Influence of the global economic and financial crisis on the utilisation of the German seaports Hamburg and Bremerhaven

Table of contents

1. Introduction

2. Definitions
2.1. Financial crisis
2.2. Economicalcrisis

3. Relevance of the global economic and financial crisis for seaports

4. Economic situation of the German seaports
4.1. Hamburgseaport
4.2. Bremerhaven seaport

5. Development and trends after the global economic and financial crisis

6. Discussion and Conclusion

7. List of references

8. List of further literature

1. Introduction

The purpose of this literature review is to detect the state of knowledge about the influence of the global economic and financial crisis on the utilisation of the German seaports Hamburg and Bremerhaven. Firstly, the paper draws attention to the important definitions. The second part deals with the relevance of the crisis for the seaports. The economic situation of the ports before and during the recession will be examined in the following. The fourth part concentrates on the development and the trends after the crisis. Finally, a discussion is given to identify the main findings and to conclude the literature review.

2. Definitions

2.1. Financial crisis

One can not compare a financial crisis with another. Different types could be identified that occurred over the last three decades (Hill, 2009, p. 369). Hill named the foreign debt crisis, currency crisis and banking crisis (Hill, 2009, p. 369). Moreover, Johnson and Turner (2010, pp.418-419) added a fourth type: the systemic financial crisis. The first type, foreign debt crisis, is defined as "situations where a state cannot meet or service its foreign debt" (Johnson and Turner, 2010, p.419). Aizenman and Pinto (2005, p.548) argued that this type of crisis has been related to an event of default. Default can be explained as failure of the borrower to pay the whole amount of interests on the due date in accordance to the contract (Standard & Poor's, 2002). The next type of crisis is the currency crisis. It can be "defined as a nominal exchange rate depreciation, which exceeds specific cutoff levels" (Karabulut, Bilgin and Danisoglu, 2010, p.52). The monitoring of the change "of the nominal bilateral exchange rate of the domestic currency" during a certain time is necessary to identify such crises (Falcetti and Tudela, 2008, p.203). This is particularly important because some crises can co-occur. For example, 30 percent of modern banking crises go hand in hand with currency crises (Boyd, Sungkyu and Smith, 2005, p.978). Banking crises are defined in different ways. Demirgue-Kunt, Detragiache and Gupta (2000, p.4) define it as "a period in which significant segment of the banking system become illiquid or insolvent." A broader definition is given by the International Monetary Fund (2008) which said that banking crises are "those events where at least one institution was intervened and/or closed, or was subject to resolution." However, this type of crises and the systematic financial crises were dominant in the events of 2007 to 2008 (Johnson and Turner, 2010, p.419). A systematic financial crisis occurs "when a country's corporate and financial sectors experience a large number of defaults and financial institutions and corporations face great difficulties repaying contracts on time" (Claessens, Klingebiel and Laeven, 2005, p.171). Johnson and Turner (2010, p.419) go further and argue that these crises have also negative implications on the real economy which leads to the next definition.

2.2. Economical crisis

Dirksen and Klopper (1986, pp.66) divided the fact of economical crises into business cycle and the structural crisis. In the case of business cycle, crisis is used to point out that the economy records a negative economic growth or shows the already achieved minimum of the business cycle (Dirksen and Klopper, 1986, pp.66). In terms of structural crises, they talk about a long term negative trend of economic growth which occurs by a less than optimal economic mechanism (Dirksen and Klopper, 1986, pp.67). In accordance to Pearson and Clair (1998, p.66), a crises represents "a low probability, high impact situation that is perceived by critical stakeholders to threaten the viability of the organization." Such crises could have different reasons. They could be released by unforeseen events such as natural disasters or through events which were ignored by the management for example bad working conditions for the workforce (Grewal and Tansuhaj, 2001, p.68). This could lead to strikes of the employees and thus, to a crisis for the company. Indeed, this reason is more on a firm based level and not a crisis for the whole economy (Grewal and Tansuhaj, 2001, p.68). However, looking at crises which concern the economy in total, it is highly relevant to consider business cycles because they are inseparable affiliated with such crises (Mattick, 1981, p.126). Certainly, there are many types of business cycles which consider the economy on different periods of time (Mullineux, 1984, p.6). By consolidation of the different cycles and the consideration of dependencies of different nations, economists should be able to identify general economic trends such as crises. (Grewal and Tansuhaj, 2001, p.68). However, Grewal and Tansuhai (2001, p.68) argue that not every reduction in growth rate of the economy ends in a crisis. "Crises refer to contractions in which real output decrease" (Grewal and Tansuhaj, 2001, p.68).

