Cover Story: Gibraltar’s Brexit conundrumPrepare for the worst, hope for the best

As the uncertainty of Brexit hangs over Gibraltar like an ominous dark cloud, the jitters it is creating are palpable.

There is certainly fear in the eyes of the many maritime representatives based in the bunkering bastion but it is not so much a fear of the UK leaving the EU but fear of the unknown and how it could upend the finely balanced relationship the British territory has with neighbouring Spain.

Gibraltar has endured a stormy liaison with Spain since coming under British rule over 300 years ago, and while many consider there is already a hard border others claim it will only get tougher to move goods, and people, in and out of Gibraltar after Brexit (which was due to happen on 29th March but had been granted a further extension by the EU as SMI went to print).

“There are challenges ahead, but it is business as usual” said Karl Alecio, General Manager at Redwood International, which offers freight forwarding, courier services, removals and port services and relies on movement of goods across the frontier each day.

“It is hard to plan for the unknown, but when you have covered all your angles, you can be satisfied that you are ready to face the challenge ahead.”

It is estimated that around 14,000 workers cross the border from Spain into Gibraltar every day and Redwood International’s Managing Director, Danny Gabay, added that the economy will be in a “complete mess” if workers, and tourists, cannot get through.

Presently, he said, if there are any border niggles the EU can intervene but he worries Gibraltar will be left to sort out its own problems after Brexit.

“With all the workers coming in each day, the impact on their side would be quite dramatic as well,” said Mr Gabay.

Redwood International says movement of goods will just have to move away from road to sea.

“There is a vessel that will come from Tangier Med and most containers and a lot of goods coming to Gibraltar will come through Morocco and then there will be a daily shuttle from Morocco instead of Algeciras which is where most of it comes in,” said Mr Gabay.

“Geographically, it is not that big a distance, but obviously it’s a bit more complicated. However, it could be set up within almost a week or two.”

Another impact could be with the many cruise ships that visit Gibraltar each week and fears they will be put off visiting the port because if they do so they will then not be allowed to then call at Spanish ports, as has happened in the past.

“Those cruise lines may have to make those commercial decisions and say is Gibraltar that important that we have to skip these Spanish ports. They have done that in the past, and they can do that again.”

Mr Alecio added: “There are a lot of things that have been done in the past that I don’t think they will hesitate to do again. If they feel they have got the backing of the European Union, that could be the case.”

Gib Oil, which provides fuel products and services in Gibraltar, and part of World Fuel Services, has already made preparations for Brexit in extending its capacity to the port by taking on two new barges.

The barges, dedicated to Marine Gasoil and Ultra Low Sulphur Diesel in readiness for the introduction of the 2020 Global Sulphur Cap on 1st January 2020, also add further operational flexibility to WFS’ ex-pip facility located at Gibraltar’s Western Arm jetty.

Harry Murphy, Director, Commercial Services at Gib Oil, said: “The biggest thing we have done is take the two barges on, because we import over 3,000 trucks a year through the land frontier. Right now the frontier is open from 8am to 3pm Monday to Friday, and closed on Spanish public holidays and saints days. We don’t really know what the post-Brexit scenario will look like. A hard Brexit frontier could become more difficult, but if it does, we have options for self-supply. We can supply our marine gas oil, auto gas oil, we can supply to jet to the airfield – we have a contingency plan for supplying and those barges are currently operational.”

He too agrees that Brexit is the subject which is discussed most – whether in business, on street corners or in family households.

In July, Gibraltar is hosting the Island Games, with the Government investing £65 million in the infrastructure required to put on the sporting spectacle, which will feature 24 island nations.

But such is the concern over Brexit and the border that the Island Games Committee, on which Mr Murphy sits, has ordered and paid for all necessary equipment with the insistence that everything was delivered and in Gibraltar before 29th March, just in case there were any issues.

“A lot of people are thinking that way,” said Mr Murphy.

However, he does foresee some positivity from Brexit: “The Gibraltar vote for Remain was 96%. Most of that was to do with the frontier situation and the tenuous relationship with Spain, but as far as the UK is concerned there’s going to be a hit but arguably longer term it probably opens up a whole range of new opportunities.

“What we have put in place, at least as far as the business is concerned, enables us to have continuity of supply no matter what happens. You plan for the worst, but hope for the best.”

Ian Penfold, Director, Port Agency for M H Bland said Brexit concerns were affecting business.

“The way I see it, is that it could be extremely good for Gibraltar if all our goods came by sea as this would create employment and investment opportunities in the port which are desperately needed. We wouldn’t be dependent on the land frontier as we are today.”

