Government of Canada, Department of Foreign Affairs and International Trade, Inland Ports Roundtables, February 2008 Inland Ports: Perspectives for Western.

Government of Canada, Department of Foreign Affairs and Government of Canada, Department of Foreign Affairs and International Trade, Inland Ports Roundtables, February International Trade, Inland Ports Roundtables, February 20082008

Inland Ports: Perspectives for Inland Ports: Perspectives for Western CanadaWestern CanadaJean-Paul Rodrigue

Associate Professor, Dept. of Economics & Geography, Hofstra University, New York, USA

Van Horne Researcher in Transportation and Logistics, University of Calgary, Alberta, Canada

Global Supply Chains, Global ConnectionsGlobal Supply Chains, Global Connections

Global Freight DistributionGlobal Freight DistributionCommodity Chains as Agents of Added ValueCommodity Chains as Agents of Added ValueTerminals and the Continuity of Supply ChainsTerminals and the Continuity of Supply Chains

Container yard, Port of Yantian, ChinaContainer yard, Port of Yantian, China

Traffic at the 50 Largest Container Ports, 2005Traffic at the 50 Largest Container Ports, 2005

Dubai

Tacoma

Santos

Jeddah

Seattle

Salalah

Oakland

Colombo

Savannah

Melbourne

Long BeachCharleston

Nhava Sheva

Los Angeles

Hampton Roads

New York/New Jersey

Kobe

Tokyo

BusanXiamen

Ningbo

Nagoya

Manila

Dalian

Tianjin

Keelung

Yokohama

Shenzhen Shanghai

Quingdao

Singapore

Kaohsiung

Hong KongGuangzhou

Port Kalang

Ho Chi Minh

Laem Chabang

Tanjung Priok

Tanjung Pelepas

LeHavre

Hamburg

Antwerp

Valencia

Rotterdam

Barcelona

Algeciras

Felixstowe

Gioia Tauro

Bremen/Bremerhafen

Pacific Asia Europe

TEU

Less than 2 million

2 to 4 million

4 to 7 million

7 to 10 million

More than 10 million

Commodity Chains; Where Value Comes From?Commodity Chains; Where Value Comes From?

Commodity chain

Adde

d va

lue

Low

High

Manufacturing

R&D Globalization

DistributionDesign

Branding Marketing

Sales / Service

Concept Logistics

Terminals and Supply Chains; Insuring a ContinuityTerminals and Supply Chains; Insuring a Continuity

SuppliersSuppliers

Gateway

Gateway

Offshore

Hub

Offshore

Hub

Cus

tom

ers

Cus

tom

ers

BottleneckBuffer

DC DC

DC Distribution centerInland containerized goods flowInland non-containerized goods flowMaritime container flow

Inland Term

inal

Inland Term

inal

Gateway

Gateway

‘‘Last mile’Last mile’‘‘First mile’First mile’

Composition: Pallets waiting to be loaded in a Composition: Pallets waiting to be loaded in a container (APL DC - Shenzhen, China)container (APL DC - Shenzhen, China)

Interchange: Post-Panamax Containership (Le Interchange: Post-Panamax Containership (Le Havre)Havre)

Interchange: UPS Willow Springs Distribution Center Interchange: UPS Willow Springs Distribution Center (Chicago)(Chicago)

8

Decomposition: Unloading “Floor Loaded” Decomposition: Unloading “Floor Loaded” Containers and Palletizing Shipments (Antwerp)Containers and Palletizing Shipments (Antwerp)

9

Transport Terminals and Inland PortsTransport Terminals and Inland Ports

Freight TerminalsThe Setting of Inland Ports

Free Trade Zones

Translisft crane, NS Rutherford yard, PATranslisft crane, NS Rutherford yard, PA

Freight Transport Terminals: Operations and Added Freight Transport Terminals: Operations and Added ValueValue

Core Core (Operations)(Operations)

Infrastructure Modal access (dock, siding, road), unloading areas

Equipment Intermodal lifting equipment, storing equipment

Storage Yard for empty and loaded containers

Management Administration, maintenance, access (gates), information systems

AncillaryAncillary(Added Value)(Added Value)

Trade Facilitation Free trade zone, logistical services

Distribution centers

Cross-docking, warehousing, light manufacturing, temperature controlled facilities (cold chain)

