barge convoy system phd

8/10/2019 Barge Convoy System PhD

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Developing a Small Barge Convoy

System to reactivate the use of thesmall inland waterway network

Edwin van Hassel

University of AntwerpFaculty of applied Economics

Department of transport and regional Economics

Supervisor: Prof. Dr. Eddy van de Voorde

University of AntwerpFaculty of applied Economics

Department of transport and regional Economics


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Doctoral commission

Prof. dr. A. Verhetsel (Antwerp University, president)

Prof. dr. M. Savy (Paris-Val de Marne University)

Prof. em. dr. W. Rotherngatter (Karlsruher University)

Prof. ir. H. Hopman (Delft University of technology)

Prof. dr. H. Meersman (Antwerp University)

Prof. dr. T. Vanelslander (Antwerp Univeristy)

Prof. dr. E. van de Voorde (Antwerp University, supervisor)

ISBN: 978-90-8994-049-0

Copyright 2011 by Edwin van HasselAll rights reserved. No part of the material protected by this copyright notice maybe reproduced or utilized in any form or by any means, electronic or mechanical,including photocopying, recording or by any information storage and retrievalsystem, without written permission from the author.


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Developing a Small Barge ConvoySystem to reactivate the use of the

small inland waterway network

(Ontwikkeling van een klein bakken concept om het gebruik van de kleinewaterwegen te reactiveren)

door

Eduard Bastianus Hendrikus Johannes van Hassel

Scheepsbouwkundig ingenieurgeboren te s-Hertogenbosch

Proefschrift

Proefschrift aangeboden tot het behalen van het doctoraatsdiploma inde toegepaste economische wetenschappen aan de universiteit

Antwerpen

Openbare verdediging: 15 november 2011(Grauwzusters, Antwerpen)

Promotor: Prof. Dr. Eddy van de VoordeUniversity of AntwerpFaculty of applied EconomicsDepartment of transport and regional Economics


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Preface

Being born and raised in the city of s-Hertogenbosch I have always beensurrounded by different waterways (small ones like the Zuid Willemsvaart

and large one like the river Maas) and several shipyards (the old Verolmeshipyard in the city of Heusden for example). It was during a visit to thisyard when I was still at elementry school that my interest for shipbuilingand shipdesign was formed.

During my study of maritime technology at the Delft University ofTechnology I also developed an interest in the economics behind the shipswe were used to design. Therefore the choice to specialize in the field ofshipping management was easily made. Prof. Van de Voorde and Prof.Meersman offered me the opportunity to develop a master thesis, incooperation with the Universtity of Antwerp, which would give a new

technical solution to reactivate the use of the small inland waterwayswhichwas also economically viable. This master thesis has been the start for thedevelopment of this PhD-thesis. This PhD thesis will now connect myinterest in the design of new ships and their economic viability, and applythem to a situation which is all too formiliar to me.

The thesis will combine the design/technical knowledge with thelogistics/transport economics aspects. The economic theories applied in thisthesis will not be extensively discussed because it is only my aim to applythese theories to determine the competitiveness of the small barge convoysystem.

Although writing a thesis is an individual task, many more people wereinvolved. So this is the moment to express my gratitude to them. First ofall, I would like to thank my promoter professor dr. Eddy van de Voorde. Hewas always there to provide me with advice and feedback on my work. Hisincredible speed of reading text and commenting is always very muchappreciated by me.

I would also want to thank Prof. dr. Meersman, Prof. dr. Verhetsel and Prof.ir. Hopman for commenting on earlier drafts of parts of this thesis. Theirsuggestion and comments were also very much appreciated. Also the

comments and suggestions, on earlier drafts of the thesis, of Prof. dr.Rothengatter, Prof. dr. Savy and dr. Vanelslander where very muchappreciated.

I would also like to thank dr. ir. Martin van Hees for making the Quaestorsoftware available to me.

I am also very much in debt with my sister Laura van Hassel for making thefirst effort of improving the English in this thesis. The second person who Iwant to express my gratitude is Prof. Braecke for his time and effort that hehas put into the thesis to improve the English even further to aPhDlevel.


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Of course, many more colleagues should be credited as they havecontributed to a pleasant and inspiring working atmosphere.

Last but not least, I would like to thank my parents, who have alwaysencouraged me and given all possible support to me to study.

Edwin van Hassel

s-Hertogenbosch / AntwerpSeptember, 2011


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Table of contents

Preface....................................................................................................... iv

Table of contents................................................................................ vi

1. Introduction....................................................................................... 11.1 Background of the thesis......................................................................... 11.2 Objectives of the thesis........................................................................... 11.3 Methodology............................................................................................ 21.4 Results of the thesis................................................................................ 41.5 Outline of the thesis................................................................................ 4

2. Inland waterway transportation........................................... 92.1 Introduction............................................................................................. 92.2 Inland waterway system.......................................................................... 92.3 Definition of small inland waterways...................................................... 102.4 History of the small inland waterways.................................................... 102.5 Definition of small ships......................................................................... 112.6 Realized demand on the Flemish total waterway network...................... 122.7 Demand on the small waterways........................................................... 14

2.7.1 Current demand............................................................................... 142.7.2 Potential demand............................................................................. 15

2.8 Supply on the small waterways............................................................. 172.9 Summary.............................................................................................. 18

3. Decreased supply of small inland ships on the(small) inland waterway network............................................ 193.1 Introduction........................................................................................... 193.2 Lack of new small inland ships............................................................... 19

3.2.1 Competition of road transport, large and small inland ships............. 213.2.2 Economies of scale........................................................................... 223.2.3 Banks............................................................................................... 243.2.4 Ship Owners.................................................................................... 263.2.5 Entry and exit barriers..................................................................... 26

3.3 Reduction of the small inland fleet......................................................... 273.3.1 Reduction of the small inland fleet................................................... 27

3.3.2 Threats to the remaining small inland fleet...................................... 303.4 (Small) Inland ships in deep-sea ports.................................................. 36

3.4.1 Container transportation.................................................................. 363.4.2 Dry bulk transportation.................................................................... 383.4.3 Consequences of (small) inland ships at deep-sea ports.................. 38

3.5 Impact of losing the small inland ships.................................................. 393.6 Infrastructure capacity.......................................................................... 403.7 Impact of losing the small inland waterways.......................................... 413.8 Preliminary conclusions......................................................................... 42


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4. Potential solutions for the re-activation of thesmall inland waterway network................................................ 44

4.1 Introduction........................................................................................... 444.2 Adjustment of the inland waterway infrastructure................................. 444.3 Adjustment of the inland navigation concept......................................... 45

4.3.1 Inland navigation concept development........................................... 464.3.2 Supply on one waterway.................................................................. 494.3.3 Supply on two or more waterways................................................... 494.3.4 Tug sailing on the small waterway................................................... 504.3.5 Available markets for the developed concept................................... 514.3.6 Ownership of the barges.................................................................. 52

4.4 Preliminary conclusion........................................................................... 52

5. Modelling methodology............................................................ 555.1 Introduction........................................................................................... 555.2 Modelling approach................................................................................ 55

5.3 Monetary values in the model................................................................ 595.4 Summary.............................................................................................. 59

6. Network design model.............................................................. 606.1 Introduction........................................................................................... 606.2 Network options.................................................................................... 61

6.2.1 Independent sailing of the barges.................................................... 616.2.2 Barges on small and large waterways combined.............................. 626.2.3 Tug and barge on the small waterway.............................................. 636.2.4 Classic tug and barge convoy........................................................... 636.2.5 Time components in the network model........................................... 63

6.2.6 Different routes in the network model.............................................. 666.3 Port organization................................................................................... 67

6.3.1 Different port organization options for the small barge convoy......... 676.3.2 Geographical port data..................................................................... 70

