market observation no. 14

Market Observation No. 14

Analysis of the Economic Situation as of mid-2011 and Outlook for 2012

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Disclaimer

Use of the knowledge, information or data contained in this document is at the user’s own risk. The European Community, the Central Commission for the Navigation of the Rhine and its Secretariat shall in no way be liable for use of the knowledge, information or data contained in this document or for any ensuing consequences. The facts presented in the study and opinions expressed are those of the consultant and do not necessarily also represent the position of the European Commission, its agencies or the Central Commission for the Navigation of the Rhine on the subject in question. This notice does not constitute a formal commitment on the part of the commissions referred to.

November 2011

TAblE Of CONTENTS

foreword

Special Report 1: Inland Water Transport in particular European countries

a) United Kingdom b) Poland c) Italy

Special Report 2: Seine-Nord-Europe Canal

Section 1: Situation of the demand for transport in autumn 2011 and prospects for 2012

1. Economic growth: trends and prospects

2. Transport demand: development and prospects 2.1 Agricultural and forestry products 2.2 Foodstuff and animal fodder 2.3 Iron and steel industry 2.4 Solid mineral fuels 2.5 Stone, earth and building materials 2.6 Chemical products and fertilizers 2.7 Mineral oil products 2.8 Containers

3. Market development for passenger transport

Section 2: Relationship between Supply and Demand

I. fleet development: New ships 1. Dry cargo shipping 2. Tanker shipping 3. Passenger shipping

II. Capacity Utilization 1. Dry Cargo Shipping 2. Tanker Shipping

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Section 3: Situation of inland navigation companies I. Development of freight rates and business activity 1. Dry Cargo Shipping 2. Tanker Shipping

II. Cost Development 1. General cost structure and development 2. Fuel costs 3. Labour costs 4. Capital costs 5. Insurance costs 6. Maintenance costs 7. Passenger Shipping

Conclusion

Summary and Outlook

Annex:

NewConstructions

Glossary

Sources of Information

fOREWORD

Inthecourseofthismarketobservation,ithasbeenpossibletocompleteexaminationofinlandshippingwithineachindividualgeographicalareabyincludingarticlesdealingwiththeperipheryofEurope’smainnetworkof waterways, specifically with the UK, Poland and Italy. While theScandinaviancountriesarealsoquitefamiliarwithinlandshipping,thismodeof transport isnonethelesssoclosely linked tomarineshippingwithin these countries that a separate examination would not appearwarranted. Poland’s system of inland navigation is connected to themainnetworkofwaterways,whileasignificantvolumeoftransportflowsbetweenPolandandGermany.

Asecondreportfocusesonthesubjectofprovidingaccesstoanothershipping area of national importance: the Seine-Nord Europe Canal.On completion, this project, of exceptional strategic significance forinland shipping, will result in a new link between a region of Europehaving a superior level of economic activity and themajorNorthSeaports. Providing access to this canal systemwill give new impetus tointernationalwaterway transport for tworeasons:due to thehigh levelofdemandalreadyexistingalongthisaxis;andasaresultoftheuniquelogistic context, specifically because supplying goods to France’seconomic heartland will face inland shipping with special challenges.Yet,importantdecisionsarestillpending.Thefundingdecision,onwhichfurtherplanningand implementationdepend,will be takenonly in thecourseof2012.

Thebusinesscycledevelopmentsinthefreightandpassengertransportsectors usually represent the major portion of the report. Passengershipping,whileseeminglyunaffectedbytheoveralleconomicsituation,is nonetheless experiencing independent growth as a result ofdemographicchanges,andthustheprospectsforthissectoraregood.Freighttransport,incontrast,continuestobeaffectedbybusinesscyclevolatilityingeneral.AsaresultoftheeconomicsituationinEuropeandof current uncertainty, the general tendencywould appear to indicateadownwardtrend.Whereas in2010therewastalkofoptimismin thefaceofthespeedyrecoveryfromthe2008-2009crisis,theprospectsfor2012arenolongerasfavourable,whileprospectsinthelongertermarefraughtwith suchgreat uncertainty that reliable predictionsarehardlypossible.

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Special Report 1:

Inland Water Transport in particular

European countries

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► a) United Kingdom

BecausetheUnitedKingdomisanisland,thereareafewpeculiaritiesabout inlandshipping there.The largenumberof rivers in thecountryformwidebays(estuaries)wheretheyflowintotheNorthSea,allowingsea-goingvesselstonavigatetheriversacertaindistanceinland,too.

ThesewideestuarieswereevenusedbytheVikings,whosaileduptheEnglishrivers in their longboats.Acombinationofmaritimeand inlandshippingcontinuestobeatypicalcharacteristicofshippingintheUnitedKingdomtothepresentday.

Definition of inland waterway traffic in the United KingdomPure inland waterway transport on British rivers (with inland ports asthestartingpointanddestinationoftheshipment)isnotverysignificant,atabout3.5million tonsperannum.Marineshippingwhichalsousesinlandwaterways,andisthereforeincludedinthetotalfigureforinlandwaterwaytraffic, isfarmoresignificant.Thisincludescoastalshipping,insofaras theshipscross theboundarybetweenmaritimewatersandinland waterways. There are two concepts used for the demarcationbetweeninlandwaterwaysandmaritimewaters:

Inland waterways boundary = all water areas available for navigationthatlieinlandofaboundarydefinedasthemostseawardpointofanyestuarywhichmightreasonablybebridgedortunnelled-thisistakentobewherethewidthofwatersurfaceareaisbothlessthan3kmatlowwaterandlessthan5kmathighwateronspringtides.

Smooth water line =marks the boundary in tidal rivers and estuarieswheresignificantwaveheightcouldnotbeexpectedtoexceed2metresatanytime.

BelowisasummarythatprovidesanoverviewofthevariousindividualcomponentsofinlandwaterwaytrafficintheUnitedKingdom:1

1Source:BritishDepartmentforTransport

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Internal (or pure) inland waterway traffic: all non-seagoing trafficbetweenportsandwharveswhichremainswhollywithinthesmoothwaterline

+ Coastwise traffic: Inwards seagoing traffic coming from UKseaportsandunloadedatportsandwharvesupstreamoftheinlandwaterwaysboundary;andoutwardsseagoingtrafficloadedatportsandwharvesupstreamoftheinlandwaterwaysboundaryandgoingtoUKseaports

+ Foreign traffic: Inwards seagoing traffic coming from foreigncountriesandunloadedatportsandwharvesupstreamoftheinlandwaterwaysboundary;andoutwardsseagoingtrafficloadedatportsandwharvesupstreamoftheinlandwaterwaysboundaryandgoingtoforeigncountries

+One-port traffic: Inwards seagoing traffic coming fromoffshoreinstallations or sea dredged aggregates unloaded at ports andwharves upstream the of the inland waterways boundary; andoutwardsseagoingtrafficloadedatportsandwharvesupstreamoftheinlandwaterwaysboundaryandgoingtooffshoreinstallationsorbeingdumpedatsea

________________________________________________________=TotalamounttransportedoninlandwaterwaysintheUnitedKingdom

Structure and development of the transportationThe graph below clearly shows that the foreign traffic accounts forthe largestproportionof the total inlandwaterway traffic in theUnitedKingdom.ThedatathatthesegraphsarebasedonwascollectedbytheBritishDepartmentforTransportbysurveyingshippingcompaniesandshipbrokersaswellasusingportstatistics.

Itshouldbeadded thatvoyagesmadebyseagoingvesselson inlandwaterwayssolelyforthepurposeofrefuellingoftheseagoingvessels,notforthepurposesofrivertransport,arenotincludedinthisfigure.

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figure 1: Transportation on inland waterways in the United Kingdom by type of traffic

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internal traffic

one-port-traffic

coastwise traffic

foreign traffic

Source: British Department for Transport

Themostimportantbranchofinlandwaterwaytraffic,intermsofquantity,isforeigntraffic.Thisinvolvesgoodsfromabroadbeingtransportedonsea-rivervesselstoaninlandportintheUnitedKingdom,orviceversa.

Ifthetotalamounttransportedissortedbyproductcategory,itbecomesevident that,ataround38%, liquidbulkcargoaccounted for the lion’sshare of the volume transported. This segment grew by 10% in theperiod2000-2008.Asaresultoftheeconomiccrisis,2009sawa17%dropcomparedtothepreviousyear.

Drybulkcargoaccounted forabouta thirdof thevolume transported.Thevolumetransportedstagnatedintheperiod2000-2008,whichwasfollowedbya28%droprelativeto2008in2009.TransportationofdrybulkcargothusdroppedmoremarkedlythanthetransportationofliquidbulkcargointheUnitedKingdom,too,reflectingthesituationinGermany,FranceandtheNetherlands.

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figure 2: Transportation on inland waterways in the United Kingdom by product category

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other general cargo

Container and RoRo

forestry products

dry bulk

liquid bulk


Themost important segment of foreign traffic, in terms of quantity, isaccountedforprimarilybycontainertransportationandliquidbulkcargo(mainlycrudeoilandmineraloilproducts).

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figure 3: Transportation on inland waterways in the United Kingdom by product category and type of traffic

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one-port-traffic

foreign traffic

coastwise traffic

internal traffic


Internal inland waterway transportWithin this segment of internal inland waterway transport (shipmentstransportedonlyoninlandwaterways)sand,earthandbuildingmaterialsaccount for themajority of freight transported, at around 2.0m tons.In second place comes the transportation of household waste, whichamountstoapprox.700,000t.2

Theseshipmentsareprimarily in theGreaterLondonarea.Thewasteis sealed in containers and transported on the Thames to wastecollectionsitesbytherecyclingandwastemanagementcompanyCoryEnvironmental,whichusesmorethan6tugs,47pushedbargesandover1,000containers.3

Pure inlandwaterway transport has seenmodest growth since 2004,althoughtheamounttransporteddroppedin2009,logically,duetotheeconomiccrisis.

2Source:Navigation,Ports&IntermodalitéNo.07/08;mid-2011.3Source:CoryEnvironmental

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The mean transport distance for pure inland waterway transport iscurrently41km.Themost common transportdistance isa journeyof10kmatmost,withabout37%ofthetotalquantityoffreighttransportedviainlandshippingbeingtransportednomorethan10km.Theseshortdistances are also related to the fact that sand, earth and buildingmaterialsarethemostimportantsegmentofinlandwaterwaytraffic,intermsofquantity,andbecausethesecargosarelow-valuecargos,theyareusuallyonlytransportedshortdistances.

Themeandistanceforwastetransportationisaboveaverage,at56km.Themeandistanceforgeneraldrycargoisexactlytheaveragedistance(41km),andthemeandistanceforliquidcargoesisbelowaverage,at22km.

figure 4: Development of internal inland waterway transport on waterways in the United Kingdom

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TheincreaseinpureinlandwaterwaytransportcanprimarilybeputdowntoshippingontheThames.Thisisevidentfromthegraphbelow,whichshowsthedevelopmentofinternalinlandwaterwaytransportonthefivemostimportantwaterwaysintheUnitedKingdom.

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figure 5: Development of internal inland waterway transport on the five most important waterways in the United Kingdom

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Thames

Medwey

Humber

Mersey and Manchester Ship Canal


The river Mersey, with Liverpool in its estuary, together with theManchesterShipCanal,wasanimportantarteryforBritishtradeinthepast.Thecanalwasbuiltbetween1887and1894.Itfellintodeclineinthe1970s,as itwasunabletoaccommodatetheever-largerseagoingcontainerships.

Afewyearsago,theportsofLiverpoolandManchesterwereboughtbythecompanyPeelPorts,ofwhichDeutscheBankholdsa50%stake,andin2011italsoboughttheManchesterShipCanal,whichconnectsthetwo,anditnowhopestodeveloptheportsintheformofasynergyrelationship.InLiverpoolitplanstobuildadeepwatercontainerterminaland in Salford, near Manchester, there are proposals for an inlandcontainer terminal.Container trafficonthecanal isexpectedtoriseto300,000TEUinthecomingyears.4

4Source:Navigation,Ports&IntermodalitéNo.07/08;mid-2011

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figure 6: Map of the main inland waterways and ports in the United Kingdom

LONDON

Manchester

Liverpool

Glasgow Edinburgh

Birmingham

Kingston-upon-Hull

Thames

Trent

SevernGrand Union Canal

Manchester Ship Canal

Mersey

Humber

Forth & Clyde Canal

Ouse

Caledonian Canal

Medwey

Nene

Trent

UNITED KINGDOM

IRELAND

Source: UK Department for Transport / Creaprint / CCNR Secretariat

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► fleets

The British Department for Transport conducts statistical surveys oftheinlandshippingfleeteveryfewyears,withthelastonehavingbeenconductedin2007.TheresultingregisterofshipsbasedonthissurveylistsallofthecommerciallyoperatedinlandvesselsintheUK,althoughitonlycountsshipsthatoperateexclusivelyoninlandwaterways.Coastersand sea-river vessels, which are capable of navigating both inlandwaterwayandsearoutes,arethusnotincludedinthisfigure,althoughthe“narrowboats”,whicharecapableofnavigatingverynarrowcanals,are.

