PROPS - TRIMIS · members of the PROPS Consortium accept no liability or responsibility, in negligence or otherwise, for any loss, damage or expense whatsoever incurred by any person

PROPS

Grant Agreement No. TREN/FP7/TR/218621/”PROPS”

Deliverable 2.3

Business Case for Short Sea Shipping Solutions

Project Start Date: 1st July 2008

Project End Date: 30th June 2011

Co-ordinator: University of Piraeus Research Centre

WP No.: 2 Leader WP2: Nautical Enterprise

Task Leaders inWP2:

MRTK, UPRC, ILS, NECL

Participants inWP2

NECL, MRTK, ILS, AT, IEA, U.Turku, GPI, SPCB, PGA, BPG, TIS, UPRC,K-NET, ED, LB, SPC Lithuania

July 2010

A Project supported by the European Commission.Directorate-General for Energy and Transport.

Business Case: Maritime Service Ireland – France

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Document summary information

Task Role Persons Organisation RoleAuthors Gerry Trant, Kevin Riordan NECL Leader T2.4

Even A. Holte, Agatha Rialland MARINTEK Leader T2.3

Dr. Takis Katsoulakos, Dr. HeatherMcLaughlin

ILS Leader T2.2

Prof. Stratos Papadimitriou, IoannisKoliousis

UPRC Leader T2.1

Capt. Aedan Jameson Rosslare Europort Harbour Master &Commercial Manager

Richard Nolan Nolan Transport Managing Director

Contributors

Capt. Tony Flanagan Irish Ferries Manager at RosslareEuroport

Task Role Persons Organisations

Ioannis Koliousis UPRC

Carlos Alvarez-Cascos Trasmediterannea

John Whelan IEA

Assessors

Dr. Aoife Trant Nautical Enterprise

DISCLAIMER

Use of any knowledge, information or data contained in this document shall be at the user’s sole risk. Themembers of the PROPS Consortium accept no liability or responsibility, in negligence or otherwise, for anyloss, damage or expense whatsoever incurred by any person as a result of the use, in any manner orform, of any knowledge, information or data contained in this document, or due to any inaccuracy,omission or error therein contained.The European Commission shall not in any way be liable or responsible for the use of any suchknowledge, information or data, or the consequences thereof.


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ContentsBusiness Case: “Maritime Service Ireland – France” .................................................................................1

Abstract.................................................................................................................................................4

Introduction ...........................................................................................................................................5

1. Business Opportunity.........................................................................................................................6

2. Market Potential for unitised cargoes Ireland - France.......................................................................7

2.1 Overview of unitised cargo movements between Ireland and France ............................................7

2.2 Nature of Unitised Cargo movements between Ireland and France...............................................7

2.3 Segmentation of Unitised Cargoes .............................................................................................10

2.4 Inferences drawn from Segmentation of Unitised Cargoes..........................................................11

2.5 Appraisal of the Irish Economy ...................................................................................................12

2.6 Normalized Trade Flows between Ireland & its neighbouring States ...........................................13

2.7 Inferences drawn from Normalised Tables of Imports & Exports .................................................15

2.8 Estimated unitised cargoes via the British Land-Bridge (2008)....................................................17

2.9 Summary ...................................................................................................................................18

3. Analysis of a possible new RoRo Service ........................................................................................19

3.1 Overview of the Analysis ............................................................................................................19

3.2 Pricing Model for a new RoRo Service........................................................................................20

3.3 Comparative Analysis of Transport Modes..................................................................................25

3.4 Summary ...................................................................................................................................26

4. Inferences Drawn from Comparative Analysis of Transport Modes...................................................27

4.1 A 20% discount on the computed price via the British Land Bridge .............................................27

4.2 The use of a Discretionary component in the unit price. ..............................................................27

4.3 The relevance of D2D delivery times ..........................................................................................28

4.4 Formation of a Trading Corridor between Ireland and France .....................................................28

4.5 Supporting Innovations...............................................................................................................29

4.6 An Appropriate Strategy for the Proposed Service......................................................................29

4.7 Summary ...................................................................................................................................30

Implications of the Study......................................................................................................................31

Appendix: Appraisal of Irish Economy through a review of relevant literature...........................................32

Introduction .........................................................................................................................................33

Economic & Social Research Institute (ESRI) Medium-Term Review 2005– 2012................................33

Details of the Medium-Term Forecast...............................................................................................36

Review of Outcomes, June 2010......................................................................................................39

Literature Review on the Recession of 2008........................................................................................42

‘The Return of Depression Economics and the Crisis of 2008’ by Paul Krugman ..............................42

‘The Shock Doctrine’ by Naomi Klein................................................................................................42

‘The Big Short – Inside the Doomsday Machine’ by Michael Lewis ...................................................42

‘The New Paradigm for Financial Markets – the Credit Crisis of 2008’ by George Soros ...................43


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AbstractThis study examines the possibility of initiating a new RoRo shipping service between Ireland and France

via the ports of Rosslare and Cherbourg. The study analyses the business opportunity for such a service

through –

a. Investigating whether-or-not there exists a trade gap between the two states, from which it is found

that unitised trade between Ireland and France, in value and volume terms, is considerably less

than half what it ought to be. The computations are based on GDPs and average distance

between the two states;

b. Analysing the unitised cargo movements between the two states and segmenting the cargoes into

market-orientated categories;

c. Quantifying the cargo throughput via the principal competitive option, which is combined truck &

ferry via the British Land-Bridge.

A pricing model is derived for the proposed RoRo service, which ensures that when compared with its

principal competitors it has a significant price advantage. If the price advantage is not achievable, the

service is deemed not to be viable.

A number of innovations are proposed that would strengthen the position of the new service and would lay

the foundations for its marketing and growth strategies.


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IntroductionAn important economic dividend from participation in the European Union for member states is the

facilitation of trade amongst its members, because trade is the primary driver in the generation of wealth

amongst participating members. Nevertheless, trade growth does not necessarily occur spontaneously;

trading opportunities must be identified and transport solutions devised that will help realise trading

opportunities.

This Business Case addresses the opportunities and difficulties associated with improving intermodal

services between Ireland and France in order to bridge a significant trading gap between the two

neighbouring states1. The Business Case focuses on the ports of Rosslare, which is situated at the

Southeast corner of Ireland, and Cherbourg in Northern France.

There are three ports on the South Coast of Ireland that provide intermodal services with Mainland

Europe:

o Rosslare, which accommodates RoRo / RoPax vessels to Cherbourg in France and to Fishguard

and Pembroke in SW Wales,

o Waterford, which is approximately 30 nautical miles to the west of Rosslare and from which LoLo

services are operated with Mainland Europe,

o Cork, which is approximately 80 nautical miles further west from Rosslare and which

accommodates all transport modes.

The three ports are approximately the same distance from Northwest Europe – because of the shape of

the South Coast of Ireland, which slopes in a WSW / ENE direction, and the fact that to reach Northwest

Europe, all vessels must round Landsend.

Figure 1

1 Refer to Sections 2.6 & 2.7 of this study, where there is an estimation of trade gap between the two states.


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The objectives of the Business Case are:

a. To identify a business opportunity for securing market share for maritime services operating

between Ireland and France;

b. To develop and analyse strategies for availing of the business opportunity, using the ports of

Rosslare in Ireland and Cherbourg in France as the reference ports.

The elements of the Business Case are:

1. Identify a realistic Business Opportunity for services on the route linking Rosslare and Cherbourg.

2. Quantify the market potential for unitised cargoes between Rosslare and Cherbourg.

3. Compare unitised services between Rosslare and Cherbourg with the principal competing

services; specifically:

o long-haul trucking to / from Mainland Europe transiting Britain,

o LoLo services to / from Northern Europe via Port of Cork,

4. Assess the benefits and risks of a RoRo service between Rosslare and Cherbourg.

5. Assess strategic improvements that have the potential of increasing the competitiveness of

maritime services linking Rosslare and Cherbourg;

6. Devise competitive and growth strategies for a RoRo service between Rosslare and Cherbourg.

1. Business OpportunityRosslare Harbour was developed in the latter half of the 19th century, connecting Dublin and Waterford by

rail and ship with Fishguard in Wales. It commenced, therefore, as an adjunct to the railway network that

was being developed at that time in Britain and Ireland.

Currently, there are six sailings per week between Rosslare and Cherbourg. These are provided by Irish

Ferries and Celtic Link, each with a ship sailing on alternative evenings from Rosslare. In addition, and as

a continuation of the old railway connection, there are two sailings per day, seven days per week, between

Rosslare and Fishguard that are operated by Stena Lines. This is complemented by a service operated by

Irish Ferries between Rosslare and Pembroke, also with two sailings per day, seven days per week. There

are, therefore, 28 sailings per week between Rosslare and Britain and 6 sailings per week with Mainland

Europe, all operated using RoPax vessels that accommodate passengers, cars and roll-on freight.

In the study ‘Feasibility of New RoRo / RoPax Services between Ireland and Continental Europe’2, it was

estimated that there was a combined total of approximately 250,000 trailers per year trucked through

Britain to & from Ireland and Mainland Europe in 2004. Because of the severe recession in shipping in

2008 and 2009, data for 2010 is not significantly different from that of 2004. Also, one extra RoRo vessel

trading between Ireland and Northern France would have the potential of carrying in combined imports

2 This study was completed in 2007. It can be accessed using the following reference:http://www.nauticalenterprise.ie/updates/1050/general-news/1050

http://www.nauticalenterprise.ie/updates/1050/general-news/1050


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and exports a total of approximately 25,000 trailers / year, whereas an extra RoPax vessel would carry

much less freight than that and at significantly higher cost.