6.4 Number of barges in the system............................................................ 726.5 Summary.............................................................................................. 74

7. Ship design model....................................................................... 757.1 Introduction........................................................................................... 757.2 Barge design model............................................................................... 76

7.2.1 Introduction..................................................................................... 76

7.2.2 Position in the design model............................................................ 777.2.3 Geometry......................................................................................... 777.2.4 Resistance calculation...................................................................... 787.2.5 Construction.................................................................................... 817.2.6 Propulsion........................................................................................ 857.2.7 Power generation............................................................................. 867.2.8 Stability........................................................................................... 887.2.9 New building price of the barge........................................................ 897.2.10 Sensitivity analysis of the barge design model............................... 95

7.3 Barge trains......................................................................................... 1037.3.1 Introduction................................................................................... 103

7.3.2 Position in the design model.......................................................... 1037.3.3 Coupling of barges......................................................................... 104


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7.3.4 Barge train coefficient................................................................... 1077.3.5 Resistance of the barge train......................................................... 112

7.4 Tug design model................................................................................ 1147.4.1 Introduction.................................................................................. 1147.4.2 Position in the design model.......................................................... 1157.4.3 Geometry...................................................................................... 1167.4.4 Resistance calculation................................................................... 1167.4.5 Construction.................................................................................. 1177.4.6 Propulsion..................................................................................... 1187.4.7 Accommodation............................................................................. 1237.4.8 Wheelhouse .................................................................................. 1247.4.9 Stability and trim.......................................................................... 1257.4.10 New-building price tug................................................................. 1267.4.11 Emissions..................................................................................... 1287.4.12 Sensitivity analysis of the tug design model................................. 129

7.5 Preliminary conclusion......................................................................... 133

8. Transportation costs model................................................. 1358.1 Introduction......................................................................................... 1358.2 Cost components................................................................................. 135

8.2.1 Fuel costs....................................................................................... 1358.2.2 Crew costs..................................................................................... 1368.2.3 Repair and maintenance................................................................ 1408.2.4 Insurance costs............................................................................. 1418.2.5 Depreciation.................................................................................. 1418.2.6 Interest costs................................................................................ 1428.2.7 Costs of crew logistics................................................................... 1428.2.8 Waterway infrastructure costs....................................................... 143

8.2.9 Overhead costs............................................................................. 1438.3 Sensitivity analysis of the transportation cost model........................... 1438.4 Preliminary conclusion......................................................................... 148

9. External costs............................................................................... 1509.1 Introduction......................................................................................... 1509.2 Justification of external costs............................................................... 1509.3 External costs components.................................................................. 152

9.3.1 Congestion costs............................................................................ 1529.3.2 Infrastructure costs........................................................................ 1539.3.3 Environmental costs....................................................................... 154

9.3.4 Accident costs................................................................................ 1559.4 Summary ............................................................................................ 155

10. Generalized costs.................................................................... 15810.1 Introduction....................................................................................... 15810.2 Cargo handling costs......................................................................... 15910.3 In-transit inventory costs.................................................................. 16010.4 Reliability costs.................................................................................. 16110.5 Flexibility cost.................................................................................... 16210.6 Preliminary conclusions..................................................................... 163


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11. Net present value calculation.......................................... 16511.1 Introduction....................................................................................... 16511.2 Cash flow statement.......................................................................... 16511.3 Investment decision criterion............................................................. 17211.4 Summary........................................................................................... 173

12. Competitor modelling........................................................... 17412.1 Introduction....................................................................................... 17412.2 Road transportation........................................................................... 175

12.2.1 Transportation costs..................................................................... 17512.2.2 Terminal handling costs............................................................... 17612.2.3 External costs.............................................................................. 17612.2.4 Generalized costs......................................................................... 178

12.3 Traditional inland shipping................................................................. 17812.3.1 Transportation costs..................................................................... 17812.3.2 Port residence costs..................................................................... 18212.3.3 Terminal handling costs............................................................... 183

12.3.4 External costs.............................................................................. 18312.3.5 Generalized cost........................................................................... 184

12.4 Generalized costs demand side.......................................................... 18412.4.1 Small barge convoy system.......................................................... 18412.4.2 Road transportation..................................................................... 18512.4.3 Classic small inland shipping........................................................ 185

12.5 Summary........................................................................................... 185

13. Total competition modelling............................................. 18613.1 Introduction....................................................................................... 18613.2 Competition modelling....................................................................... 18613.3 Total logistical cost............................................................................ 190

13.3.1 Inventory costs............................................................................ 19113.3.2 Assumptions made to calculate the inventory costs...................... 19213.3.3 Inventory costs for the small barge convoy system...................... 19213.3.4 Inventory costs for road transport................................................ 19313.3.5 Inventory costs for inland navigation........................................... 19413.3.6 Total logistics costs of the different modes................................... 194

13.4 The logit model.................................................................................. 19613.4.1 The model.................................................................................... 19613.4.2 Data for the logit model............................................................... 19713.4.3 Calibration of the logit model....................................................... 197

13.4.4 Calculation of the market share per mode.................................... 20213.5 Sensitivity analysis of the total competition model............................. 202

13.5.1 Sensitivity analysis TLC model..................................................... 20213.5.2 Sensitivity analysis logit model.................................................... 203

13.6 Enlarging the potential market.......................................................... 20513.7 Preliminary conclusions..................................................................... 208

14. Applying the small barge system in a real case ... 21114.1 Introduction....................................................................................... 21114.2 Selection of the geographical area..................................................... 21114.3 Potential demand............................................................................... 21214.4 Determining the main features of the small barge convoy system..... 214

14.4.1 Independent or non-independent sailing barges........................... 214


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14.4.2 Determining the network and number of barge sets..................... 21714.4.3 Determining the propulsion system, sailing regime, sailing speedand the number of barges per waterway................................................. 21914.4.4 Influence of adding additional truck transport to the small bargesystem.................................................................................................... 22914.4.5 Influence of adding inland container terminals to the network..... 23014.4.6 Findings of the main features of the small barge convoy system.. 233

14.5 Dealing with future uncertainties....................................................... 23514.6 Preliminary conclusions..................................................................... 244

15. Infrastructure analysis......................................................... 24715.1 Introduction....................................................................................... 24715.2 Large waterway variations................................................................. 24815.3 Small waterway variations................................................................. 25115.4 Preliminary conclusions..................................................................... 253

16. Building up the small barge convoy system........... 25716.1 Introduction....................................................................................... 25716.2 Implementation strategies................................................................. 257

16.2.1 Strategy one................................................................................ 25716.2.2 Strategy two................................................................................ 259

16.3 Application of the implementation strategies..................................... 26116.3.1 Business Case I............................................................................ 26116.3.2 Business Case II.......................................................................... 265

16.4 The implementation hurdle................................................................ 26916.5 Justification of an implementation subsidy......................................... 27016.6 Crew collection.................................................................................. 273

16.6.1 Amount of personnel needed........................................................ 273

16.6.2 Crew collection............................................................................. 27416.7 Influence of the reduction of demand................................................ 27516.8 Preliminary Conclusion....................................................................... 278

17. SWOT analysis.......................................................................... 27917.1 Introduction....................................................................................... 27917.2 Strengths of the small barge system................................................. 28017.3 Weaknesses of the small barge system.............................................. 28117.4 Opportunities of the small barge system............................................ 28217.5 Threats to the small barge system..................................................... 28217.6 Small barge system strategy............................................................. 284

17.7 Preliminary conclusions..................................................................... 285

18. Conclusions and recommendations.............................. 28918.1 Brief summary of the study............................................................... 28918.2 Observations and conclusions............................................................ 291

