The market is deteriorating, the volume is declining! Start laying off employees......

The Port of Liverpool, although not as well known as the Port of Felixstowe, the Port of London and other ports, has a long history, is the main port in the west of the United Kingdom, and is the busiest Atlantic gateway in the United Kingdom, with 35 million consumers living within a 150-mile radius of the Port of Liverpool (58% of the UK population). In 2022, the Port of Liverpool completed a cargo throughput of 33.62 million tons and a container throughput of 790,000 boxes, ranking as the fourth largest port in the UK by both cargo throughput and container throughput.

Peel Ports, the operator of the Port of Liverpool, is the second largest port operator in the UK with a market share of around 14%, moving around 70 million tonnes of cargo a year. Peel Ports is the statutory port Authority for the Port of Liverpool, Manchester Canal, River Medway and the surrounding areas, in addition to operating container terminals at Port Greenock in Scotland and Dublin Port in Ireland. In addition to terminal operations, the group also has barge and logistics businesses, which made a profit of £618 million and an EBITDA of £300 million in the 2022 financial year, of which the container shipping and handling division accounted for 42%.

The Port of Liverpool is a core asset of Peel Ports, where the group operates two terminals, RSCT and Liverpool2, with an annual capacity of nearly 1.5 million TEU, handling around 75,000 TEUs and 60 vessels per month.

Among them, Liverpool2 terminal has an investment of 400 million pounds, a berth depth of 16.5 meters, 8 shore Bridges, 22 yard Bridges, handling capacity of about 600,000 TEU, is a semi-automated terminal with yard automation, and can receive and unload the world's largest container ships. In January 2020, MSC's terminal operator TiL entered into a joint venture agreement with Peel Ports for a 50% stake in Liverpool2.

Although the water depth conditions and infrastructure are excellent, and it is backed by the world's largest liner company, there are only two ocean routes in the Port of Liverpool at present, both of which are trans-Atlantic routes, one operated by Atlantic Container Line, and the other is shared by COSCO Shipping, Hapa-Lloyd and MSC, with 5 ships deployed. With an average capacity of around 4,500 TEU, the port also serves 12 internal European offshore and barge routes.

In terms of terminal utilization, in 2022, the Port of Liverpool completed a container throughput of 790,000 TEU, down 14% year-on-year, and the terminal utilization rate was only 52.6%, and the throughput was 100,000 TEU less than before the epidemic (2019), and the terminals with low return on investment were even more difficult to return. After entering 2023, the situation is more difficult, the port of Liverpool is connected to the transatlantic route, according to CTS statistics, as of July, the first freight volume decreased by about 500,000 TEU, a decline of up to 14%.

In this context, Peel Ports said job losses were inevitable in order to better align production operations with the most challenging economic conditions for many years, and that they had done everything possible to secure jobs as global container volumes declined significantly over the past two years. In fact, at the time of its FY2022 report, the group indicated that it would need to reduce its workforce in order to align its cost base with the economic outlook. The group said it would do everything possible to help laid-off employees find employment in other positions within the group, while the union said it would try to find alternatives to layoffs, requiring any workers to lose their jobs voluntarily and accompanied by the best redundancy package.

Jobs are a serious political issue in the United States and Europe, and with strong unions, it would be difficult for port operators to go this far if not for cost considerations. During the epidemic period, due to inflation, port workers in Europe and the United States have been on strike to demand a large salary increase, the Port of Felixstowe and the Port of Liverpool in the United Kingdom have broken out a large-scale strike movement, Peel Ports finally reached an agreement with the trade union in November 2022, the basic wage of the port of Liverpool increased by 9%. Laying off workers in a battle with unions will be costly.

The dismal operation of the Port of Liverpool is the dilemma faced by the United Kingdom and even European and American ports. The main container cargo sources of British ports come from Asia and the European Union region, accounting for 41.7% and 36.4% respectively, which are hit by the double blow of declining domestic demand and Brexit.

In 2022, the container throughput of major British ports will be 9.68 million TEU, down 6.6% year-on-year. Down 7.5 per cent from 2019, only Southampton of the four largest container ports saw an increase in cargo volumes compared to pre-pandemic levels, while container throughput at UK ports fell another 12 per cent in the first half of this year. Other European and American countries are also suffering, July European port container throughput fell 3.1% year on year, North America fell 12.6%, large liner companies have cut routes, the cargo further concentrated in the equity or control of the terminal.

The port circle believes that there is still uncertainty about the recovery of demand in Europe and the United States, and other port operators in the market are also facing similar challenges. Peel Ports, whose Liverpool2 terminal is a joint venture with MSC, the world's largest liner company, is still struggling with a sharp decline in cargo volumes and is pessimistic about its long-term prospects, forcing it to lay off staff. So other ports with less attention than the port of Liverpool, how much salary cuts and layoffs should be, it is unknown.