16


Issue4 2013


Derivatives could calm frantic container freight market


Derivatives and index-linked contracts could help cut freight rate volatility, a seminar at the Multimodal conference was told. David Barnes, an analyst


at Clarkson Securities, noted: “The golden egg of the transport market is a fixed price. But often neither party is willing to honour the price part of a contract because of extreme volatility.” He


added that using derivatives can help companies


plan budgets without any risk to the operational side of the contract. “You can fix the budget for up to two years, and the minimum hedge is just for one month,” he said. Nor are they only for big


operators, he continued: “Derivatives can be a particularly useful tool for SMEs who don’t have the volumes to get good fixed rates, as the minimum shipment is just one teu. “It is also quick and easy to execute,” explained


Barnes. “While a tender process can take months, derivatives can be arranged in minutes.” Dave Gaughan, operations


director at Kerry Logistics (UK), which uses derivatives for about 2% of its volumes, also spoke in favour of the financing tool: “With all this rate volatility, we thought that there might be room for another product in the market. GRI, PSS, BAF all add uncertainty to the market. An increasing number of our


///MULTIMODAL REVIEW Box mover


moves inland


customers are moving on to fixed deals, but there is still uncertainty.” Traditionally, the ‘casino’


image of derivatives inhibited their use in the container shipping industry, despite their prevalence in the bulk and tanker sectors. But, Gaughan argued,”the existing market is far more risky. If I was going to take a gamble, it would be in a casino in Macau, not on the future of the freight market this year.”


Potter takes the long view


The Wincanton Containers arm of the logistics group has developed a unique inland hub concept, says managing director, Ian Wilson. While most container hauliers concentrate all their


the ports of Southampton and Felixstowe, respectively. “They operate as a pre-DC


resources


in the ports, Wincanton – which developed its box haulage business aſter it acquired Hanbury Davies in 2008 – has set up two inland depots at Newbury in Berkshire and Alconbury, in Cambridgeshire. Both are useful staging-posts for


system,” Wilson explains. “For example, for a manufacturer of garden products importing goods in advance of the main demand season.” The hubs also do a lot of re- work, and Wincanton also operates a proportion of its container trucks there – it can be a much more flexible


approach than everything in the port.


George Baker gets into cars


Felixstowe-based handler and customs clearance specialist George Baker Shipping has opened a car compound next to its warehouse to load and unload containerised vehicles. Car shipping is a growing area of the company’s business and owners of often extremely


expensive vehicles demand a high standard of service. Raised decks mean that the car can be driven directly into the box. As well as handling its own traffic, George Baker also offers car handling to freight forwarders needing a specialised service.


Retailers have a rail revolution


Freight Transport Association director of global and European policy Chris Welsh told a Multimodal seminar that Europe was adopting the stick rather than the carrot approach to transport emissions, taxing carbon taxes and applying other penalties rather than rewarding good practice. However, Welsh saw


Potter Logistics is expanding its UK rail freight terminals, in Knowsley, Selby and Ely, to handle 750-metre trains, it was revealed at the Multimodal show. Business development director Stuart Taylor said Potter needed to maintain wagon unloading and reloading times – oſten as little as three or four hours – when train lengths increase. Shunting is not an option, so longer sidings are needed to guarantee rapid processing. Taylor said: “The new


London Gateway terminal and Felixstowe are preparing to handle 750-metre trains, and Southampton will have to follow suit. So it makes sense for us to upgrade our own facilities.”


Potter is acquiring farmland


next to its Selby terminal and will extend it next year, also increasing the gauge to W10 to allow larger containers to be handled. At Ely, the task is simpler and it is only necessary to relocate some points, which Potter is hoping to coordinate with a planned Network Rail upgrade. The key investment is


at Knowsley, where major investment is scheduled over the next two years in readiness for a 30-year contract that Potter has won from SITA, the leading waste management company. Meanwhile, Mossend Railhead


at Bellshill, central Scotland will submit a planning application


this August for a distribution park including a 775-metre rail siding. A spokesman for Mossend’s owner, PDS, said the facility was the furthest north in the UK that new, larger trains could reach. The requirement


for slower-moving freight trains to share track with higher-speed passenger services was still a live issue, he said, but


opportunities to do things differently and re-gear supply chains. He invited an expert panel to show how they were innovating to move goods in a less energy- intensive way. Justin Kirkhope, project


longer


750-metre trains would add significant capacity without taking additional train paths.


manager logistics strategy at The Co-Operative Food explained how the UK’s fifth largest food retailer tiptoed into trialling rail, sending just 10 boxes a week from its national distribution centre in Coventry to Scotland in Spring 2010 in partnership with WH Malcolm. Timetables were a problem,


especially at weekends. Instead of being able to dispatch trucks to its then three distribution centres in Scotland’s central belt on a just-in- time basis, The Co-Op was restricted to two or three services a day. While it was a challenge for rail to


match the costs of road transport, reliability has been better than by


road and the Co-op now send 25% of product by rail on this route, saving 500,000 road miles and 500 tonnes of CO2 per year. New technology was even


making temperature control on rail containers and tracking their position less of an issue, Kirkhope said.


The company is looking to


extend its use of rail for deliveries further north to Inverness and to south-west England as part of a wider package of carbon reduction measures. Argos trunkers used to run 70%


empty from the retailer’s Kettering DC to Mossend, Scotland. All this traffic has now switched to rail, representing 3,000 containers per year, according to David Parry, strategic transport improvement manager. The retailer imports 42,000


boxes per year into the UK, many through Southampton, and 15% of these now go by rail to the Midlands. “We would put more on rail if the trains weren’t always full,” Parry commented. Rail now accounts for 30% of


UK freight movements and has the potential to increase by another 10%, said Freightliner commercial director, Keith Gray.


basing


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