10th Caribbean Shipping Executives Conference, Pointe-a-Pitre (Guadeloupe), May 16-18 2011

Prospects for the Caribbean as a Gateway to North America

Jean-Paul Rodrigue

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

ACADEMIA: DON’T KNOW MUCH AND DON’T GET NO RESPECT

(At least we’re not economists…)

Words I Promise not to Utter…

■ Bullshit■ Crap■ WTF■ Bitch■ Pot smoking■ Confused■ “Supercalifragilisticexpialidocious”

Main Export-Oriented Regions and Shipping Routes Servicing North America

Intermodal (60%)

All Water (40%)

Western Canada (5%)

Pacific Northwest(20%)

Pacific Southwest(75%)

Mexico(?%)

Via Suez (5%)

Via Panama (95%)

Pacific Asia / American East Coast

CRB Index (CCI), Monthly Close, 1970-201119

7019

7119

7219

7319

7419

7519

7619

7719

7819

7919

8019

8119

8219

8319

8419

8519

8619

8719

8819

8919

9019

9119

9219

9319

9419

9519

9619

9719

9819

9920

0020

0120

0220

0320

0420

0520

0620

0720

0820

0920

1020

11

0

100

200

300

400

500

600

700

800

Paradigm shift in input costs…Reaping the consequences of monetary policy.

West Texas Intermediate, Monthly Nominal Spot Oil Price (1970-2011)

Jan-70

Jan-71

Jan-72

Jan-73

Jan-74

Jan-75

Jan-76

Jan-77

Jan-78

Jan-79

Jan-80

Jan-81

Jan-82

Jan-83

Jan-84

Jan-85

Jan-86

Jan-87

Jan-88

Jan-89

Jan-90

Jan-91

Jan-92

Jan-93

Jan-94

Jan-95

Jan-96

Jan-97

Jan-98

Jan-99

Jan-00

Jan-01

Jan-02

Jan-03

Jan-04

Jan-05

Jan-06

Jan-07

Jan-08

Jan-09

Jan-10

Jan-11

0

20

40

60

80

100

120

140

This is also going to propagate along supply chains.Steaming, slowly…

At the Crossroads… Which Value Proposition for the Caribbean?

- +

4) Last segment in import-based supply chains

1) Strong margins, but many not large enough to justify full dedicated services

2) Interlining between the America’s coastal systems

3) East coast capacity issues

The North-American Container Port System and its Multi-Port Gateway Regions

San Pedro Bay

Northeatern Seaboard

Puget Sound

Southwestern Seaboard

Pacific Mexican Coast The Caribbean Gateway?(RIMS)

GatewayEntry

Load changeClearance

Gulf Coast

Southern FLorida

Conditions suitable to the formation of a “Caribbean Gateway System”

Transshipment

Logistics and foreign trade zones

Information systems integration

Safe and secure customs pre-clearance

Harmonization of trade relations

The Transshipment System

The Insertion of Intermediate Hub Terminals

Hub-and-Spoke Relay Interlining

85% of Transshipment Traffic 15% of Transshipment Traffic

Major ports and future terminal developments in non-EU Med ports: impact of a changing political landscape?

Container throughput in million TEU, capacity extensions in million TEU

Ambarli (Turkey)Traffic: 2.26 (2008)

Mersin (Turkey)

Haifa (Israel)Traffic: 1.39 (2008)

Beirut (Lebanon)Traffic: 0.95 (2008)

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

Damietta (Egypt)Capacity: +4 (2012)

Misurata (Libya)Initial plans cancelled?

Enfidha (Tunisia)Capacity: +1 (2011)+2.5 (period 2011-2015)+2 (period 2015-2030)Rades (Tunisia)Traffic: 0.3 (2007)

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

Traffic: 0.15 (2008)Capacity: +2.5 (>2010)

Algiers (Algeria)Traffic: 0.5 (2007)

Capacity: +0.8 (2010)

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

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

Source: Notteboom (2009)

Transshipment Corridor

Tanger Med: The Cartagena of the Mediterranean…

Conventional

NorthAtlantic

CentralAtlantic

South Atlantic / Gulf

Direct

Transshipment Circum-Equatorial

NorthAtlantic

CentralAtlantic

South Atlantic / Gulf

CaribbeanTransshipmentTriangle

NorthAtlantic

CentralAtlantic

South Atlantic / Gulf

The Caribbean Transshipment Market: Triangle or Corridor?

