The Atlantic Institute for Market Studies, Halifax, Nova ScotiaThe Atlantic Institute for Market Studies, Halifax, Nova Scotia

Gateways and Corridors: Gateways and Corridors: Divergence along the North Divergence along the North American Eastern SeaboardAmerican Eastern Seaboard

Jean-Paul RodrigueDepartment of Economics & GeographyHofstra University, Hempstead, New York 11549, USA

IntroductionIntroduction

2Trimodal Container Terminal, Willebroek, BelgiumTrimodal Container Terminal, Willebroek, Belgium

The Eastern Seaboard is going The Eastern Seaboard is going through a phase of divergence…through a phase of divergence…

… … which does not benefit Halifaxwhich does not benefit Halifax

A. Globalization, Trade and Port Divergence in North A. Globalization, Trade and Port Divergence in North AmericaAmerica

1. Factors of Port Divergence• What are the main processes behind divergence?

2. Containerized Traffic Trends• How containerization has evolved along the East Coast in

recent years?3. Traffic Concentration

• What is the extent of the divergence taking place?

1. Factors of Port Divergence1. Factors of Port Divergence

SiteSite Conventional factor (modal access and accessibility). Reinforced by new generations of containerships.

Ocean CarriersOcean Carriers Choice of port calls and frequency of service. Choice of network structure.

Port PolicyPort Policy Landlord vs. private port operators. Terminal privatization. Choice of asset allocation. Differences in terminal productivity.

HinterlandHinterland Access to long distance transport corridors. Access to the regional customer base.

Supply Chain Supply Chain ManagementManagement

Production and distribution requirements (scheduling, frequency).

2. A Schematic Representation of the Eastern 2. A Schematic Representation of the Eastern SeaboardSeaboard

St. Lawrence“The Funnel”Direct to the

bottleneck: Montreal

Upper Range“The Empty Sink”

Weak handles: Halifax and Boston

Mid Range“The Full Sink”

Strong handles: New York and Hampton

Roads

Lower Range“The Filling Sink”

Strong center:Charleston / Savannah

Upper RangeUpper RangeMid RangeMid Range

Lower RangeLower Range

St. LawrenceSt. Lawrence

2. Container Traffic at Eastern Seaboard Ports, 20072. Container Traffic at Eastern Seaboard Ports, 2007

5.30

2.60

2.13

1.75

1.36

0.95

0.88

0.71

0.61

0.49

0.28

0.25

0.25

0.22

0.19

0 1 2 3 4 5 6

New York/New Jersey

Savannah

Hampton Roads

Charleston

Montreal

Port Everglades

Miami

Jacksonville

Baltimore

Halifax

Wilmington(DE)

Philadelphia

Palm Beach

Boston

Wilmington(NC)

Millions

2nd Tier (Gateways)

3rd Tier (Regional Gateways)

4th Tier (Niche ports)

Articulation Gateway

Divergence Threshold

3. Concentration of Containerized Traffic, 1985-20073. Concentration of Containerized Traffic, 1985-2007

0%

20%

40%

60%

80%

100%

20072000199519901985

Other

Top 5

Diffusion of ContainerizationDiffusion of Containerization

Hinterland EffectHinterland Effect

B. Cargo Volume Growth and Shipping ServicesB. Cargo Volume Growth and Shipping Services

1. Traffic trend among major East Coast Ports• From convergence to divergence?

2. The resurgence of All Water Services• What are the underlying factors?

3. Service routes and transit times• How Landbridge and All Water Services compare?

1. Change in Container Traffic at Eastern Seaboard 1. Change in Container Traffic at Eastern Seaboard PortsPorts

0.77 M TEU0.77 M TEU 8.36 M TEU8.36 M TEU

1.31 M TEU1.31 M TEU

+0.04 M TEU+0.04 M TEU

+0.28 M TEU+0.28 M TEU

+3.02 M TEU+3.02 M TEU +2.01 M TEU+2.01 M TEU

7.19 M TEU7.19 M TEU

1. Strong Divergence: Montreal and Halifax1. Strong Divergence: Montreal and Halifax

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

Halifax

Montreal

1. Strong Divergence: Montreal and Halifax1. Strong Divergence: Montreal and Halifax

-25%

-15%

-5%

5%

15%

25%

35%

45%

2007

2005

2003

2001

1999

1997

1995

1993

1991

1989

1987

1985

1983

1981

Halifax

Montreal

ConvergenceConvergence DivergenceDivergence

Zero-sum game?Zero-sum game?

