Journal of Transport Geography 22 (2012) 164-178
Contents lists available at SciVerse ScienceDirect
Journal of Transport Geography
ELSEVIER journal homepage: www.elsevier.com/locate/jtrangeo
Towards a new intermediate hub region in container shipping? Relay and interlining via the Cape route vs. the Suez route
Theo E. Notteboom*
ITMMA - University of Antwerp, Kipdorp 59, BE-2000 Antwerp, Belgium Antwerp Maritime Academy, Noordkasteel Oost 6, 2030 Antwerp, Belgium
ARTICLE INFO ABSTRACT
Keywords: The Suez Canal plays a pivotal role in today's global container shipping network, in particularly in accom Container shipping modating vessels sailing on the important Asia-Europe trade lane. This paper analyses to what extent and Vessel routing for which trade lanes the Cape route could develop into a competitive alternative to the Suez route. The Competition market potential of the Cape route is analysed using a distance analysis, a transit time analysis and a gen Interlining eralized cost analysis for a large set of 0/D relations. We compare vessel interlining via the port of Algec- Suez Canal iras w ith interlining via the new port of Ngqura in South Africa. The results show that the Cape route has Cape the potential to serve as an alternative to the Suez route on 11 trade lanes. A scenario and sensitivity anal ysis reveals that interlining via a hub near the Cape is expected to become more competitive due to a combination of higher Suez Canal transit fees, better vessel economics, higher bunker costs, slow steam ing practices and subject to a more competitive terminal pricing strategy of southern African tranship ment facilities. The expected emergence of the Cape route should be seen as the embodiment of a promising development of south-south trade volumes between Asia, Sub-Saharan Africa and South America. © 2012 Elsevier Ltd. All rights reserved.
1. Introduction Mediterranean, to name but a few. The role of intermediate hubs in maritime hub-and-spoke systems has been discussed exten From a network perspective, the location and function of sively in recent literature (see for instance Baird, 2006; Fagerholt, terminal facilities is not always guided by centrality vis-à-vis a 2004; Guy, 2003; McCalla et al., 2005). The hubs have a range of local/regional service area. Fleming and Hayuth (1994) pointed common characteristics in terms of nautical accessibility, proxim out that intermediate locations can emerge between origins and ity to main shipping lanes and ownership, in whole or in part, by destinations. While the concepts of centrality and intermediacy carriers or multinational terminal operators. These nodes m ultiply are not always clear-cut in practice, intermediate nodes are added shipping options and improve connectivity within the network to a network when considered appropriate by the network opera through their pivotal role in regional hub-and-spoke networks tors in view of overall performance of the network. Intermediacy and in cargo relay and interlining operations between the carriers’ typically improves the overall network connectivity and service east-west services and other inter- and intra-regional services. frequency, allows better use of economies of scale in transport Rodrigue and Notteboom (2010) argue that such intermediate equipment and generates additional cargo handling in the network. hubs in some cases go beyond a pure transfer function in the net Intermediacy has become increasingly prevalent in container work through processes of foreland-based regionalization. liner shipping. Container cargo is bundled by combining/linking Most of the intermediate hubs are located along the global belt two or more liner services through the setting of hub-and-spoke way or equatorial round-the-world route (i.e. the Caribbean, networks that rely on mainline/feeder, relay and interlining activ Southeast and East Asia, the M iddle East and the Mediterranean). ities in intermediate hub terminals. Intermediate hubs emerged Port sites situated close to strategic passage ways such as the since the mid-1990s within many global port systems: Freeport Straits o f Gibraltar, the Suez Canal, the Panama Canal and the Ma (Bahamas), Salalah (Oman), Tanjung Pelepas (Malaysia), Gioia lacca Straits act as magnets on the development of transhipment, Tauro, Algeciras, Taranto, Cagliari, Damietta and Malta in the relay and interlining activities. While the route via the Cape at the southern tip of the African continent can also be considered as a strategic passage way, at present it does not play a significant * Address: ITMMA - University of Antwerp, Kipdorp 59, BE-2000 Antwerp, Belgium. Tel: +32 3 265 51 52/3 205 64 30; fax: +32 3 265 51 50. role in the global container shipping network. The container port E-mail address: [email protected] systems in countries like South Africa, Mozambique, Namibia and
