Content

Foreland-Based Regionalization:Integrating Intermediate Hubs with Port Hinterlands

Theo NotteboomITMMA - University of Antwerp and Antwerp Maritime Academy

Jean-Paul RodrigueDepartment of Global Studies & Geography, Hofstra University

IFSPA Conference 2009 Hong Kong Polytechnic University, Hong Kong – 25-27 May 2009

Content

1. PORT REGIONALIZATION REVISITED2. THE ROLE AND FUNCTION OF INTERMEDIATE

HUBS3. IN SEARCH OF COMPETITIVE ADVANTAGE4. RECONCILING FORELANDS AND HINTERLANDS5. AN UNFOLDING PARADIGM?

1. Port Regionalization Re-visited

• Globalization- Fragmented

production and consumption systems.

- Maritime side:• Economies of scale and

frequency of service along major pendulum routes.

- Inland side:• Spatial deconsolidation

(or consolidation).

• Local constraints- Congestion and

limited amount of land.

- Port growth and expansion issues.

- Freight activities:• Used to take place in

proximity of port terminal facilities.

• Setting of a network of inland terminals.

1. Port Regionalization Re-visited The Spatial Development of a Port System

Phase 1: Scattered ports Phase 2: Penetration and hinterland capture

Phase 3: Interconnection & concentration Phase 4: Centralization

Phase 5: Decentralization and insertion of ‘offshore’ hub Phase 6: Regionalization

Load center Interior centreHinterland-based (Regional load centre network)

Freight corridor

LAND

SEA

Deepsea liner services

Shortsea/feeder services Foreland-based

1. Port Regionalization Re-visited Regionalization and Hinterland Setting

North America Western Europe East and Southeast Asia

Coastal concentrationLandbridge connections

Inland concentrationCoastal gateways

Coastal concentrationLow hinterland access

1. Port Regionalization Re-visited

- Path dependency:• Building on previous phases and ‘memory effects’.• Follow a similar evolutionary development path.

- Degree of contingency:• Deviate from existing development paths.

- Consequences:• Port systems do not follow the same sequence of

stages. • Some level of disparity among port system

developments.

1. Port Regionalization Re-visited

• “Terminalization”- Higher level of integration within freight

distribution systems through terminals.- Terminals and terminalization:

• A buffer to be used for temporary storage.• A constraint inciting various forms of satellite/inland

terminal use and inventory in transit practices. • Extended gateways and extended distribution centers.

- The need to look at intermediate hubs.

2. The Role and Function of Intermediate Hubs

• Emergence- Since the mid 1990s in many port systems.- Critical factors:

• Excellent nautical accessibility.• Proximity of major shipping routes (deviation).• Land for future expansion.

- Mostly owned by port holdings or carriers.- Not in all port systems:

• Prevalent in the Mediterranean and Pacific Asia / Middle East.

• Limited in the Americas (avoid flag restriction).

2. The Role and Function of Intermediate Hubs

• Function- Multiply shipping options.- Optimization of vessel movements:

• Hubs, relay or interlining locations.

- Points of convergence of regional shipping- Connect the same hierarchy levels and improve

connectivity within the network (relay and interlining)

- Some intermediary locations strictly perform cargo handling functions and have a non-existent hinterland

The Insertion of Intermediate Hub Terminals

Hub-and-Spoke

HubFeeder

Relay

Deep

-sea

line

Interlining

85% of Transshipment Traffic 15% of Transshipment Traffic

World’s Main Intermediate Hubs, 2007

World’s Main Transshipment Markets, 2007

Transhipment flows in Europe

0

1

2

3

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5

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11

Antwerp Zeebrugge Rotterdam Hamburg Bremerhaven Le Havre Valencia Barcelona

Co

nta

iner

th

rou

gh

pu

t 20

07 i

n m

illi

on

TE

U Sea-sea transhipment

Inland gateway traffic(road/rail/barge)

19.9%

19.6%

25.4%

34.0%28.7%

60.8%

45.8%

37.9%

Transhipment hubs in Med (85-95% transhipment incidence)

Gioia Tauro, Algeciras, Taranto, Cagliari, Malta

2. The Role and Function of Intermediate Hubs

• Regional shipping networks- Ports feel that serving feeder vessels means a

loss of status.- Feeder options:

• Direct feeders between hub and feeder port:- Lowest transit time but requires more feeders and smaller

feeder vessels.

• Indirect feeders via line-bundling loops including more than one feeder port:

- Economies of feeder vessel size, but incur longer distances and longer transit times.

2. The Role and Function of Intermediate Hubs

• Vulnerability of intermediate hubs to container growth and decline- Direct end-to-end or line-bundling services

versus hub-and-spoke: a hub can become a redundant node in the network

- Footloose behaviour of transhipment/relay volumes

Transhipment Hubs in the West Mediterranean

Algeciras

Valencia (MSC) Cagliari

Gioia Tauro

Malta

Taranto

Piraeus (?)