1. From Convergence to Divergence: the American 1. From Convergence to Divergence: the American East CoastEast Coast

0

1

2

3

4

5

6

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

Mill

ionsCharleston

NorfolkNew YorkSavannah

1. From Convergence to Divergence: the American 1. From Convergence to Divergence: the American East Coast (Annual Growth Rates)East Coast (Annual Growth Rates)

-25%

-15%

-5%

5%

15%

25%

35%

45%

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

Charleston Norfolk

New York Savannah

DivergenceDivergence ConvergenceConvergence DivergenceDivergence

Equa

tor

2. The Resurgence of All Water Services to the East 2. The Resurgence of All Water Services to the East CoastCoast

LandbridgeLandbridge

Westbound Westbound RouteRoute

Eastbound Eastbound RouteRoute

Algeciras

Gioia Tauro

Jeddah

Colombo

Singapore

Hong Kong

Shanghai

PusanKobe

LA/LB

Seattle / Vancouver

PanamaPanamaRouteRoute

““China Effect”China Effect”

West Coast CongestionWest Coast CongestionLandbridge CongestionLandbridge Congestion

Growth in the SoutheastGrowth in the SoutheastNew Distribution GatewaysNew Distribution Gateways

3. Service Routes and Transit Times: Far East to New 3. Service Routes and Transit Times: Far East to New YorkYork

14

14

16

18

18

24

21

26

23

25

22

23

0 5 10 15 20 25 30

Busan

Tokyo

Shanghai

Kaohsiung

Hong Kong

Singapore

Land Bridge All Water

-1-1

+4+4

+7+7

+7+7

+12+12

+7+7

3. Service Routes and Transit Times: Far East to 3. Service Routes and Transit Times: Far East to Norfolk, VirginiaNorfolk, Virginia

14

14

16

18

18

24

23

26

24

25

22

23

0 5 10 15 20 25 30

Busan

Tokyo

Shanghai

Kaohsiung

Hong Kong

Singapore

Land Bridge All Water

-1-1

+4+4

+7+7

+8+8

+12+12

+9+9

3. Service Routes and Transit Times: Far East to 3. Service Routes and Transit Times: Far East to Savannah, GeorgiaSavannah, Georgia

14

16

18

19

18

28

25

24

22

22

21

25

0 5 10 15 20 25 30

Busan

Tokyo

Shanghai

Kaohsiung

Hong Kong

Singapore

Land Bridge All Water

-3-3

+3+3

+3+3

+4+4

+8+8

+11+11

Equa

tor

3. The Resurgence of All Water Services to the East 3. The Resurgence of All Water Services to the East CoastCoast

LandbridgeLandbridge

Westbound Westbound RouteRoute

Eastbound Eastbound RouteRoute

Zone of ContestabilityZone of Contestability

Equilibrium

Equilibrium

(indifference) Point

(indifference) Point

New York (1):75% (2005)60% (2020) New York (2+3):

25% (2005)40% (2020)

NYNY

SavannahSavannah

PanamaPanamaRouteRoute

New Direct LinksNew Direct Links17 (2002)17 (2002)26 (2007)26 (2007)

1

2

3

3. Service Time Reliability to the EC: All Water 3. Service Time Reliability to the EC: All Water Services vs. Transpacific / Landbridge Services vs. Transpacific / Landbridge

18 days

NY: 22 daysSavannah: 21 days

Port congestionOffshore transshipmentTransloadingUnit train assemblyRail congestionTransmodal operationsRoad congestion

Port congestionOffshore transshipmentPanama / Suez Delays

Transpacific / Landbridge

All Water Services

Beware of Future Expectations: The Fallacies of Beware of Future Expectations: The Fallacies of Linear Thinking; Smoking CrackLinear Thinking; Smoking Crack

Beware of Future Expectations: The Fallacies of Linear Beware of Future Expectations: The Fallacies of Linear Thinking (Projected TEU Traffic, Port of NY/NJ)Thinking (Projected TEU Traffic, Port of NY/NJ)

0

2

4

6

8

10

12

1990 2000 2010 2020 2030 2040 2050 2060

Mill

ion

TEU

s

Real (- 2007)

Projection (2002)

3. Monthly Inbound Traffic (loaded containers), Port of Los 3. Monthly Inbound Traffic (loaded containers), Port of Los Angeles (TEUs)Angeles (TEUs)

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Janua

ry

Februa

ryMarc

hApril

MayJu

neJu

ly

August

Septem

ber

Octobe

r

November

Decem

ber

2004

2005

2006

2007

2008

C. Port Regionalization and Potential Port Hinterland C. Port Regionalization and Potential Port Hinterland DivergenceDivergence

1. The reemergence of the “hinterland factor”• How the maritime / land interface is being modified?

2. Port regionalization strategies• How specific gateway ports are improving their regional

hinterland access?

1. The Reemergence of the “Hinterland Factor”1. The Reemergence of the “Hinterland Factor”

New York Hampton Roads Charleston Savannah H

arbo

r Channel deepening (50 feet). On dock rail (Expressrail).

New Craney Island Container Terminal ($2.2 billion; 2017). APM terminal in Portsmouth.

Construction of a new 1.4 million TEU terminal ($600 million; 2013). Channel deepening (47 feet; $148 million).

New berth at Garden City Container terminal. Join with Charleston to develop a new container terminal at the bank of Savannah River.

Hin

terla

nd

Port Inland Distribution Network (North Kearny, NJ, South Kearny, NJ, Port Elizabeth terminal, NJ, Port Newark terminal, Croxton, NJ, and New York Container Terminal, NY)

Virginia Inland Port. Heartland project. (CSX – Portsmouth Marine Terminal, VA, Norfolk International Terminal, VA, Newport News Marine Terminal, VA).