3. Relevance of the global economic and financial crisis for seaports

As stated by Patrick Hinton (2009) the global financial crisis appeared in September 2008 to the business world. He argued that this crisis was not a real surprise for experts because they were already scared of "the stability of the leading American and European financial firms" (Hinton, 2009) after the sub-prime mortgage crisis. An analysis of Canstar (2009) also argues that with the collapse of Lehman Brothers in September the crisis entered a new level but the real start was already in July with the credit crunch. The International Monetary Fund (IMF) highlights that the "bursting real estate bubbles and a collapse of securitization in the United States and other advanced economies marked the beginning of the [...] financial crisis" (IMF, 2009, p.128). However, these reasons and the ongoing involvement of more and more firms also highlighted in the BBC News (2009) lead to a financial and economical crisis. The result was a recession in all developed and emerging economies. Only China constituted an exception with a declining but existing economic growth rate (Congressional Research Service, 2009, p.4). The International Monetary Fund projected a declining world output for the year 2009 for the first time after the Second World War (IMF, 2009). "These declines in economic activity have combined with trillions of dollars lost in equity markets and a credit squeeze that not only is affecting households and business world wide but is putting a damper on the financing of activities such as world trade" (Congressional research Service, 2009, p.4). This damper and the high dependency of international trade and international transport from global financial transaction had led to a collapse in volume of cargo and thus to a decrease of the utilisation of seaports (Hoffmann, 2010, p.122).

4. Economic situation of the German seaports

In this section, the paper draws attention to the detailed situation of Hamburg and Bremerhaven seaport before and during the crisis. Moreover, it shows which specific types of goods are handled at each port. Previously, a little overview of the correlation between international production and the occupancy rate of seaports is given.

In general, due to the strong shift of production in the 1980's to low cost areas such as China the international trade (United Nations, 2007, p.6) and thus the utilisation of seaports around the world increased significantly (Pallis and De Langen, 2010, p.1). For example, Ocean Partners Shipping Invest (2008) identifies that between 1980 and 2000 growth rates of nine percent on average and between 2000 and 2007 growth rates of 11 percent at Hamburg seaport were achieved. In this time "the ocean transport industry was growing at a faster rate than the terminal industry could build facilities" (Pallis and De Langen, 2010, p.1). This development matches the historical knowledge that one percent of worldwide economic growth leads to greater need of container transports of three percent (Ocean Partners Shipping Invest, 2008). Looking at forecasts from the early 2000s, it was assumed that this trend continues constantly (Lemper, 2003, p.6). However, as shown in the previous paragraph, the financial crisis stopped this ongoing growth and thus the boom of throughput of seaports.

4.1. Hamburg seaport

Nearly every general cargo which arrives or leaves Hamburg seaport is handled in containers (Port of Hamburg, 2012). Just three percent of the total general cargo are conventional shipments such as heavy lifts or project cargo (Port of Hamburg, 2012). In addition to containers, the port handles liquid bulk cargo such as petroleum, dry bulk cargo, for example grain and fodder, and grab cargo such as coal and ore (Port of Hamburg, 2012). Furthermore, vehicles, fruits, iron and steels are handled at special terminals (Port of Hamburg, 2012). Between 1990 and 2007 the whole amount of handled cargo has more than doubled (Milz, 2010). In 2007, 140.4 million tonnes were handled. A part of 98.7 million tons was general cargo and another part of 41.7 million tons were bulk commodities. During these 17 years each single year recognized a growing amount of dispatched cargo (Milz, 2010). The article in the Seaports Press Review (2007) also highlights the perfect ongoing development of the port in accordance to increased volume of handled cargo, raised container handling and the improvement of transhipments. In total, the annual report of 2007 shows a revenue of 114.5 million euro (HPA, 2007, p.U2). This was an increase of about 11.7 percent in comparison to the previous year which indicated a sales revenue of 102.5 million euro (HPA, 2006, p.U41). Furthermore, the annual report (HPA, 2007, p.24) illustrates that this improvement occurred due to the increased number of handled containers which amounts 11.6 percent or slightly more than a million TEUs (Twenty foot Equivalent Unit). In 2007, Hamburg seaport handled about 9.9 million TEUs in total (Common Wadden Sea Secretariat, 2009, p.6). The annual report of the Hamburg Port Authority (HPA, 2008, p.5) highlights that this ongoing growth was stopped in the second half of 2008 when the financial crisis occurred. Nevertheless, the document shows that 2008 was the second-best year in the history of the port (HPA, 2008, p.5). It created sales revenue of 129.6 million euro (HPA, 2008, p.2). However, it also indicates a declining container trade of 1.5 percent. This was caused by the downward economic growth rate of China which is the main trading partner of Hamburg seaport (HPA, 2008, p.36). The high dependency of the trade with China is also publicized by the Hamburg Marketing GmbH (2010) which indicates that China takes position number two for imports and number three for exports. The downward trend continued in 2009. As shown by the Port of Hamburg (2010) the general cargo as the main market segment decreased by about 24.8 percent to 73.6 million tons. Both exports and imports diminished. Furthermore, also transhipments declined to a total amount of 71.2 million tons. This was a reduction of 25.1 percent (Port of Hamburg, 2010). Sven Boll (Spiegel online, 2010) named the port as a ghost town because no ships were alongside the terminal and the crane jibs were fold up. Moreover, not only the container business stocked in 2009; also the bulk cargo handling declined by 13.4 percent to 36.8 million tons (Port of Hamburg, 2010). The slump of the world economy of 0.6 percent as stated by Peter Specht (Focus Money, 2011) was highly noticed by the occupancy rate of Hamburg seaport. Pleasure was even bigger when the recession started to stabilize at the end of 2009 (Bonney, 2009, p.18).

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