0966-6923/$ - see front matter © 2012 Elsevier Ltd. All rights reserved, doi: 10.1016/j.j trangeo.2012.01.003 T.E. Notteboom/Journal of Transport Geography 22 (2012) 164-178 165 the islands of Madagascar and Mauritius are considered remote to Middle East/Asia and Europe. This process has accelerated since the main network and are served by a limited number of container the 1970s when significant scale increases in oil tankers and bulk carriers (m ainly Maersk Line, MSC, MOL, Evergreen and CMA CGM). carriers coincided w ith m ajor upgrades o f the Suez Canal. The glo There are no hub-and-spoke and relay/interlining operations in the bal container shipping network now primarily relies on the equa region comparable to the ones found along the global beltway. The toria l route in w hich the Suez Canal is a key m aritim e passage. geographical location and the current limited cargo potential of 6852 container vessels transited the Suez Canal in 2010, an in southern Africa seem to make the ports in the region no match crease of 46% compared to 2001. More than a third of all vessels for the traditional relay/interlining centres located at the cross using the Canal are container vessels (Table 2). About 646 million roads of east-west and north-south trade. As a result, tranship tons of cargo passed via the Canal in 2010. Some 57% of the cargo ment incidence in Africa was around 32% in 2008, but this is volume is containerized (Table 3). Total container volumes reached mainly the result of the North-African transhipment hubs of Port an estimated 33 million TEU in 2010 compared to 20 million in Said (transhipm ent incidence o f 96.3%), Damietta (83.1%), Alessen- 2004. Nearly 93% of these container flows are related to the Eur- dria (77.3%) and Tanger Med (99.1%). Africa, excluding these North ope-Asia trade routes. North America (East Coast)-Asia trade rep African hubs, has a low transhipment incidence of only 12% which resents about 5.3% (figures Boston Consulting and Suez Canal points to a port system with a weak ‘intermediacy’ in the global Authority). container shipping network. Important for this study is that the North-South and diagonal Recent history has shown that container shipping remains a trade lanes (e.g. North Europe-West Africa and North Europe- highly dynamic market. Shippers and shipping lines are continu South America) are largely connected to the main beltway via tran ously re-assessing the design of their shipping and distribution shipment and interlining/relay hubs such as Algeciras in Spain, networks in search of high cost efficiency, manageable risks and in Tanger Med in Morocco and Port Said and Damietta in Egypt. creased routing flexibility. Against this background, this paper In this paper we w ill analyze the market potential of the Cape analyses to what extent and for which trade lanes interlining/relay route by answering the following research question: operations along the Cape route could develop into a competitive What is the current and expected future market position of alternative to existing routes. We particularly zoom in on the po intermediate hub locations in southern Africa vis-à-vis interme tential for ports in southern part of Africa to serve as an alternative diate hubs in the Mediterranean for east-west and north-south to the main hubs on the east-west shipping routes for attracting relay and interlining operations? relay/interlining business. This paper not only assesses the current competitive position of southern Africa in this respect, but also Fig. 1 gives a schematic representation of the methodology de elaborates on the conditions that need to be met in order to make ployed. The concept of ‘market position’ is made operational by the Cape route a viable option in container shipping networks. analyzing and comparing relative distances, transit times and gen In the first part of this paper, we develop the research question eralized costs on a set of origin-destination relations. A first qual and a methodology to analyse route competition between the Cape itative analysis of the relevant routes to consider when comparing route and the Suez route. Next, the results of the route competition the Cape route and the Suez route resulted in 14 relevant origin- analysis are discussed. The paper concludes w ith a discussion on destination relations (Table 4). The choice of the 14 routes w ill key issues related to the com petitive position o f the Cape route be further substantiated in the distance and transit time analyses. vs. the Suez route. Most of the selected routes relate to shipments between West Afri ca and Asia and South America and Asia. 2. Research question and methodology We compare the Suez route and the Cape route by using pivotal ports: the port of Algeciras as a main transhipment and interlining/ Over the last 50 years or so, the development and upgrading of relay hub linked to the Suez route and the new port of Ngqura in the Suez Canal (Table 1 ) gradually undermined the position of the South Africa as a potential transhipment and interlining/relay route via the Cape as the dominant vessel route between the hub linked to the Cape route.
Table 1 Evolution of the nautical characteristics of the Suez Canal. Source: Own elaboration based on data Suez Canal Authority.
Unit 1869 1956 1962 1980 1994 1996 2001 2008 Width at 11 m depth m 44 60 90 160 210 210 210 210 Maximum draft of vessels feet 22 35 38 53 56 58 62 68 Overall length km 164 175 175 190.25 190.25 190.25 190.25 190.25 Doubled parts km - 29 29 78 78 78 78 78 Water depth m 10 14 15.5 19.5 20.5 21 22.5 23.5 Max. tonnage o f vessel (DWT) ton 5000 30,000 80,000 150,000 180,000 185,000 210,000 210,000
Table 2 Key data on Suez Canal transit (absolute figures and growth compared to the previous year). Source: Based on Government of Egypt and Suez Canal Authority.
