Post on 30-Mar-2015
Caribbean Shipping Association Annual General Meeting, Montego Bay (Jamaica), October 11-13 2010
Global Supply Chains, Maritime Transportation and the Caribbean Transshipment Market:The Challenges of Growth and Rationalization
Jean-Paul Rodrigue
Associate Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA
Van Horne Researcher in Transportation and Logistics, University of Calgary, Canada
THE PANAMA CANAL EXPANSION: WHAT’S UP DOC?
Non academic title:
Factors Impacting North American Freight Distribution in View of the Panama Canal Expansion
Macroeconomic Factors
Operational Factors Competitive Factors
Aggregate demand changes
Structure of production changes
Supply chain diversification and
differentiation
Economies of scale in shipping
Shipping costs structure
Slow steaming
Response from East and West coast ports
Response from railways
New gateways
Response from Suez Canal and Med
transshipment hubs
Container Traffic at North American Ports, 1980-2009: This was supposed to be impossible…
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
0
10,000,000
20,000,000
30,000,000
40,000,000
50,000,000MexicoUnited StatesCanada
Equa
tor
Main Export-Oriented Regions and Shipping Routes Servicing North America
Landbridge
Westbound Route
Eastbound Route
PanamaRoute
East Asia
South AsiaIndifference Point
Southeast Asia
At the Crossroads… Which Value Proposition for the Caribbean?
- +
4) Last segment in import-based supply chains
1) Strong margins, but many not large enough to justify dedicated services
2) Interlining between the America’s coastal systems
3) East coast capacity issues
What Drives Supply Chain Management? Control Freaks
Added Value Efficiency Control
OffshoringCosts / time /
reliabilityInternalize efficiency
Diversification: Routing Options between Pacific Asia and the American East Coast
Intermodal (60%) All Water (40%)
Western Canada (5%)
Pacific Northwest(20%)
Pacific Southwest(75%)
Mexico(?%)
Via Suez (5%)
Via Panama (95%)
Pacific Asia / American East Coast
Share of the Northeast Asia – U.S. East Coast Route by Option: Transition Already Completed?
1999 2000 2001 2002 2003 2004 2005 2006 20070%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
85.7% 82.8%77.2%
71.8%64.6% 60.9% 58.1% 56.0% 55.0%
11.3% 15.1%20.8%
23.6% 33.8% 38.2% 40.1% 42.0% 43.0%
3.0% 2.1% 2.0% 4.6% 1.5% 0.9% 1.8% 2.0% 2.0%
Suez CanalPanama CanalIntermodal
Supply Chain Differentiation: Pick Your Preference
Factor Issues
Costs (38%) Stability of the cost structure.Relation with the cargo being carried.Lower costs expectations by the Panama Canal expansion.
Time (12%) Influence inventory carrying costs and inventory cycle time.Routing options in relation to value / perishability.No/limited time changes with the expansion.
Reliability (43%) Stability of the distribution schedule.Reliability can mitigate time.No/limited reliability changes with the expansion.
Slow Steamin’: What Hath You Brought Us?
28
25
26
25
19
13
14
12
13
22
5
5
5 3
4
8
8
5
Vancouver
Seattle / Tacoma
Prince Rupert
Oakland
Los Angeles
Lazaro Cardenas
Panama
Houston
Savannah/Charleston
Norfolk
New YorkChicago
DallasAtlanta
Toronto
Slow Steaming:More WC transloadingMore inventory in transit
Transit Times from Shanghai and North American Routing Options (in Days)
The Toll Conundrum: Potential Diversion between Intermodal and AWR for Asian Imports
0 50 100 150 200 250 300 350 400 450 5000
10
20
30
40
50
60
70
80
90
100
Cost Differential (Premium per TEU per Day Saved, USD)
Mar
ket S
hare
of A
ll-W
ater
Rou
te (%
)
Expansion (unconstrained)
The Toll Conundrum:Financial pressures versus maritime shipping pressuresCurrent
Adapted from A. Ashar (2009)
Expansion (constrained)Toll increases have already captured 40% of the potential savings of the expansion.The appeal of revenue maximization (NOT traffic maximization).
Yield management?