18.2.1 The existing and expected problems concerning the use of thesmall inland ships.................................................................................... 29118.2.2 The development of a new type of inland navigation system........ 29218.2.3 Network and tug & barge design in a real case............................. 29318.2.4 Business case development.......................................................... 29418.2.5 Implementation research............................................................. 297

18.3 Recommendations............................................................................. 29818.3.1 Scientific recommendations.......................................................... 298


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18.3.2 Policy recommendations............................................................... 29918.3.3 Implementation recommendations............................................... 300

Literature list...................................................................................... 302

List of abbreviations....................................................................... 308

Summary of the thesis................................................................. 310

Samenvatting van de thesis...................................................... 318

Appendix A: Barge geometry..................................................................... 329Appendix B.1: Resistance methods............................................................ 331Appendix B.2: Resistance calculation......................................................... 333Appendix B.3 Shallow water correction...................................................... 335Appendix B.4: Correction lines shallow water resistance............................ 337

Appendix B.5: influence Ion barge resistance.......................................... 341Appendix C.1: Construction design barge.................................................. 342Appendix C.2: Scantling determination...................................................... 345Appendix D: Calculation of the SWBM and stresses................................... 346Appendix E.1: Barge propulsion design and calculations............................ 349Appendix E.2: Costs of hydraulic thrusters................................................ 352Appendix F.1: Battery pack design and calculations................................... 353Appendix F.2: Battery product data........................................................... 355Appendix G: Barge stability calculations.................................................... 356Appendix H: Coupling system.................................................................... 357Appendix I: Comparison barge train resistance.......................................... 362

Appendix J: Barge train formulae............................................................... 364Appendix K: Tug geometry........................................................................ 365Appendix L.1: Thrust and propeller calculations......................................... 367Appendix L.2: Wageningen B-series data................................................... 369Appendix L.3: Nozzle data......................................................................... 371Appendix M: Rudder calculations............................................................... 372Appendix N.1: Determining working point propellers................................. 373Appendix N.2: Calculating propulsion efficiency and installed power.......... 374Appendix 0: Gen-set data.......................................................................... 375Appendix P: Diesel engine data................................................................. 376Appendix Q: Gearbox data......................................................................... 377Appendix R: Fuel, lubrication and dirty oil tanks........................................ 378Appendix S: Accommodation design.......................................................... 381Appendix T: Stability and trim calculations of the tug................................ 383Appendix U: Waiting time in the port......................................................... 386Appendix V.1: Design data case I.............................................................. 387Appendix V.2: Design data case II............................................................. 388Appendix V.3: General arrangements barge and tug................................. 389


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1. Introduction

1.1 Background of the thesis

Inland shipping in North Western Europe is well known transportation mode

which can make use of a large and dense inland waterway network.However in the last 45 years no new small inland ships have been built. Asa result the small inland fleet is diminishing, and only in Flanders 4,000,000tonnes of cargo (WenZ, de Scheepvaart, 2009) transported to and fromcompanies located at the small inland waterways, by small inland ships, riskbeing shifted to road transportation. Those tonnages are then added to thealready heavily congested road network. These extra tonnages and thepotential further increase in cargo flows will lead to more investments inexpanding the existing road capacity while the available infrastructure ofthe small waterways will not be used at all. This small waterway capacity isvery much needed to deal with a part of the total tonnages that have to be

transported from the seaports of Rotterdam and Antwerp to their respectivehinterlands.

Another consequence of the diminishing small inland fleet is that thediversity in the total inland fleet will disappear. The new ships that arebeing built are increasing in size and therefore the available sailing area ofthese ships is reduced because those large ships can only sail on a limitednumber of inland waterways. Therefore there is a large risk that there willbe only large inland ships left in the future, while more than 50% of theinland waterway network can only be used with smaller (


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in an economically viable way, the small barge convoy system via suitablebusiness cases.

The four main objectives are now reformulated into five main researchquestions:

1) What are the existing and expected problems concerning the use of smallinland waterways with the present small inland fleet?

2) What type of solution could be developed to reactivate the use of thesmall inland waterway network?

3) How does the proposed solution work? What is the optimal design of theproposed solution?

4) Is it possible to construct a suitable business case for the developedsolution?

5) How could the developed solution be implemented and how will the othermodes react to the introduction of the proposed solution?

1.3 Methodology

The main research will be divided into five main research areas each withtheir own research goals:

A) Problem definition

This part of the research deals with the existing and expected problemsconcerning the present small inland fleet on small inland waterways. Theexisting problems are researched along with the reason behind the lack ofnew small inland ships via a literature study. Also the effect of losing thesmall inland waterways on the external costs will be taken into account.

B) Providing a potential solution

Based on the results of the research of the problem definition an innovativeinland navigation concept based on a barge convoy will be proposed toprovide a solution for the problems mentioned.

C) Modelling of the proposed solution

Within this part of the research the small barge convoy system will beresearched. This research area can be divided into several smaller sub-areaswhich all need to be researched.

1) Network designIn this part of the research the several network design options,limited to the developed small barge system, are analysed, e.g.:what is the number of barges to be pushed, to which waterways andat which speed?


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2) Tug and barge designThe barges and tug that are used do not exist yet. Therefore newdesigns should be made. The designs will be based on the maindesign parameters, such as: required speed, cargo carrying capacity,number of barges pushed by the tug, type of propulsion system(diesel direct, diesel electric). The barges and tug will be designed tocomply within the rules of the shipping inspection(scheepvaartinspectie) and the rules of the Germanische Lloyds.

3) Generalized cost calculation of the small barge systemBased on the chosen network and the designs made for thedeveloped concept, the transportation and total logistics costs will bedetermined.

4) Price setting / Competition researchBesides the (generalized) costs of the small barge convoy system,also the (generalized) costs of the competitive modes must be takeninto account. Based on the generalized costs of the developedconcept and the competitors it can be determined if the small bargeconvoy system can offer a competitive price.

D) Applications of the small barge convoy system

When the design of the network, tug & barge convoy, transportation costsand prices of the new concept are known, a concrete business case will bemade to see if it is possible to invest in the small barge convoy system. Inorder to determine if the small barge convoy system can be implemented, aminimum value of the internal rate of the return (IRR) must be achieved.

E) Implementation research

In this part of the thesis, the start-up phase of the small barge convoysystem will be researched. What are the start-up costs, how many bargesshould one start with? Also an overview of the strength and weaknesses ofthe small barge system will be researched via a SWOT analysis. Based onthis analysis several strategies will be developed in order to deal with theweaknesses and threats of the system.

Research areas A to E show that the total research will consist of: atechnical / nautical part and a network / economic part which will be

combined into a single research project.

Part A of the research (problem definition) is researched ships via aliterature study. Part B will partly be based on a literature study and partlyon my own insights and creativity.

For research area C (Researching the proposed solution) a computer modelwill be made which will be programmed in the program Quaestor1. Themodel will be developed to gain insight in the dynamics of the developed

1Quaestor is a knowledge management system software tool developed by Qnowledge. It is

a development platform, working environment and management tool for engineers, enablingintegration of design configuration, calculations and the generation of drawings and graphs.http://www.qnowledge.nl


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concept and it will give the design of the barges and tug which are usedwithin the concept. Also, the competiveness of the developed system will bedetermined in this model. For the graphical output of the tug and bargedesigns the program Rhinoceros2will be used. The Rhinoceros model will beintegrated into the total Quaestor model. From the model it must be clearwhat the influence will be on the generalized transportation costs andtherefore on the competitiveness of the small barge convoy system if thedesign of the barge is changed or if a different network is chosen. Alsoinfluences of the size of convoy, the sailed speed, the chosen sailing regimeon the competitiveness must become clear.

For the application research (D) the developed model will be applied on theFlemish small waterway network. The implementation research (E) will alsobe based on the developed model.