Growth 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2001-2010 Total crossing vessels 13,986 13,447 15,667 16,850 18,224 18,664 20,384 21,415 17,228 17,993 29% -3.85% 16.51% 7.55% 8.15% 2.41% 9.22% 5.06% -19.55% 4.44% Net tonnage (m illion tons) 456.1 444.8 549.4 621.2 671.8 742.7 848.2 910.1 734.5 846.4 86% -2.48% 23.52% 13.07% 8.15% 10.55% 14.20% 7.30% -19.29% 15.23% Number of container vessels 4700 4549 5209 5928 6557 6974 7718 8156 6080 6852 46% -3.21% 14.51% 13.80% 10.61% 6.36% 10.67% 5.68% -25.45% 12.70% Total cargo volume (m illion tons) 372.4 368.8 457.9 521 571.1 628.6 710.1 723.0 559.2 646.1 73% -0.97% 24.16% 13.78% 9.62% 10.07% 12.97% 1.81% -22.65% 15.54% 166 T.E. Notteboom /Journal o f Transport Geography 22 (20Í2) 164-178
Table 3 Cargo volumes transiting the Suez Canal and estimation of TEU volumes. Source: Based on Government of Egypt and Suez Canal Authority -estimates in TEU based on 1 TEU = 11 tons.
In m illion tons 2004 2005 2006 2007 2008 2009 2010 All cargoes North to South 211.6 244.8 252.2 286.0 309.6 295.4 318.1 South to North 309.4 326.3 376.4 424.0 413.4 263.9 328.0 Total 521.0 571.1 628.6 710.1 723.0 559.3 646.1 Containerized cargo North to South 108.3 119.0 126.1 141.4 156.0 149.7 179.7 South to North 112.0 128.1 150.8 177.1 188.0 159.2 187.3 Total 220.4 247.1 276.9 318.5 344.0 308.9 367.0 Share of containerized cargo North to South 51% 49% 50% 49% 50% 51% 57% South to North 36% 39% 40% 42% 45% 60% 57% Total 42% 43% 44% 45% 48% 55% 57% Estimated loaded TEU in millions (1 TEU = 11 tons) North to South 9.849 10.819 11.462 12.853 14.180 13.609 16.337 South to North 10.185 11.648 13.711 16.101 17.092 14.473 17.027 Total 20.034 22.467 25.173 28.953 31.271 28.082 33.364
Inputs: Distance analysis Distance tables for routing via Algeciras and via Ngqura (South Africa)
Inputs: Transit time analysis Sailing times, dwell time at interlining terminal, Port-to-portbasis time at intermediate ports of call, canal transit time, delays
Cost analysis Inputs: Handling rates at interlining terminal, ship Costs per TEU - operating costs, canal transit fees, port dues perspective of shipping line
Fig. 1. Sub-analyses in the route competition analysis.
Table 4 Identification of relevant routes for the Cape route in competition w ith the Suez route. S S West Coast India/Pakistan North North Africa (Maghreb) East Asia Middle East North Europe Europe Med US East Coast/Gulf U East East Africa To West Africa Southeast Asia Carribbean SAEC SAWC Oceania From
West Africa I s l s s s s p p s S - Suez Canal now typically used East Africa 1 S s s s s s p North Africa (Maghreb s s s s p p s P = Panama Canal now typically used India/Pakistan s s s s s Southeast Asia s s S/P S/P S/P S/P = now via Suez Canal and/or Panama Canal East Asia s s S/P S/P S/P Middle East s s s s s S/P □ = trade route that does not represent a market North Europe p p s for relay/interlining via the Cape Europe Med p p s Carribbean p p p □ = trade route that might represent a market SAEC l i i p p S/P for relay/interlining via the Cape SAWC i l l p US East Coast/Gulf 1 p S/P US West Coast
Oceania
Note: SAEC = South America East Coast, SAWC = South America West Coast. T.E. Notteboom /Journal o f Transport Geography 22 (20Í2) 164-178 167
The port of Algeciras is a key terminal facility in the worldwide transhipment point between east-west (mainly Europe-Asia) and liner network of Maersk Line functioning as a major interlining and north-south container flows (mainly from Europe to South Amer-
Table 5 Distance analysis - Cape route vs. Suez route (in nautical miles) (dataioy distance tables).