The business opportunity for Rosslare / Cherbourg services, therefore, is to win sufficient extra business

from cargoes trucked through Britain that will increase sailings between Rosslare and Mainland Europe by

one RoRo vessel; and in so doing will increase trade between the two states.

Rosslare provides access to the Republic of Ireland, particularly the Southeast region and the southern

section of Dublin. Cherbourg provides access to the greater Parisian region, which is the major distribution

hub for France.

2. Market Potential for unitised cargoes Ireland - France

2.1 Overview of unitised cargo movements between Ireland and France

There are three competing modes of transport for trade between Ireland and Continental Europe:

1. Truck and ferry using the British Land bridge,

2. Direct RoRo / RoPax between Ireland and Mainland Europe,

3. Direct LoLo between Ireland and Mainland Europe.

A large proportion of trucked cargo is transported via the British Land Bridge, partly for historical reasons,

but mainly because it is convenient & efficient and the momentum of current practice sustains it. Against

this, the efficient movement of freight through the British Land Bridge is being threatened by a number of

factors;

Increasing road congestion in Britain and bottlenecks at strategic points mitigates against the

smooth movement of road freight through Britain;

The Land Bridge option is relatively expensive and becoming more so with rising fuel prices and

the pending imposition of environmental and infrastructural road tolls, under the Euro-vignette

directive;

European policy initiatives are aimed at diverting traffic from road to sea, with increasing

restrictions on long-haul trucking, which include limits set on driving times under the Working Time

Directive.

2.2 Nature of Unitised Cargo movements between Ireland and France

2.2.1 Top-20 Imports & Exports between Ireland & France

The Top-20 imports and exports between Ireland and France for 2008 are presented below. These tables

were compiled using a combination of annual port data (Irish Central Statistics Office) and more specific

SITC3 data (Eurostat), which provide information on the value and weight of different cargo types traded

between states. The Top-20 tables account for approximately 90% of unitised imports and exports, albeit

about 30% of the different types of goods. Concentrating on the Top-20 cargoes is therefore a Pareto-

style approach to analysing cargo flows.

3 SITC: Standard International Trade Classification


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Table 1: Top-20 unitised imports into Ireland from France (2008)

Top-20 unitised imports into Ireland from France ( 2008)

IMPORTS

Rank SITCCode SITC Description Est

TEUs% ofTotalTEUs

Value€000

Value/TEU €

1 4 Cereals & cereal preparations 6,848 12 18,523 2,705

2 67 Iron & steel 6,006 11 48,052 8,000

3 57 Plastics in primary forms 5,333 9 56,721 10,635

4 6 Sugar, sugar preparation & honey 5,093 9 38,688 7,596

5 5 Vegetables & fruit 5,062 9 60,573 11,965

6 78 Road vehicles (include. air-cushion vehicles) 3,314 6 286,601 86,486

7 66 Non-metallic mineral manufactures 3,088 5 17,953 5,814

8 11 Beverages 2,952 5 106,028 35,920

9 56 Fertilisers (other than those of Division 27) 2,817 5 7,937 2,818

10 64 Paper, paperboard & articles thereof 2,446 4 31,985 13,078

11 8 Feeding stuff for animals (excl. unmilled cereals) 1,279 2 3,116 2,436

12 69 Manufactures of metals 1,159 2 29,495 25,440

13 33 Petroleum, petroleum products & relatedmaterials 1,068 2 3,529 3,303

14 1 Meat & meat preparations 1,066 2 29,878 28,028

15 55 Essential oils, perfume materials; toilet & cleansing 1,026 2 79,225 77,196

16 89 Miscellaneous manufactured articles 959 2 53,829 56,150

17 2 Dairy products & birds’ eggs 842 1 14,370 17,061

18 74 General industrial machinery & equipment 697 1 62,108 89,107

19 58 Plastics in non-primary forms 554 1 20,238 36,541

20 72 Machinery specialised for particular industries 487 1 36,693 75,318

Total for Top-20 52,098 92 1,005,541

Total for all unitised imports 56,924 100 1,882,068

Note 1: TEUs are used as the common unit of cargo and include containers as well as trailers (with an

appropriate conversion factor).

Note 2: In addition to the loaded imports as shown above, imported empty containers and trailer units in

2008 are estimated to have been 2,265 TEUs

Note 3: The residual unitised cargoes that are not in the Top-20 list are composed of a large number of

different cargo types (~ 40), some of which have quite high values, although the majority have

medium-to-low values; all have relatively low numbers of TEUs.


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Table 2: Top-20 Exports from Ireland to France (2008)

Top-20 Exports from Ireland to France (2008)

EXPORTS

Rank SITCCode SITC Description Est

TEUs% ofTotalTEUs

Value€000

Value/TEU €

1 27 Crude fertilisers & minerals, excl. coal, petroleum 12,533 23 1,479 118

2 1 Meat & meat preparations 10,945 20 291,840 26,665

3 2 Dairy products & birds’ eggs 3,540 6 76,719 21,671

4 3 Fish, crustaceans, molluscs and preparations 2,951 5 77,390 26,225

5 89 Miscellaneous manufactured articles 2,849 5 286,921 100,718

6 75 Office machines & data processing machines 2,582 5 968,243 375,009

7 63 Cork & wood manufactures (excl. furniture) 2,530 5 14,300 5,651

8 55 Essential oils, perfume materials; toilet &cleansing 1,587 3 364,340 229,571

9 54 Medical & pharmaceutical products 1,475 3 737,547 499,970

10 59 Chemical materials & products 1,346 2 531,024 394,589

11 74 General industrial machinery & equipment 1,266 2 172,522 136,282

12 25 Pulp & waste paper 1,097 2 820 747

13 28 Metalliferous ores & metal scrap 974 2 1,857 1,907

14 72 Machinery specialised for particular industries 950 2 33,515 35,275

15 21 Hides, skins & furskins, raw 829 2 6,498 7,835

16 11 Beverages 817 1 30,360 37,174

17 58 Plastics in non-primary forms 704 1 47,480 67,479

18 32 Coal, coke & briquettes 587 1 264 450

19 57 Plastics in primary forms 560 1 15,498 27,691

20 9 Miscellaneous edible products & preparations 479 1 24,429 50,951

Total for Top-20 50,601 93 3,683,046

Total for all unitised exports 54,649 100 4,659,670

In addition to the loaded exports as shown above, exported empty containers and trailer units in 2008 are

estimated to have been 30,857 TEUs.


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2.2.2 Observations on the Top-20 Imports & Exports between Ireland & France

1. From the Top-20 tables for the years 2005 to 2008, it can be seen that unitised trades between

Ireland and France are nearly balanced. For maritime services, this increases the average ship

utilisation and reduces transport costs.

Table 3: Summary of Top-20 unitised cargoes Ireland – France 2005-2008

Description 2005 2006 2007 2008

Top-20 Unitised Imports intoIreland from France (TEUs)

41,121 47,756 49,006 52,098

Top-20 Unitised Exports fromIreland to France (TEUs)

41,947 54,675 52,152 50,601

2. It is also evident that both unitised imports into Ireland and exports from Ireland to France are on a

growth trajectory, with unitised imports experiencing an average growth rate of 8.2% and unitised

exports growing on average by 6.5% per year.

2.3 Segmentation of Unitised Cargoes

The unitised imports & exports can be segmented, in broad terms, into:

a. Consumables, Perishable goods;

b. Medium Value, Durable goods;

c. High Value, Durable goods;

d. Low Value, Durable goods.

Table 4: Unitised cargo segments in Top-20 tables 2005 – 2008: Imports into Ireland from France

Number of TEUs in each segment in each yearTop-20 Unitised Imports intoIreland from France 2005 2006 2007 2008

Consumables; Perishable goods 16,351 17,870 20,484 21,864

Medium value, durable goods 15,648 19,874 18,649 16,458

High value, durable goods 5,927 6,357 6,560 5,524

Low value, durable goods 3,196 3,655 3,313 8,252

Totals 41,122 47,756 49,006 52,098

Table 5: Unitised cargo segments in Top-20 tables 2005 – 2008: Exports from Ireland to France

Number of TEUs in each segment in each yearTop-20 Unitised Exports fromIreland into France 2005 2006 2007 2008

Consumables; Perishable goods 19,057 22,442 21,872 18,732

Medium value, durable goods 5,112 3,211 13,981 2,339

High value, durable goods 13,787 13,281 9,698 11,808

Low value, durable goods 3,991 15,741 6,601 17,721

Totals 41,947 54,675 52,152 50,601


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2.4 Inferences drawn from Segmentation of Unitised Cargoes

Consumables & Perishable Goods – mainly food stuffs – constitute the largest export segment from one

state to the other. From the Top-20 Imports and Exports between Ireland and France for 2008, it can be

seen that the range of such goods between the two countries is quite varied, due to climatic and industrial

factors in each state. Ireland’s climate makes it ideal for products such as meat and dairy, while its large

continental shelf provides the basis for fish and crustacean exports. France, on the other hand, enjoys

more sunshine and exports fruit and vegetables and processed cereals.

The transport requirements for these goods are fast, reliable deliveries. Trucking via the British Land

Bridge provides such services, supported by frequent ferry services between Dublin and Holyhead &

Liverpool, as well as ferry services between Rosslare and Fishguard & Pembroke. Trucking also provides

unbeatable flexibility and consistency – with a driver in charge of the goods from collection to delivery.