1.4 Results of the thesis

The total research must give, at first, an insight into why the small inlandships are disappearing and why it is important to revitalize the small inlandwaterway network. The research must give insight into whether it ispossible to implement the small barge convoy system in a real case. Theresult of the research must be a potential business case that could be usedby an investment company / inland shipping company wanting to invest inthe new concept. Besides potential business case(s) also the preliminarydesigns of the developed barges and tug will be available.

The aim is that the small barge convoy system should not only be acompetitive and a profitable business but it must also provide emission andcongestion reduction for cargo transportation compared to road haulage.

1.5 Outline of the thesis

This thesis is divided into five different parts. In figure 1.1 a schematicoverview of the outline of thesis is given. The first part, background, will bedealt with in chapter 2, with a description of the inland navigation structureand the current and potential market on the small inland waterway networkin Flanders. Chapter 3 will deal with the problems in the small inlandshipping segment. In chapter 4, the new inland navigation concept will bepresented which could deal with the problems mentioned in chapter 3.

2Rhinoceros is a 3D cad package that is used to draw the 3D designs of the barges and tughttp:// www.rhino3D.com


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Figure 1.1: Outline of the thesis

The second part, the model, will consist of chapters 5 to 13. In chapter 5 anoverview of the developed model will be given. In this model the smallbarge convoy system will be modelled which will consist out of several sub-models. In chapter 6 the first sub-model is given which will deal with thedifferent network design options.

In chapter 7 the designs of the barges and tug are given along with adescription of the used design algorithms. In chapter 8 the costcalculations, for the small barge convoy system, are given. In chapters 9the external costs and in chapter 10 the generalized costs are determined.

Ch.4: Potential solutions for the re-activation ofthe small inland waterway network

Ch.3: Decreased supply of small inland shipon the (small) inland waterway network

Ch.6: Network design model

Ch.5: Modeling methodology

Ch.13: Competition modelling

Ch.14: Trade offs in the small barge systemin a real application

Ch.2: Inland waterway transportation

Ch.1: Introduction

Ch.8: Transportation costsCh.7: Ship design model

Ch.9: External costs

Ch.10: Generalized costs

Ch.11: Net present value calculation

Ch.15: infrastructureanalyses

PART I: Background

PART II: Methodology

PART III: Applications

PART IV: Implementation

PART V: Major conclusions

Ch.16: Building up the small barge convoy system

Ch.17: SWOT analysis

Ch.18: Conclusions

Ch.12: Competitor modelling

Introduction


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In chapter 11 the net present value calculation of the small barge system isgiven. Chapter 12 of this thesis will deal with the modelling of thecompetitors of the small barge system. Chapter 13 will deal with thecompetition modelling of the small barge system in a competitiveenvironment.

In the third part of the thesis, Applications, the model is demonstrated witha complete case study of the Flemish small waterway network including afuture scenario analysis (chapters 14). In chapter 14 designs are made forthe needed tug and barges and suitable business case(s) will be developed.In chapter 15 an infrastructure variation analysis will be performed toresearch the influence of network characteristics on the small barge convoysystem and its competitiveness towards the other modes.

In the fourth part, called implementation research, it will be determined inwhich way the small barge convoy system could be implemented and builtup. Also the needed crew and personnel that are needed for the tug andbarge system will be determined (chapter 16). In chapter 17 a SWOTanalysis of the small barge system will be made. This chapter will give anoverview of the strong and weak points of the developed concept.

In the last part of the thesis the main conclusions, the main conclusions arepresented and recommendations will be given on if and how the small bargeconvoy system can be implemented (chapter 18).


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PART I:BACKGROUND


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2. Inland waterway transportation

2.1 Introduction

This chapter will start with a general introduction of the inland waterway

system in North West Europe. The second part will deal with the useddefinitions for small waterways and small ships. Finally the chapter will dealwith the market and transported tonnages via the small inland waterways inFlanders.

2.2 Inland waterway system

The inland ships that are sailing on the inland waterways provide asustainable and reliable transportation mode. In the Netherlands 40% (andin Flanders 11.5%) of the total transported cargo is transported with inlandships (Meersman et.al. 2008). These inland waterways have a spare

capacity, contrary to the already heavily congested roads. Therefore, theseinland waterways can play a vital role to deal with the growing demand fortransportation in the Netherlands and Flanders. In figure 2.1 an overview ofthe inland waterways in the Netherlands and Belgium is given.

Figure 2.1: Inland waterways in the Northwest of Europe

Source: Bureau Voorlichting Binnenvaart, 2009

Figure 2.1 shows that the inland waterways form a dense network that

connects the two main ports in the Hamburg- Le Havre range (port ofRotterdam and the port of Antwerp) with its hinterland. That hinterland


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consists of the Netherlands, Belgium, Germany, the northern part of Franceand even Switzerland (via the Rhine). There are large differences betweenthe waterways in Northwest Europe. There are large rivers (Rhine, Waal,Scheldt and Maas), there are small rivers, where only small inland ships cansail on, and there are men-built waterways (either large or small). Everywaterway has its own characteristics and own maximum type of inland shipcapable of sailing on that waterway. All these waterways are categorizedinto different E.C.M.T. (= Confrence Europenne des Ministres deTransport) classes which are given in table 2.1. The classes are based onthe maximum dimensions of the ships that are capable of sailing on thatwaterway.

Table 2.1: Overview of the different waterway classes with their ship dimensioncriteria

ClassLength

(m)Width

(m)Draft(m)

Air draft(m)

Payload (tonne)

I 38,50 5,05 1,8-2,2 4.0 250-400

II 50-55 6,6 2,5 4 to 5 400-650

III 67-80 8,2 2,5 5 to 5 650-1000

IV 80-85 9,5 2,5 5,25-7 1000-1500

Va 95-110 11,4 2,5-4,5 5,25-7 1500-3000

Vb 172-185 11,4 2,5-4,5 9,1 3200 (barge convoy 1x 2 barges in length)

VIa 95-110 22,8 2,5-4,5 7-9,1 3200-6000 (barge convoy 1x 2 barges a breast)

VIb 185-195 22,8 2,5-4,5 7-9,1 6400-12000 (Barge convoy 2x 2 barges)

VIc 193-200 34,2 2,5-4,5 9,1 9600-18000 (Barge convoy 2x 3 barges)

VIIb 195/285 34,2 2,5-4,5 9,1 14500-27000 (Barge convoy 3x3 barges)

Source: New classification of inland waterways 1992 CEMT

The main dimensions of the ships are limited by either dimensions of thesmallest locks located on that waterway (length and width) or by the depthof the waterway (draft). The air draft is limited by the height of the bridgescrossing the waterway.

2.3 Definition of small inland waterways

In BCI (2008) small waterways are defined as waterways of class IV andsmaller. On those waterways, ships can sail up to 1.500 tonnes payload. Inthis research, small waterways are considered to be of class II and smaller.Waterways of class III and IV are classified as medium sized waterwaysrather than small waterways. The waterways of class V and larger areconsidered large waterways. Figure 2.1 shows that small waterways (greenones) cover a large region in the Flemish hinterland of the port of Antwerpand in the Netherlands of the ports of Rotterdam and Amsterdam.

2.4 History of the small inland waterways

In 18th and 19th century, the use of inland ships, especially in theNetherlands and Belgium, was the only economically viable way to


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transport cargo over long distances. As a result of that, a dense waterwaysystem was built to connect many important economic regions. Thecharacteristics of the waterways were based on the ship dimensions ofthose days.

