Cosco’s Belt and Road ambitions hinge on Mediterranean terminals

Piraeus is an example of what happens when Chinese money meets European demand. But with tensions between the port and its surroundings, will Cosco look elsewhere for growth?

SINCE it first took on a 35-year concession to run two of Pireaus’ container terminals in 2009, Cosco has driven up the Greek port to second place in the Mediterranean rankings.

In 2016, Cosco expanded its grip on Piraeus with the acquisition of a 51% stake in the Piraeus Port Authority and according to Lloyd’s List’s Top 100 Container Ports report, now sits behind only Valencia in the region. In 2018, Piraeus handled just shy of 5m teu, up by one fifth from the year before, and placing it at 32 in the global rankings.

Unctad’s Port Liner Shipping Connectivity Index number of Piraeus in the second quarter of 2019 was 63, up from 32 ten years ago, putting  the port in 21st place, up from 49th in 2009.

Due to its geographical position within the Mediterranean area, and its proximity to the Suez Canal, Piraeus is considered a key link for the Belt and Road Initiative, which aims to boost trade between the Chinese and European markets.

Piraeus is also an important transhipment hub for intra-European shortsea services in northern European and Black Sea markets.

In its Containership Databank, MDS Transmodal records 55 direct services scheduled to call at Piraeus in the third quarter of this year, up from just 26 in 2009.

While the majority of these loops serve the intra-European market (six connecting the Mediterranean with the northern European ports) and the Asia-Europe market, there are also two services operating on the transatlantic trade lane calling at US east coast ports.

In July 2019, Hapag-Lloyd announced the launch of a new service between India and Europe with Piraeus being the only call in the Mediterranean.

Hapag-Lloyd chief operating officer Maximilian Rothkopf said the service, which will start late in October this year, was offered to address its customers’ growing needs in the Indian and Bangladeshi markets.

This service, however, remains unique. Based on the latest MDST Containership Databank, only one other fully cellular service connects the two areas directly (CMA CGM/Hapag-Lloyd: NEMO/EAX), which is offered on the North Europe-Australia service calling at Chennai westbound.

Hitting the rocks

Cosco’s plans to develop the port and surrounding area, however, have been challenged recently by Greece’s Central Archaeological Council and Museums (KAS), which has rejected the Piraeus Port Authority’s plan, halting any form of construction activity.

KAS has stopped the development of a shopping mall, floating ship repair dock and a luxury hotel, saying that they would affect local archaeological sites.

But Cosco will have no doubt welcomed the election of the New Democracy government of Kyriakos Mitsotakis, which is looking to boost investment in Greek ports.

The Mitsotakis government has identified ports as drivers of economic recovery for Greece and wants to mobilise funding, modernise infrastructure and simply bureaucracy for the sector.

The government has already encouraged the Piraeus Port Authority to finalise its €612m investment plan and resubmit it to planning authorities.

Cosco is expected to resubmit its masterplan to the government, stressing the need for additional investments in order to achieve the port’s full potential.

While the discussions between Cosco and the Greek authorities continue to try to define the fate of the investments in the port of Piraeus, China is keeping busy engaging in talks with other potential partners in the Mediterranean.

In March, 29 deals were signed in Rome during the state visit of the Chinese president Xi Jinping. All these deals were grouped in an overall memorandum of understanding for Italy to cooperate with China in the Belt & Road Initiative.

The beneficiary ports from the MoU are Genoa and Trieste, which signed commercial agreements with China Communication Construction Co, a state-owned enterprise. These ports, both well located and with expanding cargo rail connections with central and northern Europe, could become key locations for the Chinese strategy.

If the delays in Greece continue, China could decide to press on with its review of its Mediterranean port investment plans and intensify its attention towards other Mediterranean ports. Potentially the most suitable candidates for Chinese investment could be French and Spanish ports both offering excellent and fast rail and road connections to the rest of Europe.

First published on Lloyd's List website August 2019