RMIT International University Vietnam

Subject Code: OMGT-2321 / 2322

Subject Name: Global Trade Operations
Location & Campus: Saigon South
Title of Assignment: Global Port Cities

Student name: Le Tuan Minh

Student Number: S3878437

Teachers Name: Dinh Khuong Duy

Group Number: 2

Assignment due date: 31/7/2022

Date of Submission:

Number of pages including this one:

Word Count:

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 PORT OF ALGECIRAS ANALYSIS

Executive Summary
Globalisation has resulted in a growing demand for international trade by integrating different markets
around the world, improving telecommunication networks, and rasing awareness for potential business
prospects in remote regions of the world. Moreover, the development of transportation infrastructure
and favorable government policies have increased global trade flows among nations and increase the
effectiveness of international logistics.

I. Introduction
With the expansion of the economy and more complex global economic integration, transportation
modes become crucial components in the supply chains since they provide mobility. As of 2018,
maritime transport contributed to 80% of world trade volume and 70% of global trade value (Rodrigue
2020). Thus, this report will undertake an in-depth analysis on one of the largest and busiest ports in the
world - the port of Algeciras. Firstly, this report will provide the historical evolution of the port of
Algeciras. Secondly, it will apply some theories to analyze the comparative advantage and the
competitive advantage of the port based on its characteristics and other factors like shipping activities,
strategic control, and commercial usage. Thirdly, the operational challenges of the port will be
examined, followed by the recommendations for business strategies to overcome those limitations.
Lastly, some further predictions will be made regarding the future of the port of Algeciras.

THE PORT OF ALGECIRAS BAY

II. Historical evolution
a) How did the port start?
Algeciras is a port city located in the province of Cadiz, Andalusia in southern Spain. Founded in 713
AD by the Moors, the port was originally named Green Island by the Arabs. The port was then invaded
by Alfonso XI of Castille in 1344, but the Moors later recaptured it back and destroyed it in 1368. After
that, the city was abandoned until it was refounded by the refugees from Gibraltar in 1704 when Anglo-
Dutch soldiers conquered the region during the Spanish Succession war. Later on, Charles III of Spain
reestablished the port of Algeciras in 1760. In 1906, the port city served as the location for resolving an

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international crisis as it held the Algeciras Conference to discuss about the future of Morroco (World
Port Source n.d).
b) Location
The port of Algeciras is positioned in the strait of Gibraltar, where the Mediterranean Sea and the
Atlantic Ocean meet. This location is also where Europe and Africa are closest to one another. In
addition, the port of Algeciras lies at the convergence of the major East-West and North-South axes of
global marine shipping routes (Coronado et al. 2006). The port’s primary economic activitity is for
transatlantic shipping (mainly oil imports). In addition, ferrry service is also available for people going
to and from Tangier and other Moroccan ports. Furthermore, tourism is also expanding in this area due
to favorable climate conditions. Along with ice-making and preservation facilities, Algeciras is also
home to petrochemical refinery. Finally, the port of Algeciras facilitates a thriving fishing industry and
the export of agricultural goods including tobacco, grains, and farm animals (Britannica n.d)
c) What signifinant events occured in its development?
In Spain, the growth in container traffic has increased dramatically as the amount of cargos being
transported went from 270,000 TEU in 1973 to 17 million TEU in 2018 (figure 1). This evolution is
closely linked to the emergence of global marine traffic but also to regional specificities. The proximity
to the Mediterranean sea, which is the crossing shipping point of Asia-Europe, has boosted the
container port activities in this region. Hence, Spanish Mediterranean ports have utilized their strategic
locations to draw in more throughput by providing transhipment options. According to figure 2, the
port of Algeciras ranked second in terms of total container traffic’s shares in 2018, just behind the port
of Valencia (Serry & Kerbiriou 2020).

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 Figure 1: Containerised traffic in Spain from 1973 – 2018 (Source: Serry & Kerbiriou 2020)

Figure 2: Share of total container traffic of Spanish ports in 2018 (Source: Serry & Kerbiriou 2020)

III. Comparative advantage and competitive advantage

Exported value in Exported value in Exported value in Exported value in Exported value in
Product label
2017 2018 2019 2020 2021
All products 311,600,619 346,064,315 337,215,114 312,080,513 391,558,519
Vehicles other than railway or tramway
rolling stock, and parts and accessories
thereof 54,155,840 57,205,375 54,060,748 48,343,367 54,144,088
Machinery, mechanical appliances,
nuclear reactors, boilers; parts thereof 23,181,564 24,943,198 24,169,985 21,713,589 25,131,521
Commodities not elsewhere specified 7,317,670, 17,065,652 19,107,662 19,616,863 23,982,977

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 Mineral fuels, mineral oils and
products of their distillation;
bituminous substances; mineral … 17,842,250 22,296,673 20,345,861 12,432,661 23,137,931
Pharmaceutical products 11,352,834 11,583,645 12,755,759 13,756,762 20,196,767
a) Comparative advantage of Spain
Table 1: List of the top 5 products exported by Spain from 2017 – 2021 (Unit: thousand dollar)
(Source: Trademap n.d)

