Court Decision

An Uncertain Future for Hamburg's Port

  • Why it matters

    Why it matters

    Germany’s Federal Administrative Court is slated to decide on Thursday whether the River Elbe, which flows through the Port of Hamburg, can be excavated by 100 centimeters.

  • Facts

    Facts

    • The River Elbe has to be deepened to make way for ever larger ships, otherwise Hamburg’s docklands could fall further behind rivals, say proponents.
    • Some 150,000 jobs in greater Hamburg are dependent on the port, says the city’s economics and transport senator  and over 200 freight trains leave the quay walls daily for the south and east of Europe.
    • In the years the port has fallen behind competitors, the city has still managed to grow its GDP, partly thanks to innovations in other parts of the economy.
  • Audio

    Audio

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Hapag-Lloyd – Quartalszahlen
Hamburg has more to offer than shipping containers. Source: Christian Charisius/dpa

Each year, 10,000 cargo ships, stacked high with bright containers carrying millions of tons of everything from coffee and carpets to pharmaceuticals, slip in and out of Hamburg’s port. Known as Germany’s “gateway to the world,” it’s nearly as old as the Hanseatic city itself but a seemingly innocuous legal case is about to decide its future.

On Thursday, Germany’s Federal Administrative Court in landlocked Leipzig is slated to rule on a “fairway upgrade in the Lower and Outer Elbe,” – the river that rises in the Czech Republic and flows out through Hamburg to the North Sea. The court must decide whether the river can be deepened by another 100 centimeters (39.4 inches). It’s surprisingly controversial.

The case has dragged on for a good ten years, although the fairway has been excavated eight times since the beginning of the 19th century to keep up with a global commerce that has required ever larger ships.

But excavations are becoming more difficult and the economic rationale less clear. Environmentalists have raised concerns too over ecological damage.

Still, as many in Hamburg see it, the court’s decision will affect the very economic survival of their city. Should the answer of the judges be no, then Hamburg could soon be inaccessible to the world’s largest container ships, cutting the 800-year-old port off from the flow of global trade and prosperity.

W6 p70 Cargo in the Ship’s Hold-01

“If it stopped, we wouldn’t be closing down the port tomorrow,” said Frank Horch, who in Hamburg is usually just called the port senator, although he is responsible for the city’s entire economy, in an interview with the business weekly WirtschaftsWoche, a sister publication of Handelsblatt. But he warned: “If we cut the port’s capabilities, all of Germany as an industrial location will suffer.”

His message is clear: In Leipzig they’re not making a decision about a minor local issue but a matter of national significance. In greater Hamburg, 150,000 jobs depend on the port. Nationwide, that number rises to half a million, he said. Over 200 freight trains leave the quay walls daily for the south and east of Europe. Airbus ships from here to other plants and even Ford in Cologne depends on its supply line deliveries from Hamburg. The port senator with a maritime record as impeccable as a gold-buttoned navy parade uniform is banking on these economic arguments winning the day in court.

But what Mr. Horch doesn’t mention is that the arguments over jobs aren’t as clear-cut as proponents of deepening the Elbe make out. The number of jobs directly dependent on container handling isn’t particularly large. For instance, the HHLA, Hamburg’s largest container terminal operator, employs only around 3,500 workers. And this number has barely changed in the past 15 years, even though the number of containers passing through has doubled. The estimates about the impact on indirect jobs are largely unconfirmed speculation.

“The deepening of the Elbe would enable the port to be competitive again for a decade – but after that, the declines would be all the more drastic.”

Henning Vöpel, Director, Hamburg Institute of International Economics

However, for an economist like Henning Vöpel, director at the Hamburg Institute of International Economics (HWWI), there are many good reasons to excavate and invest in the dockland. “The deepening of the Elbe will pay off over the next ten years. However the port does need a completely different concept for the long term,” he says, citing a study by the World Trade Organization.

Merciless competition between the world’s major shipping companies – and thus the need for lower costs – is the single force driving the demand for new super-sized ships even as the quantity of goods isn’t necessarily increasing. So just to maintain their turnover, port operators have to invest money in larger loading terminals too.

“The importance of ports is always relative,” says Mr. Vöpel. “When shipping companies decide for a port terminal then it isn’t necessarily the absolute shipment volume handled that is decisive but the position vis-à-vis rival ports.” For that reason, Mr. Vöpel agrees with the port senator. If the Elbe keeps its bed, the port is likely to lose business to its two main competitors, Antwerp in Belgium and Rotterdam in the Netherlands. But the questions remains: would that be a bad thing?

W6 p70 Hamburg Loses Out-01

Sitting in the Hamburg’s well-known Hafen-Klub restaurant, the lights of the harbor visible outside on a dark winter evening, Angela Titzrath, chair of the HHLA board, provides the business perspective. “The customers,” she says, “see the port in a European context.” In other words, if the Elbe’s floor remains in its current state, some ships would indeed dock at Rotterdam instead of Hamburg.

Hamburg has already lost out to the Belgians in recent years. Before the 2008 financial crisis, Germany’s second-largest city was well ahead of Antwerp in handling of shipping containers. The tide has since turned. And after years of constant growth, the Flemish city has shot ahead of Hamburg to second place in Europe behind Rotterdam.

In Mr. Vöpel’s view even if the judges rule in favor of another excavation, it will still be tough to maintain competitiveness against rivals in the long-term. “The deepening of the Elbe would enable the port to be competitive again for a decade – but after that, the declines would be all the more drastic,” he said, adding that the local economy will benefit in the short-term merely because of the €650 million investment required to do it.

A trip outside the harbor to one of the city’s many formerly run-down streets demonstrates what Hamburg is capable of beyond the unceasing ballet of containers south of the Elbe. On Lange Reihe, Marc Schmitt runs his company Evertracker. The business equips containers, trolleys, carts – and whatever else companies use to transport goods – with a GPS transmitter. Mr. Schmitt’s software analyzes the transporter’s capacity and its route for optimization.

He’s part of a wave of entrepreneurs who’ve helped the city’s gross domestic product soar 23 percent between 2009 and 2015 – exactly the same period the port was falling behind its rivals.  Today Hamburg’s economy generates €110 billion ($118 billion) and can easily compete with hip Berlin and wealthy Munich for top young talent.

Ultimately, a no from Leipzig could force Hamburg to think outside the container. “If the court were to prohibit the deepening,” Mr. Vöpel said, “It could force the city into doing what’s good for it.”

 

This interview first appeared in the German business weekly WirtschaftsWoche, a sister publication of Handelsblatt. To contact the author: wirtschaft@wiwo.de

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