Location (+)Depth (=)Land (=)Costs (+)

Hinterland (-)Ownership (+)

Possible Options in the Development of a Transshipment Hub

• Location and costs advantages• Dependent on shipping companies and global

terminal operators

Pure Transshipment Hub

• Logistic zones and inland load centers

Hinterland Gateway

• Port-centric logistics zones• Gateway to a regional freight system

Foreland Gateway

The Big Port Squeeze: Largest Available Containership, 1970-2011 (in TEUs)

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

L “Lica” Class(3,400 TEU)

R “Regina” Class(6,000 TEU)

S “Sovereign” Class(8,000 TEU)

E “Emma” Class(12,500 TEU)

Pushing Atomization in the Hinterland and Massification in the Foreland

PORT FORELAND

PORT HINTERLAND Different momentumsEconomies of scale

Functional Integration

Hinterland-Based Regionalization

Foreland-Based Regionalization

Atomization

Massification

Capacity Frequency

CapacityGap

Economies of scale

FrequencyMitigation

The Insertion of an Intermediate Hub as a Gateway

FORELAND

HINTERLAND

Inland Terminal

GATEWAY

Main Shipping Lane

INTERMEDIATE HUB(Caribbean)

A Taxonomy of Logistic Zones

Port

Port-Centric

A

Intermodal Industrial Park

Inland Port

Freight Village

Industrial Park

B

A) Inland terminalB) Freight services

Corri

dor

Port Centric Logistics Zones: The Search for Added Value

Port Terminal On-Dock /Near Dock Rail

FTZ / Manufacturing

Container Depots

Consolidation / deconsolidation

Transloading

Postponement

The “Terminalization” of Logistics

• Terminal as a constraint• Rational use of facilities to maintain operational conditions• Storage space, port call frequency, gate access• Volume, frequency and scheduling changes

Bottleneck-Derived

• Terminal as a buffer• Incorporating the terminal as a storage unit• “Inventory in transit” with “inventory at terminal” • Reduce warehousing requirements at distribution centers

Warehousing-Derived

Terminalization

Panama Canal Expansion and Supply Chain Differentiation: Pick Your Preference

Costs (38%)Stability of the cost

structure.Relation with the cargo

being carried.Lower costs

expectations by the Panama Canal

expansion.

Time (12%)Influence inventory carrying costs and

inventory cycle time.Routing options in relation to value /

perishability.No/limited time changes

with the expansion.

Reliability (43%)Stability of the

distribution schedule.Reliability can mitigate

time.AWR has a reliability

advantage.

Comparative Advantages in Supply Chain Preferences: A Complex Balancing Act

$2,300$2,110

Vancouver

Los Angeles

Houston

New York

Montreal

$1,300$2,100

InboundOutbound

$2,620$1,400

$3,510$2,560

$3,700$1,830

$4,040$3,950

Inbound rates: function of distanceOutbound rates: function of trade imbalances

Time

Costs

Reliability (?)

Shipping Rate from Shanghai for a 40 Foot Container, Mid 2010

RIMS as an IT Triangle: Key Information Technology Drivers in Freight Distribution

Freight Visibility (tracking)

Improve the reliability of supply chain management.Status and locations of shipments (vehicles, rail cars, containers and individual loads).Mobile communications and Global positioning systems (GPS).Radio-frequency identification (RFID) tags and bar codes.

Asset Management Maximize equipment utilization.Equipment location (tractors, trailers, rail cars, containers, ships).Real Time Locating Systems (RTLS; GPS and RFID tags).Status monitoring of vehicle and cargo conditions.

Efficiency Improvements

Improve productivity and reduce errors in data transmission.Verification and exchange of shipment information.Non-intrusive inspection and information technologies such as optical character readers (OCR), RFID tags and bio-metrics (to identify drivers).

Freight Information Exchange

Information exchange using web-based technologies and electronic data interchange (EDI). Real-time terminal information systems.

Regulatory Compliance

Pre-screen loads and direct low-risk freight to quick clearance.Enhance security at international borders.Electronic pre-notification of shipment information.

Conclusion: The Caribbean Looking Beyond Transshipment

1• Gateway function an option for the Caribbean

transshipment triangle

2• Economies of scale both changing the

hinterland and the foreland

3• Convergence of suitable conditions

(Transshipment, logistics, IT, customs, trade)