Accordingtothislist,thereare445inlandvesselsintheUnitedKingdom,158ofwhicharemotorcargovesselsand287arepushedbarges.Thetotaltonnageofmotorcargovesselsisapprox.40,000t,thetonnageofpushedbargesisapprox.98,000t,amountingtoatotaltonnageofalmost138,000tfortheinlandshippingfleet.TheinlandvesselsintheUnitedKingdomareconsiderablysmallerthantheinlandvesselsincontinentalEurope.Themeantonnageofamotorcargovesselisapprox.252tons.

Thislowaveragetonnagecanprobablybeattributedtothedifferencesinthewaterwaysnetwork.For instance,theUKhasarelativelydensenetworkofcanals,someofwhichcanbeusedforpassengershipsandsomeofwhichcanalsobeusedforfreightnavigation,butareunabletoaccommodateanylargevesselsduetothewaytheywerebuilt.

Thegraphsbelowshowthefleet,expressedintermsofthetonnageandthenumberofvessels,byarea.

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figure 7: Shipping fleet in the United Kingdom (tonnage) by area*

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self-propelled vessels

Source: UK Department for Transport *Vessels used exclusively on inland waterways

figure 8: Shipping fleet in the United Kingdom (number of vessels) by area*

020406080

100120140

dumb barges

self-propelled vessels

Source: UK Department for Transport *Vessels used exclusively on inland waterways

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Itisapparentfromthesegraphsthatthelion’sshareofthefleetislocatedin theSouthEast, i.e.primarilyon theThames.London isaseparatewaterwayregionandthevesselstherearesmaller,onaverage,thaninotherwaterwayregions,asisrevealedbycomparisonofthenumberofvesselsvs.thetonnage.

TheproportionofpushedbargesishigherintheSouthofEnglandthanintheMidlandsor theNorth.Tugboatandpushedbargetraffic is thusevidentlyveryimportantontheThames.

Modal Split Inlandshipping in theUnitedKingdomcurrentlyaccounts foramodalsplitofapprox.6%offreighttransport,althoughthisfigureincludesallinlandshipping,includinginland-seagoingtrafficandone-porttraffic.TherehavebeenanumberofmodalshiftprojectsinthecoresegmentofinternalinlandwaterwaytrafficintheUK,thetransportationofsand,earthandbuildingmaterialsinrecentyears.5

Belowisaprimeexampleofsuchaproject:In2005thecompanyCemex,aglobalmanufacturerofbuildingmaterials,introducedbargetransportontheriverSevern,thelongestriver intheUnitedKingdom.About200,000t–300,000tofstone,sandandgravelforuseinconcreteproductionaretransportedontherivereachyear.Ifthebargesmakefourtripsperday,thissaves116lorrytripseachday,or30,000tripsperannum.Agovernmentfundingprogrammewasalsousedtopurchasethetranshipmentmachineryneededatthedocks.6

Ingeneral,transportoninlandwaterwaysisalsoadvantageousforthebuildingindustrybecauseitallowsthestoragecapacitytobeincreased,especiallywherespace isatapremium(as isoftenthecase inurbanareas).Inlandvesselscaneasilybeusedasfloatingstoragefacilitiesforsandandgravel.Deliveryonthewateriseasiertoplanandmorereliablethanbyroadastheriskoftrafficjamsisavoided.Therearealsomodalshiftprojectsinothermarketsegments,aswellasinthesand,earthandbuildingmaterialssegment,inparticularforcontainertraffic.

5Source:BritishDepartmentforTransport6Figuresderivedfromthecapacityofthebarges(180teach),thecapacityofthelorries(25teach)andthenumberofbargesavailable(2).

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The supermarket chain Tesco imports wine from overseas (Australia,NewZealand,California,ChileandArgentina),allofwhicharrivesintheUKviatheseaportofLiverpool.Foralongtime,lorrieswerethenusedtodistributeitthroughouttheUK.Afewyearsago,however,acontainerlinesetupbusinessontheriverMerseyandtheManchesterShipCanal,whichisusedtotransporttheimportedwinefromLiverpooltoacontainerterminalnearManchester–adistanceofabout40miles(approx.64km)–uptothreetimesaweek.

Theeconomicviabilityof thisproject isalso improvedby the fact thatthecontainershipsareusedtocarrygoodsforexport,ontheonehand,andurgentlyneededemptycontainers,ontheother,ontheirreturntripto Liverpool.This is the firstwaterwayproject forTesco in theUnitedKingdom.

Thegrowthpotentialof inlandshipping in theUnitedKingdomderivesprimarilyfromtheever-increasingdensityoftrafficontheroads,resultingintrafficjamsandtheadditionalcostsincurredbythisforfreighttransport.Thewaterwayscanthusbeseenasameansoftransportwithplentyofsparecapacity.

However, amodal shift on a large scale is less likely for bulk goods,thanitisforcontainertransport.Thisisbecause,ontheonehanditisnecessary to take intoconsideration that theUK’seconomicstructureis now essentially dominated by the service sector and the iron andsteel industry,whichused tobevery important, isnowno longerverysignificant. The iron and steel industry is thus amajor customer thatinlandshippingintheUnitedKingdomlacks.

A study commissioned by British Waterways and the East MidlandsDevelopmentAgency is investigating theopportunities for shippingontheriverTrent.7Thisstudydrawsanumberofcomparisonsbetweenthecost of transportation by lorry and by ship. These comparisons showthat the waterways can be more cost-effective than transportationby lorry, inparticular if theshipsmakeseveral tripsperdayandcarrysufficientpayload.However, thecostadvantage is rapidlyunderminediftherecipientofthegoodsisnotlocatedintheimmediatevicinityofawaterway,asthepre-andpost-riverhaulagebylorryandthereloadingofthegoodssoonerodethecostadvantageofinlandshipping.

7BritishWaterwaysandEastMidlandsDevelopmentAgency(2009):RiverTrentWaterwayFeasibilityStudy

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► b) Poland

Polandhasveryconducivenaturalconditions for inlandshipping,with3,660kmofinlandwaterwaysintotal,ofwhich3,351kmarenavigablebynavigablebycargoandpassengerships.Thedensityofthenetworkofwaterways(thelengthofthewaterwaysrelativetothesurfaceareaofthecountry)is11.6kmper1,000km2andisthusonaparwithFrance.

About 80% of inland shipping in Poland is along the Oder, with theremaining20%ontheVistula.BothoftheseriversflowintotheBaltic,wherethemostimportantPolishseaports,Gdansk(Vistula)andSzczecin(Oder)arelocated.

In 2009 some 5.6 million t of goods were transported on Poland’swaterways,adecreaseof2.4milliontrelativetothepreviousyear.Thetotalamounttransportedwasjust9.8milliontin2007,anddroppedby17%to8.1milliontin2008.Theglobaleconomiccrisis,whichonlymadeits full impact felt in 2009, resulted in a further 30% drop, to just 5.6milliont.

Modal split and infrastructureThemarketshareofthewaterwaysisverylowinPoland.In2010itwasjust0.3%,andthusfarlowerthanpipelines(3%),therailways(12%)androadtransport(84%).Themodalsplitshareisjustaslowifyoulookattheamounttransported.

The main problem appears to be that inland shipping itself is at adisadvantagewhenitcomestotheclassicalbulkgoodsincomparisontoroadandrail transport.Oreandscrapmetal,whichareactually thedomainofinlandshipping,aretransportedfarmorebylorrythanontheinlandwaterways.

Apart from the other factors, it is primarily the infrastructure that isresponsiblefor theuncompetitivepositionof inlandshipping.Eventhemost important river in the country, the Oder, flows freely for a longdistance,meaningthatthedraughtfallsbelowthe1metremarkinthesummermonths,makingtheriverunnavigable.ThesectionoftheOderwhere it remains in itsnaturalcourse isbetweenBrzegDolny (36kmnorth-westofWrocław)andtheconfluenceof theWartaandtheOder(nearKüstrin/KostrzynontheGermanborder).8

8Cf.thereport“AnalysisofinlandwaterwaynetworksintheSoNorAprojectarea”,publishedbytheEuropeanUnion–EuropeanRegionalDevelopmentFund,2010.

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Due to theundevelopedstateof theOderalong thisstretch,shippingontheOderisdividedintwo:TheupperOderupuntiljustdownstreamofWrocław,and the lowerOder fromKüstrin to theBaltic.These tworelativelynavigablepartsoftheOderareconnectedbyapoorlydevelopedmiddle section, which makes uninterrupted passage, in particular theexportofcoalfromtheSilesianCoalBasinviatheseaportofSzczecin,impossible,especiallyinthesummermonths.

figure 9: Map of Poland

WARSZAWA

Szczecin

Wroclaw

Opole

Katowice

Gliwice

Krakow

Gdansk

Torun

Poznan

Oder

Oder

Weichsel

Weichsel

Weichsel

Bug

Warthe

DEUTSCHLAND

TSCHECHIEN

SLOWAKEI

RUSSLAND

WEISS-RUSSLAND

UKRAINE

OSTSEE

Kostrzyn nad Odra

Source: CCNR Secretariat / Creaprint

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Transportation by type of trafficDue to the size of the country, national transport plays a relativelyimportantrole.

figure 10: Transportation on inland waterways in Poland by type of traffic

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Export

Import

Transit

national

Source: Polish Office of Statistics

The proportion of the total traffic accounted for by international trafficis on the increase, as expressedby the steady increase in themeantransportationdistance.BothofthesefactorsreflectthefactthatPolishshippingcompaniesareincreasinglyactiveonwestEuropeanriversandcanals.

ThereareclosetieswithGermanyintermsofinternationaltransport.Forinstance,98%ofexportsfromorimportstoPolandtransportedviathewaterwaysaretoGermanyorarefromthere.Some67%,orpreciselytwothirdsoftheexportstransportedviathewaterwaysareofhardcoal,almostallofwhichgoestoGermany.Apartfromcoal,alimitedamountofchemicalsarealsoexported.

Shipping companies and employmentMostof thePolishportsareownedbyshippingcompanies.TheportsofWrocławandOpolearebothownedby ‘Odratrans’, forexample. InWrocławthereisacoalportwhichiscapableofhandlingupto800,000

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ThemostmoderninlandportinPolandistheportofGliwice,whichhasapotentialtransshipmentcapacityof2.5milliontperannum.Theportprimarilyhandlesrawmaterialsandproductsforandfromthesteelin-dustry,with coal, coke, ore, gravel and steel productsbeing themaingoodshandled.

Before the fallof the IronCurtain thereweresevenstate-runshippingcompanies. Today’s private company ‘Odratrans’ was one of the twolargeststate-runcompaniesatthattime.Afterthestate-runcompaniesweredissolvedinthecourseofprivatisationalargenumberofshippingcompanies and small-scale independent ship-owners came intoexistence.There are thus now about 200 companies of various legalforms active in the field of inland shipping in Poland. Some of thesecompaniesalsoperformportservicesandrepairworkaswellasofferingtransportservices.

Thefluctuationinthedemandfortransportservicessince2006hashada severe impact on theeconomic viability of the shipping companies.For instance, for the shipping companies for which data is available(companies with more than 9 employees) the cost/turnover ratioworsenedin2008and2009relativeto2007.Thiscanprimarilybeputdowntotheslumpindemandin2008and2009.

Costs rose slightly in 2008 and dropped again in 2009. This canpresumably be put down to effects such as the rise in fuel prices in2008andthedrop inprices in2009.Thefinancingcostsonlymakeasmallcontributiontothetotalcosts,althoughthiscostcomponentrosesignificantlyfrom2008onwards.