Position From To via Suez via Cape Difference Cape 1. West Africa East Africa Dakar-Muqdisho 5954 6505 551 Dakar-Maputo 7801 4728 -3073 Favourable Douala-Muqdisho 7942 5316 -2626 Douala-Maputo 9789 3508 -6281 2. West Africa India/Pakistan Dakar-Mumbai 6497 8240 1743 Dakar-Calcutta 8161 9126 965 Mixed Douala-Mumbai 8486 7020 -1466 Douala-Calcutta 10,150 7906 -2244 3. West Africa Southeast Asia Dakar-Singapore 8487 9255 768 Dakar-Kaohsiung 10,099 10,867 768 Mixed Douala-Singapore 10,475 8035 -2440 Douala-Kaohsiung 12,087 9647 -2440 4. West Africa East-Asia Dakar-Shanghai 10,696 11,472 776 Dakar-Tokyo 11,389 12,157 768 Mixed Douala-Shanghai 12,684 10,207 -2477 Douala-Tokyo 13,377 10,937 -2440 5. West Africa Middle East Dakar-Jeddah 4163 8298 4135 Dakar-Dubai 6363 8418 2055 Weak Douala-Jeddah 6151 7078 927 Douala-Dubai 8351 7198 -1153 6. West Africa Oceania Dakar-Perth 9763 8464 -1299 Dakar-Auckland 12,830 11,320 -1510 Very Douala-Perth 11,751 7244 -4507 favourable Douala-Auckland 14,818 10,100 -4718 7. East Africa SAEC Maputo-Georgetown (Guy.) 9658 6132 -3526 Maputo-Buenos Aires 11,606 4809 -6797 Favourable Muqdisho-Georgetown 7811 7940 129 Muqdisho-Buenos Aires 9759 6617 -3142 8. India/Pakistan SAEC Mumbai-Georgetown 11,967 9207 -2760 Mumbai-Buenos Aires 10,303 8321 -1982 Favourable Calcutta-Georgetown 10,019 10,530 511 Calcutta-Buenos Aires 11,967 9207 -2760 9. Middle East SAEC Jeddah-Georgetown 6020 9702 3682 Jeddah-Buenos Aires 7968 8379 411 Weak Dubai-Georgetown 8220 9822 1602 Dubai-Buenos Aires 10,168 8499 -1669
Table 6 Distance analysis - Cape route vs. routes via the Suez Canal and the Panama Canal (in nautical miles).
From To via Suez via Panama via Cape Difference Difference Position Suez Panama Cape 10. Southeast Asia SAEC Singapore-Georgetown 10,344 12,119 10,659 315 -1460 Singapore-Buenos Aires 12,292 16,042 9336 -2956 -6706 Favourable Kaohsiung-Georgetown 11,956 10,534 12,271 315 1737 Kaohsiung-Buenos Aires 13,904 14,457 10,948 -2956 -3509 11. Southeast Asia East Coast/Gulf Singapore-New York 10,201 12,620 12,439 2238 -181 Singapore-Houston 11,762 12,212 13,165 1403 953 Weak Kaohsiung-New York 11,813 11,035 14,051 2238 3016 Kaohsiung-Houston 13,374 10,627 14,777 1403 4150 12. East-Asia SAEC Shanghai-Georgetown 12,553 10,127 12,831 278 2704 Shanghai-Buenos Aires 14,501 14,050 11,508 -2993 -2542 Mixed* Tokyo-Georgetown 13,246 9252 13,561 315 4309 Tokyo-Buenos Aires 15,194 13,175 12,238 -2956 -937 13. SAEC Oceania Georgetown-Perth 11,620 12,709 9868 -1752 -2841 Georgetown-Auckland 14,687 8065 12,724 -1963 4659 Very favourable Buenos Aires-Perth 13,568 16,632 8545 -5023 -8087 Buenos Aires-Auckland 16,635 11,988 11,401 -5234 -587 14. East Coast/Gulf Oceania New York-Perth 11,477 13,210 11,648 171 -1562 New York-Auckland 14,544 8566 14,505 -3 9 5939 Mixed Houston-Perth 13,038 12,802 12,374 -6 64 -428 Houston-Auckland 16,105 8158 15,230 -875 7072
Favourable to Brasil, Argentina, Paraguay and Uruguay. 168 T.E. Notteboom /Journal o f Transport Geography 22 (20Í2) 164-178
Algecirass^ **'■------•To kyo •Shanghai •Kaohsiung
Mumbai sue Muqdisho nn j ¿ I* Singapore
^Maputo,-^'
J Ngqura BuenosBuem Aires
Fig. 2. Base ports and example of distance comparison between Suez and Cape route. ica East Coast and West Africa). Algeciras is the 8th largest con favorable sailing distance profile on the trade lanes West Africa- tainer port in Europe with a total container throughput of 2.8 m il East Africa, W est Africa-Oceania, East Africa-South America East lion TEU in 2010, compared to 1.5 m illio n TEU in 1998. It is an Coast, India/Pakistan-South America East Coast, Southeast Asia- almost pure transhipment hub with a transhipment incidence South America East Coast and South America East Coast-Oceania. (hub-and-spoke and relay/interlining) of 85%. Algeciras particu On the other trade lanes the results are fairly mixed depending larly is a major interlining hub for West Africa with a volume of on the port of origin or destination. Routes 5, 9 and 11 give a poor about 631,200 TEU in 2007 o f w hich 442,800 TEU southbound result for the Cape route. These three O/D routes w ill therefore not and 151,200 TEU northbound (Dynamar, 2008). The distribution be considered in the transit time and cost analyses further in this of the container volumes of Algeciras to/from West Africa are esti paper. mated to consist of 58% European volumes (North West Europe 42% and Mediterranean 16%), 32% Asian cargo and 10% American 4. Transit time analysis cargo. The port of Ngqura is located near Port Elisabeth on the East In the transit time analysis we compare the