Figure 3: Number of automotive exports of Spain from 1999 – 2020 (Unit: million Euros) (Source: Garriga &
Díaz 2021)

The comparative advantage theory (1817) states that a country should specialise in exporting the goods
in which it is most efficient in producing, compared to other products, even if it has an absolute
advantage for producing all products. According to table 1, Spain’s top export product in recent years is
automobiles and other motor vehices. Moreover, the number of automotive exports in Spain has been
increasing significantly from 1999 to 2020 (Figure 3). In terms of total vehicles manufactured, Spain is
the second-largest producer in Europe and the 8th largest worldwide. Additionally, 10% of Spain’s GDP
and 18% of all exports come from the automobile sector (Heras n.d).

The Heckscher-Ohlin model (1930) states that a country should export the items which it can produce
most efficiently based on its endowed factors of production including land, labor, and capital.
Therefore, the Spanish automotive sector has a combination of highly qualified workforce, extensive
R&D, cutting-edge technology, and strategic geographic position (Garriga & Díaz 2021).

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In terms of location, all major automakers have factories in Spain, with 17 facilities that are active and
generate significant employment. Some automotive units have sparked the development of “hubs”,
which have drawn a large number of suppliers and service providers into the area (Lovells 2019). In
terms of human resources, the sector employs a large number of skilled workers, many of whom
engage in R&D. Moreover, the labor cost of Spain is relatively low as the cost can be half of that in
Central Europe (Icex 2013). In terms of capital, this industry spends an estimated of 4 billion euros
annually on expanding new facilities and modernizing production plants. Therefore, the manufacturing
capacities of production plants in Spain are among the most productive and automated in Europe, with
1,000 industrial machines for every 10,000 employees (Heras n.d).
b) Competitive advantage of Port of Algeciras
One of the largest industry for trade at the port of Algeciras is the agriculture industry. The port has
become an important venue in the supply chain of agricultural products to North America due to the
direct services that link the US and Canada with the container terminals of the Algeciras port. Hence,
the fast transit time is ideal for the transportation of fresh goods including citrus, stone fruit, garlic,
peppers, and strawberries. Packaged olive oil remained the most exported commodity to North
America, with a 48% increase in the US and 423% in Canada (Freshplaza 2021). The port of Algeciras
also plays a major role as a gateway for the exports of Peruvian agriculture to Europe, with more than
600,000 tonnes of fruits and vegetables each year (Maxwell 2019). Furthermore, the strong logistic
facilities are able to connect producer areas like Costa Rica or Colombia for the transhipment of fruit
markets in less than 2 weeks (Marfret n.d).

The Porter’s Diamond theory (1990) states that there are four attributes that promote the national
competitive advantage of the port: factors conditions, demand conditions, related and supporting
industries, and firm strategy. Regarding the basic factors, Spain is located on the Iberian Peninsula in
the Mediterranean area, which has an ideal climate for growing a wide range of fruits and vegetables
(CBI 2020). As for the advanced factor, the large expenditures undertaken on the infrastructure by the
Port Authority of the Algeciras port and the organization Maersk has increased the space available for
moving and storing containers (Acosta, Coronado & Mar Cerban 2007). In terms of human capital, the
farm sector expansion over the last decades were aided with the entrance of high amount of immigrant
laborers, mainly from Eastern Europe and Latin America. In fact, before the immigrants arrived, the
restrictions of family labour and the lack of locally hired employees were a significant barrier to the
growth of agriculture (Moreno-Perez 2013)

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Regarding the demand conditions, the organic food market of Spain has been growing significantly
over the last decade. In fact, the surface area dedicated to to organic crop production has increased by
more than six times from 2000 to 2020 (Figure 4). Andalusia remains the most popular location for
organic farming producers in 2020 (Figure 5). Furthermore, the annual expenditure per capita on
organic products has been escalating from 2012 to 2020 (Figure 6). By 2021, health and the desire to
avoid synthetic chemicals became he primary drivers of organic food consumption. Thus, products
such as vegetarian and plant-based foods are growing rapidly and are expected to continue on this
upward trend (Trenda 2022).

Figure 4: Surface area dedicated to organic crop production in Spain from 2000 to 2020 (Source:
Statista n.d)

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Figure 5: Number of organic farming producers in Spain in 2020, by autonomous community (Source:
Statista 2020)

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 Figure 6: Annual expenditure per capita on organic food products in Spain from 2012 to 2020 (Unit:
Euros) (Source: Statista n.d)

Regarding supporting industries of agriculture, Spain has a huge competitive advantage in the supply of
olive since it is the largest producer and exporter of olive oil and table oil in the world. With 2,605,252
hectares under cultivation, it produces 44% of all olive oil and 24% of table olive in the world. This
means that one-half of all olive oil bottles and one of four table olive jars consumed around the world
comes from Spain (La Moncloa n.d). Some major olive suppliers in Spain are Palacio Oliaxi S.L,
PrOliveOil, and Sororidad S.L. According to figure 7, the production trends of olive in Spain has been
on an upward trend over the last decade. In 2020, Spain produced 8.1 metric tons of olive, putting them
1st in production output worldwide with a 39.22% share in production (Tridge n.d)

