Hamburg ranks among Europe’s historic ports, tracing its prominence to the Middle Ages—some 820 years ago—and the Hanseatic League alliance of North Sea cities. Back then it was agricultural produce—crops like flax, wheat and rye—from the east that flowed through the port, bound for Flanders and England in exchange for cloth and, later, manufactured goods. Five centuries later it is still eastern trade—Georgia, Ukraine, Russia and particularly Poland—that animates Europe’s second-largest container port, but this time it’s largely inbound as the revitalized ex-Iron Curtain countries become growing customers for western products.

The importance of Eastern Europe in the global economy continues to grow. Increased purchasing power has accompanied a shift eastward in the continent’s center of economic gravity, making ‘the hinterland’ attractive for both direct investment and supply chain sourcing. Ukraine’s GDP grew at close to 7 percent the last few years; Georgia’s growth was even more robust. Poland is a great success story of the transitioning economies, now a member of the European Union, thereby eliminating the customs border that had existed between Germany and Poland. Which, in turn, allows goods to flow more easily into and out of that market and to reach further east into Russia.

Playing a central role as Europe’s most important port of entry to the eastern region, Hamburg is emerging as the logistics hub into the hinterland. In addition, intermodal service provided by Polzug Intermodal runs through Poland as far east as Kazakhstan, further solidifying the strategic positioning of the port.

As a universal port offering a full range of transportation services, the Port of Hamburg, just off the North Sea on the River Elbe, is regarded as one of the most important cargo handling centers in the world (and Europe’s second-largest container port). With 320 berths and around 200 container gantries and cranes, the Port can accommodate any type of vessel. In addition, its well-situated geographical position facilitates fast, convenient access via canal to the Baltic Sea.

A distinct advantage to the growth of the Port vis-à-vis its competitors is the large amount of cargo directly servicing Hamburg itself, affording the Port substantial economic foundations within the region with an immediate population of 3 million. With some 156,000 jobs in the region depending directly or indirectly on the Port, it exercises strong claims to public and private resources needed to fully exploit growth potential. Some 1 billion euros are expected to be invested in the Port over the next half-dozen years by the city-state of Hamburg, supplemented by billions of euros from the private sector.

Container traffic has been the main motor for growth, expanding annually at rates approaching double digits. Asian transshipment figures prominently in the mix; China is the Port’s most important trade partner. South Korea and Malaysia are also significant. The Baltic Sea connection to the Russian Federation and Poland continues to build.

The cyclical downswing associated with the global financial crisis is understandably heavily impacting the growth trajectory. With Germany and the wider euro zone in recession (economists see no prospects for growth until late 2009 at best), volumes at Hamburg have ‘slacked’ to single-digit growth this year (after 7 consecutive years of double-digit growth). Four container terminals have a collective capacity of nearly 9 million TEUs per year, with a handling capacity of over 2,500 TEUs every 24 hours. 

Port infrastructure is strong. Eurogate Container Terminal Hamburg, already able to accommodate post-Panamax vessels, is scheduled for 200 million euros worth of investments to modernize the facility and boost handling capacity to over 4 million TEUs. HHLA Container Terminal Alterwerder is considered one of the most modern container handling facilities in the world; HHLA Container Terminal Burchardkai, the largest handling facility in the Port, accounts for over 5,000 vessels per year.

While the Port has historically been well positioned to western Europe, at its eastern end, the step jump in its distribution prowess comes from rail initiatives eastward, which have contributed significantly to Hamburg’s boom in container traffic as it regained its traditional hinterland—now dead-center in Europe. With road infrastructure in the old Soviet bloc countries insufficient to meet increasing demand, a joint venture intermodal (port operator HHLA, a Hamburg-based trucking company and the Polish State railways) launched Polzug Intermodal in 1991.

Today, Polzug is operating more than 3000 block trains annually to and from Bremerhaven, Rotterdam and Hamburg and the industrial centers of Poland and beyond. In 2007, Polzug carried 140,000 TEUs into the Soviet Union and Eastern Europe with volume expected to jump by a substantial margin in 2008 (pre-year projections were for 25 percent growth minimum, although that was before the global economic slowdown). Currently, it offers container train service at least twice daily from Hamburg to Poland, Lithuania and Ukraine, loading between 70 and 80 TEUs per train. “We have improved our inland terminal facilities in Poland with modern reach-stackers, gantry cranes and tractor-trailer combinations,” notes CEO Walter Schulze-Freyberg.

A major factor promoting Polzug has been the “disappearance” of borders among many of the countries it services and the ability to deliver containerized cargo as far as Central Asia. The plan is ultimately to go into China. 

With differences in track gauge into Russia, equipment specifications and border-crossing procedures en route, extending rail corridors to China poses challenges. To test the viability earlier this year, Polzug ran a “demonstration train” from Beijing to Hamburg.

“Border-crossing procedures, which are the main obstacle, were modified for this special train,” explains Schulze-Freyberg. “However, we did learn that in the future, if we find a solution for lean border management, trains could run as fast as 12-13 days from Beijing to Hamburg.”

For the time being, of course, Hamburg is coping with the global economic contraction. Most of Europe officially fell into recession in by late 2008 (the first time ever for the euro zone); U.S. consumers and companies are showing accumulating signs of distress; China is re-grouping.  This shows up in the Port’s traffic. After surging better than 11.5 percent in 2007 largely on the strength of strong growth with Asia, Eastern Europe and Russia, Port CEO Walter Schulze-Freyburg conceded that 2008 numbers would be soft—but even that is relative, since he projected growth would ‘only’ be in single digits (after seven consecutive years of double-digit growth). 

Still, conditions deteriorate. Freight rates in the Asia-Europe trades have crashed to record lows as consumer demand continues to crumble. A 20-foot container can now be shipped from Hong Kong to Hamburg for as little as $350, excluding surcharges, compared with around $1,400 per TEU last summer.

Even in the face of such dire circumstances, however, there is still plenty of cargo moving around the world. Shipping hasn’t stopped. Clarkson Research, which tracks supply and demand growth, now expects trade to be up by just 6.8 percent in 2008. In isolation, this looks quite good, but is way down from the figure of more than 11 percent that was being projected this time last year, and largely reflects the collapse in Asia-Europe growth that is now close to zero.

“The volumes are not there,” recently admitted Dr. Jurgen Sorgenfrei, Chairman of the Hamburg Port Marketing. “But we believe that’s merely a temporary fact.”  wt