two routing alterna Coast of South Africa. Notteboom (2010) demonstrates that the tives for the remaining 11 origin-destination relations. The transit South African container port system is a multiple gateway system time in hours on route k between a port o f origin and a port o f des with Durban as the dominant gateway and Cape Town and Port tination with n intermediate ports of call and an interlining opera Elisabeth as two other gateway ports. The gateway ports are each tion at intermediate hub u is defined as follows: serving a part of the South African hinterland. None of the ports in the South African container port system to date serves as a tran d " shipment terminal in an extensive hub-and-spoke network or as c ~ ~ ' ¿s y tpi • Z p i + tp u+ t sc ¡=1 interlining/relay terminal. The transhipment/interlining/relay inci dence in South African ports is still low but rising: from a modest w ith ds is the sailing distance on liner service route k (in nautical 18.2% of total container throughput in South African ports in 2007 miles); vthe average sailing velocity or speed (in knots); tpithe ‘nor to 21.9% in 2011. Transhipment volumes are mainly concentrated mal’ port time (in h) at intermediate port of call i along liner service in Durban (transhipm ent incidence o f 20.2% in 2007 and 20.6% in route k\ tpu average dwell time of the container (in h) at the inter 2011) and newcomer Ngqura (transhipment incidence of 52.2% lining hub port u; tsc the average tim e (in h) for Suez Canal transit; in 2011). The current transhipment activity is mainly in relation zs contingency factor representing the degree of risk for an exten to Tanzania, Namibia, Kenya and Angola (figures Transnet). The sion of sailing time caused by chance such as heavy weather condi public company Transnet operates all container terminals in the tions or mechanical failure (value >1). For example, a value of 1.1 country (via Transnet Port Terminals or TPT) and also acts as port indicates a 10% increase of the ‘normal’ sailing time due to the fac authority (via NPA) and controls all rail freight business in the tor chance; zpi is the contingency factor representing the risk for country. In the summer of 2009, Transnet made several announce having abnormal delays in port i caused by e.g. no berth available ments that the new port Ngqura would be positioned as a hub port or abnormal waiting times for pilots or tug boats (value > 1 ). for South Africa. The first two container berths were opened in The above equation indicates the transit time excludes the han October 2009 as Phase 1. W ork on the second tw o in Phase 2 is u n dling time at the port of origin and the port of destination. As such der way (Kernohan, 2009). Industry experts endorsed Transnet’s we consider the total transit time between the departure from the decision to select the port of Ngqura as a new shipping hub of port of loading and the arrival at the port of discharge. The transit the country. Ngqura’s success depends on it becoming an efficient, o f the Suez Canal tsc typically takes 14 h transit time plus 4 h wait cost effective and well serviced hub. ing time. Variables zs and zpi are included to incorporate risks linked to the time factor (see also Notteboom, 2006 for a more 3. Distance analysis comprehensive analysis on the time factor in liner shipping ser vices). The standard value for these variables is 1. Heavily con Tables 5 and 6 give the competitiveness o f the Cape route vs. the gested intermediate ports of call have a high value for zpi (in Suez route based on a distance analysis in nautical miles. For each extreme cases up to a value of 4) while routes characterized by fre trade region two base ports were selected at both extremes of the quent rough seas and heavy weather w ill typically have a value for region considered (Fig. 2). The Cape route has a favorable or very zs o f between 1.05 and 1.2. T.E. Notteboom /Journal o f Transport Geography 22 (20Í2) 164-178 169
In terms of transit times, interlining via the Cape route does of port of West Africa) to other parts of the world are mostly better fer advantages compared to interlining via Algeciras on most of the off via the Suez route, while shipments out of more southern ports routes considered (Fig. 3). The SAEC-Middle East route is the least in West Africa (here Douala in Angola) are better off if interlining interesting with in some cases a time disadvantage for the Cape takes place in South Africa. This is in line with the conclusions of route of up to 33%. Shipments out of Dakar (most northern major the distance analysis.
