Gateways and Corridors: Routes to the Next
Economy, Vancouver, November 17-20 2010
The Panama Canal Expansion
and its Impacts on Global
Shipping Patterns
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
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
Global Shifts: The Unstable Structure of Production,
Consumption and Distribution
Southeast Asia
South Asia
East Asia
E qu
Eastbound
Route
Landbridge
Panama
Route
a tor
Westbound
Route
What Drives Supply Chain Management? Control
Freaks
Offshoring
Costs / time /
reliability
Internalize
efficiency
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.
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
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
Economies of Scale are a Bitch…
Photo: Dr. Theo Notteboom
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
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
Governance Changes in Port Authorities: Competing
over the Hinterland
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
Intermodal Terminals and Recent Co-Located
Logistic Zones Projects
Every rail operator involved.
Partnership with a major real estate
developer.
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?
Emerging Global Maritime Freight Transport System
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