It will arrive in a few days port of Trieste the first transoceanic ship who completed the circumnavigation of Africa. Taking two weeks instead of one. A few days ago a container ship barely managed to escape from Houthi attacks in Red Sea. The way of transport has changed. Again. After the experience already lived in the period of Covid. And Italy which had managed to build an excellent role in the traffic of goods between Mediterranean and northern Europe now it is particularly involved in the events in the Red Sea. Zeno D'Agostino, president of the European Ports Organization as well as President of the Port System Authority of the Eastern Adriatic Sea and former President of Assoporti, has some fears in this regard, but also sees interesting and innovative alternatives for the future
Another crisis in transport. The memory of the bottlenecks and major difficulties that were seen at the time of the pandemic is still vivid. Now ships in the Red Sea are unable to pass due to Houthi attacks. How do ports deal with this new situation?
We must get used to the fact that shocks, especially negative ones, will be increasingly frequent: we did not expect the war in the Red Sea. But not even Covid or the war in Ukraine. The key word is knowing how to diversify: only if a port invests in multiple alternatives can it emerge better than the others. The example of this crisis in the Red Sea is exemplary, it is indicative.
How do you see the transport situation in the Red Sea at the moment?
The good news is that shipowners are reacting to the new difficulties and adapting in order to maintain the frequency of landings: they are moving more ships to the new route in order to restore weekly calls in Trieste.
With relative increase in costs…
Of course, this means increased costs. Today freight rates are between 6 and 8 thousand dollars, relative to the route between Europe and Asia, i.e. between three and four times more than the costs before the crisis. Insurance for ships passing through this area has also increased significantly.
In addition to the increase in costs, do you see other risks linked to this Red Sea situation for Italian trade and transport?
My real fear concerns customer retention and the competitiveness of the port of Trieste, but also of the other Italian ports: with a doubled waiting time, the customers of the port of Trieste (German, Austrian, Hungarian, Czech and Slovakian companies) could return to favor the ports of Northern Europe. It would be going back: those were markets that years ago allowed goods to pass practically only from the north. However, recently, after decades of attempts, we have managed, Italy and Trieste, to organize those traffics passing from the south. My real fear is that if ships from Asia do not pass through Suez, I am referring to the port of Trieste, our competitiveness will collapse. Pendulum services depart from Asia to Europe and usually pass through Suez, then leave Gibraltar and go to Northern Europe. If the pendulum circumnavigates Africa, the western Mediterranean risks less, while the central-eastern Mediterranean obviously suffers more.
A lot is being invested in the economies of ports and all the infrastructure linked to them. Thanks also to the Pnrr funds. What would happen if traffic moved to northern ports?
If traffic moved again towards the ports of the north, all those investments in infrastructure serving the ports that are being made with Pnrr funding would lose their meaning. Just as all those growth expectations of many other Italian ports would lose their value, linked to the fact that Italy is where it is and that it has Suez opposite. What would happen to all those investments that are being made, for example, behind the port of Genoa in terms of infrastructure (completion of the Terzo Valico dei Giovi, high speed, increase in railway capacity to connect Genoa to Milan and then to Europe)? They would lose their meaning.
You said before that a port must know how to invest in multiple alternatives in order to prevail. For example, we notice that many companies are thinking of using closer production sites, given that the lower labor costs are often canceled out by shipping costs. How does this reshoring impact logistics? What alternatives are there?
We are actually seeing that supply chains are getting shorter and companies are now aiming for reshoring or even dual shoring, choosing to leave production in countries where it already existed but also creating other sources of supply in closer places. In the Mediterranean basin there are very important countries from a production point of view. Last autumn an agreement was signed with Egypt and Morocco to favor companies that want to shorten supply chains by bringing production centers back to the Mediterranean. For some time now we have been preparing to create a strong connectivity of the Port of Trieste with the Mediterranean ports to loosen the dependence on China and Asia. In light of the latest events, these dynamics are already seeing a strong acceleration.
The way of managing logistics has changed a lot. Once upon a time it was almost a shame to keep stock in the warehouse. Today the situation is reversed. What do you think of Tesla and Volvo's decision to shut down production because they ran out of components due to tensions in the Red Sea?
I was a little disappointed that large companies like Tesla and Volvo didn't have stocks to last 2 weeks without components. It means that nothing has been learned from Covid. The situation has completely changed. Previously, the focus was on minimizing inventory, which can only work if there are no problems. But we have seen that shocks in maritime traffic are increasingly frequent, close together and powerful: we need to change the register.
So whoever keeps inventories efficient has the upper hand?
Now abundant supplies constitute a large part of the efficiency of the global logistics chains of the future and ports must prepare. Not only. The places that will have a future will be free ports and free zones. We are getting ready
The port of Trieste is also a free port…
To be precise, Trieste is an international free port, which means that goods can stay here for an unlimited time, unlike other ports where there is a delimited and sometimes very short time space. And it must be said that compared to those companies that stopped production while waiting for the components, we instead recorded a significant increase in free port storage.
Do supplies also refer to food? How are the ports being equipped?
Precisely also in relation to the agreements with the countries of North Africa and the intra-Mediterranean lines, we are preparing ourselves by planning investments in refrigerated warehouses in the port area or behind the port and
we are developing the controlled temperature supply chain
Speaking of retroport activities, you are an innovator from this point of view, supporting the importance and role of what happens behind the scenes of a port. Are there any new developments?
Absolutely yes. Let's start from the reference paradigm that has been in force since the times of the Phoenix fleets: the symbiosis between the port and the activity of a ship, which loads and unloads people and goods. As I have always said, the future of the port is not just the port, but also everything that can be built and organized in the harbour: the more I invest outside the more I increase competitiveness. But the real revolution is another: moving away from the port-ship paradigm and instead thinking of the port as a place on the sea. Regardless of whether there is a ship. Regardless of the cargo. I'll give you an example: if you look at the geography of the submarine cables that transport data, you notice that the cables that come out of Suez all go to Marseille (except for a very small part in Sicily). Marseille is the third global data management node. It is clear that we are not talking about ships here. But from the sea. It's another type of logistics: submarine cables must in any case "land" in a port and it's about creating value regardless of the ship. It is said that 90% of European maritime traffic passes through the Mediterranean. Fine, but I would add that 95% of European data traffic passes through the Mediterranean. Not even a cable enters the Adriatic and Trieste is getting ready.
Many people underline that China is present in many ports and infrastructures. How do you see this situation? Do you think it's dangerous?
When I see something that isn't working I look in the mirror: you can't criticize China for minding its own business. We too must learn to do our own business by leaving our territory. If you want to be competitive at home, you need to invest outside of your home. Which we didn't do. It is taboo to go and invest in other Mediterranean ports (there is also a rule). We see the Chinese investing in Africa, while we who have Africa in front of us do not do so. So before criticizing others, we should see what we should do: go around the world, create logistical chains, protected logistical corridors, for example.