The addition of a RoRo vessel on a new service between Rosslare and Cherbourg, which is the focus of

this business case, would have the advantages of having a pricing structure that would be significantly

less than that of trucking and with delivery times that would be about the same4. Other factors that would

be crucial for the success of a new RoRo service would be achieving consistent reliability of deliveries,

coordinating the intermodal elements of the networked service and marketing the service effectively, even

though faced with well-entrenched competition5.

Medium Value Durable Goods: The price range chosen for these goods is €10k - €50k per TEU. This is

the second largest segment for imports into Ireland and the third largest for exports from Ireland to France.

(Refer to Tables 4 & 5). The volumes of imports into Ireland show a small decline associated with the

onset of the recession, whereas exports from Ireland show a spiked increase in 2007. When referred back

to the primary data, this spike can be attributed to ‘essential oils & perfumes’ that can be further referred

back to the originating company or companies.

In general, the transport requirements for these goods are Price, Reliability and Delivery Times and in that

regard a RoRo service would rate highly.

High Value Durable Goods: The price range chosen for these goods is greater than €50k per TEU. It is a

substantial market segment for exports from Ireland to France and, in general, high value exports

constitute an essential element of the Irish economy. High value imports from France to Ireland show a

steady position, with a small decline in the recession (refer to Table 4).

Security is an added transport requirement for these goods. Security is an aspect of transport in which

maritime services excel because of their adherence to the ISPS6 code, for which there is no equivalent in

land transport.

Low Value Durable Goods: The price range chosen for these goods is less than €10k per TEU. The

annualised data for low value durable goods, both imports from France into Ireland and exports from

4 Refer to Section 3 of this study.5 Refer to Section 4 of this study, where these issues are addressed.6 ISPS – International Ship & Port Security Code


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Ireland to France, show irregular upward surges (refer to Tables 4 & 5). These are usually associated with

changes in agricultural requirements, which are notoriously weather and market dependent. The transport

priority for these goods is primarily price, for which a RoRo service would have a decided advantage over

long-haul trucking, although LoLo services would be less costly than both.

In summary, even though unitised imports and exports between the two states are remarkably balanced

and stable, there can be significant annual variations within the principal cargo segments. It would,

therefore, be incumbent on a new or improved RoRo service to target all cargo segments in order to

secure a balanced and consistent market share. In that regard it would be prudent to espouse the

marketing adage that ‘price gets the business and service quality retains it’.

2.5 Appraisal of the Irish Economy

A realistic concern overhanging a new RoRo service between Ireland and France is that the severity of the

credit crisis in Ireland would jeopardise Irish imports and exports. For that reason an Appraisal was carried

out of the Irish economy through a review of relevant literature. The Appraisal is included in the Appendix.

It shows that prior to the financial crisis of 2008 the threats to the Irish economy that had been accurately

identified were:

o The property bubble in Ireland;

o The inflationary costs and wages in the building industry that were undermining Irish

competitiveness;

o The burgeoning financial imbalances in the US that were an overhang on international financial

order.

The threats that were not adequately identified were:

o The out-of-control lending practices of Irish banks to developers, builders and to purchasers of

property;

o The escalation of expenditures on public services that absorbed a disproportionate amount of

resources in the boom years and that are difficult to scale back in recessionary times;

o The extraordinary financial vortex in the US into which international financial institutions were

drawn, ultimately with disastrous consequences.

The outcomes from the realisation of all those threats in 2008 were:

o A 14% fall in Irish GNP in two years;

o Unemployment going from 4% of the labour force to 12.4% in three years and still rising;

o Government debt increased from €30B to €78B in two years and remains on an upwards

trajectory;

o The only encouraging factor is that exports have held firm, while imports fell by 30% in two years,

resulting in a substantial positive increase in the balance of payments.

The implications for a possible new RoRo service between Ireland and France are:

o With a fall in Irish wages and costs, exports will probably be sustained and possibly could

increase;

o A new RoRo service would be influential in reversing the decline in imports through reduced

transport costs and with an emphasis on value of French imported goods.


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In the following section, the possibility of trade gaps between Ireland and its neighbouring states are

investigated, especially between Ireland & France.

2.6 Normalized Trade Flows between Ireland & its neighbouring States

Normalized Trades can be described as the trade flows that may be expected between a reference state

and its neighbouring states on the basis of the GDPs and distances to the neighbouring states. The

normalized trades are useful in estimating trade potentials and trade gaps. The Normalized Trades can be

computed for export & import values and common cargo units (TEUs); it is useful to do both, as some

interesting outcomes emerge.

The actual annual values (€ k) of unitized Imports & Exports, in comparison to normalized Import & Export

values are shown in table’s 6 and 7 below.

The actual annual volumes (TEUs) of unitized Imports & Exports, in comparison to normalized Import &

Export volumes are shown in table’s 8 and 9 below.

Table 6: Normalised imports (value) into Ireland from its Neighbouring States (2008)

Normalised imports into Ireland from its Neighbouring States (€ k) in 2008

TradingStates GDP (€ M)

ApproximateDistance

(Naut. Miles)

ActualImport

Values (€ k)

NormalisedImports -

GDP & Dist.(€ k)

Ratio ofActual

Imports /Normalised

Belgium/Lux. 384,024 450 980,211 1,154,181 0.85

Netherlands 595,883 505 2,427,146 1,595,868 1.52

France 1,948,511 500 1,882,068 5,270,603 0.36

Spain 1,088,502 1,270 824,006 1,159,186 0.71

Portugal 166,462 1,435 122,398 156,889 0.78

Britain 1,818,947 265 12,384,182 9,283,284 1.33

Totals & Av. 6,002,330 738 18,620,010 18,620,010


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Table 7: Normalised exports (value) from Ireland to its Neighbouring States (2008)

Normalised exports from Ireland to its Neighbouring States (€ k) in 2008

TradingStates GDP (€ M) Distance

(Naut. Miles)ActualExport

Values (€ k)

NormalisedExports -

GDP & Dist.(€ k)

Ratio ofActual

Exports /Normalised

Belgium/Lux. 384,024 450 10,913,440 2,124,089 5.14

Netherlands 595,883 505 2,722,026 2,936,946 0.93

France 1,948,511 500 4,659,670 9,699,720 0.48

Spain 1,088,502 1,270 3,227,480 2,133,300 1.51

Portugal 166,462 1,435 369,981 288,729 1.28

Britain 1,818,947 265 12,374,615 17,084,429 0.72

Totals & Av. 6,002,330 738 34,267,212 34,267,212

Table 8: Normalised imports (TEUs) into Ireland from its Neighbouring States (2008)

Normalised imports into Ireland from its Neighbouring States (TEUs) in 2008


(Naut. Miles)Actual

Imports(TEU's)

NormalisedImports -

GDP & Dist.(TEU's)

Ratio ofActual

Imports /Normalised

Belgium/Lux. 384,024 450 59,255 45,017 1.32

Netherlands 595,883 505 79,674 62,244 1.28

France 1,948,511 500 56,924 205,570 0.28

Spain 1,088,502 1,270 67,721 45,212 1.50

Portugal 166,462 1,435 11,943 6,119 1.95

Britain 1,818,947 265 450,722 362,077 1.24

Totals & Av. 6,002,330 738 726,239 726,239


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Table 9: Normalised exports (TEUs) from Ireland to its Neighbouring States (2008)

Normalised exports from Ireland to its Neighbouring States (TEU's) in 2008


Naut. MilesActualExport(TEU's)

NormalisedExports -

GDP & Dist.(TEU's)

Ratio ofActual

Exports /Normalised

Belgium/Lux. 384,024 450 20,329 30,734 0.66

Netherlands 595,883 505 49,355 42,495 1.16

France 1,948,511 500 54,649 140,347 0.39

Spain 1,088,502 1,270 16,791 30,867 0.54

Portugal 166,462 1,435 3,122 4,178 0.75

Britain 1,818,947 265 351,574 247,198 1.42

Totals & Av. 6,002,330 738 495,820 495,820

2.7 Inferences drawn from Normalised Tables of Imports & Exports

The inferences that may be drawn from the normalised tables relate to each individual neighbouring state

with Ireland, taken one at a time.

Belgium / Luxemburg:

From Table 6, it is evident that the value of imports into Ireland from Belgium / Luxemburg is about

normal or slightly less than normal, with the ratio of Actual to Normal being 0.85.

From Table 7, the ratio of Actual to Normal value of exports from Ireland to Belgium is an amazing 5.14.

This requires some explanation. From an investigation of the value of Irish exports to Belgium over

previous years, it is found that in year 2002 the value of Irish exports to Belgium flipped from

approximately € 4B / year to over € 13B / year and has remained at about € 11B per year ever since.

This was due to a concerted move for high value pharmaceutical and chemical products to be exported

from Ireland to Belgium / Luxemburg for finishing and distribution in Europe.

Tables 9 shows that the ratio of Actual to Normal unitised exports (TEUs) from Ireland to Belgium /

Luxemburg is 0.66, which is considerably less than normal, indicating that, even though the exports are

of high value, they are of low volume.

The Netherlands

Imports and exports between the Netherlands and Ireland are either greater than normal or about

normal for both value and volume. This is probably due to the excellent unitised transport services

emanating from Rotterdam that service a significant proportion of Europe, including Ireland.


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Spain & Portugal

The pattern of trade between Ireland and Spain & Portugal is relatively high value / low volume exports

from Ireland and relatively low value / high volume imports into Ireland. This mismatch effectively

increases the unit cost of transport and would need to be rectified with a much higher volume of exports

from Ireland to both Spain and Portugal.