Storage depot Container depot, bulk storage

Container services Washing, preparation, repair

Inland Terminals, Different Settings, Different Inland Terminals, Different Settings, Different FunctionsFunctions

PortPort

Satellite TerminalSatellite Terminal

Intermodal / Transmodal Intermodal / Transmodal FacilityFacility

Freight Distribution ClusterFreight Distribution Cluster

Profitability of Inland Terminals: Balancing Volume Profitability of Inland Terminals: Balancing Volume and Service Areaand Service Area

Gateway PortGateway Port

Inland TerminalInland Terminal

10 km

60 kmService Area

Inland corridor

High volume potential and low haul costs

(Ideal Case)

High haul costs compensated by high

volume

Low volume compensated by low

haul costs

Bad situation with high haul costs.

Limited costumers

15 km

20,000 TEU

Service Area

TEU PotentialHigh Profitability

Low Profitability

Volume

High

Low

Inland Terminal Life CycleInland Terminal Life Cycle

TrafficTraffic

Stage 1Stage 1 Stage 2Stage 2 Stage 3Stage 3

Planning Maturity DeclineGrowth

Stage 4Stage 4

Setting

Stage 5Stage 5

Subsidies / InvestmentsSubsidies / Investments

Operationsbegin

Concept

ProfitProfit

Inland Ports: Different Stages, Different ConcernsInland Ports: Different Stages, Different Concerns

Phase Characteristics

Planning Relevance and viability studies. Local support. Attraction of users and investment commitments. High risk and subsidy level.

Setting Construction of terminal and distribution facilities. First users (some can be transitional).

Growth Realization of market potential. Growth of traffic. Capture of additional users. Clustering effect and generation of added value.

Maturity Traffic stabilization. Available space filled and/or few new users. Non-commercial activities (housing). Revenue generation optimal.

Decline Change in market conditions. Departure of users. Reemergence of subsidies.

Free Trade Zones: Setting The RulesFree Trade Zones: Setting The Rules

Infrastructures High level of infrastructure, such as land, transport, office space, utilities, logistics services, business services and other facilities.

Regulations Streamlined to improve efficiency, including custom services, labor regulation and permits.

Location High accessibility location, often close to major terminal facilities such as a port, inland terminal or an airport. Location often away from conventional industry.

Trade-oriented Activities operating within the zone produce mainly or exclusively for foreign markets. Alternatively, activities distributing imported goods.

Incentives Low cost land, infrastructures, tax and duty exemptions or various subsidies.

Free Trade Zones: “Bending the Rules”Free Trade Zones: “Bending the Rules”

Custom Clearance

Done inland instead of at the gateway port.Likely faster.Receiver gets further advance notice.

Duties Not paid until the consignment is released and moved out of the FTZ.If transformation is performed in the FTZ, the duty class may change.Select the taxation regime.

Settlement If combined with Warehousing.Vendors often not paid until the freight leaves the terminal for delivery.

North American Freight Transportation: Gateways North American Freight Transportation: Gateways and Corridorsand Corridors

18Trimodal Container Terminal, Willebroek, BelgiumTrimodal Container Terminal, Willebroek, Belgium

Fitting in the Global Freight PictureFitting in the Global Freight PictureTranspacific ConnectionsTranspacific ConnectionsThe Hinterland ProblemThe Hinterland Problem

Transportation in North America: Then and Now…Transportation in North America: Then and Now…

Then Now

Fast growth and diffusion of containerization

Maturity and ubiquity

Excess capacity Running at capacity. Search for alternatives.

New standards and technology (Containerization, unit trains, double stacking, 53 footers)

Established practices. Diminishing returns.

Segmented transportation ownership and integration

Consolidation (Maritime, trucking and rail industries). Emergence of large operators.