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figure 11: Revenue and cost development in the Polish inland shipping industry*

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Source: Calculation performed by the CCNR (conversion of data on turnover in Polish zloty to euro applying the mean annual exchange rates for 2006, 2007, 2008, 2009); Original data: Polish Office of Statistics. * For companies with more than 9 employees

figure 12: Employees of Polish inland shipping companies

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Source: Eurostat

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► fleetThere are currently about 600 inland vessels used for freighttransportation,about20%ofwhicharemotorcargovesselsaswellastugsandpushers.Theremaining80%arepushedbarges.

PushedbargetrafficisaverymajorfactorinPoland.Boththenumberand the total capacity ofmotor cargo vessels, tugs andpushers roseslightlybetween2006and2008(seegraph).Thenumberandcapacityofpushedbargesalsosawanetincreaseupuntil2009.

figure 13: Development of the tonnage of the Polish freight shipping fleet

55 718 64 570 67 571 65 336

231.451 217.657 212.445

235.790

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Mostof themotorcargovesselsdate fromthe1950sand1960s.Theageprofileofthetugsandpushersaswellasthepushedbargesisabitbetter.Overall,theageprofileoftheentirePolishfleetisasfollows:

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Table 1: Age distribution of the Polish inland shipping fleet

Year of construction Proportion of the fleet in %Upto1949 2,21950-1969 22,51970-1979 41,01980-1989 30,61990-2009 2,4


Therearealsoslightlyover100passengershipswithatotalcapacityofapprox.8,600passengerseats.Themeanageoftheseshipsisrelativelyhigh.Forinstance,abouthalfofthepassengershipswerebuiltbetween1950and1969,whereas slightly less thanaquarterwerebuilt in theyear2000orsincethen.In2008and2009about1.1millionpassengerstravelledonthePolishinlandwaterwayseachyear.

Goods segmentsInland shipping in Poland is strongly dominated by the steel industry.Oreandscrapmetalaswellashardcoal,altogether,accountforabouttwothirdsofthetotalamounttransported(65%in2009;68%in2008).Building materials, at just 5%, play a far less significant role than inWesternEurope.

Tankershippingisveryunderdeveloped.Almostnomineraloilproductsaretransportedandchemicalsandchemicalproductsalsoonlyaccountforaverysmallproportionofthetotal.

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figure 14: Transportation on inland waterways in Poland by product category

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brown coal

wood and wood products

chemicals and chemical products

metals and metal products

cereals

cement

hard coal

metal ores and other minerals


AlthoughPolandistraditionallyamajoragriculturalcountry,agriculturalproductsdonotplayamajor role.Thisalsoapplies to theVistula,onwhichlargeamountsofagriculturalproductsusedtobetransportedfromthePolishhinterlandtotheseaportofGdansk.

Becausehardcoal isverysignificant for thePolisheconomy, thenextsectionwilltakeacloserlookatthepotentialthatcoaloffersforinlandshippinginPoland.

Furthermore,itshouldbepointedoutthatthereisalsopotentialforgrowthinthecontainersegment,primarilyontheVistulainthehinterlandoftheportofGdansk,whichwasthecontainerportwiththestrongestgrowthintheBalticintheperiod2005-2009(+244%).9

9Cf.:HamburgSparkasse(2011):GutgerüstetfürdieZukunft?DerHafenalsImpulsgeberfürdenLogistikmarktHamburg.(Wellpreparedforthefuture?TheportasasourceofstimulusforthelogisticsmarketinHamburg.)

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There are plans to quadruple the port’s transshipment capacity, fromapprox.500,000TEU toapprox.2millionTEU, in thenext fewyears.Since2010therehasbeenadirectconnectionbetweenChinaandtheportofGdansk.

Priortothis,theportwasservedprimarilybyfeederservicesandbyrailservicesfromHamburgandtheARAports.ShippingontheVistulacould,giventherightpoliticalsupportandawaterway-friendlyportpolicy,playasignificantroleincontainerdistributioninthehinterlandofthePortofGdansk.

Hard coal – a goods category with potential for inland shipping in PolandThecentreof thePolish coalmining industry is inUpperSilesia.Thelargestcoalmines in thecountryare located inGliwiceandKatowice.The Upper Silesia coalfield accounts for 93% of Poland’s entire coalproduction.GliwiceisconnectedtotheOderviaacanalandKatowiceliesapprox.34kmeastofGliwice.

PolandisthelargestproducerofhardcoalinEurope,withaproductionvolumeofalmost77milliont(2010)justaheadoftheUkraine.10ItisalsoaheadoftheUkrainewhenitcomestoexports,exporting14million.t.It isonlywithrespectto importsthatPolandlagsbehindseveralotherEuropeancountries,includingGermany,FranceandtheUnitedKingdom.Thetotalamountofhardcoal(production,exportsandimports)isveryhighinPoland,ataround100milliont(cf.Germany:54milliont).

Incomparisontothesefigures,theamountofhardcoaltransportedontheinlandwaterwaysinPolandcanbedescribedasbeingverylow(seegraphbelow).Ofcourse,itissafetoassumethatsomeofthecoalminedinPoland is used in-situ for power stations and by the steel industry,andisthereforenottransportedtoanysignificantdegree.Nevertheless–irrespectiveoftheamountofdomesticproduction–atradingvolumeof23.5milliontthatneedstobetransportedinfull,inanycase,buttheamountofcoaltransportedonthewaterwaysisonly2.4milliont.

10NotincludingRussia

29

figure 15: Total amount of hard coal and amount of hard coal transported

2,4

35,8

0,5 4,7 4,8

0

20

40

60

80

100

120

Poland Germany United Kingdom

France Romania

Mio

. t

hard coal - total market volume*

hard coal transport per inland shipping

Source: VDKI. Figures for 2010. *Total amount = sum total of hard coal mined, exported and imported

Thetablebelowshowsthetradingvolumeofhardcoalforthecountriesinthegraphabove.Polandisnowanetimporterofhardcoal,asisthecaseformostotherEuropeancountries.ThereasonforthisisthattheamountofhardcoalminedinPolandisdropping.Importsofhardcoalarethereforelikelytoincreaseinfuture,whichshouldbeespeciallybeneficialforthelargestportsinthecountry,GdanskandSzczecin.ThereisthusalsogreatpotentialforinlandshippingontheOderandtheVistula.

Table 2: Imports and exports of hard coal for a number of European countries (2010)

Country Hard coal imports Hard coal exportsSum total of exports

and imports (trading volume)

Poland 13,5 10 23,5Germany 40 0 40UnitedKingdom 26 1 27France 19,3 0 19,3Romania 1,4 0 1,4

Source: VDKI

30

Ofthehardcoalexportedin201063%wasexportedbyseaand37%onland.TheseaportsusedtoexportcoalareprimarilytheportsofGdanskandSzczecin.ThelargestcustomersofcoalexportedbyseafromPolandareGermanyandtheUnitedKingdom.ThehardcoalexportedonlandismostlytransportedbyrailtoPoland’sneighbours.

The amount of coal transported by rail thus exceeds the amounttransportedbyinlandwaterwaybyalongway.In2009about1.5milliontofhardcoalweretransportedonPoland’swaterways,incomparisontoapprox.100milliontbyrail.

There are several coal-fired power stations that, despite the fact thatthey liedirectlyon theOder,arenot suppliedwith coal via the inlandwaterways,butbyrail.Asfarascoal isconcerned, it isveryapparentthatthewaterwaysinPolandareusedfarlessthanwouldbepossible.

► c) Italy

IthastobestatedquitecategoricallythatinlandshippingcurrentlyplaysaverymarginalroleinfreighttransportinItaly.Themodalsplitshareisabout0.1%ofthetotalvolumeoffreighttransportinItaly.InlandshippingplayedamuchmoresignificantroleinItalyupuntilthelate1970s,beforethenseeingasteadydeclineinthefollowingyears.

ThetotallengthoftheinlandwaterwaynetworkinItalyis957km,564kmofwhichiseconomicallynavigable.ThePo,asthemainaxisofinlandshippinginItaly,isnotnavigablealongitsentirelength.Forinstance,itfollowsitsnaturalcourseforthefirst250km(outofitstotallengthof650km),notartificiallycontainedinanyway.Thesubsequent400kmhavebeensubjectedtohydraulicengineeringmeasuresinordertomakethePonavigable.11

ThePoflowsintotheAdriaticSea,formingadeltawhereseveralportsthataresuitableforcombinedriverandseatraffic(e.g.Chioggia,PortoGaribaldiandPortoLevante)arelocated.Pureinlandtrafficaccountsforabout80%ofthetotal,withtheremaining20%beingaccountedforbyriver-seatraffic.

11Source:RegionEmilia-Romagna(2011),Directorate-GeneralforInfrastructureNetworks,LogisticsandMobility:AnnualreportonthemonitoringofmobilityandtrafficintheregionofEmilia-Romagna.

31

Asfarasthefleetisconcerned,therearealmostonlypushedconvoysonthePoandthecanalsystemFissero-Tartaro-CanalBianco,eachwithbetween6and8shipseach.OntheFerrarawaterway,whichliesinthesouthofthePodelta,thereareprimarilysea-rivervesselswithameancarrying capacity of 1,300 t. There are 35 to 40motor cargo vesselsavailablefortransportingsandfromthePo.

figure 16: Waterside freight transport at Italian inland ports

0

50 000

100 000

150 000

200 000

250 000

300 000

2005 2006 2007 2008 2009 2010

t

Mantova

Rovigo

Cremona

Viadana

Ostellato

Source: Agenzia interregionale per il fiume Po (AiPo)

Categories of goodsAtpresent,alargeproportionofthefreighttransportedconsistsofsandand gravel that is dredged from the river bed of thePo and suppliedtothebuildingindustry.Anotherimportantsegmentisflour.InMantova,Italy’s largest inlandport, themain freighthandled,other thanflour, ischemicals,as thereareanumberofmajorchemicalplants located inMantova.Rawmaterials for thesteel industrydonotplayasignificantrole for inland shipping in Italy, despite the fact that Italy is a majorproducerofsteel.

32

figure 17: freight traffic on inland waterways in Italy by product category

0

500 000

1 000 000

1 500 000

2 000 000

2 500 000

2005 2006 2007 2008 2009 2010

t

heavy cargo

iron & metal products

chemicals

wheat flour

Sand & Gravel

Source: Agenzia interregionale per il fiume Po (AiPo)

Thedemandfortransportationdroppedfromapprox.2milliontin2005toapprox.1.6milliontin2010.Thisisprimarilyduetoareductioninthequantityofchemicalstransportedandintheimportantsegmentofsandtransportation.

Theverylowvolumeoftransportationofheavygoodsisaccountedforbylarge,bulkyandheavyitemssuchascomponentsfornuclearpowerplants,whichareexportedfromItalytoAmericaandAsia.Onlyaminuteamount ofmineral oil is transported,mainly for use in thermal powerstationsonthePo.

33

figure 18: Map of main inland waterways and ports in Italy

Milano

Piacenza

Bologna

Porto Garibaldi

Source: VNF / Creaprint

ContainersThelogisticscompaniesFluviomarandVeneziaLogisticshavetraditionallyrunrivertransportbetweentheportsofVenice,MantovaandCremona,primarily transporting flour, steel products and heavy goods. In early2011 they,bothsubsidiarycompaniesofVenicePortAuthority,startedthefirstregularcontainerserviceonthePo.12Theinlandnavigationlineconsistsof5containerbarges,eachwithacapacityof60TEU,andonepusherboat.ThisconvoyprovidesaregularservicebetweenVeniceandMantova.

Alongside this container service, Venezia Logistics has also set up aterminalcovering8,500m2intheriverportofMantovaforthehandlingandstorageofcontainersandgoods.

Passenger shippingThere are about 15 river tourismoperatorswith over 50 ships,whichcarryabout150,000passengerseachyear,onthePo.13Theyofferone-weekrivercruisesfromCremonatoVeniceandbackaswellasshortercruiseslastingoneormoredays.

12Source:www.venezialogistics.com 13Source:AiPo

34

OutlookIn the light of the rich industrial network in the north of Italy, inlandshippingstandsagenuinechanceofplayingamuchgreaterroleinfreighttransportationinItalyinthefuturethaniscurrentlythecase.Inadditiontothis,thenorthofItaly(theprovincesofLombardyandVenice)aretheindustrialandeconomicheartofthecountry,accountingforsome31%of the ItalianGDP.Theprospects for the futureofpassengershippingarealsogood.

Forinlandshippingtoattractagreatershareofthemarket,however,itwillrequiregreaterflexibilityandbetterorientationbythecarrierstotheneedsoftheindustrialcustomers.Also,itwillrequirehigherreliabilityofthePoasawaterway.