Britain

The unitised exports from Ireland to Britain are, surprisingly, relatively low value and high volume, with

the value of exports significantly less than normal and the volume of exports significantly greater than

normal. Both the value and volumes of imports into Ireland from Britain are greater than normal.

France

As this Business Case is all about trade and transport between Ireland and France, the data relating to

France in Tables 6, 7, 8 & 9 are shaded relative to the rest of the data. They show a singular,

unambiguous situation: unitised trade between Ireland and France – imports, exports, values and

volumes – are all considerably less than half what they ought to be.

In these recessionary times it is generally recognised that increasing trade is the only sure means of

increasing prosperity. In that regard, the significant trade gap between Ireland and France is an

opportunity for the two states to increase their GDPs through increased trade; it is also an indictment on

both states for years of neglecting to build up proper trade links with each other.


Page 17

2.8 Estimated unitised cargoes via the British Land-Bridge (2008)

Table 10: Estimated Trailers to/from Ireland via the British Land-bridge (2008)

Table 10 lists the total estimated trailers imported and exported between Ireland and Mainland Europe. By

subtracting the estimated number of trailers transported by sea, the trailers trucked through Britain to

Mainland Europe can be determined. These were an estimated 247,238 trailers, imports & exports, laden

and empty in 2008.

Est. Trailers Est. LoLo (TEU's)

Origin / Destination StateImports Exports Imports Exports

France 16,871 16,469 13,601 12,385

Belgium 17,381 6,580 10,899 2,887

Netherlands 22,250 14,057 22,538 13,282

Germany 25,124 12,476 38,669 14,594

Denmark 4,108 1,559 5,152 1,824

Sweden 4,297 4,211 5,388 4,926

Finland 1,818 709 1,465 534

Spain 20,071 5,060 21,575 5,074

Portugal 2,908 836 4,476 977

Italy 6,472 6,200 12,175 7,253

Greece 275 581 172 340

Austria 1,311 817 616 358

Rest of Europe 34,324 13,018 258,271 202,294

Est. Total Laden MainlandEurope 157,209 82,572 394,997 266,728

Est. Total Empty MainlandEurope 7,792 29,666 16,057 220,627

Est. Total Laden and Empty 165,001 112,237 411,054 487,355

Less Est. RoRo/RoPaxfrom/to Ireland & MainlandEurope

15,000 15,000

Estimated trucks Laden &Empty via British Land-bridge

150,001 97,237


Page 18

There is clearly an opportunity here for a percentage of this cargo to be shipped directly to Mainland

Europe through an enhanced RoRo service via Rosslare. One RoRo vessel with a capacity of 198 trailers,

which is the example used in the Business Case, would account for approximately 25,000 trailers per

year.

2.9 Summary

The business opportunity that is being investigated is the feasibility of operating a RoRo vessel of 198

trailer capacity between Ireland and France via the ports of Rosslare and Cherbourg. The two vessels

operating on this route at present are RoPax vessels, one of capacity 89 tractor / trailers, 580 cars and

1,458 passengers and the other of capacity 120 tractor / trailers, 200 cars and 800 passengers. The two

RoPax vessels are augmented during the summer months with a RoPax vessel operating between Cork

and Roscoff and another RoPax vessel operating between Dublin and Cherbourg.

In addition, approximately 250,000 trucks, laden & empty, use the British Land Bridge in transit between

Ireland and Mainland Europe. Also, 900,000 TEUs (approx. 400,000 trailer-equivalents) of LoLo cargoes,

laden and empty, are shipped between Ireland and Mainland Europe. The RoRo vessel, that is the subject

of the Business Case, would carry approximately 25,000 trailers, laden and empty, per year. It would be

faced with stiff competition from the alternative transport modes and routes, primarily trucking through

Britain, with LoLo being the main competitor for medium-to-long distances.

The nature of the cargoes that are transported between Ireland and France are analysed using the Top-20

cargoes by volume, which are differentiated by their SITC7 codes. This is a Pareto-style approach to cargo

analysis and is quite effective. It enables the cargo types to be segmented into different categories related

to the transport function. Four segments are used: consumables / perishable goods, medium value

durable goods, high value durable goods and low value durable goods, with values being arbitrarily taken

to be €10,000 per TEU or less for low value goods and €50,000 per TEU or greater for high value goods.

The recent deterioration of the economy in Ireland is examined in the Appendix. It shows that the principal

current weakness in the Irish economy is the accumulating government debt. Exports are holding firm and

could increase because of reductions in wages and costs; imports have fallen and will be slow to recover,

although a low cost transport solution that facilitates trade would be a positive factor in an eventual

recovery.

An investigation is carried out of ‘normalised’ trades between Ireland and its neighbouring states in terms

of value of trades and numbers of unitised cargoes. The normalised trades are computed on the basis of

GDPs of the neighbouring states and their average distances from Ireland. In the case of France, the

results are unambiguous and somewhat surprising: the normalised trades between Ireland and France for

import and export values and number of cargo units are considerably less than half what they ought to be

based on GDPs and distance. This signifies significant deficiencies in both trading arrangements and

associated transport between the two states.

7 SITC: Standard International Trade Classification


Page 19

3. Analysis of a possible new RoRo Service

3.1 Overview of the Analysis

The analysis of a possible new RoRo service between Rosslare and Cherbourg is carried out by

comparing the proposed service with alternative currently available options. The reference point in Ireland

for exports and imports is taken to be Limerick, as it is representative of the South and West of Ireland; the

reference point in France is taken to be Paris, as the greater Parisian region accounts for approximately

40% of French consumption and it is the principal distribution hub in France. The comparative services

that are selected are:

1. Trucking between Limerick and Dublin, RoPax ferry to Holyhead, trucking between Holyhead and

Dover, RoPax ferry to Calais and, finally, trucking between Calais and Paris. This is primarily a

trucking option.

2. Trucking between Limerick and Rosslare, RoRo vessel between Rosslare and Cherbourg, then

trucking between Cherbourg and Paris. This is primarily a RoRo option.

3. Trucking between Limerick and Cork, LoLo ship between Cork and Zeebrugge, and trucking

between Zeebrugge and Paris. This is primarily a LoLo option.

These services are drawn on the chart in Figure 1 and are schematically represented in Figure 2 below.

Limerick Paris

Dublin Holyhead Dover Calais

Land

brid

ge

Rosslare CherbourgRoRo

LoLo

Cork Zeebrugge

Figure 2

The principal characteristics of these modes are shown in the Table 11, as follows:


Page 20

Table 11: Principal characteristics of the transport modes used in the analysis:

Description TruckCharacteristics

(Used throughout)

RoRo ShipCharacteristics

LoLo ShipCharacteristics

Type Vehicle / Vessel Euro V RoRo LoLo

Capacity 1 Trailer 198 Trailers 500 TEUs

Design Speed Variable 21.5 kts 14 kts

Service Speed 75 km/hr 18 kts 13 kts

Type of fuel used at Sea N/A MDO MDO

Type of fuel used in Port or on

land MGO MGO MGO

Daily Fuel Consumption at Sea

(t/hr) N/A 2.28 0.94

Fuel Consumption in Port or on

land 2.8 litres/ km 0.6 t/hr 0.18 t/hr

Reserve Time (%) N/A 7% 6%

Daily Charter Rate (€ / day) N/A € 21,014 € 10,000

Average Utilisation of Capacity 75% 45% 45%

Repeatable Round Trips per

period N/A

Three Round Trips

per week

Three Round Trips

per two weeks

3.2 Pricing Model for a new RoRo Service

There are various pricing models that may be used for products or services and it is necessary to review

these before proceeding further with the analysis.

3.2.1 Economic Pricing Model:

An Economic Pricing Model is invariably presented as a reference in text books on this subject8. The

following are the essential elements of such a model:

a. A demand function is derived, where the volume of cargo throughput is expressed as a

dependent variable of unit price;

b. A transport cost function is required, which has a fixed cost element and a variable element

based on the volume of cargo throughput;

c. A profit function is then derived, which is ultimately based on unit price.

The relatively simple task then is to determine the unit price that yields maximum profit.

8 Ref: ‘Marketing Management’ and ‘Principles of Marketing’ by Philip Kotler


Page 21

Without going into the detail of it all, the economic model on its own is patently a simplistic approach to an

important issue, all dressed up in the trappings of economic sophistication.

3.2.2 Cost-Orientated Pricing:

A unit price is determined that will cover all costs and yield an adequate profit margin to ensure

sustainability of the service. The problem is that costs and revenues are a function of cargo volumes and,

hence, are variables. Nevertheless, the directness of this model, coupled with the necessity of covering

costs and of gaining an adequate profit margin means that it is invariably used, if only as a check against

other more complicated models.

3.2.3 Discretionary Pricing:

Different prices may be quoted for different clients, times, locations or for marginally different services.

Discretionary pricing is used for clearly defined market segments, such as clients with relatively large

cargo throughputs, and is widely used in maritime services.

3.2.4 Competition-orientated Pricing:

Where there is keen competition between service providers, then a going-rate price may prevail, with

marginal discounts provided or extra charges imposed, depending on particular circumstances.