The man-made small inland waterways in the Netherlands and Belgiumwere built in the 19Thcentury to connect the major industrialized regions ofthose days. The Zuid-Willemsvaart (in Belgium), for instance, was built in1806 for Napoleon who ruled Europe in those days. In 1822, King Willem Iof the Netherlands updated the canal and increased its length. Willem Iconnected the city s-Hertogenbosch to the cities Maastricht and Liege. Theoriginal plans to build a men- made waterway date from 1645 (Bruggeman2001). The basic characteristics of the waterway (lock size, width, etc havenot changed up to now. In figure 2.2 the trajectory of the Zuid Willemsvaartis given.

Figure 2.2: Trajectory of the Zuid Willemsvaart

In Flanders, the small inland waterways were built to connect the port ofAntwerp with the main industrialized areas such as Liege and Leuven. The

canal Leuven-Dijle, which was built in 1750, was also built to connectLeuven with the river Scheldt to enable sea going vessels to enter the cityport and therefore boost the local economy.

2.5 Definition of small ships

In the inland shipping sector only a small number of different ship types areused. These ships are categorized according to their payload anddimensions. The names of the ships are taken from the regions where theseships can sail. In table 2.2 the different ship types are given.

s-Hertogenbosch

Maastricht


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Table 2.2: Overview of the current inland ships (with small ships indicated in bold)Ship type Tonnage Length Width Depth Waterway class

[tonne] [m] [m] [m] [-]

Spits 250-400 39 5.05 2.2 II

Kempenaar 400-650 55 6.60 2.5 II

New type of Kempenaar 400-600 63 7.20 2.5 II

Canal du Nord schip 800 60 5.75 3.2 III

Dortmund-Ems-Kanaal 968 67-81 8.20 2.5 III

Rijn-Herne-Kanaal 1378 80-85 9.50 2.5 IV

Large Rijnschip 2160 95-111 11.4 2.7-3.5 V

Large container ship 470 TEU 135 17.0 3.0 VI

Source: Promotie Binnenvaart Vlaanderen

According to BCI (2008), small ships are ships with a length smaller than86 meters and a payload of less than 1.500 tonnes. These are the shipsthat can sail on the class IV waterways. This definition is adopted in Europe,while the ministry of transportation in the Netherlands defines a ship with apayload less than 1.000 tonnes small (class III). A reason for this

distinction can be a political one. The problems concerning the decreasedsupply on the small waterways are widely accepted so that governmentalinterference is expected. Therefore the sector wants to define the class ofsmall ships as widely as possible so that as many ships as possible can beserved by governmental aid. In this research, however, small ships aredefined on the basis of their dimensions, where the criteria for small shipsare:

- Length less than 55 meters- Draft less than 2.5 meters- Width less than 6.8 meters

These ships have the opportunity to sail with only a captain on smallwaterways with criteria in the Netherlands (= Alleenvaartregeling)(Jaarbericht Inspectie Verkeer en Waterstaat, 2004). According to thesecriteria, in table 2.2 only the Spits and the Kempenaar are considered to besmall ships. The ships up to 1.500 tonnes are in this research defined asmedium sized ships. Ships larger than 85 meters are defined as large ships.The reason for this definition of small ships is based on these criteria thatsmall ships can sail on every class II waterway. Ships with a length of 63meters (new type of Kempenaar) cannot sail on every class II waterwaydue to length restrictions of the locks located on those waterways.

2.6 Realized demand on the Flemish total waterway network

Via the waterways in Flanders 35,000,000 tonnes of cargo are transportedeach year. This is shown in table 2.3 where the total transported tonnagesvia the Flemish waterways are given.


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Table 2.3: Total transported tonnage via the Flemish waterways

2007 2008 2009

[tonne] [tonne] [tonne]

Loaded 30,750,129 31,254,942 28,085,189

Unloaded 9,164,633 8,778,580 7,849,199

Total 39,914,762 40,033,522 35,934,388

Source: PBV, 2009a

Twenty million tonnes of the total transported tonnages (50%) are loadedor unloaded on the Albert canal. Of total transported tonnages in 2009,450,000 TEU where transported to the inland terminals in Flanders. Infigure 2.3, an overview is given of the inland terminals.

Figure 2.3: Overview of inland container terminals in Flanders

Source: PBV, 2010Note: numbers indicate the location of the container inland terminals

From figure 2.3 it can be concluded that almost all the inland containerterminals are located at large waterways (class IV and larger). There is onlyone container terminal located at a small waterway (Leuven-Dijle) where

this terminal is completely dedicated to Cargill. This company transports itscontainers from the inland terminal to the port of Antwerp (4,000 / 5,000TEU per year). In figure 2.4, the evolution of the total container traffic tothese inland terminals on the Flemish waterways are given.


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Figure 2.4: Evolution of the container traffic in Flanders

Source: PBV; 2009b

There has been a strong increase in container traffic from 1997 to 2007(from 60,000 to 515,000). In 2008 the amount of transported containersdeclined a little bit from 5150,000 TEU to 500,000 TEU while in 2009 thetransported TEUs decreased to 2005 levels due to the economic crisis of2008.

2.7 Demand on the small waterways

2.7.1 Current demand

In figure 2.5 the small inland waterways in Flanders are shown. Where intable 2.4 the total transported tonnages to and from those waterways in2007, 2008 and 2009 are given.

Table 2.4 shows that more than 4,000,000 tonnes of cargo per year areloaded and unloaded on the small waterways in 2008 and 2009. The largestpart of the transported tonnages is loaded tonnages that have an origin atone of the small waterways. The majority of the loaded tonnages are ofNTS/R category 6 (building materials = sand) and a large part is of NTS/R

category 2 (oil products). All these tonnages account for 160,000 truckmovements per year in Flanders (based on 25 tonnes per truck). All thesetruck movements will be added to the already congested road when theyare not transported via the small inland waterways.

If the market of the small inland waterways is compared to the totalpotential demand on the small inland waterways given in table 2.4, it canbe concluded that the small waterways are responsible for 10% of the totalmarket. This is an indication that the small waterways are not used asmuch as the large ones.


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Figure 2.5: Overview of the small inland waterways in Flanders

Source: original figure from PBV

Table 2.4: Overview of the transported tonnages per year on the small waterways

WaterwaysWaterway

administrator 2007 2008 2009

(1)Dessel-Turnhout-

Schoten NV de scheepvaart 764,173 811,295 882,228

(2) Bocholt-Herentals NV de scheepvaart 2,165,730 1,940,455 1,525,855

(3) Zuid Willemsvaart NV de scheepvaart 525,919 632,633 661,054

(4) Dender WenZ 493,458 474,752 521,822

(5) Leuven-Dijle WenZ 217,313 195,539 412,203

total 4,166,593 4,054,674 4,003,162

Sources: NV de Scheepvaart and WenZ year reports 2007, 2008, 2009

There are not a lot of containers transported via the small waterways. Onlyon the Leuven-Dijle canal there is a container flow to the port of Antwerp.The reason for the limited amount of containers transported is that thereare no container terminals at the small waterways. Another problem withrespect to the small ships is that they have to deal with long waiting timesin the port. The reason for that is that the number of containers which has

to be unloaded (or loaded) per call are small (


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Flanders. In figure 2.6, the different waterways are shown while in table 2.5the total potential cargo flows are shown.

Figure 2.6: Overview of the different small waterways in Flanders

Source: original figure from PBV

Table 2.6: Total potential cargo flows from the seaport Antwerp to the differentwaterways

ROUTE 1 ROUTE 2 ROUTE 3 ROUTE 4

Small Waterway DenderLeuven-

DijleDeseel -Turnhout-

SchotenBocholt-

Herentals

Cargo flow containers (in) [TEU] 2,250 7,500 8,140 -

Cargo flow containers (out) [TEU] 2,720 12,600 9,950 -

Cargo flow bulk (in) [tonne] 233,500 128,000 10,000 231,461

Cargo flow bulk (out) [tonne] - - 84,000 463,248

Source: Waterslag (2008), FISN data (2008), cargo flows WenZ and NV descheepvaart (2009)Note: all containers are loaded, no empty containers in the cargo flows

The available market consists of existing inland navigation cargo flowstaken from cargo flow data of NV de Scheepvaart and WenZ and cargoflows that currently are transported by road (BCI, 2006, WenZ, 2008 andScheepvaart, 2008). These cargo flows come from companies located atsmall inland waterways and having an origin or destination at the port ofAntwerp. In table 2.6, the total potential cargo flows can be found.