35

Special Report 2:

Seine-Nord-Europe Canal

36

The connection between the Seine-Oise basin around Paris and theBeneluxregion iscurrentlyensuredby threewaterways: theCanalduNord,theCanaldeSaint-QuentinandtheSambre-OiseCanal.Togetherwith the rail and road links, these canals form the North-South axisbetweentheBeneluxregionandParis.

TheeconomicallyimportantanddenselypopulatedParisianagglomerationareais locatedattheendofthisaxis.InadditiontotheIle-de-France,thereareanotherthreeregionsinthecanal’sdirectcatchmentarea:theNord-PasdeCalais,PicardyandUpperNormandy.The total regionalGDPof thesefourregionsaccounts for39%ofFrance’soverallgrossdomesticproduct.

Atpresent,onlyvesselswithamaximumcarryingcapacityof600tonnesarepermitted to travelon theNorth-Southaxis.Thissituation restrictswater-basedNorth-Southtraffic.Consequently,theconstructionofacanalwhich canhold large,modern freight vesselswith a carrying capacityof several thousand tonnes could significantly increase the volume ofinland shipping in theNorth of France and its bordering regions.TheSeine-NordEuropecanalrepresentsthepriorityprojectNr.30withinthetranseuropeannetwork(TEN).

Due to the fact that thecanal links thenorthernFrenchwaterwaysofthe Seine and theOise with the dense networks in Belgium and theNetherlands, itwill save thewaterwaynetwork in theNorthofFrancefromitsisolatedsituation.

Atthesametime,itjoinstheinlandportsandseaportsofNorthernFrance(LeHavre,Dunkirk,Rouen,Paris)andtheseaportsofBelgiumandtheNetherlandsintoasinglenetwork.Itmustberememberedthatthecanalis located in the hinterland of several important seaports (Rotterdam,Antwerp,Gent,Zeebrugge,Dunkirk,Calais).

The chances of the project being realised in the near future haveimprovedsincetheFrenchPresident,NicolasSarkozy,gavetheprojecthis backing in the spring of 2011. It should be decided in 2012whatcompanyisgrantedthelicenseforoperatingthecanal.Accordingtothecurrentschedule,thecanalissettocommenceoperationseitherin2016or2017.

37

Costs and financingTheSeine-Nord Europe project will cost a total of €4.2 billion. Publicbodies shall provide 50%of the construction costs as initial financingbefore construction starts.The remaining50%will be financedduringconstruction,with €1.67 billion coming fromprivate investors. Severalorganizationsareinvolvedintheinitialfinancing.

InadditiontotheFrenchState,theseincludetheimmediatelyaffectedregions, Nord-Pas de Calais, Picardy, and Ile-de-France as well astherelevantdepartments.TheEuropeanUnion ismakingasignificantcontribution.Lastly, theseaportsofLeHavre,RouenandDunkirkandtheinlandportofParisarealsoparticipatinginthefinancing.

Thequestionofusagechargeshasnotyetbeenfullyclarified.Choosingatoohighvaluefortheusagechargeimpliestheriskofalossofmarketsharesforinlandshipping.

Technical characteristics and navigabilityTheSeine-NordEuropecanalhasthefollowingtechnicalcharacteristics:

Length: 106kmWidth(onthesurface): 54mDraught: 3mClearanceunderbridges: 7mNo.oflocks: 7No.ofmultimodalplatforms: 4No.ofcornquays: 5No.ofindustrialquays: 3

Source: VNF

38

The canal will run parallel to the existing Canal du Nord. This latterwaterwaycanonlyholdvesselswithacarryingcapacityof600tonnes.

TheSeine-Nordcanal,bycontrast,willholdvesselswithacapacityof4,500tonnesandpermitsthree-tieredcontainertransport.TheaveragetravellingtimeonthecanalforalargeRhinevesselisabout18hours.

figure 19: The planned Seine-Nord-Europe Canal

Compiègne

meD/

moc

D/FN

V 0

10

2/6

0 ru

oj à esiM

Canal Seine-Nord Europe

Belgique / België

France

Source: VNF

39

benefits and economic effectsThe social benefits that the Seine-Nord EuropeCanal is expected tobringinthenext45yearsareestimatedatabout€10billion.Outofthis,75%isallocatedtoFrance,15%toBelgium,7%totheNetherlandsand3%toGermany.InFrance,theIle-de-Franceregionstandstoprofitthemost(20%ofthetotalbenefits),followedbytheregionsofNord-PasdeCalaisandPicardy(17%each).

Thesesocialbenefitswillbegeneratedbythefollowingfactors:

• Lowertransportcosts• Availabilityofatransportroutethatissafe,predictableintermsof traveltime,andindependentoftrafficjamsontheroadlinks(logisticsargument)• Structuraleffectsonregionaleconomies(improvementoflocalconditionsofcompaniesclosetothecanal)• Lessenvironmentaldamage• Employmenteffects

Lower transport costsThe existence of a canal which is suitable for vessels with a largercarrying capacity enables transport costs to be reduced by exploitingeconomies of scale when transporting large quantities of containers,agriculturalproducts,coal,sand,soilandconstructionmaterialsetc.

This is illustrated by the cost comparison below: The external costsshownhereindicatetheenvironmentaldamagecausedbythetransport,estimatedinmoneyterms.

Table 3: Cost comparison for transporting one ton over 350 km

Meansoftransport Commercialcosts ExternalcostsInland shipping withhighloadingcapacity

€12/t €3/t

Inland shipping withlowerloadingcapacity

€17/t €4/t

Truck €21/t €12/tRailway €22/t €5/t

Source: VNF

40

Logistics argumentThe Seine Nord Canal will basically run parallel to the existing A1motorwaybetweenParisandLille.ThisA1motorwayisthemosttrafficintensivemotorwayinallofFrance,withanaveragevolumeof14,000trucks per day.At the same time, the capacity of the French railwaysystemisexhausted,atleastforfreighttransportation.A canal that holds vesselwith a large carrying capacitywould relievetrafficandreducethecostsoftrafficjams.Atpresent,thewaterwayonthe North-South axis has amarket share of 3%. By comparison, themarketshareoftheSeine,whichcanholdmuchlargervessels,is13%.

Structural effects on regional economies:The canal will provide French industry and agriculture with easieraccesstotheglobalmarkets.Moreover, itconnectstheeconomicanddemographicheartofFrance, theIle-de-FrancearoundParis,with themostimportantEuropeanseaports.

Displacementeffectsbetweenregionsareexpected.Forinstance,theremaybeapartialdisplacementof logisticsdistributioncentresfromtheBeneluxregiontoFrance.IndividualdistributioncentreswouldtherebymoveclosertoParis.

Less environmental damage:Thankstothecanal, itwillbepossibletoredirect trucktrafficfromtheroadtothewater,whichwouldsaveenormousquantitiesofCO2.ItmustberememberedthattheSeine-NordCanalwillbasicallyrunparalleltotheexistingA1motorwaybetweenParisandLille.

Employment effects:Theemploymenteffectsoftheprojectinclude,ontheonehand,temporaryjobsassociatedwith theconstructionof thecanal. It isestimated that4,500 jobs could be created in this way. Furthermore, about 25,000permanent jobs should be created by the year 2025, in the areas oflogistics,industryandtransport.

41

Transportation forecast A traffic volume on the canal of between 13.5 to 15million tonnes isprojected for 2020.This includes250,000TEUof container transport.Transittrafficwillaccountfor2/3ofthetransportationontheSeine-Nordcanal.

In this context, north-south traffic will be twice as important as thattravelling south-north.This is becauseof the supplyof sand, soil andbuildingmaterialstotheParisianconstructionindustryfromtheNorthofFranceandofcontainersfromtheseaports.

Table 4: Development of shipments through the Seine-Nord Canal on the North-South axis*

Water-based transport on the North-South axis

2020 2050

WithSeine-NordCanal 13.8–14.9milt. 16.3-27.7milt.Currentsituation(withoutSeine-NordCanal) 5.1miltonnes 5.0miltonnes

* with a usage charge of €1.75 / ton Source: VNF

In other words, thanks to the canal, river traffic on the North-Southaxisislikelytotriplebetween2012and2020.Failuretogoaheadwithconstruction of the canal would lead to stagnation of inland shipping,duetothelimitedcapacitiesofthethreeexistingcanals(max.carryingcapacityof600t).

Overhalfoftheadditionaltraffic,amountingtoalmost10milliontonnes,will result from traffic being displaced from roads and railways to thewater.

42

figure 20: Waterway transport on the North-South axis in 2020 (%)

36

2010

34

modal shift from road

modal shift from rail

induced transport

existing transport

Source: VNF

Inadditiontothedisplacedtraffic,thereisfurthertrafficwhichwillemergeforthefirsttimeinresponsetothenewwaterway.Thisinducedtransportwill originate from industrial sectorswhich, up to now, have not usedor havehardlyused thewaterwayasa transport route in the regionsunderconsideration.Theseincludethechemicalindustry,theautomobileindustry,heavygoodsandfertiliser.

Thecategories of goodsforwhichtheSeine-NordCanalhasastrategicsignificanceincludesand,soil,buildingmaterials,agriculturalproducts,andcontainers.

Sands, Earths and building materialsThereisconsiderablepotentialforthetransportofsand,soilandbuildingmaterials,inviewofthehighdemandintheIle-de-France(about30mil.tonnesperyear)andinPicardy(12mil.tonnes)andofthesimultaneouslydwindlingsupplyintheseregions.Thequantitytransportedin2020willbe4.9milliontonnes,whichrepresents34%ofthetotal transportationonthecanal.

Agricultural productsTheSeine-Nordcanalwillpassthroughregionswithsignificantagriculturalproduction.Theopportunityoftransportingagriculturalproductscheaplytotheseaportsisveryfavourabletotheexportopportunitiesofagriculture

43

inPicardyandintheregionofNord-PasdeCalais.

Moreover,thesupplyofrawmaterialstomalthousesandotheragriculturaloperations must also be taken into consideration. The quantity ofagriculturalproductsthatwillbeshippedin2020ispredictedtobe4.2milliontonnes,ascomparedwiththe1.6milliontonnescurrentlybeingtransportedonthewaterwaysoftheNorth-Southaxis.Thiscategoryofgoodswillaccountforabout21%.Mostoftheadditionalshipmentswillbetakenoverfromtheroadtraffic.

ContainersThe canal will exploit the rising trend in maritime container transportforthebenefitofinlandshipping.TherewillaccordinglybeasignificantincreaseincontainertransportbyinlandshippingintheNorthofFrance.Thevolumeofcontainersbeing transported in2020 isexpected tobe250,000TEU.

Anestimated180,000TEU,or72%ofthetotalvolume,willbeaccountedforbytransittraffic.In2020,containers,heavygoodsandautomobileswillbethesecondmostimportantcategoryofgoodsontheSeine-NordCanal,witha25%shareoftheoveralltransportperformance.

Other goods categoriesOther segments that will benefit from the Seine-Nord canal includemineraloilproducts,metaloresandchemicalproducts.About800,000tonnesofmineraloilproductswillbetransportedontheSeine-Nordcanalin2020,whichrepresentsafourfoldincreasecomparedtothesituationwithoutthecanal.Producersoffluidbiofuelswillplayanimportantrolehere.

Thewaterway’smodal split will increase to about 10% on theNorth-Southaxisin2020.InFranceasawhole,themarketshareoftheinlandwaterwayswilldoublefrom3%to6%thankstotheSeine-NordEuropeCanal.

Impact on neighbouring countriesThe Seine-Nord Canal connects the waterways in Belgium with theSeine basin in the North of France. The improvement of the water-based hinterland connections will result in new perspectives for thelargeseaportsinBelgiumandtheNorthofFrance.Consequently,therewillalsobeanincreaseintheamountoftransportonthewaterwaysofBelgiumandtheNetherlands.

44

It is estimated that if the Seine-Nord Canal existed, the transportperformance on Belgium waterways in 2020 would be somewherebetween2.5and2.9billiontkm,ascomparedtoaperformancebetween2and2.2billiontkmwithoutthecanal.

InBelgium,thefreighttransportonroadswouldtherebyloseroughly3to6percentagepointsfromitsmodalsplit.ThetrafficcongestioncausedbytrucksinBelgiumwoulddecrease.AnincreaseintransportperformanceofasimilarorderofmagnitudeisforecastfortheNetherlands.