3.2.5 A pricing model for a new RoRo service:

A pricing model is suggested that is a composite of Economic Pricing, Cost-orientated Pricing,

Discretionary Pricing and Competition-orientated Pricing and is applied to the RoRo service between

Ireland and France via the ports of Rosslare and Cherbourg. The following are the various steps in the

process:

a. Door-to-Door (D2D) unit transport cost for any level of ship utilisation can be calculated using a

decision support system, such as Nautical Enterprise’s TransPlan-IT system.

b. A corresponding D2D unit transport price can be computed on the basis of unit cost plus a profit

margin, such as 15%.

c. The most important reference point is based on the price set by the greatest competitor, which in

this case is truck-and-ferry via the British Land Bridge. The computed D2D price between

Limerick and Paris via the British Land Bridge is €2,528 per trailer. The new RoRo service would

have to give a substantial discount on this price because of the entrenched position and flexibility

of Land Bridge services. The discount that is proposed is 20%. The competitive RoRo unit price

would therefore be €2,528 x 0.8 €2,022 per trailer, and the corresponding RoRo unit cost

would be €2,022 / 1.15 €1,758 per trailer. The ship utilisation corresponding to a unit D2D

cost of €1,758 can be obtained by inspection using the decision support system and is found to

be 32%.

This determines the principal reference point in terms of minimum ship utilisation and reference

D2D unit cost to the ship operator and D2D unit price to the shipper / freight forwarder. The row

corresponding to this data has dark shading in the table below.


Page 22

Table 12: Ireland – France: Computed D2D Costs, Prices & Ship Utilisations for RoRo Vessel

Trailersonboard

Av. AnnualUtilisation

%

Unit D2DCost

(Cal'd withDecisionSupport)

Unit D2DPrice (D2DCost+15%)

DiscretionaryExtra per

Cargo Unit

Discretionaryextra per

Voyage (€)

Discretionaryextra perYear (€)

109 55 €1,496 €1,720 €302 €32,918 €9,875,400

107 54 €1,503 €1,728 €294 €31,458 €9,437,400

105 53 €1,509 €1,735 €287 €30,135 €9,040,500

103 52 €1,516 €1,743 €279 €28,737 €8,621,100

101 51 €1,523 €1,751 €271 €27,371 €8,211,300

99 50 €1,531 €1,761 €261 €25,839 €7,751,700

97 49 €1,539 €1,770 €252 €24,444 €7,333,200

95 48 €1,547 €1,779 €243 €23,085 €6,925,500

93 47 €1,555 €1,788 €234 €21,762 €6,528,600

91 46 €1,564 €1,799 €223 €20,293 €6,087,900

89 45 €1,573 €1,809 €213 €18,957 €5,687,100

87 44 €1,583 €1,820 €202 €17,574 €5,272,200

85 43 €1,593 €1,832 €190 €16,150 €4,845,000

83 42 €1,604 €1,845 €177 €14,691 €4,407,300

81 41 €1,615 €1,857 €165 €13,365 €4,009,500

79 40 €1,626 €1,870 €152 €12,008 €3,602,400

77 39 €1,639 €1,885 €137 €10,549 €3,164,700

75 38 €1,651 €1,899 €123 €9,225 €2,767,500

73 37 €1,665 €1,915 €107 €7,811 €2,343,300

71 36 €1,679 €1,931 €91 €6,461 €1,938,300

69 35 €1,694 €1,948 €74 €5,106 €1,531,800

67 34 €1,711 €1,968 €54 €3,618 €1,085,400

65 33 €1,728 €1,987 €35 €2,275 €682,500

63 32 €1,758 €2,022 0 0 0

61 31 €1,765 €2,030 N/A N/A N/A

59 30 €1,785 €2,053 N/A N/A N/A


Page 23

It should be noted that the minimum ship utilisation from this computation could be rather high

e.g. ~ 50%, in which case the proposed service or service improvement is probably not viable. In

the example of a possible RoRo service between Rosslare and Cherbourg, using Limerick and

Paris as reference points, the minimum ship utilisation of 32% is relatively good and is an

important criterion in the assessment of viability of the service.

d. A second reference point is used to illustrate the pricing routine. It is taken to be a reasonably

achievable level of ship utilisation, with the corresponding unit cost determined using the

decision support system and the price that gives a required profit margin (e.g. 15%). In the

example of Limerick to Paris the second reference point is taken to be 45%; the corresponding

unit cost is €1,573 and unit price is €1,809 per trailer.

The difference between the Reference Unit Price (€2,022 per trailer) and the ‘price’ at 45%

average ship utilisation (€1,809 per trailer) is €213 per trailer. This does not appear to be much,

but it amounts to €5,494 per voyage or €1.6M per year. This €213 per trailer is discretionary

extra income. Some of it may be used to provide extra incentives for high volumes, early

bookings or non-urgency bookings; some of it may be used as an extra booking fee for freight

forwarders or service providers to facilitate distributed marketing & bookings throughout the

service network; the remainder could be discretionary extra profit to the service provider.

Relationship between Ship Average Utilisation and Price per Trailer

Price per Trailer vs Ship Utilisation

1,7001,7501,8001,8501,9001,9502,0002,0502,100

25 30 35 40 45 50 55 60

Ship Average Utilisation (%)

Pric

e pe

r Tr

aile

r (€

)

Business Case: Rosslare Europort – Mainland Europe

Page 24

Table 13: Pricing Routine

D2D UnitPrice ofMajor

Competitor

Discount onCompetitor

Price

ReferencePrice for

D2DShippingService

RequiredProfit

Margin

Referenceunit cost

MinimumShip

Utilisation(DecisionSupport)

TargetedAverage

Utilisation

CorrespondingUnit Cost, (from

Decision SupportSystem)

CorrespondingUnit Price:

(Unit Cost x1.15)

DiscretionaryExtra Revenue(for discounts,

marketing &profit)

€2,528 20% €2,022 15% €1,758 32% 45% €1,573 €1,809 €213

Note 1: In the Pricing Routine the Reference Price is the base price throughout; the Discretionary Revenue per cargo unit (€213) can be distributed between

selective further discounts, marketing fees and profit. It should be noted that as the Average Ship Utilisation is increased, the Discretionary Revenue is increased,

which indicates that at relatively low levels of Average Utilisation a considerable proportion of the Discretionary Revenue should be devoted to marketing and

discounting in order to win market share and to increase the Average Utilisation. As the Average Utilisation is increased, progressively more of the Discretionary

Revenue could be assigned to profit.

Note 2: If a different point of origin in Ireland is selected e.g. Dublin rather than Limerick, then the Pricing Routine would have to be reactivated to give a new

Reference Price and new Discretionary Revenue at the targeted average ship utilisation of 45%. With Dublin as the point of origin the Land Bridge price would be

significantly reduced because of considerably less trucking required in Ireland. The RoRo Reference Price would have to be proportionately reduced to provide a

20% discount on the Land Bridge price, but the RoRo Discretionary Revenue would shrink from €213 to €46 per cargo unit. That is, the relative competitiveness of

the RoRo option would be significantly reduced.

Note 3: The Pricing Routine can be used to delineate the hinterland of a port of departure and the foreland around of a port of arrival. That is, the hinterland and

foreland are areas around the departure and arrival ports respectively where a transport service has a distinct competitive advantage over its principal

competitors. The hinterland and foreland are, therefore, priority areas for marketing a particular service and they can be zoned into high priority, medium priority

and low priority areas for marketing purposes. Under Note 2 (above), Limerick and all areas to the East and South of it would be a high priority zone, whereas

Dublin and areas to the North of it would be medium priority zones, associated with reduced Discretionary Revenues.


Page 25

3.3 Comparative Analysis of Transport Modes

The three transport options for freight movements between Ireland (Limerick as reference point) and France (Paris as reference point) that are examined are:

1. A RoRo service between Ireland and France,

2. Truck & Ferry via the British Land Bridge,

3. A LoLo service via the ports of Cork and Zeebrugge.

The principal outputs in the comparative analysis are D2D unit prices, discretionary revenues, delivery times and CO2 per cargo unit.

These are shown in summary form in Table 14 below.

Table 14: Outputs from the Comparative Analysis between Transport Modes

Description Truck & Ferry via BritishLand Bridge RoRo via Rosslare & Cherbourg LoLo via Cork & Zeebrugge

Truck Ferries Total Truck Ship Total

DiscretionaryRevenue, associated

with the ship,included in the Price

Truck Ship Total

DiscretionaryRevenue, associated

with the ship,included in the Price

AverageUtilisation 75% N/A 75% 75% 45% 75% 45%

D2D Priceper Trailer

€2,028 €500 €2,528 €823 €1,199 €2,022 €213 €746 €871 €1,617 €40

D2DTransporttimes (hrs)

24 5 29 8 26 34 6 55 61

CO2(t/Trailer) 1.6 0.8 2.4 0.6 1.7 2.3 0.6 1.3 1.9


Page 26

3.4 Summary

The possible new service between Ireland and France using the ports of Rosslare and Cherbourg is

analysed by comparing the service with what would be its main competitor – trucking via the British Land-

Bridge and ferries across the Irish Sea and English Channel.

A pricing routine for the new RoRo service is proposed that would be a composite of a standard economic

pricing model, cost-orientated pricing, discretionary pricing and competition-orientated pricing. It is

contended that pricing would be a key element in the success of a new service and that a pricing structure

that could be automated on the web would remove much of the uncertainty and mystique about maritime

freight transport. The pricing routine could also be used to delineate the hinterland and foreland markets

around the two trading ports; that is, the geographical regions within which the new service would have a

clear competitive advantage.