He said the service they offer clients could be offered from other ports “so, in the event that the ships don’t call here for whatever reason, we can service our clients at any other port within the Straits of Gibraltar through our network office.”

However, he added: “My issue is our local livelihood. The local economy will suffer drastically.”

Tyrone Payas, Managing Director, Global Agency Company and Chairman of the Gibraltar Port Operators Association, said the uncertainty of Brexit was playing on everyone’s minds, with the main problem being the frontier.

“It’s the not knowing how it is going to affect us in terms of crew, merchandise, spare parts and services as well, because there are some services that we do get from Spain such as supplies and provisions.

“That frontier is going to be crucial to us.”

However, he does not believe much will change with bunkering.

“The ships will still come in, but maybe we will need to have our own technicians here. We don’t have the space – warehousing is a problem, and the port has shrunk in terms of space.”

Others are more optimistic that Brexit will not change much.

Mark Salmon, General Manager, Gibraltar/Spain/ North Africa, Inchcape Shipping Services, said: “We already have a hard border so to speak, and in recent days we have received undertakings from Spain on workers’ rights and taxation etc. This is encouraging should a wider UK-EU deal fail. We are known to be resilient people and I have no concerns with this regard.”

While Brexit is posing problems for some, another big concern to face the Gibraltar maritime sector recently was the departure from the market of oil companies Aegean Marine Petroleum Network, which filed for Chapter 11 Bankruptcy in November, and Macoil, which halted operations in Gibraltar in December.

“Figures, I believe, paint a disappointing picture,” said Mr Salmon. “There were 102 less bunker calls in January 2019, the demise in Aegean’s physical capability is also an important factor. I’m hoping WFS and Peninsula are able to bring figures up going forward.”

Wayne Penalver, Operations Manager, Resolve Towing (Gibraltar), said business was now picking up following this but the loss had hit the port hard.

“It was a very bad end to 2018. One of our main incomes here is ship to ship operations.”

While Gerald Victor, Commercial & Marketing Manager, Underwater Works, at Resolve Marine Group said: “We all felt it, as there were less vessels coming in. They were going to other locations such as Algeciras.”

Mr Penalver added that it was fortunate that Resolve Towing was the only towage company. “Bunkering is the name of the game,” he said. “If vessels come in for bunkering they use all the other services.”

This includes Resolve’s hull cleaning service, which includes the offering of ROV cleaning using unmanned, automated cleaning vehicles instead of divers, which affords more flexibility as cleaning can be carried out at night, and is safer and more environmentally-friendly.

While the port did take a big hit, Mark Lincoln, Operations Director at shipping agents and bunker trader Rock Maritime Services said it was Gibraltar’s resilience and pulling together which kept the bunker market ticking along.

“The beautiful thing is that this is Gibraltar and even though it took a massive hit, very quickly other companies stepped in and from a volume perspective we are back to normal.”

And the departure of the oil companies also proved a good test for the resilience of Wilhelmsen Ships Service Gibraltar.

Its Port Operations Manager, Nicholai Bado, explained: “This year has been complicated in the sense that the market conditions are tightening up, and also we had the two bunker suppliers leaving Gibraltar for whatever issue.

“We are quite lucky because our business has increased. Normally I should see a drop in our port calls and also the volumes coming in but the volumes have not stopped for us. In fact, we think we are increasing, so someone is definitely losing out. If we used to have around 20% market share and if we have lost two bunker suppliers and we keep the same volumes, that means someone is dropping some.”

Gib Oil’s Harry Murphy added: “We’ve stepped up and others have brought in additional barging capacity.”

With around 60,000 vessels passing through the Strait of Gibraltar each year, another big issue affecting the bunkering operations at the port will be the 2020 Sulphur Cap and Mr Murphy believes Gib Oil is well prepared for what is undoubtedly one of the biggest shake-ups the shipping industry has seen in recent years.

“I think we are probably one of the most prepared for it, locally, in that we took on the two new barges and with those we are effectively 100% distillate fuels. We are not selling heavy fuels at all. We are now marketing the products that we will have for 2020.”

Like many, he expects those opting for exhaust gas cleaning technology – scrubbers – to be around 10% of the world fleet and says this solution has caused uncertainty with some ports such as Singapore saying they will ban the use of ‘open loop’ scrubber systems.

“We asked the question of the port here, and they said they are investigating internally as to what they intend to do,” said Mr Murphy.

He added that despite the uncertainty with the various solutions, one thing that was absolutely certain was that the distillate market would increase from 10% by at the very least 300% to 400%.

“That in itself is enough rationale for us to focus on distillates only,” he said.