45

Situation of the demand for transport in autumn 2011

and prospects for 2012

32

Section 1: Situation of the demand for transport in autumn

2011 and prospects for 2012

► 1 - Economic growth: trends and prospects

Followingayearthatwascharacterisedbyrecoveryin2010,theglobaleconomicconditionshaveslumpedduring2011.Individualevents,suchas the catastrophe in Japan and the political developments in NorthAfricahadanegativeimpactoneconomicgrowth.Aboveall,therisingoilpriceleadtoadropinprivateconsumptioninthe27EUcountriesinthe2ndquarter,comparedwiththepreviousyear.

Theproblemsinthebankingsectorandthesovereigndebtcrisisarefarfromoverandaredampingtheglobaleconomyinvariousways.Itisoncemorebeingdemonstratedthatfinancialcrisesareoflongerdurationthanrecessionsoriginatingintherealeconomy.

Sovereign debt in Europe is of great relevance. The governmentcutbackswhichitnecessitatesrestrictbothpublicinvestmentandprivateconsumption,resultinginlessgrowth.Thisprimarilyaffectstheperipheralandsoutherncountriesoftheeurozone.

TheIMFandtheOECD,alongwithvariouseconomicresearchinstitutes,thereforeconcludethattheriskofadownturninthesecondhalfof2011has increased substantially.These institutes have accordingly reviseddownwards their forecast for economic growth and global trade inautumn2011.Weakergrowthisexpectedinmostcountriesfor2012ascomparedwith2010or2011.

In2011,theriseinoilpricesislikelytocontinueatthesamepaceasin2010.Itwillfallslightlyin2012accordingtheestimatesoftheseinstitutes.

46

3247

Table 5: Economic growth for the Rhine states and other countries

Country Rate of change in real GDP (%)2009 2010 2011 2012

Belgium -2,7 2,1 2,4 1,5Germany -5,1 3,6 2,7 1,3France -2,6 1,4 1,7 1,4Netherlands -3,5 1,6 1,6 1,3Switzerland -1,9 2,7 2,1 1,4Eurozone -4,3 1,8 1,6 1,1USA -3,5 3,0 1,5 1,8UK -4,9 1,4 1,1 1,6Japan -6,3 4,0 -0,5 2,3

Source: IMF; Autumn Report 2011

Table 6: Global trade and oil price

Country Rate of change (%)2009 2010 2011 2012

Exports -14,0 14,4 7,1 5,2Import -13,6 13,5 6,9 4,0Oilprice -36,3 27,9 30,6 -3,1

Source: IMF; Autumn Report 2011. Exports and imports concern the developed countries

► 2. Transport demand: trends and prospects

Inthefirstsixmonthsof2011,thetransportvolumeontheRhinewasalmost3.4%lowerthanthesameperiodofthepreviousyear.However,itmustberememberedthatbesidestheweakereconomicdynamics,theaccidentoftheWaldhoftanker inJanuary,thecatastropheinJapaninMarchandthelowwaterlevelsontheRhinealsohadtobecopedwith.Againstthisbackdrop,theresultlooksratherpositive.14

14TheearthquakeandthefloodinJapandidnothaveastronginfluenceonmaritimeshippingandinlandshipping.

32

In theend, theabove-mentionedaccidentmainlydisturbed theUpperandCentralRhine,whereastrafficontheLowerRhinewasnotnegativelyaffected.ThiswouldexplaintherelativelyhighvolumesinJanuary.

figure 21: Transport volume on the Rhine

10000

14000

18000

22000

1 2 3 4 5 6 7 8 9 10 11 12

1.00

0 t

2010

2009

2011

Source: destatis

Inviewoftheeconomicforecastsdescribedabove,theoutlookisnotasbrightasitwassixmonthsago.Theslumpinglobaltrade,forinstance,willprobablydampengrowthinthecontainersegment,ifnoteliminateitaltogether.

Thesteelandcoalsegmentwillalsosufferfromthisslowdown.Ontheotherhand,thereissomelightattheendoftunnelasfarasthetransportdemandformineraloilproductsisconcerned,thankstotheeasingoftheoilpriceexpectedfor2012.

48

3249

2.1 Agricultural and forestry products In the first sixmonths of 2011 this segment profited from rising cornimportsfromtheUSA,whichpassedthroughtheportofRotterdamandwerecarriedonwardsontheRhine.TherisingimportswereduetobelowaverageharvestsinFranceandGermany.

The reception of corn in Rhine ports in Switzerland grew especiallysharply(byapprox.40%inthefirstsixmonths).InFranceandinWallonia,bycontrast, therewasadecline inthissegment,amountingto16%inFranceand24%inWallonia.

2.2 foodstuff and animal fodderInthewakeofareductioninimportdutiesonfeedgrainbytheEU,therewasan increase in theamountof this typeofgoodbeing imported in2011.Forexample,thereceptionoffoodstuffandanimalfodderattheSwissRhineportsgained15%.InFrance,theresultwasroughly10%belowthepreviousyear’s level,while itwasabout5%higherthanthepreviousyearinWallonia.

2.3 Iron and steel industryAlthoughsteelproductioninGermanyhasstabilisedagainatitslongtermlevel,therewasrelativelyweakoretransportontheRhineduringthefirsthalfoftheyear.Onereasonforthiscouldbethelowwaterlevels.ThereislikelytobeanincreaseinoretransportontheRhineforthesecondhalfoftheyear,evenmoresoastheportofRotterdamisexpectingmoreoreimportsduringthisperiod.

InFrance,ontheotherhand,transportoforesandscrapmetalsroseby18%inthefirsthalfoftheyear,andtherewasgrowthof66%inWallonia,aclassicsteelproducingregion.This iscertainlyduetothereopeningofsteelworksaroundLiège.Admittedly,theArcelorMittalsteelcompanyannouncedinoctober2011thefinalclosureofthefurnaceinLiège.Thiswillhaveanegativeimpactonoretransportinthisregioninthelongrun.

Therehasbeenunreservedly positivedevelopment in themetals andmetalproductssector.ThisappliestotheRhineaswelltoFrance(+17%)andWallonia(+12%).

32

2.4 Solid mineral fuelsAltogether,thetrendforcoaltransportontheRhineremainedaroundthesamelevelasthepreviousyear.Duringthesecondquarter, lowwaterlevelstemporarilyhamperedthetransportofcoalontheRhine.

figure 22: Transport of solid mineral fuels on the Rhine

0

500

1000

1500

2000

2500

3000

1 2 3 4 5 6 7 8 9 10 11 12

1.00

0 t

2009

2010

2011

Source: destatis

Roughly 1.8million tonnes of solid fuels were transported on Frenchwaterwaysduringthefirsthalfof2011.Thiscorrespondstoareductionof 24% compared to the 2010, despite the fact that the French steelindustrysawcontinuousgrowthduringthefirstsixmonthsof2011.

It must be taken into account that coal imports from Australia wereinterruptedduringthefirstquarterbecauseofheavyrainfalls.ThecoalturnoveratLeHavresankbyabout45%inthefirsthalfoftheyear.

AndtheimportquantitiesalsosankattheSwissRhineports(by40%).Althoughore transport increasednotablyonWallonianwaterways, thetransportofcoalwasstillat10%belowthehalf-yearresultin2010.

50

3251

2.5 Stone, earth and building materialsPresumably due to the low water levels in the second quarter, thetransport of sand, stone, earth and buildingmaterials developed verymodestlyduringthefirstmonthsoftheyear.ThisappliestotheRhineatleast.

figure 23: Transport of stone, earth and building materials on the Rhine

400

800

1200

1600

2000

2400

2800

3200

3600

4000

1 2 3 4 5 6 7 8 9 10 11 12

1.00

0 t

2009

2010

2011

Source: destatis

On theotherhand, therewasgrowth inareasnotaffectedby the lowwaterlevel.Withavolumeof11.5milliontonnes,about7%morestone,earth,andbuildingmaterialsweretransportedoninFrancethaninthepreviousyear.Almost9milliontonnesweremovedonthewaterwaysofWallonia,equivalenttoariseof14%.

2.6 Chemical products and fertilisersTransport on the Rhine could essentially match the previous year,thoughwithsomeslight losses inJanuary.The latterwerecausedbytheaccident-relatedclosureoftheRhine,becausealargeportionofthechemicalindustryislocatedinregionsontheCentralandUpperRhine.

Vesselscomingfromtheseaportwithpetrochemicalrawmaterialswereunabletoapproachtheselocations,andvesselswithchemicalsonboardcouldnolongerreachtheseaports.Thiswasalsoreflectedbyaslumpin

32

transportperformance(tkm)duringthefirstquarter.

Due to theabsenceof this longstretch (between theARA regionandtheUpperRhine)transportperformanceontheRhinefellmuchfurther(-18%) than transportvolume(-8%)during thefirstquarterof2011. InFrancetheresultwasmoreorlessstable(-2%),inWalloniaitwas6%lowerthanthepreviousyear.

InviewofthecontinuedstrengthoftheGermanchemicalindustry,thetrendshouldrisefortherestoftheyear.TheGermanChemicalIndustryAssociation (VCI) assumes that chemical production for the whole of2011willincreaseby5%comparedtothepreviousyear.

ThetransportoffertiliserontheRhinedevelopedverypositively.Duringthe first four months, there was 24% more transported than in thepreviousyear.Asinthetwopreviousyears,Marchwasthebestmonth.ThisseasonalpeakinMarchmaybeconnectedwiththesowingcycleinagriculture.Therewasan increaseof20% in the fertilisersector inWallonia,butadecreaseof11%inFrance.

2.7 Mineral Oil productsTransportlevelswerecomparabletothoseofthepreviousyear.Inthelightofpricehikesandfullstores,endconsumersonlypurchasedabsolutelynecessaryheatingoil.InFrancetheresultwas10%belowthepreviousyear.

Wallonia saw an increase of 2%. This region of Belgium, incidentally,has recordedasteady rise inmineraloilproducts forseveralyears, incontrasttoGermanyandtheRhineregion,wherethetransportofmineraloilproductshasseenadownwardtrend.

The transportofmineraloil productswill probablyseesomegrowth in2012.Thisisexplainedbytheexpectationofeconomicresearchers(cf.IMF)thatoilpriceswillstoprisingforawhilein2012.Thiswillresultfromsluggisheconomicgrowthnextyear.

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2.8 ContainersThe Container segment was hit particularly badly by the “Waldhof”accident.Thisisduetothefactthatcontainertransportisascheduledtransport,wheredelayscancausesignificanteconomicdamages.Fromthe followinggraph, the fall-off inJanuarycanbeclearly traced to theclosureoftheRhine.

For the first time on German waterways, over 200,000 TEU weretransported inMarch,witha totalweightof justover2million tonnes.However,thisall-time-recordalsoreflectscatch-up-effectsregardingtheclosureoftheRhineinJanuary.

Theabovementionedfiguresincludeboththeemptycontainersandthetareweightofthecontainers.Ifweleaveouttheemptycontainers,andonly include thenetweight (without the tareweightof thecontainers),asimilarrelationshipemerges,namelyanaverageweightofaround10tonnesperTEU.15

TheillustrationshowsthattheRhinestillaccountsforalmost100%ofthetotalcontainer transportonGermanwaterways.Thisstructuralpicturewillprobablychangeonlyveryslowlyinfuture.

figure 24: Container transport on the Rhine and in Germany

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-10

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-10

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15CCNRcalculationbasedondatafromdestatis

32

The Swiss Rhine ports recorded a reduction of 5% in their containerturnover during the first six months. It was above container exportswhichdeclined (-18%).Theslump inexports isaconsequenceof theappreciationof theSwissFrancagainst theEuro.The currency trenddamagedSwissexportsfortheentirefirsthalfoftheyear.

► 3. Market development for passenger transport

Inthelastyear,thenumberoftouristswhoundertookarivercruiseonaEuropeanriverrosebyabout10%.Bycomparison,maritimecruisesgrewbytwiceasmuch(+20%).

However,asurveyconducted inGermany lastyearshowedthat therestillexistsaconsiderablepotentialdemandforrivercruiseswhichhasyettobetapped.Outofthepersonsunder30yearsofagedwhowereasked,42%couldimagingbookingarivercruise.Inthecaseofthe50to58yearolds,thefigurewas48percent.Onlyeightpercentofthesurveyparticipantshadactuallytravelledbyriveralready.Accordingly,demandisexpectedtogrowby10%perannuminthenextfewyears.