Region 1 Region 2
Tokyo-Buenos Aires Tokyo-Georgetown East Asia Shanghai-Buenos Aires Shanghai-Georgetown Buenos Ai res-Auckland Buenos Ai res-Perth Oceania Georgetown -Auckland Georgetown -Perth Kaohsiung-Buenos Aires Kaohsiung -Georgetown Southeast Asia Singapore-Buenos Aires South Singapore -Georgetown America East Coast Dubai-Buenos Aires Du bai-Georgetown Middle East Jeddah-Buenos Aires Jeddah -Georgetown Calcutta-Buenos Aires
India/Pakista Calcutta-Georgetown n Mumbai-Buenos Aires M um bai-Georgetown Muqdisho -Buenos Aires Muqdisho -Georgetown East Africa Maputo-Buenos Aires jyiaputo -Georgetown (Guy.) Douala-Auckland Douala-Perth Oceania Dakar-Auckland Dakar-Perth Doua la-Tokyo Douala-Shanghai East Asia Dakar-Tokyo Dakar-Shanghai Douala-Kaohsiung Douala-Singapore West Africa Southeast Asia Dakar-Kaohsiung Dakar-Singapore Douai a-Calcutta Douala-Mumbai india/Pakista Dakar-Calcutta Dakar-Mum bai Douala-Maputo Douala-Muqdisho East Africa Dakar-Maputo Dakar-Muqdisho
■ via Ngqura 0 5 10 15 20 25 30 35 40 45 50 □ via Algeciras Transit time in days
Fig. 3. Transit time analysis - Cape route vs. Suez route in days (port-to-port basis) w ith call interlining in respectively Ngqura and Algeciras. 170 T.E. Notteboom /Journal o f Transport Geography 22 (20Í2) 164-178
44 and marine charges per TEU carried (in USD) for vessels x and y at 42 the interlining hub port u; ctu the total two-way transhipment cost per TEU (discharge plus loading) at interlining hub port u; cSC(X:y) is 40 > the one-way Suez Canal transit fee per TEU carried (in USD) for ves sel size x or y transiting the Suez Canal ( if applicable). The total bunker costs per trip depend on speed and vessel size. In the analysis we used a bunker price of USD 300 per ton for the base scenario representing the situation in the first half of 2008 (Notteboom and Vernimmen, 2009). In scenario A the bunker price amounts to USD 500 per ton. For scenario BÍ we assumed USD 1000 per ton and slightly lower average vessel speeds due to slow steaming strategies of container lines. The higher bunker prices are not only the result of expected higher fuel prices, but also a result 24 of the new low sulfur fuel requirements of the International Maritime Organization (IMO) for global shipping. These regula tions impose a reduction of the maximum sulfur content in ship 16 17 18 19 20 21 22 23 24 25 fuel from 4.5% today (1.5% for the Emission Control Areas in north Vessel speed in knots Europe) to 3.5% by 2012 and even 0.1% for the ECAs by 2015 (see also Notteboom, 2011). Scenario B2 represents the case of super • Singapore - Buenos Aires via - Singapore - Buenos Aires via slow-steaming large vessels incurring high bunker costs of USD Algeciras Ngqura 1500 per ton. Dakar-Shanghai via Algeciras - — — Dakar-Shanghai via Ngqura The values for ctu or the rates for transhipment containers (including discounts for larger volumes) for Ngqura were obtained Fig. 4. Sensitivity analysis on transit times - examples on the impact of slow steaming on transit times - Singapore-Buenos Aires and Dakar-Shanghai. from the rate tables of Transnet. The rates for Algeciras were obtained via market information. We assume that terminal rates in scenarios A, BÍ and B2 are the same for both ports but substan Fig. 4 presents the results of a sensitivity analysis on the impact tially higher than in the base case. We also collected data on the of vessel speed on transit times for two port-to-port routes: Singa- applicable cargo dues and port dues at the interlining hubs. Termi pore-Buenos Aires (Southeast Asia-SAEC) and Dakar-Shanghai nal efficiency gains are expected to decrease the average container (West Africa-East Asia). The change in the vessel speed v, for dwell times at the interlining terminals from 2.5 days in the base example by introducing slow steaming, seems to have only a mar case to 2 days in the other scenarios. The cost model does not ginal impact on the gap in transit times between the routing via include port dues and terminal handling costs at intermediate Algeciras and Ngqura (Fig. 4). ports of call on the route and at origin/destination ports. The typical Suez Canal transit fees per vessel type for the base 5. Cost analysis scenario are presented in Table 8. The transit rates are established by