HC10 Inland Shipping

7/27/2019 HC10 Inland Shipping

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Piet Rietveld

Olaf Jonkeren

Transport Economics and ManagementInland Waterway Transport


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This lecture

The sector

Current issues

Article Konings (2007)

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The sector

Policy document EU, PINE: Prospects of Inland

Navigation within the Enlarged Europe. A study that gives an overview of the inland

waterway transport

sector in four corridors (next slide):

Rhine & tributaries East-West corridor

Danube corridor

North-South corridor

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The sector source: PINE (2004)

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The sector

Infrastructure

Rhine and Danube form backbone system.Waterway network quite dense in Netherlands and

parts of Belgium, Germany.

Load capacity on a certain route determined by

draught and bridge clearance. Weakest stretchdetermines load capacity for the whole route!

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The sector

Characteristics and performance:

In the former European Union (EU-15) inland

waterway transport accounted for:

440 million tons per year, 3,5% market share

125 billion ton-kilometres, 6,5% market share

Gravity lies in countries Netherlands, Belgium,

Germany: 113 billion ton-kilometres, 90%.

Modal share (ton-kms) in The Netherlands, 40%,

Germany, 14%, Belgium, 12%.

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The sector

Employment and training

In recent years a decline of national personnel. In

West Europe a wave of East European staff.

Problems: language/ communication, knowledge

of foreign waterways unsafe situations.

Also: nowadays not only nautical skills required.

Additional qualifications like financial/

management/ ICT skills.

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The sector

Fleet

Two main types of vessels:

Self propelled vessels: dry bulk, wet bulk

Push barges: dry bulk

Vessels have a very long lifetime (+- 45 years).

Advantage: long pay back period for the

investment.

Disadvantage: hinders fleet innovation behind

of rail and road.

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The sector

Information and communication

Currently integration of ICT within IWT sector by

means of RIS e.g.

RIS = River Information Services:

Obstructions in waterway, water levels.

Estimation arrival time: for ports terminals

Route planning, calculation time schedules, document

exchange with waterway authority.

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The sector

3 segments:

Dry bulk

Wet bulk

Containers

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The sector

Dry bulk

Ore and coal: thick flows (on Rhine), large ships (push

barges), Dutch seaports German hinterland (Ruhrarea).

Sand & gravel: strong relation with construction sector

(and construction locations), on smaller waterways,

domestic oriented + upper and lower Rhine area.

Many suppliers, for some segments many customers,

free entrance, leaving market difficult, some

heterogeneity (ship size), transparency in spot market,

in contract market less transparency.

Market form:

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The sector

Wet bulk

Chemical industry + refineries, crude oil, oil products,

sea port oriented.

Relatively few suppliers, few customers, free entrance,

leaving market difficult, some heterogeneity, mainly long

term contracts

> not transparent.

Market form:

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The sector

Containers

Sea port oriented, often pre-and-end-haul by road,

clients mainly deep-sea liners who organize total chain,mainly on Rhine and between Rotterdam - Antwerp.

Many suppliers and customers, free entrance, leaving

market difficult, relatively homogenous, mainly long term

contracts (year).

Market form:

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Current issues

Port competition

Climate change

Increase in ship size

Double hull obligation

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Port competition, hinterland

connections

Hamburg-Le Havre range: connections via road,

rail and inland shipping

Antwerp: strong position via road

Rotterdam: strong position via inland shipping

Hamburg: strong position via rail

Improvements mainly via rail Betuweroute

Iron Rhine

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Bottlenecks in hinterland connections

Road congestion

Lack of rail capacity

Maasvlakte II

Stimulation of inland water transport

40% of containers should be transported to hinterland

by inland shipping (government regulation)

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Climate change

Global:

In 20th century average temperature worldwide + 0,7oC

Cause: use of carbon fuel

River Rhine basin, climate change for this area:

Winters: warmer and wetter

Summers: warmer and dryer

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Rhine river basin

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Large fluctuations of water levels:change in monthly discharge of Rhine river at

different climate scenarios.

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Example: low water levels in 2003

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Low water levels during a very long time


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Problems

One-way traffic

Alternative routes

Delays

Lower load factors

Other transport modes

What does this mean for the competitive position

of inland waterways?

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Lower load factor

As a result of low water levels, a ship can

transport less cargo, so for transporting the same

amount of cargo more ships are needed.