Besides the available and potential market for cargo which have an origin ordestination at companies located directly at the small waterway there isalso a potential market which includes cargo flows which have an origin ordestination in the proximity of the small inland (see also section 4.4

available markets for the developed concept). It has to be researched howmany additional road kilometres can be added to the developed system and


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which types of goods are suitable for this. In section 13.4 this analysis willbe done.

Besides the traditional bulk and container markets also the so-called thirdwave of palletized cargo could be part of the potential demand. However, toget these cargo flows on the (small) inland waterways three items areimportant (Verbeke, Macharis, Cornillie, 2007):

- A critical mass is needed (for the inbound and outbound)- There is maximum allowable road distance that can be added- The transportation price of the combined inland waterway transport

and pre and on carriage must be lower than the price for direct roadtransport.

Because no studies are available indicating that there are enough palletizedcargo flows and because similar projects of palletized cargo transported viathe inland waterways have failed (Distrivaart concept3) due to the largecomplexity of organizing palletized cargo via the inland waterways (multimodal) and the absence of large transport volumes (Jansen, Verver, 2008),these cargo flows of the palletized goods are left outside this research.

2.8 Supply on the small waterways

Two main modes of transportation are available to companies locatedat thesmall inland waterways. First there is road transportation. All thecompanies, located at the small inland waterways are connected to the roadnetwork so that trucks can also reach their premises. The other mode isinland navigation on the small inland waterways. Inland ship types that cansail on the small inland waterways are the Spits4 and Kempenaar5. It isexpected that the number of these small inland ships will decrease evenmore in the near future. The reasons for this decrease can be found inchapter three, where the problems in small inland fleet will be discussed.Moreover, two different types of solutions have already beendeveloped todeal with the reduction of supply on the small inland waterways. The firstone is the Neo-Kemp concept and the second solution was the Waterslagproject.

Neo-Kemp (small inland container ship)

The Neo-Kemp vessel is a small inland container ship (63 m length, 7 m

wide, maximum 32 TEU loading capacity) introduced in 2000 by the Dutchcompany Neo Logistics Services. The wheelhouse is located at the bow ofthe vessel so that a good visibility is obtained without the need to lift thewheelhouse. Nine of these ships werebuilt. These ship, where deployed onwaterways where the larger vessel could not sail. The investments arerelatively high and these ships can only be used by crew members who areemployed by a shipping company instead of a small independententrepreneur (BCI 2008, Konings 2004).

3Distrivaart is a concept in which a ship was used to transport palletized cargo via the inland

waterway network.4Inland ship type with an average loading capacity upto 450 tonnes5Inland ship type with an average loading capacity upto 650 tonnes


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Due to the dimensions of this vessel it cannot serve the small inlandwaterways of CEMT class II and smaller. The length and the width are toolarge. The NEO-kemp ships were sold in 2003 to the Mercurius shippingcompany, where these are now operated as normal inland ships.

Waterslag project (push barge coupled with a small ship)

The second project that has been developed for the reactivation of the smallinland waterways is the Waterslag project. In this project a small pushbarge- which can independently pass a lock is coupled to a classic smallinland ship. The loading capacity of the ship is doubled; as a result a morecompetitive price can be offered. This could lead to a positive contributiontowards mobility, economy and environment. The pushed barge will bespecially designed for the use on the small waterways in Flanders and thesouth of the Netherlands (Waterslag, 2006-2008).

The project was successfully introduced in 2008 but the concept is nowtaken out of use due to the crisis (2010). The downside of using thisconcept is that still a small inland ship needs to be used. The mainproblems concerning the reduction of the captains and the changed socialconditions of not willing to live on board of the vessel are not tackled withthis concept (see chapter 3). Also the small inland ship has to push thebarge on large waterways, which will reduce the total speed of the convoyand therefore it will increase the crew costs by the increase in travel time orthe total convoy will sail at its normal speed, but then more power isneeded and the fuel costs are increased.

If the supply on the small inland waterways is decreased, then the smallinland waterways cannot be served so that the companies located at those

waterways will have to opt for another transportation mode. This othermode will be road transportation because the companies are not connectedto the train network.

2.9 Summary

In this chapter, an overview is given of the existing inland waterwayinfrastructure and the actual demand on that infrastructure. Also thedefinition of the small inland waterways and small inland ships has beenpresented, along with the historical background of the small inlandwaterways. Besides the demand of the companies located at the small

inland waterways also the current supply is described.

Now that an overview is given of the inland navigation sector, the existingand expected problems concerning the use of the small inland waterwayswill be dealt with in chapter 3.


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3. Decreased supply of small inland ships onthe (small) inland waterway network

3.1 Introduction

A lack of new building of small inland ships, the increasing age of theexisting small inland navigation fleet and no new starters for small ships arethe major reasons that, without intervention, in the near future the smallinland waterways risk not being used anymore. Due to a shortage of supplyon the small waterways, companies, which are located at small inlandwaterways, will use road transport instead of inland navigation or they willrelocate their activities.

However, due to growing road congestion and an increasing awareness ofenvironmental care, the small inland waterways can play a vital role inproviding solutions to these problems. These waterways, especially thesmall ones in the Netherlands and Belgium, connect many regions toimportant hubs like the ports of Rotterdam and Antwerp, enabling transportof a major part of their hinterland cargo over these inland waterways.Therefore, it can be worthwhile to re-commercialize the small inlandwaterways.

In the first part of this chapter, an analysis will be made to determine whythere are no new small inland ships. The second part will determine why thecurrent small inland fleet is reduced and what the threats are for theremainder of the small inland fleet. The third part will deal with a specificproblem concerning the use of (small) inland ships in a deep-sea port. The

fourth part addresses the impact of losing the small inland ships. The fifthpart will discuss the existing small inland waterway infrastructure, while thesixth part will treat of the impact of losing the small inland waterways.Finally, the conclusions of this chapter are formulated.

3.2 Lack of new small inland ships

This section of chapter 3 will deal with the analysis behind the lack of newsmall inland ships. In figure 3.1, a schematic overview is given of themechanism that will lead to the lack of new small inland ships. This lack isexplained by the lack of cash available in the sector because the smallinland shipping sector is not viable anymore. The major underlying reasonsfor the lack of cash and therefore no new-building of small inland ships are:

- Competition of other modes of transportation and other inland ships- Economies of scale of the inland fleet- Banks / investing companies not willing to invest in small ships- New ship-owners not willing to operate a small ship- Entry and exist barriers

These major reasons are further explained in the upcoming sections of thischapter.


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In figure 3.1 the four different shipping markets are given (Freight, Sale &purchase, newbuilding and scrap market) (Stopfort, 1997). The first marketthat is described in this figure is the freight market in which the small inlandships have to operate. In this market, the ships have to compete with itsmain competitors:

- Road- Train- Other inland ships

o Large inland shipso Small inland ships

- intermodal transport (combination of inland ships, trains and road)

Figure 3.1: Overview of the cash flow mechanism of inland navigation

Source: own composition based on Stopford, 1997

Due to this severe competition of road transportation and larger inlandships small ships do not generate enough money while large ships can.

