fixed toll (to pay-back investments)» MSC-tolling

Methodological difficulties with

» Nash (Private/Private)» Mixed (Private/MSC)

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Outcome: Policy bound tolls (per variant)

Toll per TEU: Negotiated Trade-off Policy 2004-2012

0

2

4

6

8

10

Reference Fixed MSC pricing variants

Euro

/TEU Rotterdam route

Antwerp route

Toll per TEU: Status Quo Policy 2004-2006

0246810

Reference Fixed MSC pricing variants

Rotterdam routeAntwerp route

Toll per TEU: Adoped Policy 2004-2012

0246810

Reference Fixed MSC pricing variants

Rotterdam routeAntwerp route

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Outcome: Effects of pricing policy on demand

Adopted Policy Effects on Demand at Rotterdam and Antwerp (Regime variants: Reference, Fixed, MSC )

02468

101214161820

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year

mln

TEU

s

Ref-Rotterdam

Ref-Antw erp

Fixed-Rotterdam

Fixed-Antw erp

MSC-Rotterdam

MSC-Antw erp

Trade-off Policy Effect on Demand at Rotterdam and Antwerp (regime variants: Reference, Fixed, MSC)

02468

101214161820

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 year

mln

TEU

s

Ref-Rotterdam

Ref-Antw erp

Fixed-Rotterdam

Fixed-Antw erp

MSC-Rotterdam

MSC-Antw erp

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Outcome: Policy Bound Revenues Versus InvestmentsToll revenues (Euro mln)

/At the end of the period/

Status Quo Policy Criteria

End 2006

Adopted Policy Critreria

End 2012

Negotiated Policy Criteria

End 2012Rotterdam

routeAntwerpRoute

(+ maintenance Westerschelde)

Rotterdamroute

Antwerproute

(+ maintenance Westerschelde)

Rotterdamroute

Antwerproute

(+ deepening & maintenance

Westerschelde)

Reference 171.5 79.04 563.6 231.7 564.5 231.6

Fixed 204.4 120.4 752.3 414.4 752.4 464.3

MSC 93.3 78.8 344.0 195.2 489.9 250.0Investments 47.6 191.2 767.6 221.3 803.6 721.3Required accumulative net payment to Westerschelde Fund (“User Pays”)

- - - 107.8 - 311.8

Study Case - Rotterdam Port, Final Conference Revenue November 29-30, 2005

Conclusions Fixing the level of charges sufficiently high to self-finance the

investment costs significantly reduces the container transport volumes and has a negative impact on welfare levels

Charging at marginal cost levels scores better, but does not produce sufficient revenues to recover the investment costs for big scale projects, like Westerschelde en Maasvlakte 2

Existence of a “third port” competition makes it even more difficult to earn the investments back

Modification of current port tariffs might struggle with a legal problem on waterways charging in the Netherlands

Practical solution of the cross-border problem of the Westershelde project is a political trade-off /an impropriate example on transparency of seaport bound investments/