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 Figure 7: Production trend of Olive in Spain from 2006 – 2020 (Unit: metric tons) (Source: Tridge
n.d)

Regarding the market competition, the EU Common Agricultural Policy (CAP) reform during the 2014
– 2020 period has put an emphasis on deregulating the markets rather than assisting with restructuring,
modernization and promoting a more competitive environment. The focus of this process was to
remove most market intervention mechanisms and allocate funds to the agriculture sector’s supply of
puclic goods. Moreover, this evolution only focused on increasing environmental protection and
encourage diversity in rural regions than giving farmers the incentives to be more competitive. Due to
this reason, local competitors had to rely heavily on the allocation of agricultural budget of the
government, which was applied unequally across different territories and regions. The unequal
distribution had revealed significant differences in terms of tactics of various autonomous
communities, and forced firms to adapt itself to the challenging and fast-changing international
environment. In general, in order to increase competitiveness in Spanish agriculture, the government
needed to design alternative economic plans for different regions and provide them with an adequate
source of finance (González-Moralejo & Sanchís 2017)

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References:

Acosta, M, Coronado, D & Mar Cerban, M 2007, 'Port competitiveness in container traffic from an
internal point of view: the experience of the Port of Algeciras Bay', Maritime policy and management,
vol. 34, no. 5, pp. 501-520.

Britannica (n.d) Algeciras | Spain, Encyclopedia Britannica, accessed 15 July

2022, <https://www.britannica.com/place/Algeciras>.

Coronado D, Acosta M, Cerban M and Lopez M (2006) 'Economic Impact of the Container Traffic at
the Port of Algeciras Bay', SpringerLink, accessed 15 July
2022, <https://link.springer.com/chapter/10.1007/3-540-36789-6_1>.

CBI (2020) The Spanish market potential for fresh fruit and vegetables, CBI Ministry of Foreign
Affairs, accessed 20 July 2022, <https://www.cbi.eu/market-information/fresh-fruit-vegetables/spain/
market-potential>.

FreshPlaza (2021) The Port of Algeciras consolidates agri-food exports to North America, FreshPlaza,
accessed 18 July 2022, <https://www.freshplaza.com/article/9303367/the-port-of-algeciras-
consolidates-agri-food-exports-to-north-america/>.

Garriga J and Díaz S (2021) Spain’s automotive industry: strategic and undergoing a transformation,
CaixaBank Research, accessed 17 July
2022, <https://www.caixabankresearch.com/en/sector-analysis/industry/spains-automotive-industry-
strategic-and-undergoing-transformation>.

González-Moralejo, SA & Sanchís, FE 2017, 'The Common Agricultural Policy and the Increased
Competitiveness of Spanish Regional Agriculture', Journal of agricultural science (Toronto), vol. 9,
no. 6, p. 74.

Heras A (n.d) Automotive Industry in Spain, InvestinSpain, accessed 16 July

2022, <https://www.investinspain.org/content/icex-invest/en/sectors/automotive.html>.

Icex (2013) The sector of the automotive sector in Spain keeps on being attractor trucks in the outside,
Interempresas, accessed 17 July
2022, <https://www.interempresas.net/MetalMecanica/Articulos/105500-El-sector-de-la-automocion-
en-Espana-sigue-siendo-atractivo-en-el-exterior.html>.

Lovells H (2019) Automotive in Spain, Lexology, accessed 18 July

2022, <https://www.lexology.com/library/detail.aspx?g=82ef102c-b4eb-4a6c-b055-222dc07c0b65>.

La Moncloa (n.d) Agriculture , La Moncloa, accessed 22 July

2022, <https://www.lamoncloa.gob.es/lang/en/espana/stpv/spaintoday2015/agriculture/Paginas/
index.aspx>.
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Maxwell M (2019) Port of Algeciras woos Peruvian exporters, Fruitnet, accessed 18 July
2022, <https://www.fruitnet.com/eurofruit/port-of-algeciras-woos-peruvian-exporters/180306.article>.

Marfret (n.d) Algeciras, Marfret, accessed 19 July 2022, <https://www.marfret.fr/en/ports/algeciras/>.

Rodrigue, J-P 2020, The geography of transport systems, Fifth edition. edn, Routledge, London ;.

Tridge (n.d) Spain Olive market overview 2022 , Tridge, accessed 22 July

2022, <https://www.tridge.com/intelligences/olive/ES>.

World Port Source (n.d) Port of Algeciras Bay, World Port Source, accessed 15 July
2022, <http://www.worldportsource.com/ports/review/ESP_Port_of_Algeciras_Bay_1204.php#:~:text=
After%20German%20barbarians%20and%20Vandals,XI%20of%20Castile%20in%201344.>.

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