Freeport & Logistics

A Bigger Vision: Moving from Cheap and Fast to Value Added

A growing global eCommerce sector is driving Malta’s ambitions to become a major transport and logistics hub, though new and existing infrastructure will need to be better leveraged to achieve the country’s goals.

Efforts to increase capacity and space for logistics and warehousing operations are aimed to enable Malta to capitalise on its strategic location on the main international shipping lanes. On the back of the record-breaking performance of the Malta Freeport, the country now aspires to strengthen its credentials as a logistics and distribution centre, in particular for Asian eCommerce companies. The Freeport – a top Mediterranean transshipment port – is keen to expand its extensive investment programme, and the Maltese government is considering measures such as the creation of free trade areas in the form of flexible warehouses located in various parts of the island. While some industry players call for wider reforms, highlighting that challenges such as outdated procedures as well as inflated charges are impediments to growth, it was welcome news when in March 2017 supermarket giant Lidl announced that they would set up an international regional distribution centre in Malta.

 

Alex Montebello"The changes undertaken since privatisation have been significant, and the company has managed not only to double its throughput level, which reached the 3 million TEU mark once again in 2016, but it has also optimised the usage of the facilities giving all parties better value and a better return. Such a scenario provides ample proof that Malta Freeport Terminals has in place the right mix of resources fully geared up to efficiently handle its clients’ business."

Alex Montebello, CEO of Malta Freeport

 

Warehouse of the Mediterranean

Throughout its history, Malta has been an important trading hub, and the island’s many foreign rulers from the Phoenicians to the British built storage wharves and shipping docks in Malta’s natural harbours. Trade flourished so much that Malta was referred to as ‘the warehouse of the Mediterranean’.
From the 1960s onwards, Malta also started to develop a thriving bunkering business when Shell built a storage facility on the island, which was later taken over by the Maltese government. The Malta Freeport was established in 1988 as the first transshipment facility in the Mediterranean. Supported by a free trade zone, it quickly became a leading player in the global supply chain. The management of the container terminal was privatised in 2004. Yildirim Holding, a Turkish container port operator, holds 50% of Malta Freeport Terminals, with the other 50% being owned by Terminal Link, whose shareholders are CMA CGM, the third-largest shipping line in the world, and China Merchants Holdings International (CMHI).

"Since the Freeport’s privatisation we invested €230 million. The port was numbered 6th in the Mediterranean port ranking, today Malta Freeport is number 2, which goes to show that we are putting the right investment to give Malta what it deserves, and now we are discussing with the Prime Minister and the transportation Minister to expand the Freeport to reach a capacity of 5 million TEUs. We are considering another €200 million investment in this port"

Robert Yuksel Yildirim, Chief Executive Officer and President of Yildirim Holding A.S
 

 

A Growing Sector

Much of Malta’s transport and logistics activity is concentrated in the south of the island. The Malta Freeport in Marsaxlokk today has a container handling capacity of 3.2 million twenty-foot equivalent units (TEUs) and spreads over 771,000 square metres of land. It prides itself on being the only hub in the Mediterranean with two berths capable of handling vessels of 18,000 TEUs. In the past years, the port has invested more than €230 million in the extension and expansion of its facilities. As modern deep-sea cargo ships are getting bigger and more powerful than ever before, the water depth has been dredged to 17 metres and new cranes have been purchased and installed while quays have been extended to accommodate post-panamax vessels. An oil terminal operated by Oiltanking Malta and a logistics base for the offshore oil and gas industry operated by Medserv are also located in the Freeport. The Malta Freeport Corporation is the authority responsible for regulatory compliance and security, as well as the management of the customs-free zone and warehouses.