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Extra costs

Inland waterway transport enterprises have to

leave tonnes behind so they want a higher tariff

per ton transported.

Result: costs for transporting of one ton of cargo

by barge increase:

Normal water: 1000 ton * 5 = 5000

Low water: 333 ton * 15 * 3 ships = 15000

For transporting the same number of tonnes a

shipper pays 3 times the price in case of low

water levels.

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Extra costs

Relation between water levels and gas oil freight rate in

Rhine shipping

Source: EU, CCR (2011)

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Economic theory

Equilibrium

at normal

and lowwater

levels.

Change in

economicsurplus?

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How to increase supply

Short term

Increase load factor (when possible)

Use capacity more hours per day

Use capacity more days per year

Increase speed

Increase speed of loading/unloading

Long term

New ships

Larger ships (when possible)

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Speed choice, working hours

Optimal speed depends on fuel prices

Decrease in speed with 30%: decrease in fuel use of 50%

Working hours depend on extra crew costTEM27

Speed inknots

Fuel usein tons

Fuel savings (in $000) if fuel price is:

$200/ton $100/ton

14 10176 - -

13 8184 398 199

12 6546 726 363

11 5156 1004 502

Source: Stopford (1993)


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Concluding

Supply in de market is reduced.

Higher transport prices: P by 20% for example.

Demand is quite inelastic: Qby 3% for example.

About same quantity transported at higher prices

extra costs for the economy.

Binnenvaart vaart wel bij lage waterstand (CBS)

Inland shipping fares well with low water levels

Turnover in 2nd quarter of 2011 20% compared to 2010

due to low water levels.

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Current trend: new ships are all big (> 1500 ton).

Inland ships < 1500 tons are becoming scarce.

Reasons:

Economies of scale.

Larger living area.

New small ships have capital costs, existing small ships

are relatively (compared to new ships) old, no capitalcosts hard to compete.

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Consequences:

Less navigation on small waterways: in future less

maintenance? IWT dependent firms leave? Low water levels vs. large ship.

Case: building material sector

Large ships cannot reach firms transshipment

on small ships necessary extra transport costs.

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Optimal ship size

Haulage costs (on the move):

decrease with size (economies of scale/density)

Handling costs (in port)

Increase with size (diseconomies of size)

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Optimal ship size

Haulage costs

2/3 Power law

Capacity: Volume of ship

Costs: proportional to surface area

Cube or ball:

volume=a*radius3

surface=b*radius2

volume=c*surface3/2

surface=d*volume2/3

Cost proportional to capacity2/3

Costs increase with an elasticity of 2/3 with respect to its size

10% increase in ship size leads to a 6.7% increase in costsTEM32


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Optimal ship size

Handling costs (Jansson and Shneerson, 1981)

Handling capacity (tons/day) as function of ship size

1/3 power law: H=h*S*1/3

Time costs

Fuel cost, operating cost, capital cost

Cost of factor i per day: Ci=pi*qi*Sei

where ei is the elasticity of factor cost with respect to size

Total cost per ton in port:iCi/H= 2*ipi*qi*Sei/(h*S*1/3) = ipi*qi*S

(ei-1/3)/h

(dis)economies of ship size S if (e i-1/3) (>)


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Optimal ship size

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ship size

handling costper ton

haulage costper ton

total cost per ton =(transport cost per ton


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Optimal ship size

TEM35 distance

Given shipsize, transportcosts are linearwith distance

Handling cost/tonincreases withship size

transport cost/tonsmall ship

transport cost/tonlarge ship

distance

transport cost/ton taperswith distance: envelope ofship specific cost lines

freight curve:freight rate perton tapers withdistance


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Optimal ship size, short distance

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ship size

handling costper ton haulage cost per

ton, short distance

total cost perton

smaller optimalship size


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Optimal ship size

Optimal size low for short distance and high for large

distance

Reason: Weight of haulage costs are low for short distance Explanation: haulage costs are product of haulage costs

per ton and kilometers

When trips get longer larger ships are necessary

E.g. feeder services vs. trunk services

Low frequency on long distance routes

Low demand

High vehicle (ship) capacity

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More on the freight curve

Prices may taper even if transport cost do not

Quantity discounts: 2nd-degree price discrimination

More possibilities for high mark-up in short trips

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haulage cost perton, short distance

haulage cost perton, short distance

positive mark up onshort distance

HC10 Inland Shipping

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