Market shares of ports in the West Mediterranean according to the diversion distance (1975-2008)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

19

75

19

76

19

77

19

78

19

79

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80

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81

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82

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00

20

01

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08

Sh

are

in T

EU

th

rou

gh

pu

t W

est-

Med

West-Mediterranean ports with one-way diversion distance > 250 nm

West-Mediterranean ports with one-way diversion distance 100-250 nm

West-Mediterranean ports with one-way diversion distance < 100 nm

Source: Notteboom (2009)

Tanger Med IIAPMT/Akwa: + 3 mln TEU (2012)PSA: +2 mln TEU (2012)

Tanger MedAPMT: + 1.5 mln TEUEurogate: +1.5 mln TEU

Port Said (Egypt)Traffic: 3.2 (2008)Capacity: +2.5 (2011)

Ambarli (Turkey)Traffic: 2.26 (2008)

Haifa (Israel)Traffic: 1.39 (2008)

Beirut (Libanon)Traffic: 0.95 (2008)

Damietta (Egypt)Capacity: +4 (2012)

Mersin (Turkey)

Djendjen (Algeria)Capacity: +2 (DP World)

Bejaia (Algeria)Traffic: 0.15 (2008)

Capacity: +2.5 (>2010)

Algiers (Algeria)Traffic: 0.5 (2007)

Capacity: +0.8 (2010)

Container throughput in million TEU, capacity extensions in million TEU

PLAN OF TANGER MED

Rades (Tunisia)Traffic: 0.3 (2007)

Enfidha (Tunisia)Capacity: +1 (2011)+2.5 (period 2011-2015)+2 (period 2015-2030)

Misurata (Libya)Initial plans

Competition from new port developments in Med

Source: Notteboom (2009)

3. Foreland-Based Regionalization: In Search of Competitive Advantage

• Vulnerability of intermediate hubs:

- Narrow focus on transhipment only

- Competition on basic resources such as location, nautical accessibility, terminal infrastructure and on terminal productivity

- Sources of competition can rather easily be imitated by competitors => hard to create a sustainable competitive advantage

3. Foreland-Based Regionalization: In Search of Competitive Advantage

• Intermediate hubs likely to play a more important role beyond pure transhipment:- Capitalize on scale increases of vessels:

• Undermining the serviceability of some ports (lack of connectivity)• Hubs offer advantages of consolidation + support a level of traffic not

feasible otherwise

- Extracting more value/economic rent from cargo passing through:

• Using the hub for added-value logistical activities (see e.g. Theys et al, 2008)

• Low-end to high-end value added activities (e.g. mass customization of products)

• Low cost location before entering high distribution cost areas• Free-trade zone status can trigger development of value-added services

3. Foreland-Based Regionalization: In Search of Competitive Advantage

- Integration of intermediate hubs in regional shipping networks.

- The maritime foreland of the intermediate hub is functionally acting as a hinterland.

- Reconciling operational characteristics of forelands and hinterlands

FORELAND

HINTERLAND

Main Shipping Lane

Inland Terminal

INTERMEDIATE HUB

4. Foreland-Based Regionalization: Reconciling Forelands and Hinterlands

• Different momentums- Maritime momentum (carriers’ needs):

• Economies of scale.• Optimal network configuration (concentration).

- Inland momentum (shippers’ needs):• Spatial coverage (deconcentration).• Frequency and flexibility.

- A growing disparity:• Massification versus atomization.• At a certain traffic level; inland diseconomies of scale.

The “Last Mile” in Freight Distribution

GatewayGatewayInland Inland

TerminalTerminalDistributionDistribution

CenterCenter

Capacity

Frequency

CorridorCustomerCustomer

“Last Mile”

Segment

GLOBALGLOBAL HINTERLANDHINTERLAND REGIONALREGIONAL LOCALLOCAL

Shipping Network

MassificationMassification AtomizationAtomization

Functional and Geographical Diffusion of Containerization: Globalization and Regionalization

Cost

per

TEU

-KM

Volume

Foreland Traffic

Hinterland Traffic

Regionalization

4. Foreland-Based Regionalization: Reconciling Forelands and Hinterlands

• Reconciliation- Hinterland-based regionalization permitted

inland freight traffic to keep up with volume and network configuration changes.

- Foreland-based regionalization enables small and medium-sized ports an integration to an intermediate hub:

• Long distance volatile transshipment traffic complemented with more stable regional traffic.

• Functional gateway of a regional port system.• Competitiveness of a maritime range.

Port Regionalization Clusters in Pacific Asia

Foreland-based regionalization

Hinterland-based regionalization

5. An Unfolding Paradigm?

• Changing role of intermediate hubs in regional shipping networks ?- Competitive strategy to cope with risks:

• Footloose operators and shifts in maritime shipping networks.• Secure traffic from smaller regional ports.• Capture added value.

• Perception of the feeder function- Ports prefer direct calls.- Option: link to more than one hub.

• Transition phase?- Foreland-based regionalization appears to be a

distinct phase on its own.

Thank you for your attention [email protected]

[email protected]