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
Non academic title:
THE PANAMA CANAL EXPANSION:
WHAT’S UP DOC?
Factors Impacting North American Freight
Distribution in View of the Panama Canal Expansion
Aggregate demand
changes
Supply chain
diversification and
differentiation
Response from East
and West coast ports
Structure of
production changes
Economies of scale in
shipping
Response from
railways
Shipping costs
structure
New gateways
Slow steaming
Response from Suez
Canal and Med
transshipment hubs
Million TEUs
Container Traffic at North American Ports, 19802009: This was supposed to be impossible…
50
Mexico
United States
Canada
40
30
20
10
0
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008
Main Export-Oriented Regions and Shipping Routes
Servicing North America
Southeast Asia
South Asia
East Asia
E qu
Eastbound
Route
Landbridge
Panama
Route
a tor
Westbound
Route
At the Crossroads… Which Value Proposition for the
Caribbean?
3) East coast capacity issues
1) Strong margins, but many not large
enough to justify dedicated services
4) Last segment in importbased supply chains
2) Interlining between the America’s
coastal systems
What Drives Supply Chain Management? Control
Freaks
Offshoring
Costs / time /
reliability
Internalize
efficiency
Diversification: Routing Options between Pacific
Asia and the American East Coast
Share of the Northeast Asia – U.S. East Coast Route
by Option: Transition Already Completed?
100%
90%
3.0%
2.1%
11.3% 15.1%
2.0%
20.8%
80%
4.6%
1.5%
0.9%
1.8%
2.0%
2.0%
23.6% 33.8%
38.2% 40.1%
42.0% 43.0%
70%
60%
Suez Canal
Panama Canal
Intermodal
50%
40%
30%
85.7% 82.8%
77.2%
71.8%
64.6% 60.9%
58.1% 56.0% 55.0%
20%
10%
0%
1999 2000 2001 2002 2003 2004 2005 2006 2007
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?
Prince Rupert
12
Vancouver
Transit Times from Shanghai
and North American Routing
Options (in Days)
4
13
8
5
Seattle / Tacoma
Toronto
Oakland
13
5
Chicago
3
26 New York
Los Angeles
25 Norfolk
Atlanta
5
14
Dallas
5
Slow Steaming:
More WC transloading
More inventory in transit
Savannah/Charleston
25
28 Houston
8
19
Lazaro Cardenas
22 Panama
The Toll Conundrum: Potential Diversion between
Intermodal and AWR for Asian Imports
Market Share of All-Water Route (%)
100
90
80
Current
70
The Toll Conundrum:
Financial pressures versus
maritime shipping pressures
60
50
Expansion (unconstrained)
40
Expansion (constrained)
Toll increases have already captured 40% of
the potential savings of the expansion.
The appeal of revenue maximization (NOT
traffic maximization).
30
20
10
Yield management?
0
0
Adapted from A. Ashar (2009)
100
200
300
400
Cost Differential (Premium per TEU per Day Saved, USD)
500
Shipping Rate from Shanghai for a 40 Foot
Container, Mid 2010
Vancouver
Montreal
$2,300
$2,110
$4,040
$3,950
New York
$3,700
$1,830
Los Angeles
$2,620
$1,400
Inbound rates: function of distance
Outbound rates: function of trade
imbalances
$3,510
$2,560
$1,300
$2,100
Inbound
Outbound
Houston
The North-American Container Port System and its
Multi-Port Gateway Regions
4
2
1
3
Multi-port gateway regions
1. San Pedro Bay
2. Northeastern Seaboard
3. Southwestern Seaboard
4. Puget Sound
5. Southern Florida
6. Gulf Coast
7. Pacific Mexican Coast
6
5
7
The Caribbean Gateway?
(RIMS)
Selected MOU between the Panama Canal Authority
and American Gulf and East Coast Ports
Port Authority
Antwerp Port Authority
Mississippi State Port Authority
at Gulfport
Jacksonville Port Authority
Alabama State Port Authority
Date
September
2010
August 2010
Nature
Share expertise in the handling of Post-Panamax vessels, including rolling
gate locks and tug boats.
None specific except as identified by the MOU.
April 2010
April 2010
None specific except as identified by the MOU.
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.
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.
(Port Everglades). Increase its capacity to handle larger ships. Develop the
cruising industry with a new terminal for large cruise ships (2009).
Container and cruise segments. South Gate Complex. Inland Port Complex
project.
(Charleston). None specific except as identified by the MOU.
Maryland Port Administration
June 2009
Broward County’s Port
Everglades Department
Port of Palm Beach
August 2009
South Carolina State Ports
Authority
Port Authority of New York and
New Jersey
Virginia Port Authority
July 2006
Georgia Port Authority
Port of Houston
June 2003
July 2003
December 2009
September
2003
June 2003
Dredging projects to 50 feet. New on dock rail facilities. Bayonne Bridge
clearance.
Construction of the new APM terminal at Hampton Roads. Setting of the
heartland corridor. Virginia Inland Port.
Deepening of the Savannah River from 42 to 48 feet (completed by 2014).
None specific except as identified by the MOU.
Governance Changes in Port Authorities
Conventional Port Authority
• Planning and
management of port
area.
• Provision of
infrastructures.
• Planning framework.
• Enforcement of rules
and regulations.
• Cargo handling.
• Nautical services
(pilotage, towage,
dredging).
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
Direct
North
Atlantic
Central
Atlantic
South
Atlantic / Gulf
Transshipment
Circum-Equatorial
North
Atlantic
North
Atlantic
Central
Atlantic
Central
Atlantic
South
Atlantic / Gulf
South
Atlantic / Gulf
Caribbean
Transshipment
Triangle
Emerging Global Maritime Freight Transport System
The Caribbean Transshipment Market
The “curse of economies of scale”
Jones Act + 24 hour rule
Anchoring footloose traffic
Conclusion: The Complexities of Divergence
Aggregate demand
changes, structure
of production
Supply chain
diversification and
differentiation,
economies of scale,
Slow steaming
No expansion: High impact (trend reversal)
Expansion: Maintaining existing trends (AWR)
Response from East
and West coast ports,
hinterland factors, tolls