Page 27

4. Inferences Drawn from Comparative Analysis of Transport ModesThe features of the comparative analysis of transport modes in the business case are, in summary:

4.1 A 20% discount on the computed price via the British Land Bridge;

4.2 The use of a Discretionary Element as a component of the unit price;

4.3 The relevance of D2D delivery times;

4.4 Formation of a Trading Corridor between Ireland and France

4.5 Supporting innovations;

4.6 An Appropriate Strategy for the proposed service.

4.1 A 20% discount on the computed price via the British Land Bridge

As shown in Table 10 (‘Estimated Unitised Cargoes via the British Land-Bridge (2008)’, there are

approximately 250,000 truck journeys per year through Britain, travelling between Ireland and Mainland

Europe. The trucking services are supported by a high frequency of ferry sailings across the Irish Sea

between Britain and Ireland, and across the English Channel between Britain and France. The total value

of these freight movements to the ferry companies is about €125 M per year, which is further augmented

by passenger, car and bus travel.

Trucking, which is the essential element in these journeys, is very competitive and is tremendously

adaptable with a driver accompanying the cargo from beginning to end. This adaptability enables a truck

to be used in securing return business, as well as for cabotage9 opportunities whilst in Mainland Europe

and Britain.

For these several reasons, trucking via the British Land Bridge is the well established market leader in the

transportation of unitised cargoes between Ireland and near-Mainland Europe. In order to win market

share from this formidable competitor it would be necessary for a new alternative service to provide a

distinct advantage in one of the key aspects of intermodal transport; that is, in D2D unit price, delivery

time, reliability of deliveries or frequency of services. The only one of these aspects in which a new direct

RoRo service can excel is in D2D unit price, and it must compete visibly and meaningfully in this aspect.

The identification of a meaningful differential in price in many respects is in keeping with Weber’s Law,

which states that people can only detect proportionate i.e. percentage, increases in physical stimuli, such

as noise, heat, light intensity. It is reckoned that the discernable differential in transport price is about 15%,

so that the D2D unit price for a proposed new RoRo service should be at least 15% less than that of Land

Bridge. The 20% discount that is used is therefore a distinctive market differentiating feature.

4.2 The use of a Discretionary component in the unit price.

Having a Discretionary component in the unit price enables a Reverence Price to be used that is pegged

to the price of the Market Leader. The Discretionary component is dependent on the level of ship

utilisation that is achieved. This approach has several advantages:

9 Cabotage: the transportation of goods between two points in a country by a vehicle or vessel registered

in a different country.


Page 28

a. Pricing is relatively simple, to the extent that it can be automated, with an algorithm to determine

the Discretionary component of the price.

b. Pricing and bookings can be carried out by operational personnel anywhere in the network, with

the division between extra discounts, booking fees and revenue determined on a strategic basis.

c. Bookings can be linked to a pre-loading capability for specified vessels, taking into account ship

capacity, stability & trim, as well as ports of discharge for multi-port calling.

4.3 The relevance of D2D delivery times

Table 14 ‘Outputs from the Comparative Analysis between Transport Modes’, shows that D2D delivery

times for the RoRo service (34 hours) would be, on average, five hours longer than delivery times for Land

Bridge (29 hours). This raises the issue of the value that shippers attach to delivery times. From a

separate study carried out by Nautical Enterprise it was found that in the determination of the value that

Irish shippers attach to delivery times, food stuffs (consumables) and high / very high value goods could

be grouped into one segment and medium-to-low value durable goods grouped into another.

The average Value of Time (VoT)10 for food-stuffs and high / very high value goods was found to be €60 /

hr, while the VoT for medium-to-low value durable goods was €5 / hr.

A RoRo service between Ireland and France would aim to win market share in both these segments. The

5 hours delivery advantage of Land-Bridge services over the proposed RoRo service would be equivalent

to €60 x 5 €300, which is covered by the minimum price advantage of €500 per cargo unit (€2,528 -

€2,022) that the RoRo service would have over Land-Bridge. This means that a RoRo service would still

have a value advantage over Land-Bridge services, but the size of the advantage is very much diminished

when VoT is taken into account.

4.4 Formation of a Trading Corridor between Ireland and France

Currently there are two RoPax vessels plying between Rosslare and Cherbourg, making a total of six

round-trips per week. The proposed new RoRo vessel would increase the total number of round-trips to

nine per week and would double the capacity of freight throughput. The increased number of sailings and

greatly increased cargo capacity has the potential of converting the route into a trading corridor between

Ireland & France, with the two ports, Rosslare and Cherbourg, being the focal hubs on the corridor.

Even though the immediate target would be to win market share from British Land-Bridge services, the

long-term goal would be to address the major trade gap between Ireland and France. It is shown in

Section 2 of this study that the values and volumes of current unitised trade between the two states are

less than half what they ought to be. Helping to bridge this gap through an efficient and cost-effective

service would not only increase cargo volumes along the trading corridor, it would also increase wealth

generation in the two states because of the proportionate relationship between trade growth and GDP

growth.

10 Value-of-Time (VoT): The Value of Time can be deemed to be the value that a shipper attaches to each hour that

unitised cargo takes to be delivered, over-and-above a reference and faster delivery time, which is taken to be that

provided by trucking. (Refer to PROPS D2.1 ‘Networking Strategies for SSS Stakeholders & SPCs’, June 2010.


Page 29

4.5 Supporting Innovations

In addition to implementing a cost effective and competitive operation, it would be necessary to provide

supporting innovations in order to win market share from the well established and highly efficient services

via the British Land-Bridge. It is proposed that these features would include:

a. Deployment of an organisational structure that would enable operational participants in the service

to engage directly in marketing the new RoRo service. Operational participants would be

appropriately rewarded for their success in securing business from their circle of clients. This

capitalises on the fact that operational participants have access to their own contacts and clients,

who would remain within their influence whilst engaged with the new service.

b. The automation of essential client services would ensure that the RoRo-lead services would at

least be queried for the transportation of unitised cargoes between Ireland and France. Such web-

based client services would be helpful to all clients, especially those not familiar with the

intricacies of freight transport. The client services would include:

o Automated pricing, including discounts for cargo volumes, repeat business, non-urgency

categorisations; automated bookings and provision of transport insurance;

o Managing documentation and interfacing with regulatory authorities;

o Issuing of milestone notifications e.g. cargo collection, ship departure, rounding of key

headland, arrival and delivery.

c. A web-based decision support system could provide the capability of tuning the physical design

and organisational structure of the network to varying market conditions and would ensure that the

needs of major segments of the freight market are competitively met, whilst achieving an optimal

utilisation of transport resources.

d. An efficient marketing programme for the RoRo-lead network of services could be implemented

using the zoning categorisations suggested in Section 3.2.5; that is, the high priority, medium

priority and low priority zones in the hinterlands surrounding the ports of Rosslare and Cherbourg.

4.6 An Appropriate Strategy for the Proposed Service

An appropriate strategy would be that advocated by Christensen and Raynor11, who postulate two distinct

categories of innovative:

o Sustaining innovations,

o Disruptive innovations.

These categories are successful in the following sets of circumstances:

o A sustaining innovation targets demanding, high-end customers with better performance and

possibly higher price than what was previously available. Established competitors almost always

win the battles of sustaining technologies, regardless of how complex the technologies are.

o Disruptive innovations introduce products or services that are not necessarily as good as currently

available products or services, but offer other benefits such as simpler, more convenient and less

expensive than current products that appeal to less demanding or new customers. A disruptive

11 ‘The Innovator’s Solution – Creating and Sustaining Successful Growth’ by Clayton M. Christensen and

Michael E. Raynor (Harvard Business School Press 2003)


Page 30

innovation has a paralysing effect on market leaders, whose resource allocations are designed to

support sustaining innovations.

The proposed RoRo service has all the characteristics of a disruptive innovation and it is appropriate to

note what these characteristics are in that context:

1. A D2D unit price that is at least 20% less than that of the market leader. Where that level of

discount cannot be achieved, the service would not be actively marketed;

2. There would be a simplification and automation of essential client services, such as pricing,

provision of discounts, bookings and issuance of milestone notifications, documentation and

interfacing with regulatory authorities. These simplifications would be particularly helpful to clients

that are not familiar with the intricacies of freight transport.

3. Deployment of an organisational structure that will enable network participants – hauliers, freight

forwarders, shippers, – to engage in marketing the services of the network and to be rewarded for

their success in so doing.

4. The capability of tuning the network in response to the needs of major market segments and of

ensuring optimal utilisation of resources.

5. A focussed marketing programme that would target those exporters and importers for which the

RoRo-lead network of services would have clear competitive advantage.

4.7 Summary

It is proposed that the new RoRo service between Ireland and France would aim to secure 10% of the

current services via the British Land-Bridge, which account for approximately 250,000 trucks & trailers,

loaded & empty, per year. The principal marketing feature of the new service would be price, with at least

20% discount on Land-Bridge prices being the target. It is understood that other essential elements of

unitised transport services would also be competitively provided, such as reliability of deliveries, bearing in

mind the marketing adage that ‘clients come for the price, but stay for the service’.

The pricing routine that is proposed would have a fixed element that is pegged to the major competitor’s

price and a discretionary element that takes into account the vagaries associated with ship utilisation,

distances from ports of arrival and departure, as well as client discounts, marketing costs and vendors’

fees. The dispersal of revenues associated with the discretionary element would be dependent on the

company’s marketing and growth strategies.

Delivery times for consumable goods and for high / very high value goods are important, as illustrated by

the fact that shippers and receivers attach a high value of time (VoT) to these goods. Land-Bridge

services between Ireland and France have unbeatable delivery times. This significantly reduces the

competitive advantage of the proposed RoRo service.