While the Freeport alone accounts for 1,800 jobs, in total there are more than 5,000 people employed in warehousing, freight and logistics. Malta’s logistics companies make use of the island’s transshipment and air cargo facilities at Malta International Airport, in addition to providing land freight transportations, overseas removals and warehousing facilities. Many logistics providers offer a full suite of regular and customised services that range from simple duty-free storage of products to facilitating customs-cleared, last-minute ordering in European markets. Companies such as Salvo Grima and Carmelo Caruana are among the local leaders in this field. There are also many freight forwarders active in Malta, including Express Logigroup Ltd, Fahrenheit Freight Forwarders Co. Ltd, EuroBridge Shipping Services Ltd, Attrans Ltd, Jet services Ltd, and Express Group. Malta’s logistics firms are cautiously optimistic that they will see their business grow once the island unlocks its full potential as a gateway to the European Union and the markets of the region. The recent announcement that supermarket chain Lidl will use Malta as a distribution centre also augurs well for the sector’s future. Lidl’s investment is expected to create 120 jobs and boost local exports as the German chain would be buying €22 million worth of products from local manufacturers within three years.

 


Joseph Gafa"Technology is central to ensuring operational efficiency and a key enabler of products and services offered by MaltaPost. As a result of advances in technology, expectations of postal services consumers are continuously on the rise, particularly in tracking information related to mailed items. We performed a substantial systems upgrade to improve timeliness and clarity of reported tracking events."

Joseph Gafà, CEO of MaltaPost

 

Servicing the Mega Alliances

In 2015, the Malta Freeport reported a record year, breaking the 3 million TEU mark for the first time, handling 3.06 million TEU, an increase of 6.8% on 2014. Around 2,200 ships called at the Freeport, with 96% being transshipment business based on the ‘hub’ concept whereby cargo is discharged from large mother vessels and relayed to a network of regional ports by regular and frequent-feeder vessels. More than 130 ports can be reached from the Malta Freeport, and the large ocean carrier alliances regularly call at Malta Freeport, which helped the Freeport to further improve its performance in 2016, with 2,257 ships calls and 3,08 million TEU being handled. In 2017, after months of transformation in the form of mergers and acquisitions, eleven of the world’s largest container shipping lines have formed three new alliances - The Ocean Alliance, 2M and The Alliance. The Ocean Alliance (CMA-CGM, Evergreen, OOCL and COSCO Shipping) has chosen the Malta Freeport as their central Mediterranean transshipment hub, while the 2M Alliance (Maersk and MSC) has sustained its calls in Malta. Malta Freeport now offers regular connections to 115 ports worldwide, around 60 of which are in the Mediterranean and Black Sea.

Malta has also become an important player in the oil and gas industry. Its oil terminal, the largest bunkering facility in the Mediterranean with a storage capacity of more than 560,000 cubic metres, is operational around the clock and can dispense annually around two million metric tonnes of products, including: gasoline, jet fuel, feedstocks, industrial alcohols, heavy fuels and crude oil. The terminal’s principle activity is tank rental but it also provides other services such as blending, storage, butanising, circulation, ship-to-ship transfer, leading and injecting of additives or dyes.

 

 

Hub Potential

A relatively new cargo area at Malta International Airport, together with future works on its expansion, also promises to increase the airport’s role as an important player in the Mediterranean logistics chain. In 2016, the cargo and mail handled in the country reached 15.7 tonnes, with most of it being so-called belly cargo – freight that is stored under the main deck of a passenger plane. MIA’s cargo area is being used as a main base for operations of top local, as well as international companies, including DHL, Serviceair, Ariaserv and Medavia. Malta’s transport infrastructure also opens up excellent opportunities to exploit multimode sea and air logistics solutions. There are hopes that MIA can emulate the Freeport’s success in becoming a hub for air cargo traffic, especially between North and West Africa and Europe. Located just six kilometres from the Freeport, the sea-air option is an attractive one for companies with time-sensitive cargo. However, thus far, the airport lacks its own central warehouse, which despite the proximity to the airport, is seen as crucial in order to grow cargo volumes. While business remains largely concentrated on the Freeport, Malta also boasts another port, the Port of Valletta, or Grand Harbour as it is also known. Management of the port, capable of handling roll-on/roll-off operations, trailers, containers, continental cargo and vehicles, has been in private hands since June 2006, when Valletta Gateway Terminals (VGT), a joint undertaking between Portek International of Singapore and the Maltese Tumas Group, was established. In August 2011, Mitsui, one of Japan’s leading general trading companies, acquired the Portek Group and effectively expanded into Malta. The Grimaldi Shipping Line is one of Grand Harbour’s main clients, bringing in hundreds of trailers and cars for transshipment per week.