Deregulation Governance

Two Major Transpacific Pendulum Routes Serviced Two Major Transpacific Pendulum Routes Serviced by OOCL, 2006 (The Wal-Mart Express)by OOCL, 2006 (The Wal-Mart Express)

Seattle

Oakland

Vancouver

Los Angeles

Kobe Tokyo

Pusan

Nagoya

Shekou

Qingdao

Shanghai

KaohsiungHong Kong

Singapore

Laem Chabang

Ningbo

Source: OOCL Web Site

49 Days

40 Days

Note: Paths are approximate and transit time includes port time

Northwest Express (NWX)

South China Express (SCX)

Balance of Containerized Cargo Flows along Major Balance of Containerized Cargo Flows along Major Trade Routes, 1995-2006 (in millions of TEUs)Trade Routes, 1995-2006 (in millions of TEUs)

-18

-16

-14

-12

-10

-8

-6

-4

-2

01995 1996 1997 1998 2000 2001 2002 2003 2004 2005 2006

Europe/USA

Asia/Europe

Asia/USA

Container Traffic at Major Transpacific Container Container Traffic at Major Transpacific Container Ports: Mirror Images?Ports: Mirror Images?

Kobe

Tokyo

OsakaBusan

Xiamen

Ningbo

Nagoya

Manila

Dalian

Yantian

Tianjin

Keelung

Yokohama

Shenzhen

Shanghai

Quingdao

Singapore

Kaohsiung

Hong Kong

Guangzhou

Port Kalang

Ho Chi MinhLaem Chabang

Tanjung Priok

Tanjung Pelepas

Tacoma

Fraser

Seattle

Oakland

EnsenadaSan Diego

Anchorage

Long BeachLos Angeles

Portland (OR)

Vancouver (BC)

Pacific Asia

North American West Coast

Container Traffic (2005)

TEU

Less than 2 million

2 million to 4 million

4 million to 7 million

7 million to 10 million

More than 10 million

TokaidoYellow SeaRim

Sunan Delta

Pearl River DeltaTaiwan / Fujian

Singapore San Pedro Bay

San Francisco Bay

Puget Sound

Prince Rupert

Ensenada

The Prince Rupert The Prince Rupert Equation…Equation…

■ Increase in fuel prices • Could advantage Prince

Rupert.• Fuel (bunker oil) account for

40% of operating costs for maritime shipping.

• Forces ships to slow down (10% speed drop linked with 25% reduction in fuel use).

• Transpacific crossing times become longer (1 or 2 days).

• Closer gateways thus become more attractive for shipping companies.

Prince Rupert

Gateways and the Hinterland EffectGateways and the Hinterland Effect

Efficient Inland Freight DistributionInefficient Inland Freight Distribution

Pacific AsiaPacific Asia North American West CoastNorth American West Coast

SEZ

Corridor

Main North American Trade Corridors and Main North American Trade Corridors and Metropolitan Freight CentersMetropolitan Freight Centers

Miami

Boston

Houston

Halifax

Savannah

PortlandMontreal

Gulfport

Vancouver

Baltimore

Palm Beach

Charleston

New Orleans

Philadelphia

Jacksonville

Hampton Roads

Wilmington (NC)

Wilmington (DE)

Port Everglades

New York/New Jersey

Tacoma

Fraser

Seattle

Oakland

Long BeachLos Angeles

Container Port Traffic and Ownership of Major Rail Lines, 2005

Dr. Jean-Paul Rodrigue, Dept. of Economics & Geography, Hofstra University

Port Traffic in TEU (2005)

Less than 300,000

300,000 to 500,000

500,000 to 1,000,000

1,000,000 to 3,000,000

More than 3,000,000

Burlington Northern Sante Fe (BNSF)

Canadian National (CN)

Canadian Pacific (CP)

CSX Transportation (CSXT)

Ferromex (FNM)

Kansas City Southern (KCS)

Norfolk Southern (NS)

Union Pacific (UP)

Other

Perspectives for Western CanadaPerspectives for Western Canada

Inland Ports: Hype or Potential?Inland Ports: Hype or Potential?Containerization of CommoditiesContainerization of Commodities

Chassis waiting to be picked, Corwith Rail Yard, ChicagoChassis waiting to be picked, Corwith Rail Yard, Chicago

A Favorable Environment for Inland PortsA Favorable Environment for Inland Ports

Transpacific Trade

Strong growth (China effect)Containerization of supply chains.Long distance hinterland transportation.

Gateway Congestion

Limited possibility for terminal expansion.Higher port charges and lower dwell times.Problematic local and terminal gate access.

Trade Imbalances

Imbalanced shipping rates.Load centers for empties on backhauls to ports.

Regulatory Framework

Environmental constraints (Nimbyism).Labor issues.Political support (APGCI).

The Pacific Northwest: Two Main Corridors, but How The Pacific Northwest: Two Main Corridors, but How Many Inland Ports?Many Inland Ports?

