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Duisburg Back From Brink Gives German Lesson in Economic Revival

July 03, 2012

Duisburg Back From Brink Gives German Lesson in Economic Revival

A barge carrying shipping containers on the Rhine River passes by waterfront houses as the ThyssenKrupp steelworks loom behind in Duisburg, Germany. Photograph: Sean Gallup/Getty Images

For ways to revive the flagging European economy, the case of Duisburg shows why Germany thinks it holds the blueprint.

When clubbers in Tokyo consume a can of Red Bull energy drink they share something with workers using Hitachi Ltd. (6501) parts at the Kusile power plant in South Africa: the products were shipped from the city. Leveled in World War II bombing raids before rising to become the country’s steel and coal-mining capital in the 1960s, Duisburg overcame economic ruin again four decades later after those industries declined to turn itself into the world’s largest inland port.

“The Duisburg example shows that it is possible to change if certain industries are going down,” said Jens Suedekum, an economics professor at the University of Duisburg-Essen. “Even if it is a painful transformation that takes a long time, it is the same kind of transformation that Greece and Spain need, and the only change they can make, to flourish again.”

By turning abandoned mines and idled steel mills into warehouses and logistics centers, the city in the industrial Ruhr Valley on the Rhine river recast itself as a shipping and distribution hub. Duisburg dispatched about a third of the 400 million tons of cargo handled at German ports last year, according to volume data compiled by Bloomberg.

New Capacity

As a result, the city is adding two new container terminals to the eight it has now, Erich Staake, chief executive officer of port operator Duisburger Hafen AG, said in an interview.

One of the two terminals has been completed and will start operating in early 2013, while the second, to be used by the German rail network, will open in January 2014, Jan Heitmann, a spokesman for Duisport, said on July 2.

“We had to build the port new and took a decision 10 years ago to work very hard to position Duisburg as one of the leading logistics places,” Staake said in his office overlooking hundreds of green, red and grey Maersk (MAERSKB), Cosco and Hanjin containers waiting for shipment.

The port, which is bigger than Marseille in France and Piraeus in Greece, handles more goods than any other harbor in Europe apart from Rotterdam in the Netherlands, Antwerp in Belgium and Hamburg, the largest German port.

Paris-based food processing company Danone (BN) SA sends its Evian and Volvic bottled water from factories in France on trains to Duisburg for shipment to northern Germany, the Netherlands and Belgium.

Export Drive

German exports exceeded 1 trillion euros ($1.26 trillion) for the first time in 2011. While the European Commission predicts the euro region’s economy will shrink 0.3 percent this year, the Bundesbank on June 8 revised up its 2012 growth forecast for Germany to 1 percent from 0.6 percent.

German Chancellor Angela Merkel is pushing for a pan- European treaty on budget deficits to help avoid a repeat of the spending that pushed Greece to the brink of bankruptcy. While French President Francois Hollande wants policies to foster growth, Merkel has said countries must stick to austerity measures to ease the continent’s debt crisis.

“If the crisis has shown us one thing, it’s that irresponsible budget policy in one euro state can endanger the euro area as a whole,” Merkel told the lower house of parliament in Berlin on June 29. “This has to be reined in.”

Duisburg Cuts

That also goes for Duisburg, whose finances are stretched even with the growth of the port. The city, which has had a financial deficit every year since 1993, is cutting spending to try to balance its budget, according to a report from the municipal government.

More than 20,000 jobs disappeared in Duisburg following Germany’s coal and steel crisis in the 1990s as factories closed, leading to the loss of half of the port’s cargo volumes and pushing the unemployment rate up to 15.6 percent in 1998.

Krupp Stahl AG, now part of ThyssenKrupp AG (TKA), closed its steel plants in the Rheinhausen area of the city in 1993 after years of protests by local workers fighting to stay in employment. In 1987, they occupied a bridge crossing the River Rhine in what became a symbol of Germany’s steel crisis.

The turnaround came with a focus on containers, which port chief Staake calls “a worldwide currency.”

Containers account for 38 percent of volumes at the port compared with 6 percent in 1998. Over the same period, the number of people depending on Duisburger Hafen for employment has doubled to 40,000. Of those, 21,700 relate to the city of Duisburg, representing almost 14 percent of all jobs there.

Cargo Hub

The closure of Duisburg’s coal and steel industries in the 1990s “allowed us to become a distribution center, assemblage point and a logistical hub, which you need given the globalization and the development of the freight industry,” said Udo Mueller, the head of the city’s employment agency.

Duisburg still contends with one of the highest rates of unemployment in Germany, with 12.8 percent out of work in June compared with the 6.8 percent adjusted national average, data from the German labor agency showed. The city’s jobless rate is down from 13.3 percent in April and it aims to reduce it to between 11 and 12 percent in the next five years, Mueller said.

The agency forecasts that as many as 1,000 new jobs may be created in Duisburg from the harbor expansion. Locals are also likely to find work at a new logistics hub in the town of Oberhausen, 15 kilometers (9.3 miles) from Duisburg, where Staake estimates that “a few thousand” jobs may be created.

Well Connected

Duisburg is connected to the Black Sea via the Rhine and then the Danube. Seagoing vessels also load cargo in Duisburg for direct transport to ports such as London in the U.K., Algeciras in Spain, Casablanca in Morocco, Piraeus in Greece, St. Petersburg in Russia and all the Nordic capitals.

Railway networks connect it with cities as far away as Moscow, Barcelona and Istanbul. There are also train shuttle services to the Belgian ports of Antwerp and Zeebrugge.

Hewlett-Packard, the world’s biggest personal-computer maker, tobacco maker Philip Morris International Inc., Japanese cosmetics maker Shiseido and Johnson & Johnson (JNJ:US), the world’s No. 2 health-care products maker, all have European distribution centers at the Duisburg port.

Red Bull cans arrive in trains twice a day before making their way in containers to global destinations. Kuehne + Nagel International AG (KNIN), the world’s biggest sea-freight forwarder, has its biggest logistics center in Duisburg.

Krones AG (KRN), which supplies bottling and packaging equipment to brewers and beverage companies, assembles and packages juice and beer tanks in Duisburg for shipment to Antwerp, from where they are distributed around the world.

“Duisburg is the center for all the goods that are shipped,” said Cornelia Garwer-Schier, a historian at the German Inland Waterways Museum. “We are right in the center, the most important city on the River Rhine.”

To contact the reporter on this story: Niklas Magnusson in Hamburg at nmagnusson1@bloomberg.net

To contact the editor responsible for this story: Angela Cullen in Frankfurt at acullen8@bloomberg.net


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