Accessing Nearby Markets

Integrating all separate elements into a more holistic offering will need to be the priority in the future as the island seeks to take advantage of new opportunities. A surge in online shopping has established a flourishing eCommerce sector in the global economy which has brought with it a new type of logistics chain that caters for the transportation of products to both private households as well as distribution points. In this context, Malta could become a key hub for Asian suppliers who could store products in Malta that they seek to sell and distribute to end-consumers and businesses all over Europe and North Africa. Malta could score its first success if an agreement with Chinese eCommerce company Alibaba to use Malta as their European distribution centre materialises. There are also opportunities for value-adding services such as just-in-time inventory management and cargo consolidation, as well as in processing such as packaging and labelling.

Most companies targeting the North African market have their labels in English, but countries like Egypt, Morocco and Algeria require them to be in Arabic. This re-labelling can be done in Malta. Certification of Halal food has been identified as another possible growth area. While Malta is not a ‘Halal country’, service providers could cater for the certification. Companies can also pre-customs clear goods in Malta. For instance, goods travelling from China to Spain can be customs-cleared in Malta while in transit, resulting in time and efficiency gains for the producer.

The benefits of this centre aren’t limited to the more than 120 jobs that will be created,” said Cardona. ”It will also have a beneficial effect on exportation, where over a three year period Lidl will be increasing the value of products made locally from €3 million to €22 million.”

 

Charles Schiavone"The Express service is a niche of logistics. It is growing more than ever before as online shopping has exploded in Malta. The business to consumer segment accounts for 30% of imports in most European countries, while in Malta it now represents 75% – a 23% increase on DHL’s last year’s figures."

Charles Schiavone, Malta Country Manager of DHL


Putting it Right

There is certainly no shortage of opportunities and demand for warehousing facilities within the Freeport’s free trade zone is growing, but the space is very limited and fully taken up. However, the country has recognised the need to find alternative ways to support its growing cluster. The Maltese government favours an option that would see free trade zones established in existing warehouses in various parts of the island. This solution would require legislative changes, as well as enhanced security measures to ensure that goods stored in these warehouses are not sold illegally. The country will also see the opening of a new logistics hub running over 8,000 square metres of land in Hal Far. Additionally, the Malta Freeport has recently indicated an interest in investing a further €200 million in port facilities and to increase its current capacity to 4.5 million TEUs in the coming years.
While the Freeport’s ability to handle large ships will continue to give Malta an edge, logistics firms highlight that some fundamental issues need to be addressed. They say Valletta Grand Harbour currently suffers from a number of bottlenecks, such as old practices, gate limitations and lack of quay space to organise professional cargo operations. In addition, costs are reported to be quite high, with port charges in Malta being double those in Spain. Industry experts also propose the introduction of less complex procedures related to customs clearance, as well as work permits and immigration procedures.

 

Learning Logistics Lessons

Investment in equipment and operating systems also has to go hand-in-hand with investment in human resources. The government is looking into strengthening education and training as the sector needs expertise, not just at tertiary education level, but also at mechanical and operational level. The authorities are studying best practices from successful trade centres such as China, Dubai and Singapore, and the government’s commitment to address any bureaucratic obstacles and infrastructure challenges will be watched closely.

While the throughput at Malta Freeport was projected to surpass the 3 million TEU mark once again in 2017, not all players are recording the same growth figures. The challenge for the future will be to develop a truly multi-modal logistics network and find ways to better connect sea freight to air freight, as well as global trade to local warehousing.

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