It is worth noting that the river cruise is becoming more and moredifferentiated as a product, both in terms of its thematic focus and ofthetravelling time.Nowadays, thethematic focusofarivercruisecanrangefromspecialtripsforoperafanstotripsforhobbycooksorpeopleinterestedinarchaeology.Forthesespecialtrips,highermarginscanbeobtained.However,theydonothaveahighshareofthetotalamountofvoyages.

In termsof the time,amoveaway from theclassic travelseasoncanbe observed.There is now a travel programme forWinter 2011/2012ontheRhine,whichincludes,forexample,a6-dayadventtrip,a7-dayChristmastrip,andan8-dayNewYear’strip.Theextensionoftheseasonhelpstodrivedownthehighcostsofthenewships,bydistributingthetotalfixedcoststoahighernumberofsalesdays.

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Section 2:Relationship

between supply and demand

I. fleet Development: New ships

► 1. Dry cargo shippingAslumpinthedevelopmentofnewlybuiltshipsindrycargoshippingcanbedetected,atleastinthefirstninemonthsof2011.

UpuntiltheendofSeptember2011,12newships,withatotaltonnageofabout31,000tonnes,cameontothemarket.Tenoftheseweremotorisedcargovesselsandtwowerepushedbarges.Themotorisedcargovesselshadanaveragecapacityof2,570tonnes.

Bycontrast, for thewholeof2010,48newshipswitha total tonnageof110,000tonneswererecorded.Assumingthatthereisnosignificantsurgeduringthefourthquarter,thereislikelytobealowervolumeofnewvesselsin2011,whencomparedwiththepreviousyear.

Oneoftheimportantfactorshereisthefactthatthewaveofnewvesselsin 2010 was still essentially produced by orders placed in 2008, andthereforealateresultofthestrongeconomyinthatyear.Likewise,theweakshipbuildingactivityinthecurrentyearreflectsalowdemandfortransportin2009,restrictivelendingpracticesinthebankingsector,anduncertaintyaboutthefutureoftheeconomy.

► 2. Tanker shippingUpuntiltheendofSeptember,28newtankerswererecorded,withatotalcapacityofabout94,000tonnes.Justasinthedrycargoshippingsector,thisindicatesaslumpinshipbuildingactivityrelativetothepreviousyear.

A further 82 new ships, with a total tonnage of over 250,000 tonnes,cameontothemarketinthewholeof2010.Therewasalsoaveryhighlevelofactivity in2009,withover200,000 tonnes (almost10%of thecapacityoftheentirefleet).

Takingintoaccountallthedouble-hullvesselsnewlybuiltsince1990aswellas theconversionsofsingle-hull intodouble-hull vessels,wecandeterminethat65-70%oftankersaredouble-hull.

32

It ought to be mentioned in this connection that some of the majoractors in themarket (mineral oil companies)havealreadyannouncedtheir intention to end the use of single-hull vessels for transport from2012to2015.Itisconceivablethatotherswillfollowsuit.Tothisextent,theimportantyearsof2016and2019specifiedintheADNregulationsshouldratherbeseenasahorizonthanasaturningpoint.

► 3. Passenger shippingIn thebooming rivercruisesector, twelvenewvesselscameonto themarketduring2011.Theaveragecapacityof thenewships isaround180beds.

The number of new vessels in 2011 thus exceeds even the rate ofshipbuilding for themaritimepassenger transportsegment. Itcanalsobeseenfromtheorderbooksthatforthenextyear2012,evensixteennewrivercruisevesselscanbeexpected.

Itmaybestatedthatthevesselsaregettinglongerallthetime,inordertodistributethehighfixedcostsovermorebeds–andthushigherrevenue.However, thereare limits to futureexpansionsof thedimensions.Forinstance,thevesseldimensionshavetobeorientedtotheexistinglockdimensionsandtheclearanceunderbridges.

Intheday-tripsector,threenewvesselscameontothemarketduringthefirstthreequartersoftheyear,twofortheRhineandoneforday-tripsintheNetherlands.

II. Capacity utilisation and its development

As already described, deployable transport capacities have increasedconsiderablyoverthelastthreeyears,despitetheeconomiccrisis.Inthesametimespan,thetransportquantitieshaveonceagainapproachedpre-crisislevels.Thefreightrateshaverisenagainindrycargoshipping.Thisgrowthislargelyduetothewaterconditionshowever.Itthereforemakessenseinthiscontexttoanalysethedegreeofutilizationofthefleets(drycargofleetandtankerfleet)anditsdevelopmentoverrecentyears.

Inordertocalculatethedegreeofutilisation,boththeimpactofwaterconditionsandseasonaleffectsondemandinthevariouscategoriesofgoodsaretakenintoaccount.Allowancehasalsobeenmadeforthefactthattheproductivityofthevesselsdiffersinaccordancewiththeirsizeandtypeofoperation.

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►1. Dry cargo shippingIn2011,therateofvesselutilisationforthevesselcategoriesindrycargoshippingwashigherthanthatin2010.Itwas,however,significantlylowerthanthefiguresfor2007and2009,asshownbythefollowinggraph.

figure 25: Development of capacity utilisation in dry cargo shipping

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2004 2005 2006 2007 2008 2009 2010

transport demand transport supply capacity utilisation

Source: NEA and ZKR Secretariat

Thisongoinglowcapacityutilisationconfirmsthestillhighlyunsatisfactoryproduction and therefore profit situation of the shipping industry.As aresultoftheexpansionofthedrycargofleet,theutilisationofcapacitiesdidnotincreasetothesamedegreeasdemand.Comparedwiththetimespan2004-2008,capacityutilisationismuchlower.

However,theresultsvaryforthedifferentvesselsizes.Forinstance,itcanbeshownthatthedegreeofutilizationofthesmallerunits(carryingcapacity under 1,000 tonnes) deteriorated slightly from2009 to 2010.Bycontrast, itclearlyimprovedforthelargerunits(over1,000tonnescarryingcapacity).Thisisespeciallynoticeableforvesselswithacapacityofover2,000tonnes.

Smallerandlargerunitsappeartobedevelopingatvaryingrates.Theutilisation of larger units improved somewhat in 2010, which can beexplainedbygenerallymorefavourablewaterconditionsaswellasbythefactthatthelargervesselswhichhadbeenintroducedtothemarketinpreviousyearswereinfulloperationin2010.

32

If the deployment of the vessels is broken down by size and by goodscategories,thefollowingtrendclearlyemerges:Theshareofthetotaltransportaccountedforbythelargerunits(>2,500tonnes)isincreasinginallsegments.Generally,capacityutilisationwasunabletorecovertothesameextentasdemandin2010,duetotheintroductionofnumerousnewly-builtshipsbetween2008and2010.

Inordertoreachadegreeofutilisationsimilartothatbeforethecrisis,thetransportdemandfordrycargoshippingasawholewouldhavetobeconsiderablyhigherthanthepre-crisislevel.Accordingtoprojections,thisisnotexpectedtohappenintheshortterm.Thesefindingsindicatetheexistenceofanover-capacityatpresent.

►2. Tanker shippingIntankershipping–asaresultoftheeverincreasingtransportsupply– the degree of utilisation of the fleet deteriorated in 2010. In fact,numerousnewdouble-hullvesselsweredeployedaspartoftheongoingrestructuringofthefleet.Theslightriseintransportdemandwasunabletocompensateforthissituation.

Iftheutilisationisbrokendownbyvesselsize,wefindthatthesmallestunitsbelow400tonnesandthelargestunitsover2,000tonneshavetheworstutilisationrates.Thecategoryofvesselsabove2,500tonnesisreceivingthelargestshareofthenewtonnage,andsingle-hullvesselsinthemedium-sizedrangearestilloccupyingacompetitiveshareofthemarket.

figure 26: Development of capacity utilisation in tanker shipping

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2004 2005 2006 2007 2008 2009 2010

transport demand

transport supply

capacity utilisation

Source: NEA and ZKR Secretariat

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The supply side of the tanker shipping market needs to be viewedagainst the backdrop of fleet restructuring, from single-hull to double-hull vessels. Investments in new tankers are attributedmuchmore tothisdevelopmentthantoanychangesindemand.Asubstantialnumberofdouble-hulltankersbeganoperatingin2010,whichledtonoticeableovercapacity as demand continued at more or less the same level.Utilisationhascontinuedtolagbehindthelevelseeninpreviousyears.Onaccount of these factors, the rate atwhich new tankerswent intooperationsloweddownconsiderablyin2010.

Thisraisesthequestionastothenumberofnewdouble-hulltankersstillrequiredinordertomeetfuturedemand(i.e.intheperiodfollowingexpiryofthetransitionperiodsspecifiedbytheADN).Noquantitativeevaluationofthisissuewasdoneaspartofthecurrentmarketobservationreport.However,wedowishtopresentseveralthoughtsonthematter.

Thesluggishincreaseinfreightrateswouldindicatethatthemarketisconfronted with overcapacity.Assuming that a double-hull tanker hasthesamenominalcapacityasasingle-hullvessel,onlyaportionofthesingle-hulls still in servicewouldneed tobe replacedbydouble-hulls.Thisleadstothequestionastotherateatwhichthesingle-hulltankerscanbetakenfromthemarket.Acertainnumberofthesevesselswerebuiltrecently,sothatthisportionofthesingle-hullfleetcouldremaininoperationuntiltheendofthefinalADNtransitionperiod(2019).

Themore dated share of the single-hull fleet, on the other hand, willexperience difficulties when having any repairs performed which arerequired forextensionof the inlandnavigation certificate.The level oftheinvestmentsrequired,thesituationinthefinancialmarketsandtheavailability of necessary financing represent in this context the mainobstaclestomakingtherequired investmentsprofitably(theregulationrequirestheinvestmentstobemadeby2019atthelatest).

Inviewofthepolicypursuedbyanumberofoilcompaniestonotallowanymoresingle-hulltankersevenbeforetheendofthetransitionperiods,theactualtimeframedictatedbythemarketislikelytobeconsiderablymorelimited.Consequently,itcannotberuledoutthataportionofthistankercapacitywilldisappearfromthemarketinthecourseofaradicalrestructuringprocess.

32

Section 3: Situation of inland navigation companies

I. Development of freight rates and business activity

► 1. Dry cargo shippingThe freight rateshavereacheda relativelyhigh levelby themiddleof2011.Indrycargoshippingthepre-crisislevelhasbeenexceededagain.However,therise infreightratesisonlypartiallycausedbythehigherdemand.Infact,theverylowwaterlevelduringthefirstmonthsof2011playedalargerole.

The start of 2010 was roughly speaking the turning point when thedemandfortransportbegantorecover.Thefreightratesrosefromthistimeonwards,asshowninfollowinggraph.

figure 27: freight rates in dry cargo shipping

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2007-4

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Therisewasnotuniformfromaregionalpointofview.ThereweregreaterincreasesintripsfromRotterdamtotheLowerRhineasintripstotheCentralandUpperRhine.

Thetransportprices,whichhavebeenrisingsinceearly2010,alongwiththesimultaneousincreaseintransportquantities,haveagainsignificantlyimprovedthecommercialreturnsindrycargoshipping.Aftereconomicactivityincreasedforfourconsecutivequarters,adeclinewasrecordedagain inthefirstquarterof2011.However, thiswasprimarilyowingtoseasonalfactors(coldwinter,temporarilyfallingfreightrates).

Thefactthatfreightratesarehigheragainshould leadtoariseinthesecondquartercomparedtothepreviousquarter.

figure 28: Economic activity in dry cargo shipping

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250

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x 10

0 =

aver

age

2004

economic activity

water level

Source: Calculations by the CCNR Secretariat

► 2. Tanker shippingIn the tanker shippingmarket, the freight rates also rose for the firsthalfoftheyear,butslightlylesssothanindrycargoshipping.Thisisaconsequenceoftheover-capacitiesalreadyexistingonthemarket.

32

figure 29: freight rates in tanker shipping

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Source: Rabobank / NEA Consulting

The falling water level made an important contribution to the rise intransportprices.During the2ndquarter, thewater levelwas relativelyhigh,eveninacomparisonofseveralyears.Inthegasoilmarket,freightratesreachedahigherlevelthanin2008,2009and2010.However,inthe3rdquarter,therewasadecrease.

figure 30: Development of gas oil freight rates on the Rhine over several years

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1 2 3 4 5 6 7 8 9 10 11 12

€/pm

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Against the backdrop of attractive freight rates and a stable transportdemandcomparedtothepreviousyear,theeconomicactivity(calculatedasaproductoffreightratesandtransportquantities)forthefirstquarterof2011washigher than in thesamequarterof thepreviousyear,butlowerthaninthepreviousquarter,Q4/2010.