Due to the lack of cash (own equity and debt financing) not enough moneyis available to buy second hand ships and as a result the price of thoseships will be reduced. As a result, the second hand market, i.e. the sale &purchase market, will hardly generate money and no cash will be movedinto the small inland shipping (SIS) cash flow. If the second-hand pricesdrop and the market conditions are bad, no new ships will be ordered.Therefore there will be no new-building market for the small inland ships.

The only cash that will flow into the SIS cash flow will come from the scrapmarket or the rebuilding market. In the latter, the ships will be transformed

into a living ship for example. As a result, the number of small inland shipswill reduce.

Freight Market

Road Haulage

Train transport

Inland navigation(internal comp.)

Demand

Supply

Sale & Purchase market

Second hand PriceSmall ships

High

Low

Ship owners (buyers)

Ship owners (sellers)

Newbuilding market

NewbuildingPrice

Ship yard

Ship owner

High

Low

Scrap market

Scrap Price

High

Low

Ship owner

Demo yard

Cash FlowInland

shipping

X

No cashSmallships

No investmentin small ships

X

No investment in small ships

X

Cash large ships

X


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3.2.1 Competition of road transport, large and small inland ships

There are three different types of competition for the small inland ships.First, there is the competition of road transportation. Companies which arelocated at small waterways are also accessible for road transport, which canprovide a complete door-to-door service, so that these trucks will be the

main competitors for the small inland ships on the small waterways.

The second type of competition is the competition of the large ships (of1,350 tonnes and larger) on the large waterways. Due to the economies ofscale of the larger ships they can transport cargo for less cost per load unitthan the smaller ones. Therefore, the small ships cannot compete with thelarger ships on the large waterways. Small (and medium-sized) inland shipscan be used to transport cargo to companies located at large waterways ifonly small call sizes are required. However, the small inland ships willmostly sail to destinations or origins at small waterways and therefore theirbiggest competitors, as mentioned before, are the trucks. An exception can

occur when the water levels on the large waterways are low and the largeships cannot be completely loaded so that small ships can compete with thelarger ship.

The third type of competition is the competition between the small inlandships. All the small ships operate on a standalone basis and have little to nomarket power. From table 3.1 it can be concluded that 87% of all thevessels registered in the Netherlands and 93% of the vessel in Belgium areone-vessel companies.

Table 3.1: Overview of inland shipping companies in the Netherlands and Belgiumin 2002

Enterprises

Netherlands Belgium

Actual Percentage Actual Percentage

1 vessel 2930 87% 1058 93%

2 vessels 230 7% 51 5%

3 vessels 73 2% 11 1%

4-5 vessels 56 2% 7 1%

6-10 vessels 39 1% 5 0%

10-20 vessels 28 1% 1 0%

20+ vessels 9 0% 0 0%

Total 3365 100% 1133 100%

Source: BVB, 2009 (Netherlands), FOD economie 2008 (Belgium)

This internal competition is so severe that it is very difficult to start up abusiness with old second-hand small ships. If a new starting captain wantsto operate a small ship, his costs calculation will need to take into accountcompletely the loan, repair and maintenance, fuel and his salary. Ownerswho have had a ship for years have already paid off the loan. They may beexpecting to stop the business in the near future (within 2 to 5 years) andtherefore will only sail occasionally when offered some cargo, only chargingthe operating costs of the vessel (fuel and crew costs). Therefore, the newcaptain of a second hand vessel cannot compete with these old small-inland

ships.


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The last type of competition is with intermodal transport. Larger ships canbe used for sailing on the large waterways towards an inland terminal (witheconomies of scale leading to reduction in transportation costs), from wherea short distance can be driven with a truck to a company located at a smallwaterway.

3.2.2 Economies of scale

As a result of the competition between road transport and large inland shipsand the small inland ships only bigger new ships are being built. Thesebigger ships can transport cargo at lower costs (and therefore also lowerprice) than smaller ships (= economies of scale). The economies of scaleare illustrated in figure 3.2.

Figure 3.2: Concept of economies of scale

As a result, no new-medium sized ships (


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Figure 3.3: Cost structure inland ships

0%

10%

20%

30%

40%

50%

60%70%

80%

90%

100%

250 750 1250 1750 2250 2750 3250

Payload (tonne)

Costs per sailing hour

R&MFuel costs

Crew costs

material costs

Source: NEA, 2003

The effect of an increase in scale in the inland fleet can be found in figure3.4. It shows that there is an increase in the average tonnages of the inlandships while the number of ships sailing on the inland waterways is reduced.This means an increase in scale for the inland fleet and a reduction of thenumber of small ships.

Figure 3.4: Evolution of dry cargo inland ship in Flanders

Evolution of inland ship in Belgium

600

800

1000

1200

1400

1600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

year

averagetonnage

(tonne)

600

800

1000

1200

1400

1600

numberofinland

ships

average tonnage number of ships

Source: ITB, 2010

In BCI (2008) the same trend can be found for the Dutch inland fleet. Infigure 3.5 the evolution is given of the number of small and large ships. Inthis figure, the trend up 2003 is extrapolated to the year 2015 (linearextrapolation).


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Figure 3.5: Trend lines of small (in BCI 2008 < 1.500 tonnes) and large ships

Source: BCI, 2008

3.2.3 Banks

The banks will not invest easily in new small inland ships as these shipscannot be exploited economically with the risk being too high. The risk canbe divided into three different types (Stopford, 1997):

- Economic risk- Operating risk- Shipping market risk

The first risk relates to the global economy and how that will influence thedemand for transportation. The second risk relates to the managementcapacities of the ship owners and how well the barges are maintained. Thethird risk is where ship owners are exposed to the competition of other shipowners (large and small) and road and train transportation.

A bank wants to minimize its risk when it is investing in (small) inlandships. The first two risks are risks that all ship owners have to deal with andare relatively unrelated to the size of the ship. Only for the third risk isthere a distinction according to the size of the ship. Due to the severe

competition between the large ships on large waterways and trucktransportation on the short distances (and small waterways) (see alsosection 3.2.1), the prices in the market are not high enough compared tothe costs of operating a small ship on a sound economic basis. The shipowners will not make any profit, and therefore they will not have enoughmoney to invest in new ships as a replacement for the old ones or to repaya loan in order to buy the ship. Therefore a bank will not invest easily intonew small inland ships. Also, as the image of the small inland ships is oftennot so good, banks and investment companies are not too eager to invest in(new) small ships.

In figure 3.6 the schematic overview is presented of the cash flow in theinland navigation market, including the position of the bank. The thick lines


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in the figure represent the cash flows in and out of the total inland shippingsystem. The thin lines represent the delivery of ships from a shipyard to theshipping market or from the shipping market to the scrap market. The redlines represent the cash flow in the inland shipping sector, while the blacklines are cash flows out of the shipping market. The dashed lines representthe small inland shipping cycle, while the normal lines are for the largerinland ships.

Figure 3.6: Overview of cash flow in inland shipping

Source: own composition based on Stopford 1997 P.221

Figure 3.6 shows that the bank has a central place. In the shipping market,small ships are competing with the large ships and other small ships andeven with other modes (predominantly road). As mentioned before, the lackof money and/or cash flow generated by the small ships is a major reasonfor banks not to grant loans to build new ships. Due to the bad marketconditions of the small ships the banks also do not invest in loans forsecond-hand vessels. Therefore, the price of the small ships will drop

because there are not a lot people willing to buy a vessel purely on theirown equity. The result is that the current owners cannot sell their vesselsand will keep on sailing until they are going to retire (see also figures 3.12and 3.13). If then still no new owner is found, the vessel will be scrapped orrebuilt to become a living ship.

The bank plays a vital pumping role in the newbuilding of small vesselsand if that pumping role comes to a stop, the total cash flow will dry outand the newbuilding of small inland ships comes to a hold.