The new RoRo service would complement the current RoPax services plying between Rosslare and

Cherbourg, to the extent of increasing the number of sailings by 50% and doubling the freight capacity.

This has the potential of converting the Rosslare – Cherbourg route into a trading corridor between Ireland

and France that would, over time, generate its own momentum through frequency of sailings, reliable

deliveries, increased marketing and support services and competitive value – a particularly important

feature at present. It would also have the potential of increasing trade between the Ireland and France and

of helping to bridge the major trade gap that currently exists between the two states.


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Disruptive innovations that could be introduced to support the proposed RoRo service include:

o The automation of essential services, including pricing, booking, ship pre-loading, management of

documentation with regulatory authorities and issuing of milestone notifications regarding the

progress of deliveries.

o Deployment of an organisational structure that will encourage and reward operational participants

to secure business from their circle of clients and contacts.

o A web-based decision support system to facilitate tuning the RoRo service to varying market

conditions, whilst achieving an optimal utilisation of resources.

o Using the pricing routine to geographically segment the market into high, medium and low priority

zones corresponding to the level of competitive advantage of the RoRo service.

It is proposed that the RoRo service in the Business Case should deploy a strategy that would make

effective use of its series of disruptive innovations, which would enable it to successfully compete with

well-entrenched Land-Bridge services.

Implications of the StudyCommencing a new RoRo service between Ireland and France would be a major undertaking.

o The estimated gross ship revenues per year at 45% average ship utilisation would be €28.7M.

o The estimated trucking revenues per year associated with the operation would be €25.3M.

o Estimated port revenues per year would be €6.9M

o Estimated savings per year to exporters & importers over Land-Bridge costs would be €13.5M.

Notwithstanding the above stream of revenues and savings, the major benefit would arise from the

facilitation of trade between the two states. In general terms, a 2% increase in external trade has

associated with it approximately a 1% increase in GDP. To reap this benefit, a concerted trade and

marketing drive could be initiated to coincide with deployment of the RoRo vessel. This would help to

bridge the substantial trade gap that currently exists and to gain benefit of wealth generated in the two

states from increased trade. If, over time, 10% of the RoRo vessel’s annual unitised load was composed

of new trades, the combined benefit to the two states would be approximately € 94 M per year.

The features of the case study that could be replicated in different situations include:

o The identification of a business opportunity that would justify further, in-depth investigation.

o The determination of unitised cargo movements between relevant states, the analysis of the

cargoes and sorting them into quantifiable segments.

o The quantification of normalised trade flows between a state or region and its neighbouring states,

the identification of trade gaps that may exist, the causes of the trade gaps and the determination

of how the trade gaps may be bridged.

o The analysis of alternative service options.

o The derivation of a pricing model that may be used in the assessment of alternative services and

in the delineation of port hinterlands and forelands.

o The introduction of a range of innovations that would improve the competitiveness of a service.

o Devising an operational strategy for the design and implementation of a service.


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Appendix: Appraisal of Irish Economy through a review of relevant literature


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Introduction

In the first half of the decade 2000 – 2010 the Irish economy grew at an annual average rate of 5.4%. The

Economic & Social Research Institute (ESRI) produced their ‘Middle Term Review 2005 – 2012’ in

December 2005 in which they made predictions for the Irish economy out to 2012. These predictions, for

the most part, were positive. Circumstances, however, changed in the second half of the decade and

things went terribly wrong, with the foundations for much of the economic disaster being laid in the first

half of the decade.

This Appraisal attempts to capture the developments of the time through:

1. A review of the ESRI study ‘Medium Term Review 2005 – 2012’, as well as using references from

‘The Pope’s Children12’ and published articles from David McWilliams, a popular author and

journalist who, at the time, antagonised Government officials by his incessant warnings of the

consequences of their expansionist policies;

2. A brief review of the actual economic outcomes in Ireland using economic data;

3. Reviews of some of the international literature that followed the bursting of the Supper Bubble that

triggered the economic crisis in 2008.

Economic & Social Research Institute (ESRI) Medium-Term Review 2005–2012

The ESRI “Medium-Term Review 2005 – 2012” was the tenth in a series of such reviews that commenced

in 1986. These Reviews provide the most authoritative forecast of the parameters that underpin the Irish

economy and are immensely influential with Government and business decision makers.

Overview of the Irish economy – Favourable Influences (2005 – 2012)There was an alignment of influences that indicated that the fundamentals driving the Irish economy at

that time were mainly favourable. There were also threats that were examined separately.

The favourable influences were:

o A fortunate set of demographic circumstances,

o The increasing importance of service exports,

o The large investment in construction and housing,

o The openness of the Irish labour market.

Fortunate Demographics

The fortunate demographics were elaborated at some length in David McWilliams’s book “The Pope’s

Children”.

Ireland had a baby-boom in the period mid-seventies to the mid-eighties that peaked shortly

after Pope John Paul’s visit in 1979. McWilliams refers to these baby-boomers as “the

Pope’s Children”. He said of them –

12 ‘The Pope’s Children – Ireland’s New Elite’ by David McWilliams (Gill & Macmillan 2005)


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“Today, the youngest Pope’s Children are 25, the oldest are 35. There are close to

620,000 of them and they constitute the key generation in this country for their effect on

our economy, attitudes, politics, art and literature. They are the creative dynamo of

Ireland”.

Augmenting the ‘baby-boomers’ that had matured into highly productive young adults,

Ireland was benefiting enormously from immigrants from the Accession States, described by

McWilliams as “the last fire sale of white Christian immigrants that the world is likely to see”.

A third fortunate demographic factor that was given considerable prominence in the MTR

study was Ireland’s low dependency ratio. It was approaching 1:1, that is, there was

approximately one dependent for every person working. This was due to a combination of

factors:

a. Very high emigration in the 1950’s reduced the number of dependent elderly,

b. High participation rate of females in the labour force,

c. Large inflows of young immigrants, together with a young indigenous labour force,

d. Low net unemployment rate at the time,

e. A much reduced birth rate from the baby-boomer period.

It concluded that “Ireland faces an unusual demographic window of opportunity over the next fifteen years

when dependency will be at an exceptional low level”.

Increasing Importance of Service Exports

Service exports accounted for about one third of all Irish exports at that time and were expected to

increase to approximately 40% by 2012. The attractive features of service exports are:

They have a relatively low import content and are more beneficial to the Irish economy than

an equivalent value of exported goods,

The terms of trade were moving continuously against the price of goods, to the extent that

merchandise export prices were increasing much more slowly than the prices of export

services, making services increasingly important in Irish external trade.

Investments in Housing

Investments in Ireland amounted to a very high share of national income and expenditure, and

approximately half of this was accounted for by investments in housing. Housing has a low leakage

through imported inputs and, accordingly, has a major favourable impact on the economy.

The savings ratio in Ireland had traditionally been approximately 10% of disposable income. With large

private investment in housing at the time, the net savings ratio had flipped to a net indebtedness of

approximately 10%. The MTR study said of this situation:

“While this is not sustainable indefinitely, it is clearly sustainable (if not desirable) for some time to come”.

McWilliams, at the time, waxed eloquently on the Irish building boom. He reckoned that it wa fuelled by:

a. The young population that required high-standard housing,

b. The ready supply of affordable credit – with cash emanating from German savings, and low

interest rates that were determined by the sluggish European economy rather than by Irish

exuberance,


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c. Greed, driven by escalating house prices that increased home-owners’ wealth.

He reckoned that Ireland had moved into the bubble phase of a property boom, where

“all value, sense of proportion, etiquette and monetary decorum are thrown out the window”.

He warned that a bubble phase can last for a considerable time and can be pricked by such events as

increased interest rates, or reappraisal of house values elsewhere in the world or a fall in confidence.

Openness of the Irish Labour Market

The Irish labour market has always been one of the most open in Europe, with the labour supply being

very elastic – responsive to real after tax wage rates and to unemployment rates. In the past when the

economy was performing poorly, this resulted in sustained emigration from Ireland and a falling

population. At the time the reverse had occurred. There was a return migration of well-educated Irish

people, remarkable levels of immigration of highly educated non-nationals and substantial investment in

human capital (education) within Ireland.

Increasing participation in second and third level education

Increasing participation in second and third level education has a treble beneficial effect. It increases the

productivity of the workforce, it increases labour force participation rates and increases flexibility / reduces

the chances of unemployment. The MTR study refered to previous research when stating that:

“Had Ireland failed to invest in human capital over the past years, GNP per capita would be over 20

percentage points lower.”

The educational attainment levels in Ireland were expected to increase rapidly over the following decade.

It is interesting to note that at that time the percentage of Irish people that had third level qualifications –

degree or non-degree – was approximately 27%, whereas the percentage of foreign nationals in Ireland

with similar qualifications was 54%.

Overview of the Irish economy – Threats (2005 – 2012)The principal threats overhanging the Irish economy were deemed to be:

a. The large on-going imbalances in the US economy, in particular the current account deficit in the

balance of payments,

b. The high level of dependence on the continuing success of the Irish building industry,

c. A gradual loss of competitiveness of the Irish economy that would, if it continued as it was going,

bring the high-growth period to an end of its own accord.

Large Imbalances in the US Economy

The overhang of the US indebtedness caused the MTR to adopt a dual approach in its projections:

o A high-growth approach, extending out to 2010,

o A low-growth approach thereafter.