Thisisexplainedamongotherthingsbythefactthateconomicactivityandthefreightratesaregenerallyhighestinthefourthquarter,asshownbyacomparisonofseveralyears.

figure 31: Economic activity in tanker shipping

-30

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2004

economic activity

water level

Source: Calculations by the CCNR Secretariat

Duringthefirstsixmonthsof2011,tankershippingwasconfrontedwithanotherevent,followinguponthe“Waldhof”disaster:

The insolvency of a major German freight company from Hamburgwasannouncedon21February.Thiscompanyhadroughly100inlandtankersundercontractandamarketshareof10%ofEuropeaninlandtankershipping.Asaconsequence,theaffectedowneroperatorshadtoconcludenewcontractsofaffreightment.Inmanycases,higherfreightrateswererealisedintheprocess,whichwasanothercontributingfactorto the riseof theaverage freight rate, apart from the lowwater level.However, this insolvencydoesnotstand indirect relationshipwith thegeneraleconomicdevelopment.

32

II. Cost development

1. General cost structure and development Whenitcomestothecostsofinlandshipping,asinotherbranchesofindustry,itisnecessarytodistinguishbetweenfixedandvariablecosts.Mostof thecosts incurredbytheoperationof inlandvesselsarefixedcosts, such as labour costs, financing expenses, depreciation andinsurancecosts.Generallyspeaking,onlythefuelcostscanbetreatedasvariablecosts.

The cost structure also dependson the typeof vessel and the route:theproportionof the costsaccounted forby fuel costs increaseswiththe length of the route. For older vessels the proportion of the costsaccountedforbythecapitalcostsis lowerthanfornewvessels,sincethefinancingofoldervesselshaveoftenbeencompletedalready,ortheymayevenalreadyhavebeenwrittenoffcompletely.

Asageneral trend, it issafe tosay that forshort journeys, the labourcostsandthecapitalcostsarethetwomostimportantcomponents.Forlongjourneys,ontheotherhand,thefuelcostsarethemostimportantcostcategory,slightlyaheadofthelabourcosts.16

figure 32: Cost development for inland shipping by quarter

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1552007-4

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dry cargo

liquid cargo

Source: Rabobank/NEA

16Cf.thereport‘Kostenstructuurtankvaart2010enraming2011’bytheNEA(publishedinJanuary2011).

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2. fuel costsThedevelopmentofthefuelpricesforinlandshippingisbasedontheoilprice.Theoilpricehasrisensignificantlyafterhavingdroppedtoaverylowlevelinearly2009.Thisrisingtrendwasacceleratedfurtherbytherelativelyrapideconomicrecoveryin2010.

figure 33: Development of gas prices and the price of crude oil futures

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0 l

ICE Brent Crude Oil Future

CBRB gasoil price

Source: ICE Future Exchange, London; CBRB

Overall,thepriceofgasoilrosebysome20%betweenAugust2010andAugust2011.Bycomparison,betweenthefirsthalfof2010andthefirsthalfof2011thepricerosebyanamazing28%.

Sincethe1stofJanuary2011,shippingcompanieshavebeenrequiredtopayadisposalchargeof€7.50per1,000lofgasoil.Thischargeisusedtofinancethedisposalofwasteoilandgreasefromshippingoperations.17

Furthermore,theuseoflow-sulphurfuelhasbeenmandatoryoninlandwaterways in the EU since the 1st of January this year. There is noformaltransitionperiod,themaximumsulphurcontentofthenewfuelis10mg/kg.According to industry experts the new fuel is slightly moreexpensive than the old fuel and results in marginally higher fuelconsumption.

17Cf.Article3.01oftheCCNRConventionontheCollection,DischargeandReceptionofWastearisingfromRhineandInlandNavigation.

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3. labour costsTogetanideaofthetrendincostsforlabourorpersonnel,wereferredtothepayscalesfortheNetherlands,lookingatthewagesineverybranchoftheinlandshippingindustry(drycargo,tankerandpushtugshipping)as well as the various ranks (captain, helmsman, able seaman andsailor).Thisdatashowsthattheofficialwageslaiddowninthecollectiveagreementrosebyabout2%acrosstheboardbetweenmid-2010andmid-2011.

However,thewagesactuallypaidtocaptainswereprobablysignificantlyhigherthanthewageslaiddowninthecollectiveagreement.Suchextrapayments,whicharenotgovernedby thecollectiveagreement, reflectthesupplyanddemandonthejobmarketforcaptains.Itwasrevealedby surveys conducted in the Dutch shipping industry by the researchinstituteNEA.18Theactual development of labour costs thus probablyexceeded2%.

Therateof inflation in theNetherlandsrosefrom1.6%inJuly2010to2.0%inJanuary2011,beforereaching2.6%inJuly2011.19TheaveragerateofinflationfortheperiodJuly2010toJuly2011was1.9%.Thewageincreases– if you take theofficial increase inwages laiddown in thecollectiveagreement–intheperiod2010-2011wasthusinlinewiththeriseinconsumerprices,meaningthatrealincomeforemployeesintheinlandshippingindustryremainedstable.

18Cf.:NEA(2011),KostenstructuurTankvaart2010enraming2011;p.11.19Source:CBS

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4. Capital costsMostloanstakenouttofinancenewvesselsareforatermofsomewherebetween7and10years,withafixedinterestrateovertheentiretermoftheloaninmostcases.Ifwelookatthegenerallevelofinterestratesforloansgrantedtoindividualenterprisesandpartnerships,wefindthefollowing:

•Intheperiodfrom2008until2009interestrateswentdownasaresultofthecutsinbaseratesmadebytheEuropeanCentralBankinresponsetotheglobalfinancialandeconomiccrisis

•Interestratesthenremainedrelativelystableupuntiltheendof2010•Inearly2011interestratesroseastheECBraisedbaserates.

Surveysofshippingbankssuggestthatthistrendininterestratesalsobasically applies to loan agreements for ship financing in the inlandshippingindustry.

figure 34: Development in interest rates for loans granted to indi-vidual enterprises and unincorporated partnerships*

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2008-7

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2011-1

2011-3

2011-5%

Source: ECB *For loans with a term of between one and 5 years; with a fixed interest rate

Theaverageinterestratefor loansgrantedtoGermaninlandshippingcompanies (newbuilds) in recentyearswasbetween4-5% for5yearloans.For10yearloansitwasslightlyhigherandfluctuatedbetween5and6%.20Inthelightofthetrendininterestratesshownabove,aslightincreaseinfinancingcostshasbeenseensincethebeginningof2011.20Source:SurveyofshippingbanksconductedbytheCCNRSecretariat

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The economic crisis brought about a fundamental change in creditconditions.Before2008itwasnotunusualtohaveadebtcomponentashighas80to85%–especiallyintheNetherlands.Now,however,DutchandGermanbanks requireamuchhigherequity ratio.ThemaximumdebtcomponentacceptedbyDutchbanksforfinancingnewbuildshasdroppedtoabout70%.21

Germanbankshavereportedstronggrowthinthedemandforcreditforfinancingnewships(approx.30%)for2010.Thisgrowthissolelyduetothedynamicdevelopmentofthetankermarket,whilstdemandforcreditinthedrycargoshippingindustryhasstagnated.

Thecapitalcostsalso includedepreciation, inotherwords thedeclinein the value of capital equipment (the ships) over time. The level ofdepreciationdependson thevalueof theshipand itsworking life.Asthevalueofshipsincreases–inparticularduetotherisingnumberofhigh-costdouble-hulltankers–thedepreciationrate,andthusthecapitalcosts,increases,assumingthattheworkingliferemainsconstant.

5. Insurance costsBefore describing the development of insurance premiums for shipinsurance, we will first take a brief look at the structure of the shipinsurancemarket. Of the various insurance products available to theinlandshippingindustry,threeplayadominantroleinpractice:

1) Protection & Indemnity (P&I)ThisisaformofliabilityinsuranceofferedbyP&IClubs.Thisinsuranceprovidesthird-partyliabilityinsurancecovertoshipoperators,whichcaninclude:

•Deathandinjuryofpassengersorthirdparties •Pollutionorcontaminationofwater,airorland •Lossofordamagetotheload

Forshippingcompaniesthattransportdangerousgoods(ADN),thisinsuranceisstipulatedasmandatorybythecargoshippers(chemicalcompaniesetc.).Seriousdamagecanresult fromthe lossofcargowhen carrying hazardous substances. It is often stipulated fortransportingdrygoods,too,however.

21Source:Dutchinlandshippingconsultancy

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For companies involved in dry cargo shipping the cost of P&Iinsurance is generally lower than for tanker shipping companies,since the potential damage that may result from an accident issignificantlyhigherforthelatter,andbecausethetankersareusuallymoreexpensive.

2) Hull & Machinery insurance (together with engine insurance)Hull&machineryinsuranceprovidesprotectionfortheshipagainsttherisksofnavigationsuchasstorms,stranding,sinking,accidents,fireandexplosions.Intheeventofloss,theinsuredcompanyreceivesthesalvagecosts. InGermanyaseparate insurancepolicy isoftentakenoutforshipengines,elsewheretheyareoftenincludedinthehull&machineryinsurance.Thelatterisoftenrequiredbybanksasaprerequisiteforgrantingaloantofinanceaship.

Theinsurancepremiumpayableforhull&machineryinsurancevarieswidelyanddependsonanumberofdifferentfactors,including:

•Vesseltype •Vesselsize •Valueofthevessel •Customer’sclaimshistory •Enginedetails(primarilyitspowerinkW) andtheyeartheenginewasbuilt

3) loss-of-Hire Isaninsuranceagainstalossofincome,whichtakeseffectwhen,forwhateverreason,theshipis“outofhire”.22

LossofHire insurancecan, forexample, cover the lossof incomeresulting from the ship being repaired due to a Hull & Machineryclaim, the income in thiscontextbeing freight income.The insuredreceivesadailyamount,uptoanagreedmaximum.

Premium developmentOverall, the surveys conducted by Dutch and German shippingunderwritersindicatethatinsurancepremiumshaveremainedrelativelystable.Therearevariationsamongthedifferenttypesofinsurancecover,however:

22Heuer’isanoldGermanwordforthewagesearnedbyaseamanorsailor(similartotheword‘anheuern’).

32

•Thereisaslightdownwardstrendforhull&machineryinsurance.Thisslightdownwardstrendcanbeputdowntogreatercompetitionbetweenarisingnumberofinsurers.

• P&I insurance has remained fairly stable, but there is upwardspressureresultingfromtheincreasingnumberofclaimsandrisingreinsurancepremiums.Inthelongterm,P&Iinsurancepremiumscould well rise due to the rising maximum limits of indemnity(increasingliabilitylimits).23

6. Maintenance costsThe level of maintenance costs is dependent on steel prices, on theone hand, and on the capacity utilisation of shipyards, on the other.Steel prices (average price of themain types of steel) rose by about37%betweenthestartof2010andthemiddleof2011,whichentailsanincreaseinmaintenancecosts.

Therateofinflationacceleratedtoo.Thisalsoaffectsthemaintenancecosts,asrepaircostsincreasewithrisingpricesforenergyandelectricity.InAugust2011,theannualrateofpriceincreasesinthe27EUcountrieswas2.5%,asignificantjumpfromAugust2010(1.6%),mainlyduetothehigherenergyprices.

figure 35: Development of steel prices (index)

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06/03/2010

06/05/2010

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06/05/2011

Source: E.L.F. Hallen- und Maschinenbau

23ThelegalprovisionsregardingthemaximumliabilityarelaiddownintheStrasbourgConventionontheLimitationofLiabilityofOwnersofInlandNavigationVessels(CLNI).

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7. Passenger shippingThecoststructureofpassengershippingissomewhatdifferentfromthatof freight shipping.On theonehand,becausepassenger vesselsareonaverageconsiderablymoreexpensivethanfreightvessels.Atypicalprice for a passenger vessel is roughly €15 million and therefore onaverageabout2.5to3timesmoreexpensivethananewfreightvessel.These higher procurement costs entail higher capital costs (interest,depreciation).