CSX – Charleston, SC. NS - Charleston, SC

Georgia Port Authority, Savannah, GA, Savannah ICTF, GA.

1. The Reemergence of the “Hinterland Factor”: Rail 1. The Reemergence of the “Hinterland Factor”: Rail Gateways and Metropolitan Freight CentersGateways and Metropolitan Freight Centers

New York• 85% are local cargo• 14% is distributed by rail• Less than 1% is distributed by water

Hampton Roads• Over 47% of cargo originates or is destined for locations within Virginia• 53% of cargo are hinterland bound

26

North American Rail SystemNorth American Rail System

Major Rail Corridors Improved since 2000Major Rail Corridors Improved since 2000

2. The Terminalization of Supply Chains2. The Terminalization of Supply Chains

■ Terminalization• Growing influence of transport terminals in the setting and

operation of supply chains in terms of location, capacity and reliability.

28

Type Bottleneck-derived Warehousing-derivedNature Terminal as a constraint Terminal as a bufferConcept Rational use of facilities to

maintain operational conditions

Incorporating the terminal as a storage unit

Challenge Storage space, port call frequency, gate access

“Inventory in transit” with “inventory at terminal”

Outcome Volume, frequency and scheduling changes

Reduce warehousing requirements at distribution centers

2. Terminalization in a Supply Chain Context2. Terminalization in a Supply Chain Context

29

SuppliersSuppliers

Gateway

Gateway

Offshore

Hub

Offshore

Hub

Cus

tom

ers

Cus

tom

ers

Extended Distribution Center

BottleneckBuffer

ForelandForeland HinterlandHinterland

DC DC

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

Extended Gate

Port regionalization and the creation of a Regional Load Center Network

Inland Term

inal

Inland Term

inal

Gateway

Gateway

2. Inland Terminals and Terminalization of Supply 2. Inland Terminals and Terminalization of Supply ChainsChains

Gateway PortGateway Port

Low dwell time High dwell time

Inland TerminalInland Terminal

DC

On call delivery

Inland corridor

Extended Distribution Center

Satellite TerminalSatellite Terminal

High

Low

Deg

ree

of G

atew

ays

Syn

chro

niz

atio

nD

egre

e of

Gat

eway

s S

ynch

ron

izat

ion

30

D. Conclusion: Challenges and Opportunities of the D. Conclusion: Challenges and Opportunities of the New Panama Canal (New Panamax – 12,000 TEU) New Panama Canal (New Panamax – 12,000 TEU)

Equa

tor

Westbound Westbound RouteRoute

Eastbound Eastbound RouteRoute

Algeciras

Gioia Tauro

Jeddah

Colombo

Singapore

Hong Kong

Shanghai

PusanKobe

LA/LB

Kingston

PanamaPanama

SuezSuez

D. Conclusion: Challenges and Opportunity for D. Conclusion: Challenges and Opportunity for Arctic RoutesArctic Routes

Russia

ChinaCanada

Un

ited

Sta

tes

Kazakhstan

Mongolia

New York

Vostochny

Lianyungang

Archangel'sk

Brest

Druzhba

Zabaykalsk

Oulu

Lokot

Perm'

Astana

Harbin

Urumqi

Beijing

IrkutskLanzhou

VologdaVainikkala

Ulaanbaatar

Novosibirsk

Yekaterinburg Presnogorkovka

Halifax

MoscowSt. Petersburg

El Paso

Chicago

Kansas CIty

Minneapolis

Salt Lake CityTacoma

Oakland

Houston

Savannah

Montreal

Vancouver

Long Beach

Haparanda/Tornio

New York

Rotterdam

Maritime Segment

Rail Main Trunk (Broad Gauge)

Rail Main Trunk (Standard Gauge)

Port

Gauge Change

Rail Terminal

Azimuthal Equidistant Polar Projection

Arctic Bridge

Northern Sea Route

Northwest Passage

Potential Impacts of High Oil Prices on Potential Impacts of High Oil Prices on Transportation: How Halifax Fits into the Picture?Transportation: How Halifax Fits into the Picture?

Price

Supply chain propagationSupply chain propagation

Modal shiftModal shift

Gateway / Hub selectionGateway / Hub selection

Usage levelUsage level

Service area changesService area changes

Network configurationNetwork configuration

P

Q

Price

A/B

P

Q(A/B)

A

B

Range

R(B)

12B

A

Rail

RoadRaw

Materials

DistributionCenters

RetailersManufacturing

Cost

D. Conclusion: From Divergence to Convergence?D. Conclusion: From Divergence to Convergence?

■ There is a divergence favoring a specific number of ports• Site: Limited number able to accommodate larger ships.• Ocean carriers: Emergence of all water services as a new

dimension of standard port calls.• Port operators: Allocation of capital investment.• Policy: Ongoing privatization, albeit at a slower pace.• Hinterland: Development of rail corridors, particularly towards

the Chicago hub.• Supply chain management: A stronger factor than accounted.