the Suez Canal A uth ority (SCA). They are computed to keep the canal transit fees attractive to shippers.1 SCA charges ships based on We develop a cost model to compare the two routing alterna tives for 11 trade lanes and 44 origin-destination relations. The their volumetric cargo carrying capacity. To capture revenue for con cost model is applied to four scenarios in view of demonstrating tainers abovedeck, the Canal maintains a surcharge on tolls based on the number o f tiers of boxes. For example, an average sized Panamax the competitive position of interlining via the Cape route under dif ferent operational conditions (Table 7). The base scenario repre containership with five tiers abovedeck w ill pay a 10% surcharge on its net tonnage fee. The average canal transit fee per TEU (at 90% ves sents the situation for 2008 while A, BÍ and B2 refer to likely scenarios for the next 10 years. These scenarios for the future sel utilization) in the base scenario amounts to 102 USD for a vessel assume a.o. a further scaling up o f vessel sizes on the various o f 1000 TEU down to 56 USD for the largest container vessels. The Suez tonnage per container vessel size was obtained by performing routes combined with slow steaming strategies of shipping lines. Scenario B2 is a variation on scenario BÍ characterized by very high a linear regression analysis on the relationship between the Suez Canal Net Tonnage (SCNT) and the vessel capacity in TEU using the bunker costs and super slow steaming. The cost model specification is as follows. The total cost per TEU Fairplay ship database (K-square of 0.9861). The sample dataset con carried (in USD) on route k between a port of origin and a port of tained around 100 vessels. destination with n intermediate ports of call, an interlining It is expected that the average Suez Canal transit w a iting tim e operation at intermediate hub u and the deploym ent o f vessel size w ill increase in the future due to capacity constraints in terms of number of transits per day combined w ith peaks in vessel arrivals. X sailing to u and vessel size y sailing from u is calculated as follows: We assumed an average waiting time of 4 h in the base scenario, 14 h in scenario A and 24 h in scenarios BÍ and B2. The Suez Canal Ck(X,y) = (Ccx + Cbxix (( ■ t X ¡I + (Cry + C¡)y ) y ,1 ■ ty II + Cpu¡Xy + CtU + C f I xy Authority is likely to raise tolls. Factoring in both the opportunity w ith fx^ uis the transit tim e (in days) using vessel size x between the port of origin and an interlining operation at intermediate hub u, 1 In fiscal year 2008, Egypt earned USD 5 billion in canal fees (USD 4.6 billion in the previous year) making it Egypt’s third largest revenue generator after tourism and including intermediate ports of call; ty^ u the transit time (in days) remittances from expatriate workers. SCA has been steadily raising Suez transit fees using vessel size y between an interlining operation at intermediate at a rate oi3-7% between 2005 and mid 2008. February 2005 saw an increase of 3%, a hub u and the port of destination, including intermediate ports of first general increase in fees in 9 years. Fees increased by 7.1% in 2008. In early 2009 call; ccx the daily charter rate per TEU carried by vessel size x (in SCA announced an indefinite freeze on transit fees as a result of the global downturn USD); c¡¡x the daily bunker cost per TEU carried by vessel size x at and the Somali piracy crisis. Suez Canal fee revenues fell to USD 1.1 billion in the first quarter of fiscal year 2009/2010 compared to USD 1.5 billion in the same period of the average sailing speed v\ ccy the daily charter rate per TEU carried previous fiscal year (minus 24%). The number of ships passing through the canal is by vessel size y (in USD); cj¡¡, the daily bunker cost per TEU carried expected to decline by 7% in 2009. The Suez Canal Authority decided therefore to keep by vessel size y at average sailing speed w; cpU(Xi3,) the total port dues its transit fees unchanged (SCA press statement, 5 January 2009). T.E. Notteboom/Journal of Transport Geography 22 (2012) 164-178 171
Table 7 Average vessel sizes (x, y), bunker cost and transhipment cost ctu for the 4 scenarios. Source: own elaboration based on Drewry, Dynamar and ASX Alphaliner data.
