Hanjin slow to expand in Algeciras as high local labour costs help rivals

DESPITE rising fortunes at Hanjin's Total Terminal International Algeciras (TTIA) from 650,000 TEU to one million TEU this year, the Korean shipping giant is delaying construction of Phase B.

More than 90 per cent of volume is transshipment, and chief executive Alonso Luque said the terminal "must" reach the critical mass to make the business profitable, reported the UK's Port Strategy.

"Margins in transshipment are minimal. You need a lot of volume to make a reasonable return or at least to cover costs. After that, it's the import-export traffic that makes the difference between profit and loss," he said.

One reason for Hanjin's reluctance, is the costs for shipping lines calling at Algeciras - 50 per cent more than at at Tanger-Med.

"We have to make a major effort to offset this difference. We need to attract more shipping lines and the best way of doing that is by offering good prices, while also providing service and productivity. However, if we can't offer the prices lines are looking for, really, there's no point!" said Mr Luque.

The port authority has already done a lot of work in getting rates down, but there is still a 10-15 per cent difference to be overcome. TTIA is therefore aiming to cut labour costs. At present, the work force consists of 1,200 permanent dockers, with 420 casuals. But labour gangs, which consist of 14-15 members each, are larger than at either Barcelona or Valencia, with Mr Luque stressing that just 10 are needed in TTIA.

"Anything above that represents an additional cost for us," he said. Unless this downsizing can be achieved, the profitability of the Phase B development would be dubious.