It was emphasised that the timing of the correction to the US finances was uncertain. It was reckoned that

the process could commence in 2007 or later and that it could be gradual or sharp-and-shocking.

Euphoria associated with House Building


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Not unrelated to the uncertainty regarding the US economy, was the threat posed by the euphoria

associated with house building in Ireland. Even the ‘dogs-in-the-street’ knew that the levels of investment

in building could not be sustained indefinitely and that an adjustment, when it occurred, would be painful.

And yet it continued without abatement. It is appropriate to paraphrase the prayer of St. Augustan on the

matter:

“Lord, make me prudent and wise, but not today, while house prices are increasing at 12% per annum”.

Loss of Competitiveness

The MTR authors reckoned that high prices for houses and the high indirect costs associated with

infrastructural constraints were both passed on to the business sector through the labour market. The

associated deterioration in competitiveness would eventually reduce Ireland’s potential growth over the

following decade. The reduction in competitiveness was likely to progress independently of a correction to

the US economy. It indicated that the high-growth projection up to 2010 would most likely switch to low-

growth, with considerable uncertainty overhanging the timing and the severity of the adjustment.

Details of the Medium-Term Forecast

The MTR, like any economic study, argued its points at considerable length and one could agree or

disagree with many of the points raised. However, its forte was its detailed quantitative summaries of

relevant indicators of the Irish economy out to 2012. Projections were given for a high-growth scenario

and a low-growth scenario that was most likely to kick in at some stage. It repeatedly emphasised that the

timing and impact of the changeover were uncertain. In the detailed economic projections, the following

indicators were used, all in millions of euro:

Merchandise Exports, Service Exports, Total Exports, Total Imports, GDP and GNP.

Comparison between GNPs for Low-Growth & High-Growth Projections

Year GNP - HighGrowth (M euro)

GNP - LowGrowth (M euro)

2004 122,315 122,316

2005 133,423 133,423

2006 142,968 142,968

2007 152,912 150,235

2008 162,704 157,228

2009 173,095 163,255

2010 186,961 171,226

2011 202,540 179,537

2012 219,480 188,225

GNP is the preferred indicator of Irish wealth generation, as it excludes repatriated profits by international

firms. It was assumed that divergence from the high-growth scenario to low-growth would commence in


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2007. In the projected figures, the changeover was shown to be smooth and orderly, but it was

emphasised that it could be quite painful – if and when it occurred.

0

50,000

100,000

150,000

200,000

250,000

2002 2004 2006 2008 2010 2012 2014

Year

M e

uro

GNP - High Growth GNP - Low Growth

Comparison between Unemployment Numbers for Low-Growth & High-Growth Projections

YearUnemployment -

Low Growth(1,000s)

Unemployment -High Growth

(1,000s)

2004 109 109

2005 105 105

2006 110 110

2007 135 124

2008 154 126

2009 174 123

2010 181 107

2011 193 101

2012 192 88

The human consequences of a switch to low growth are evident in the projected unemployment figures –

deterioration in employment prospects and a near-doubling of the number unemployed in a few years.


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0

50

100

150

200

250

2002 2004 2006 2008 2010 2012 2014

Year

Thou

sand

s

Unemployment - Low Growth (1,000s)Unemployment - High Growth (1,000s)


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Review of Outcomes, June 2010

The Authors of the Medium Term Review (MTR) of 2005 had clearly warned of the dangers associated

with:

a. The massive financial imbalances in the US economy,

b. The bubble that was developing in building activities in Ireland,

c. The damage that was being done to Irish competitiveness due to inflationary costs and wages in

the Irish building industry.

What they failed to detect, possibly because it was not within their brief, were:

1. The out-of-control lending practices of Irish banks to developers, builders and property buyers.

Control of these practices was really the province of the Financial Regulator’s office, which is a

subsidiary of the Central Bank.

2. The progressive ratcheting up of expenditures on Public Services in the boom years in a most un-

Keynesian manner, with those expenditures being difficult to claw back in a recession.

3. The riotous financial practices in the US, into which European and World financial institutions

were drawn with calamitous consequences.

As it transpired, the resulting financial outcomes for the Irish economy can be gleaned from the following

table:

2004 2005 2006 2007 2008 2009

GDP (€ million) 158,223 167,742 176,669 186,609 179,989 166,345

GDP Year-on-Year Change (%) 6.0% 5.3% 5.6% -3.5% -7.6%

GNP (€ million) 135,918 144,030 153,398 160,299 154,672 138,161

GNP Year on Year Change (%) 6.0% 6.5% 4.5% -3.5% -10.7%

Labour Force (000's) 1,980 2,072 2,155 2,240 2,223 2,155

No. unemployed (000's) 85.6 91.3 88.7 101.0 170.6 267.4

Immigration ( 000's) 58.5 84.6 107.8 109.5 83.8 57.3

Emigration ( 000's) 26.5 29.4 36 42.2 45.3 65.1

Net Immigration (000's) 32.0 55.2 71.8 67.3 38.5 -7.8

Exports (€ million) 84 87 87 89 86 84

Imports (€ million) 51 57 61 63 58 45

Trade Surplus (€ million) 33 29 26 26 29 39

Government Debt (€ Million) 26,495 26,987 27,278 30,156 57,734 75,178

Debt to GNP (%) 19.5% 18.7% 17.8% 18.8% 37.3% 54.4%


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From the above table it is apparent that:

o The Irish GNP fell from a high € 160B in 2007 to € 138B in 2009, a fall of 14% in two years.

o The Irish Government debt in the same period, 2007 to 2009, rose from € 30B to € 75B, an

increase of € 45B in two years.

o If the GNP were to continue to fall and the Government debt continue to rise, both at these rates,

then the debt would equal the GNP in 2011 / 2012.

o The number of people unemployed rose from 88,700 in 2006 to 267,400 in 2009; that is, from 4%

of the labour force to 12.4% in three years.

o The only encouraging aspect of the Irish economic indicators is that exports only declined slightly

during the recession, while imports fell by approximately 30% between 2007 and 2009, giving an

increase in the trade surplus in these two years of 50%.

Irish GNP & Government Debt (€ Billions)


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Unemployment Levels in Ireland (thousands)

0.0

50.0

100.0

150.0

200.0

250.0

300.0

2004 2005 2006 2007 2008 2009

Unemployed

1000's

Value of Irish Exports, Imports and Trade Surpluses (€ Billions)

0

10

20

30

40

50

60

70

80

90

100

2004 2005 2006 2007 2008 2009

Exports Imports Trade Surplus

€ B


Page 42

Literature Review on the Recession of 2008The world recession of 2008 spawned a plethora of books that analysed and explained the origins of the

recession and pronounced on remedies for recovery. Many of these are stimulating and very readable and

they are all critical of the ‘Masters of the Universe’ and how they seriously erred in managing the world’s

finances. The following are brief reviews of a few of the books.

‘The Return of Depression Economics and the Crisis of 2008’ by Paul Krugman

(Penguin 1999 & 2008)

Paul Krugman’s book is authoritative, beautifully written and comprehendible by anybody that chooses to

read it. He sketches out the successes of capitalism, technological developments and globalisation. He

describes and explains the relatively recent financial crises in Latin America, Argentina, Mexico, Japan,

Southeast Asia, the failed attack on Hong Kong’s currency and the financial crisis in Russia, before

addressing the mismanagement of financial affairs in the United States.

‘The Shock Doctrine’ by Naomi Klein

(Penguin 2007)Naomi Klein’s book is well researched, intensely written and constitutes a savage attack on the dictates of

Milton Friedman and the Chicago School of Economics, which she reckons “pray for financial crises

around the world the way that drought-struck farmers pray for rain and that when disaster strikes they

know that their time has come”.

She reckons that the economic fundamentalists apply a simple remedy to such crises through their

influence with the US Administration and the International Monetary Fund (IMF): the elimination of the

public sphere, total liberation of corporations and skeletal social spending. The characteristic outcomes

are huge transfers of public wealth to private hands, an ever-widening chasm between the dazzling rich

and the disposable poor and an aggressive nationalism that justifies bottomless spending on security. She

sketches the application of these tenets to various financial crises around the world and elaborates on the

horrors that accompanied their application.

In summary, Naomi Klein’s book is excessively long, is rather depressing but it does highlight the ravages

that can accompany a relentless application of economic fundamentalism.

‘The Big Short – Inside the Doomsday Machine’ by Michael Lewis

(Penguin Group 2010)Michael Lewis is a populist author with an expert knowledge of financial markets. In ‘The Big Short’ he

tells the story of a number of financial traders in the US who understood they were in the middle of a

massive financial bubble and who could not believe that so many large financial houses, traders and risk

assessors could be so delusional about the situation. The story is really about life inside a bubble from


Page 43

the perspective of people who perceived they were in a bubble, while all around them was unmitigated

euphoria. The heroes of the story serviced the costs of their short positions in an ever-rising market and

had to withstand considerable aggravation before the bubble eventually burst and they reaped their

rewards.

‘The New Paradigm for Financial Markets – the Credit Crisis of 2008’ by George Soros

(Perseus Books Group 2008)George Soros’s book is relatively small, slim and packed with thoughtful insights and personal

experiences. It is an authoritative interpretation of the credit crisis that convulsed the world, with strong

views on flaws in classical economics that have played a major part in causing the crisis.

For a more detailed account, the reader is referred to the original for an enjoyable and informative account

of Soros’s views & experiences relating to the Supper Bubble, which he reckons had its genesis in

economic fundamentalism – the misplaced belief in self-regulating markets.

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