The Sulphur Cap will also provide new growth opportunities according to WSS’ Nicholai Bado, who said: “We try to be proactive with our projects and the thing that is now very attractive to us is the IMO 2020. We think we can play a big role in this because most owners will have to change fuel. For that you need to clean your tanks to perfection because otherwise they get contaminated, which means they will have to stop the vessels to clean the tanks. We are building a package where we offer the solutions for customers in various ports for tank cleaning.”

Danny Gabay, of Redwood International believes Gibraltar is still a key port for bunkering but warned that others were competing more and more for business. “The nearby port of Algeciras has grown hugely in the last decade and has grown from doing just container traffic,” he pointed out.

“They are now competing with us for bunkering, and for all the other services but I still think that Gibraltar will be their first choice – if they can get what they want done – because we are professional, we are under British jurisdiction, and there’s a lot of things in favour of calling Gibraltar rather than Spain.”

However, many argue there needs to be more investment in the port, as there is already much promotion of other nearby ports such as Algeciras.

“The port has suffered from underinvestment for as long as I can remember,” said Inchape Shipping Services’ Mark Salmon.

“Capital investment is essential if we are to maintain our status of excellence. I believe the authorities and Government need to value the sector further as morale is low among stakeholders.”

Rock Maritime Services’ Mark Lincoln said: “I agree 110% that there needs to be more investment in quite a few areas. In my opinion, there needs to be a plan for what the port will be doing.”

Many of the agents say there also needs to be more support for local established companies as many outside businesses are  now coming into the market and trying to claim their piece of the pie.

Tyrone Payas, who is also Chairman of the Gibraltar Port Operators Association and sits on the Gibraltar Port Authority Board, said how some of the agents were establishing themselves in Gibraltar but working out of Spain: “This is not a level playing field for the people who pay taxes and insurance.”

He added the Association would like to see more Government support for training programmes for the agency side, and more stringency in handing out licences. “There is very big competition in the agency now and we have put a proposal forward in terms of having a bit more control and not giving licences away like confetti,” he said.

Mr Salmon echoed this saying: “The market is already beyond saturated. Statistically, Gibraltar is unable to attract more volume because of physical constraints on anchorage space in the bay. Basically, we are sharing the same volume among more operators. Moreover, there are services which should be regulated and for some reason unbeknown to me they are not.”

Ian Penfold said M H Bland already had training courses in place for its staff but agreed that if the Government was onboard with the training it would ensure standards and maintain the pricing structure in Gibraltar. He also said more regulation was needed for the licensing.

“There are certain new agents that are coming through who have an office of 10sq m just to say they are in Gibraltar and clients unfortunately don’t see that,” he said. “It’s not right.”

Despite the negativity from this, and the concern over Brexit, Gibraltar has seen some good news stories during the past year including the rise Gibraltar is seeing in the yachting sector.

Jules Mifsud, General Manager, James Molinary Ltd, a 150-year-old family ship chandlery company, which in recent times has moved more into ships’ services, said superyachts was one of the sectors seeing the biggest expansion in Gibraltar.

“We’ve always been seen as a fuel berth for yachts. That is starting to change because there is now a quayside they can moor to, like with the new Mid-Harbour Marina. We are finding they are now staying a lot longer which they never used to do because there were only three or four berths they could stay in and not get told to move all the time. It is making a big difference having them hanging around for longer. If you draw up a list of the top 100 yachts, 80 have been here.”

Indeed Mr Mifsud, who recently took over the running of the business from his father, Julio Mifsud, has started making some changes to the company and one of the biggest is the opening of a new yacht chandlery store – Gib Yachts – at the Europa Business Centre.

James Molinary Ltd has also moved more into the services side and away from ship chandlery because Mr Mifsud said it could not compete with the multi-national companies. It operates tug boats, a barge and diveboat and also offers many services including ship and yacht repair.

Rock Maritime Services’ Mark Lincoln said the other arm of his business, World Marine Service – which provides agency work for yachts – was also enjoying the benefits of more yachts coming to Gibraltar. “In my humble opinion, it has always been a pit-stop but now we have the Mid-Harbour facility that really helps. There has been quite a nice mentality change with people starting to think there is some interesting business here.”

The superyacht sector is also providing opportunities for other businesses outside of the agencies such as with Gibdock and some of the law firms.

The port is still thriving though the number of cruise vessels is down for 2019 but this appears to be a general problem across the Med.

Every single port around the Med is suffering a downturn in numbers as cruise lines are repositioning vessels. The Asian market is very important and the Chinese are beginning to travel more, so the industry has decided to move a certain number of vessels over to the Asian market, which has been very successful.

However, it was noted that come 2020, an upturn in bookings was being seen, assimilating more or less the same number of visits in 2017 and 2018.