Containers Handled by the Port of Vancouver, 1997-Containers Handled by the Port of Vancouver, 1997-2006 (in TEU)2006 (in TEU)

0.1

1.0

10.0

100.0

1997 1998 1999 2000 2001 2002 2003 2004 2005 2006

Rat

io

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

Mill

ions

Loaded (inbound) Empty (inbound)

Loaded (outbound) Empty (outbound)

Loaded Ratio (Outbound / Inbound) Empties Ratio (Outbound / Inbound)

The Potential of Containerization of CommoditiesThe Potential of Containerization of Commodities

Bulk TransportBulk Transport Container TransportContainer Transport•Economies of scale.•Low utilization levels (at most 50% due to empty backhauls).•Delays for the assembly of loads.

•Flow concept; lower transshipment costs.•Its own warehouse unit.•Faster distribution (extending the realm of perishables).•Leveling the playing field.•Handle variety requirements.

EconomicsEconomics

?

•Imbalanced container shipping rates.•Rise in commodity prices.•Rise in bulk freight rates.

Maritime Freight Rates (Nominal USD per TEU), 1993-Maritime Freight Rates (Nominal USD per TEU), 1993-20072007

$0

$500

$1,000

$1,500

$2,000

$2,500

1993

-4

1994

-2

1994

-4

1995

-2

1995

-4

1996

-2

1996

-4

1997

-2

1997

-4

1998

-2

1998

-4

1999

-2

1999

-4

2000

-2

2000

-4

2001

-2

2001

-4

2002

-2

2002

-4

2003

-2

2003

-4

2004

-2

2004

-4

2005

-2

2005

-4

2006

-2

2006

-4

2007

-2

2007

-4

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

Asia - US

US - Asia

Baltic Dry Index

Each System has its own Advantages …Each System has its own Advantages …

BulkBulk ContainerizedContainerized

Driving force Cost / Volume Time / Flexibility (3 times faster)

Mode of shipment Large output Small shipments

Flows Specialized Mixed

Terminals Dedicated General Container

Markets Mass Niche (spot)33

… … and Will Likely See the Emergence of a and Will Likely See the Emergence of a ComplementarityComplementarity

Bulk Commodity Chain

Containerized Commodity Chain

Consolidationcenter

PortSupplier Customer

Intermodalterminal

Containerport

PendulumServices

Point-to-Point

ComplementarityComplementarity

34

Commodities are more Containerized than Commodities are more Containerized than Expected…Expected…

US Containerized Trade, 2003

0

5,000

10,000

15,000

20,000

25,000

Total Imports Exports

Thou

sand

TE

U Food

Consumer products

Technology products

Capital equipment

Raw materials

35

Several Established Containerized Commodity Several Established Containerized Commodity Chains in Western CanadaChains in Western Canada

Main Containerized Exports, Western Canada

25%

31%

21%

5%

6%

12%Pulps, paper &paperboardAgricultural products

Lumber & wood producs

Chemical products

Waste & scrap

Other

36

Challenges for the Containerization of CommoditiesChallenges for the Containerization of Commodities

Challenge

Container preparation Pre-use cleaning (avoid contamination). Post-use cleaning. Dedicated containers?

Container loading, unloading and transloading

Bulks difficult to load horizontally. Vertical loading / unloading (equipment). Transloading issues. Source loading (integrity).

Weight Limitations to about 30 tons (40 footer). 20 footer the preferable load unit (26-28 tons).

Weight distribution Containership load (10-14 tons per TEU). Trade imbalances create mitigation strategies.

Land consumption at port terminals

Space consumption (4 times) mitigated by velocity.

Existing distribution channels

Considerable accumulated investments (modes & terminals). Established distribution practices. Inertia.

The Challenge of the Box: Can Local Communities The Challenge of the Box: Can Local Communities Capture Value?Capture Value?

Load center potential (commodities)Load center potential (commodities)Intermediacy (limited)Intermediacy (limited)

The role of public actorsThe role of public actors

Will the boxes remain empty?Will the boxes remain empty?

Container waiting to be loaded, Shenzhen, ChinaContainer waiting to be loaded, Shenzhen, China

Taking Advantage of Local Opportunities, Taking Advantage of Local Opportunities, Subtropolis, Kansas CitySubtropolis, Kansas City