Freight Market

Road Haulage

Train transport

Inland navigation(internal comp.)

Demand

Supply

Second hand PriceSmall ships

High

Low

Ship owners (buyers)

Ship owners (sellers)

Cash FlowInland

shipping

XNo revenue Small ships

Revenu large ships(World)Economy

Bank

Demo YardSmall ships

X

Deliveryof smallships

Yard

X

Operating costs, maintenance costs, dividend

Sectorout

MaterialsLabour

Venture capitalExternal equity

X

X

X

debt

Loan

equity

loan

Shipowners

Deliveryof largeships


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3.2.4 Ship Owners

As a result of the economies of scale of inland ships, the ship owner,potentially, can make more money with a large ship than with a smaller oneif there is enough demand and if the larger ship can sail on the considered

waterway. Till now, young starters bought an old small ship and sailed withthat ship. After a few years, the ship was sold to a new starter and thebargeman would buy a larger newer ship. This slowly growing mechanismhas come almost to a stop because it is easier to make a suitable businesscase with a large ship then with a smaller one. The new ship owner willtherefore opt, also supported by the banks, for a large new-building shipinstead of a (new or old) small one, especially in good markets (see alsofigure 3.11 and 3.12).

There are not a lot of people willing to live on a small inland ship due to thesmall living areas. The larger ships, on the other hand, have a much largerliving area combined with the increase in comfort of that living area onnewer ships. Therefore new captains (with their family) will opt for a newerlarger ship instead of a small one (BCI, 2008).

Another, social, aspect is that not many families are willing to live togetheron a small inland ship these days. Therefore, the new captain of a smallinland ship must take a mate on board and pay him the wages agreed inthe common labour agreement. This will lead to an increase in costs,compared with the situation of small ship owners partner living on the ship(mostly the wife of the captain) and counting as the mate of the captain.

3.2.5 Entry and exit barriers

The competition between road haulage and inland navigation has alreadybeen considered to be one of the reasons behind the diminishing smallinland fleet. Another aspect of the competition between road transport and(small) inland ships is that, when the market is bad, trucking companiescan adjust their supply easier then small inland ships. A truck can be soldand the truck driver can start in another job. The owner of a small inlandship also lives at his ship so that he will not abandon his ship/house untilthe moment that he is really bankrupt. The exit barrier of inland (small)ships is therefore much larger than the exit barrier for trucking companies.This is illustrated in figure 3.7 where the number of bankruptcies in theinland navigation and road sector are given.


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Figure 3.7: Number of bankruptcies in Belgium (2007 -2010)

Source: Meersman, et.al., 2010

Besides the exist barrier also the entry barrier for inland ships is muchlarger than that of trucking companies. In order to sail with a ship thecaptain must have all its certificates and he must have at least a minimumamount of sailing experience (FOMV 2010a). Also if a captain of a smallinland ship has gone bankrupt he will not enter the market again becausehe will not take that risk again. But it is also very difficult for new captainsto enter the market; if one captain abandons his ship, it will be very difficultto find a replacement.

Therefore, the adjustment of supply on the small inland waterways is muchmore difficult than it is for road transport. In economic downturns, therealways will be an overcapacity of small inland ships so that the marketprices will be low for a longer time.

3.3 Reductionof the small inland fleet

In the previous part, it was explained why no new small inland ships arebeing built. In this part, the question will be addressed why the existingsmall inland fleet is diminishing. First the reasons are given for a reductionof the number of small ships. The second part will deal with potentialthreats to the remaining part of the fleet.

3.3.1 Reduction of the small inland fleet

Ships are being sold to low wage countries

There are a number of ships sold from western European countries toeastern European countries because these inland ships cannot be exploitedeconomically in Western Europe. In table 3.2 an overview is given ofrecently sold inland ships.


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Table 3.2: Overview of sold inland ships per tonnage class

tonnage ships 1,350[tonne]

Destinations:

East EUR 0% 53% 11%

West EUR 100% 47% 89%total ships 13% 68% 18%

Source: GTS schepen, 2010

Table 3.2 indicates that if small inland ships are sold, they do not go toeastern European countries. These ships will stay in the Netherlands orBelgium. The percentage of small inland ships sold is low (13%), comparedto the group of medium and large ships. This is an indication that the tradein small inland ships is very low (see also figure 3.6) and that small inlandships are demolished (see figure 3.7). Table 3.2 also indicates that for themedium-sized inland ships more than half of all the ships sold go to Eastern

European countries. The largest ships will also stay within Western Europeand only a limited amount of those ships will be sold to Eastern Europeancountries.

A limited amount of small ships that are traded will stay within theNetherlands and Belgium. This does not mean that the ships will beoperated on these waterways because most of them will be rebuilt tobecome a living ship.

Regulation/policy

Changes in the inland shipping policy have had a large impact on the smallinland fleet. Due to the market liberalization (abandonment of the tour-de-role-system) and demolition rules (old for new regulations61989 and thedemolishing rules 1989) a lot of small inland ships have been redrawn fromthe inland fleet (BCI 2008, Dullaert et.al. 1998).

The tour-de-role system can be described as follows. A country is dividedinto several districts with their own shipping exchanged. Charterers withinthe districts are required to request capacity (for domestic transport) fromthe exchange, where a register is kept of all available barges which meetcertain requirements. The available freight is offered to the bargemen who

are registered in the system. The bargeman who is the longest on the list isoffered the first choice of freight. The charterer has to accept the bargewhich is assigned to his cargo on the condition that it meets certain criteria.If the vessel does not fulfil the requirements or if the bargeman rejects thecargo, then the cargo is offered for the second time. If after the secondtime still no carrier is found, the cargo can be chartered freely outside thetour-de-role-system. If a bargeman does not call on a load, his position willbe retained in the system.

If an agreement is met under the tour-de-role system, the carrier andcharterer are bound by the legal conditions of the carriage. If those

6Policy to reduce the overcapacity in the inland fleet. In order to build a new ship the sametonnage of the new ship has to be demolished first


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conditions are not met, the authorities are entitled to refuse stamping thedeal. There are, for example, standard freight tariffs that have to berespected (Dullaert et.al.1998).

The abandonment of the tour-de-role system led to more competition andtherefore stimulated the increase of the size of the ship. Due to thedemolition rules, where ships have been demolished for a fixed price pertonne in order to reduce the overcapacity in the inland fleet, a lot of smallold ships have been demolished. In order to build a new larger ship, thesame tonnage of cargo carrying capacity has to be demolished first. As aresult, a lot of small ships disappeared and new bigger ships returned in theinland fleet. The reduction of the inland fleet is illustrated in figure 3.8where the demolition figures are given.

Figure 3.8: Number of demolished inland ships

Source: own figure based on debinnenvaart.nl, 2010Note: the figures presented in this graph consist out of ships that have beendemolished. Rebuildings are not in this figure.

Figure 3.8 shows that there is a large increase in demolished ships from1990 to 2000. This increase is due to the previously mentioned old-for-newrules and the demolition rules. The old-for-new regulation ended on 29-4-2003. This can also be been seen in figure 3.8. From that same figure it can

also be concluded that after 2003 the number of demolished shipsincreased again. This increase is now not fuelled by rules and regulationbut by market conditions (see previous section).

Besides the demolition and old-for-new regulations, the small ships mustalso comply with the new regulation for inland ships concerning thestructure of the ship and emissions produced7. The investments to updatethe existing small ship to these new standards are higher than the marketprice of the small ships, so that an investment is not economically viable.As a result, these new rules could force the remaining small ships to stoptheir work if no exceptions are made for these small ships.

7double hull requirements and EURO V rules concerning emissions

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barge convoy system phd

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