Shipping Rate from Shanghai for a 40 Foot Container, Mid 2010
$2,300$2,110
Vancouver
Los Angeles
Houston
New York
Montreal
$1,300$2,100
InboundOutbound
$2,620$1,400
$3,510$2,560
$3,700$1,830
$4,040$3,950
Inbound rates: function of distanceOutbound rates: function of trade imbalances
The North-American Container Port System and its Multi-Port Gateway Regions
1
2
6
5
4
3
7
Multi-port gateway regions1. San Pedro Bay2. Northeastern Seaboard3. Southwestern Seaboard4. Puget Sound5. Southern Florida 6. Gulf Coast7. Pacific Mexican Coast
The Caribbean Gateway?(RIMS)
Selected MOU between the Panama Canal Authority and American Gulf and East Coast Ports
Port Authority Date Nature Antwerp Port Authority September
2010Share expertise in the handling of Post-Panamax vessels, including rolling gate locks and tug boats.
Mississippi State Port Authority at Gulfport
August 2010 None specific except as identified by the MOU.
Jacksonville Port Authority April 2010 None specific except as identified by the MOU.Alabama State Port Authority April 2010 Port improvements to capture the anticipated traffic growth. ASPA completed
in 2008 a US$300 million container terminal at Mobile in partnership with APM and CMA CGM.
Maryland Port Administration June 2009 Fund a 500-foot berth at Seagirt Marine Terminal in operation when the Panama Canal expansion project is completed in 2014. The Port of Baltimore is currently one of only two US East Coast ports with a 50-foot draft.
Broward County’s Port Everglades Department
August 2009 (Port Everglades). Increase its capacity to handle larger ships. Develop the cruising industry with a new terminal for large cruise ships (2009).
Port of Palm Beach December 2009 Container and cruise segments. South Gate Complex. Inland Port Complex project.
South Carolina State Ports Authority
July 2006 (Charleston). None specific except as identified by the MOU.
Port Authority of New York and New Jersey
September 2003
Dredging projects to 50 feet. New on dock rail facilities. Bayonne Bridge clearance.
Virginia Port Authority June 2003 Construction of the new APM terminal at Hampton Roads. Setting of the heartland corridor. Virginia Inland Port.
Georgia Port Authority June 2003 Deepening of the Savannah River from 42 to 48 feet (completed by 2014).Port of Houston July 2003 None specific except as identified by the MOU.
Governance Changes in Port Authorities
Landlord
Regulator
Operator
• Planning and management of port area.
• Provision of infrastructures.
• Planning framework.
• Enforcement of rules and regulations.
• Cargo handling.• Nautical services
(pilotage, towage, dredging).
Landlord
Regulator
Operator
Terminal Operator(s)
Cluster Governance
• Service Efficiency• Logistical Integration
• Infrastructure and Growth
Management• Terminal-City
Integration
Conventional Port Authority Expanded Port Authority
Added Value Activities Performed at an Extended Gateway
Activity Functions
Consolidation / Deconsolidation
Inventory management practices.Cargo consolidated (or deconsolidated) into container loads (paletization).Attaining a batch size (group of containers) fitting a barge or a train shipment.Breaking down batches so that they can be picked up by trucks.
Transloading Change in to load unit (Maritime / Domestic).Consolidation, deconsolidation and transloading commonly mixed.
Postponement Opportunity to route freight according to last minute and last mile considerations (dwell time).Buffer within a supply chain.
Light transformations Forms of product and package transformations (packaging, labeling).Customization to national, cultural or linguistic market characteristics.
Major Rail Corridors Improved since 2000
Conventional
NorthAtlantic
CentralAtlantic
South Atlantic / Gulf
Direct
Transshipment Circum-Equatorial
NorthAtlantic
CentralAtlantic
South Atlantic / Gulf
CaribbeanTransshipmentTriangle
NorthAtlantic
CentralAtlantic
South Atlantic / Gulf
Emerging Global Maritime Freight Transport System
The Caribbean Transshipment Market
The “curse of economies of scale”Jones Act + 24 hour ruleAnchoring footloose traffic
Conclusion: The Complexities of Divergence
Aggregate demand changes, structure
of production
Supply chain diversification and
differentiation, economies of scale,
Slow steaming
Response from East and West coast ports, hinterland factors, tolls
Panama Canal
Expansion
Macroeconomic Factors
Operational Factors
Competitive Factors
No expansion: High impact (trend reversal)Expansion: Maintaining existing trends (AWR)
Panama
Caribbean
USA
Asia
Europe
Canal