Ontheotherhand,theoperationofpassengervesselsisconsiderablymorelabourintensivethanfreightvessels.Atypicalrivercruiseshipwith150passengershasfrom6to8nauticalemployeesandaboutanother30employeesinthehoteldepartment.Inthecontextoftheinsurancecosts,P&Iinsuranceplaysanespeciallyimportantrole.Itcoversriskstothehealthandlifeofthepassengers.

The amount of theP&I premiumdepends among other things on thetravellers’countryoforigin.ThepresenceofUSAmericanpassengersresultsinhigherpremiumsfortheshippingcompany:premiumsareatleast doubled in this case. The reason for this is the distinct “lawsuitculture” in theUS, togetherwithahighoccurrenceof legal insurancecover.

The cost of comprehensive insurance increaseswith the value of thevessel.Forinstance,theannualpremiumforarivercruiseshipwithaninsurance value of €6million is approximately €40,000, whereas it isalready€90,000foravesselwithaninsurancevalueof€14million.

Astatementofcostsforatypicalrivercruiseshipispresentedbelow.Ashipwith150bedsisconsidered,whichhasanoperationaltimeof210daysperyear(duringtheseasonfromApriltoOctober).Mostrivercruiseshipsoperatebetween210and240daysperyear.

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Table 7: Statement of costs for a typical river cruise ship (costs per year, model calculation)

Operating costs €2millionOf which:Labourcosts/nauticaldepartment €0.3millionLabourcosts/hoteldepartment €0.5millionInsurancecosts €0.12millionOtheroperatingcosts(fuel,etc.) €1.1million

Capital costs €1.5million

Total costs € 3.5 million

Source: River Advice Basel

As far as the rise in fuel prices is concerned, passenger vessels areaffectedinthesamewayasfreightvessels.Thisalsoappliestoinsurance,maintenance and capital costs. There are differences with regard tolabourcosts,however,astherecruitmentofhotelstaffisnotconfrontedwiththesamedifficultieswhichaffecttherecruitmentofqualifiednauticalpersonnel.

Conclusion

Thetwomostimportantcostdriversininlandshippingatpresent,andfortheforeseeablefuture,arefuelcostsandlabourcosts.

Theriseingasoilpricesisduetotheincreasingoilpriceandissettocontinue. Itcanbecushionedonly temporarilyusingfuturescontracts.Moreover,furthercostincreasescanbeexpectedduetotheintroductionofenvironmentallyfriendlyfuels.

Labour costs shall rise in themedium-term as a consequence of theshortage of personnel in the inland shipping industry.At present, theemployment of personnel from countries on theDanube is still facingbureaucratichurdles,leadingtoasituationinwhichshippingcompaniesarefindingtoofewqualifiedworkersonthemarket.

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SUMMARY AND OUTlOOK

Thedifficulteconomicsituationthatwasimminentbytheendoflastyearhascontinuedandbecomeevenmorecriticalin2011,sothatthegrowthforecastsforseveralcountrieshavehadtobereviseddownward.Whilethe prospects for the next few years have consequently become lessfavourable,2011willprobablycometobejudgedasatisfactoryyear,atleast fordrycargoshipping.This judgementneeds tobestatedmoreprecisely,since thesectorhasnotyet returned to theconditionsseenpriortothecrisis.Still,anincreaseinfreightratescouldbeobservedforthedrycargosector,eventhoughthe increasewastobeattributed inparttowaterconditions.

Nonetheless,astrongupwardstrendwasseenforthedrycargomarketonthewhole.Thissituationisalsoreflectedintheimprovedleveloffleetutilisation.Furthergrowth is required,however, inorder to reduce theovercapacityavailableonthemarketinthewakeofthecrisis.

Tankershipping, incontrast, is inanentirelydifferentposition.Growthrates for transport demandwill increase only slightly in the short andmedium termanddepend largelyondevelopments in the transportofchemicalproducts.Therecontinuestobenoticeableovercapacityinthetankershippingmarket.Overcapacityaccounts for the fact that freightratesinthetankershippingsectorincreasedonlyslightlyincomparisonwiththedrycargosector.

Thetankerfleetisinthemidstofacriticalphasewithintherestructuringprocess.Ontheonehand,thesupplyofnewdouble-hulltankersmeetsthe requirementsof regulatorsand cargo shippers,whileat the sametimetherateatwhichsingle-hullsarebeingwithdrawnfromthemarkethassloweddown.Appropriatemarketframeworkconditionsarerequiredinordertoprofitablyoperatethenewdouble-hulltankers.Despitecurrentovercapacity,additional investmentsarenecessary in the long term inordertosucceedinmeetingfuturedemand;specificallyintheyearsafterthetransitionperiodsexpire(bytheendof2018).

Eventhough2008canbeconsideredanabove-averageyearfortankershipping on account of the high freight rates, the losses in turnoverexperienced since have weakened the financial situation of manycompanies.Anumberofmarketparticipantshaveannouncedinitiativestonolongeremploysingle-hulltankersfortheirtransports.Thisiscertaintoacceleratefloatrestructuring,aswilltheimpactfeltfromtheexpiryand

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non-renewalof inlandnavigationcertificates.Yet itremainstobeseenwhetherthesemeasuresaresufficienttoensureabalancedrateofoldhullcapacitiesbeingwithdrawnfromthemarketandadditionaldouble-hulltankersenteringintoservice.

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Annex New Constructions

Ship type2008 2009 2010

Number T kW Anzahl T kW Anzahl T kW

Motor cargo vessels 68 226750 92944 72 237668 114002 24 73000 36000

Pushed cargo barges 38 70206 44 97461 24 37000 0

Total 106 297010 92944 116 335129 114002 48 110000 36000

Motor tankers 47 117500 31870 87 228020 72778 79 250000 42000

Pushed tanker barges 0 0 0 0 3 5230

Total 47 117500 31870 87 228020 72778 82 255230 42000

Pusher boats 3 1684 6 11188 2 1368

Tug boats 3 0 6 1697 0 0

Total 6 1684 12 12885 2 1368

Cabin ships 3 5092 9 3 2871

Excursion ships 6 5092 1 4 2828

Total 9 8184 10 0 7 5699

Ship type2011 (End of September) Total since 2008

Number T kW Anzahl T kW

Motor cargo vessels 10 25704 12430 174 563122 255376

Pushed cargo barges 2 4983 108 209704 0

Total 12 30687 12430 282 772826 255376

Motor tankers 28 94000 32080 241 674701 178728

Pushed tanker barges 0 0 3 5230 0

Total 28 94000 32080 244 679931 178728

Pusher boats 1 1268 12 0 15508

Tug boats 0 0 9 0 1697

Total 1 1268 21 0 17205

Cabin ships 7 3682 22 0 11645

Excursion ships 3 1658 14 0 7578

Total 10 5340 36 0 19223

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GlOSSARY

20-foot Equivalent Units (TEUs):Unitofmeasurementforregisteringcontainersaccordingtotheirdimensionsandforthedescriptionofthecapacityofcontainervesselsandterminals.OneISO20-footcontainer(20feetlongand8feetwide)correspondsto1TEU.

ARA ports:AbbreviationforthethreemajorEuropeanportsofAmsterdam,RotterdamandAntwerp.

Demand of transport:demandcomingfromtheindustrytotheshippingindustryfortransportationofgoods.IscalculatedinTonsandTKM.

Downstream navigation:navigationdownriver

Downstream:Referstothepartofaninlandwaterwaylocatedbetweenagivenpointandtheembouchureorconfluence.

Draught:Heightoftheimmergedpartofavessel;thusdraughtaffectstheloadinglevel.

Dry hold:Usedforthetransportofdrycargo.

Econometric ratio:Estimatedratiobetweentwoormorevalues(e.g.productionofsteel,transportoninlandwaterways,importsofcoal,etc.)onthebasisofstatisticaldata,usingelectroniccalculationprocedures.Thisestimateisusedinmakingforecasts.

Electric steel:Electricsteelisproducedbymeltingdownscrapmetalusingelectricarctechnology.

freight:Referstogoodsbeingtransportedorthepriceoftransport.

Handling:Trans-shipmentofgoodsfromonemeansoftransporttoanother.

Hold:Compartmentcoveringthelargerpartofacommercialvessel,forthestorageofcargotobetransported.

Inland navigation / inland waterways transport:Transportofgoodsorpersonsonboardavesselintendedfortransportonagivennetworkofinlandwaterways.

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Inland waterway:Navigableinlandwaterwaysthatmaybeusedwithanormalloadbyvesselswithaminimumdeadweightof50tonnes.Inlandwaterwaysincludenavigablerivers,lakesandcanals.

loading depth of a ship:Mesureoftheloadingcapacityofashipasitcanbeusedinaccordancetothewaterdepth.

Offer of transport or of capacity:Totalloadingcapacityoftheavailablefleet,expressedintonnes.

Oxygen steel:Steelproducedfromironoreandcoalusingblast-furnacetechnology,passingthroughanumberofstages(injectionofoxygen,etc).

Production/yield: Thenotionofproduction/yieldasusedinthispublicationisintendedtodefineinindexformtheactivityofinlandwaterwaystransport,takingintoaccountagivenlevelofdemandandthefreightratesappliedonthemarket.

River/sea transport:Transportofgoodsonboardariver/seavessel(seagoingvesseldesignedforuseoninlandwaterways),carriedoutentirelyorpartlyontheinlandwaterwaysnetwork.

Service:Referstotheserviceofthetransportofgoods,expressedintonnes/kilometre.

Tanker hold:Usedforthetransportofcargointankers.

Tonnes/kilometre (Tkm):Unitofmeasurementfortransportservices,correspondingtothetransportofonetonneoveronekilometreofaninlandwaterway.Determinedbymultiplyingthevolumecarriedintonnesbythedistancetravelledinkilometres.

Transshipment:Unloadingofacargofromoneseagoingfreightvesselandloadingontoanotherseagoingfreightvessel,evenifthecargohasremainedonlandforanylengthoftimebeforethetransportcontinues.

Upstream navigation:Navigationtravellingupstream.

Upstream:Referstothepartofaninlandwaterwaylocatedbetweenagivenpointandthesource.

Water conditions:Heightofthewaterinariverorcanal,incm.

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SOURCES Of INfORMATION

International OrganisationsEuropeanUnionEuropeanCentralBank(ECB)EurostatInternationalMonetaryFund(IMF)OECD

Industrial Organisations and Associations GermanChemicalIndustryAssociation(VCI)GermanAssociationofCoalImporters(VDKI)

National authoritiesGermanFederalInstituteofHydrologyCentraalBureauvoordeStatistik(CBS)DirectiongénéraleopérationnelledelaMobilitéetdesVoieshydrauliques(Wallonia)EastMidlandsDevelopmentAgencyRegionEmilia-Romagna/DirectoryInfrastructure,LogisticsandMobilityGermanStatisticalOfficePolishOfficeofStatisticsUKDepartmentforTransportWasserschifffahrtsdirektionSüdwest

Inland Shipping OrganisationsAgenziainterregionaleperilfiumePo(AiPo)BritishWaterwaysCBRBEBISELWISEBUIVRVoiesNavigablesdeFrance

PortsAmsterdamAntwerpLeHavreRotterdam

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Private Companies:AllianzVersicherungHamburgCoryEnvironmentalE.L.F.Hallen-undMaschinenbauHamburgerSparkasseICEFuturesEuropeNEAConsultingPost&Co(P&I)B.V.PJKInternationalB.V.RabobankRiverAdviceBaselStichtingAbri–AdministratiekantoorVenezialogisticsVereinigteSchiffsversicherungV.a.G.Severalotherbanksandinsurancecompanies,anonymous

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COllAbORATORS

European Commission MrDieter(Administrator)

CCNR Secretariat HansVanDerWerf(HeadofProject)Jean-PaulWeber(Administrator)NorbertKriedel(Econometrician)MartineGerolt(secretariat)BernardLaugel(printing)Contact:[email protected]/[email protected]

Group of expertsChristianVanLancker(OEB)FrédéricSwiderski(ITB)ManfredKamphaus(UENF)JanVeldman(OEB)MichaelGierke(BAG)

NEAHansVisserBredewater26NL-2715ZOETERMEER

Design:CREAPRINT22,rueduFaubourgdePierre67000STRASBOURGFrance

Printed in November 2011

PublishedbytheSecretariatoftheCentralCommissionforNavigationontheRhineSecretariat:2PlacedelaRépublique,67082STRASBOURGcedex[France]-www.ccr-zkr.orgISSN2070-6715

market observation no. 14

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