CILTNA 11th Annual Transportation Situation & Outlook Conference, April 30 2012, Ottawa, Canada

North American Gateways and Corridors: Emerging Trends in Inland Freight Distribution

Jean-Paul Rodrigue

Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA

Why Hinterland Transportation Matters?

FORELAND

90%

10%

Distance

20%

80%

HINTERLAND

Cost

Port

Global Trends: The Proverbial Elephant in the Living (Board) Room

The Three Elephants…

Energy and Resources

Debt and sovereign defaults

Aging & HealthCare

Multiplying Effects of Derived Demand on Container Transport Peaking?

1970 1975 1980 1985 1990 1995 2000 2005 2010100

1,000

10,000

Global Trade and Container Throughput (1970=100)Container Throughput(520.4 Millions TEU)

GDP in current USD($63.4 Trillion)

Exports in current USD($15.2 Trillion)

World Population(6.84 Billions)

China: The Largest Bubble in History?

Iron OreCement

EggsPorkCoalSteelLead

CopperZinc

AluminumNickel

RiceChickens

SoybeansPopulation

WheatGDP (PPP)

OilCattle

0% 10% 20% 30% 40% 50% 60% 70%

54.4%

53.6%

53.6%

49.6%

46.9%

45.8%

42.1%

39.5%

38.2%

34.6%

31.9%

30.2%

25.2%

24.9%

19.7%

16.6%

13.6%

10.4%

6.1%

1.9%

2.1%

7.8%

8.4%

15.2%

4.8%

13.7%

9.1%

1.8%

8.7%

10.1%

0.9%

11.3%

19.9%

4.5%

4.9%

19.7%

21.7%

6.8%Share of the World Commodity Consumption, China and United States, c2009/10

ChinaUnited States

Rebalancing in demand

Commodities and the Canadian Economy: A Double-Edged Sword

Aug-91

May-92

Feb-93

Nov-93

Aug-94

May-95

Feb-96

Nov-96

Aug-97

May-98

Feb-99

Nov-99

Aug-00

May-01

Feb-02

Nov-02

Aug-03

May-04

Feb-05

Nov-05

Aug-06

May-07

Feb-08

Nov-08

Aug-09

May-10

Feb-11

Nov-11

0

100

200

300

400

500

600

700

800 Price of Selected Commodities on Global Markets, 1991-2012 (Jan 2000=100)

Rapeseed OilWheatSawn SoftwoodPotash

Monthly Softwood Lumber Shipments to China, 2007-2011

Jan-0

7Apr-

07Ju

l-07Oct-

07Ja

n-08Apr-

08Ju

l-08Oct-

08Ja

n-09Apr-

09Ju

l-09Oct-

09Ja

n-10Apr-

10Ju

l-10Oct-

10Ja

n-11Apr-

11Ju

l-11Oct-

110

50

100

150

200

250

300

350

400United StatesCanada

Millio

ns o

f boa

rd fe

et

The Third Oil Shock UnfoldingJa

n-70

Jan-

71Ja

n-72

Jan-

73Ja

n-74

Jan-

75Ja

n-76

Jan-

77Ja

n-78

Jan-

79Ja

n-80

Jan-

81Ja

n-82

Jan-

83Ja

n-84

Jan-

85Ja

n-86

Jan-

87Ja

n-88

Jan-

89Ja

n-90

Jan-

91Ja

n-92

Jan-

93Ja

n-94

Jan-

95Ja

n-96

Jan-

97Ja

n-98

Jan-

99Ja

n-00

Jan-

01Ja

n-02

Jan-

03Ja

n-04

Jan-

05Ja

n-06

Jan-

07Ja

n-08

Jan-

09Ja

n-10

Jan-

11Ja

n-12

0

20

40

60

80

100

120

140West Texas Intermediate, Monthly Nominal Spot Oil Price (1970-

2011)

First Oil Shock

Second Oil Shock

Third Oil Shock

Rebalancing in input costs

The North American East and West Coasts Dominate…

Millions

… but Growth has Shifted to South America / The Caribbean

Million TEUs

An Expected Shift in Containerization Growth Factors

Derived

Economic and income growthGlobalization (outsourcing)

Fragmentation of production and consumption

Substitution

Functional and geographical

diffusionNew niches

(commodities and cold chain)Capture of bulk and break-bulk

markets

Incidental

Trade imbalances

Repositioning of empty containers

Induced

Transshipment (hub, relay and

interlining)

Inland Ports in a Paradigm

Inland Ports: Pick Your Challenge

Site and situation

Massification

Reconciling flows

Trade and transactional facilitation

The Massification of Transportation in Inland Systems

Port Port

IT

IT

IT

IT

InlandPort

Port-Centric

Inland Load Center Network Formation Logistics Support

Direct truck End haul Rail / Barge

IT

Intermodal Industrial Park

InlandTerminal

Port

Corr

idor

The Inland Logistics Funnel: The “Last Mile” in Freight Distribution

CapacityFunnel

FrequencyFunnel

CapacityGap

Economies of scale

FrequencyGap

FORELAND

HINTERLAND

Main Shipping Lane

Inland Terminal

INTERMEDIATE HUB

GATEWAY

Atomization

Massification

Transshipment in the Caribbean: From A Triangle to a Funnel

63.1%

4.9%

16.4%

15.6%

Economies of scale involve less tolerance for deviation

Asymmetries between Import and Export-Based Containerized Logistics

Many Customers• Function of population density.• Geographical spread.• Incites transloading.• High priority (value, timeliness).

Few Suppliers• Function of resource

density.• Geographical

concentration.• Lower priority.• Depends on repositioning

opportunities.

GatewayInland

Terminal

DistributionCenter

Customer

SupplierRepositioning

Import-Based

Export-Based

Container Traffic, Port of Vancouver and Prince Rupert, 2008-2011 (import / export ratio)

2008 2009 2010 20110

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

2,250,000

2,500,000

2,750,000 Vancouver

2008 2009 2010 20110

250,000

500,000

750,000

1,000,000

1,250,000

1,500,000

1,750,000

2,000,000

2,250,000

2,500,000

2,750,000 Prince Rupert

Empty (Exports)

Empty (Imports)

Loaded (Exports)

Loaded (Imports)

0.74

0.92

0.76 0.81

0.25 0.25 0.33 0.43

Trade and Transactional Facilitation: Functional Pairing of Inland Ports

Hinterland

Foreland

Gateway

Corridor

Functional Pairing

Inland Port

Conclusion: Inland Ports as Maturing Logistical Platforms

The last mile remains salient(Gateway gap + inland massification)

Inland ports are hinterland dependent(Significant regional variations in logistics)

Longitudinal fixation, latitudinal future?