Base scenario Scenario A Scenario BÍ Scenario B2 via Suez via Cape via Suez via Cape via Suez via Cape via Suez via Cape (Algeciras) (Ngqura) (Algeciras) (Ngqura) (Algeciras) (Ngqura) (Algeciras) (Ngqura) Vessel size x, y (capacity in TEU) South America East coast 3900 2900 4800 3800 5500 4900 5500 4900 East Asia 6900 3100 8700 5100 10,000 6300 10,000 6300 Southeast Asia 7800 3100 10,500 5100 11,500 6300 11,500 6300 Oceania 2900 1900 3500 2700 4200 3500 4200 3500 Middle East 3500 2100 4500 3000 5000 3500 5000 3500 India/Pakistan 4000 2000 4400 2900 4900 3500 4900 3500 West Africa 1900 900 2500 1700 2800 2200 2800 2200 East Africa 1500 1300 1900 1900 2300 2500 2300 2500 Bunker cost per ton (in USD) 300 300 500 500 1000 1000 1500 1500 Transhipment cost per TEU cm (in USD) 95 110 120 120 140 140 140 140
Table S Estimated transit fees for a single transit via the Suez Canal (fees for April 2008). Source: own elaboration based on transit fee tables of SCA
TEU- Typical Canal transit fees Net tonnage fee Fee on-deck containers Per TEU (full Per TEU 90% Per TEU 60% capacity SCNT* (USD) (USD) (USD) vessel) utiliz. utiliz. 1000 8727 91,999 87,618 4381 92.0 102.2 153.3 1500 14,210 130,762 123,360 7402 87.2 96.9 145.3 2000 19,693 168,141 157,141 11,000 84.1 93.4 140.1 3000 30,659 221,403 205,002 16,400 73.8 82.0 123.0 4000 41,625 271,939 251,796 20,144 68.0 75.5 113.3 6000 63,557 373,589 339,627 33,963 62.3 69.2 103.8 8000 85,489 455,770 414,336 41,434 57.0 63.3 95.0 10,000 107,421 536,782 483,588 53,195 53.7 59.6 89.5 13,000 140,319 654,455 584,335 70,120 50.3 55.9 83.9
Suez Canal net tonnage = 10.966 n TEU-capacity - 2238.7 (fi-square = 0.9861).
for cyclical changes in the SDR/dollar rate (the fees are expressed in the Suez route economies o f scale advantages, and differences in Special Drawing Rights or SDR) and the expectation of several port costs given that the pricing of transhipment cargo in South nominal toll increases, the average effective toll per TEU is likely Africa is less competitive compared to Algeciras. The above effects to increase by 5% per year till 2015, and w ith 3% per year between make that the additional costs related to the transit of the Suez 2015 and 2020 (Johns and Associates, 2005). These increases are Canal are more than counterbalanced by savings on vessel costs absorbed in scenarios A, BÍ and B2. and port costs. Figs. 5 -8 present the results for the base case and the three Under scenario A, the cost gap between the Suez route and the future scenarios using two axes: the average transit time difference Cape route is much smaller. Interlining via Ngqura has the poten between the Cape route and the Suez route and the cost difference tial of becoming the lowest cost option for 30 of the 44 origin-des between the Cape route and the Suez route (p o rt-to-p ort basis). tination relations considered. In scenario BÍ and B2 this figure The percentage values per trade route were obtained by averaging amounts to 34 O/D relations. In the base case, interlining via the the O/D relations per trade route listed in Tables 5 and 6. In both Cape was the best option for only 23 of the 44 routes. The routes cases a negative percentage indicates an advantage for interlining from/to Southeast Asia and East Asia, which were problematic for via the Cape route. the Cape route in the base case, show much more potential in sce In terms of the costs, interlining via the Cape at the pricing lev nario A. The trade lane from South America East Coast to East Asia els and vessel sizes o f the base case w ould be more expensive than evolves from a 12% to 36% cost disadvantage for interlining via the interlining via Algeciras on most of the routes considered. Interlin Cape in the base case to a -13% to +7% cost difference in scenario A, ing via Ngqura is only competitive on the routes West Africa-East -19% to plus 1% in scenario BÍ and -18% and plus 3% in scenario Africa, SAEC-East Africa and SAEC-Oceania. The most problematic B2. The West Africa-East Asia route sees the cost difference evolve routes are linked to Southeast Asia and East Asia: from +6%/+42% in the base case to -12%/+16% in scenario A, -14% / +9% in scenario BÍ and -16%/+7% in scenario B2. The Cape route • SAEC-East Asia: 12-36% cost disadvantage for interlining via improves its position on the shipping lanes between the South the Cape (depending on O/D relation considered). American East Coast to Southeast Asia to reach a cost difference • West Africa-East Asia: 6-42%. of -16% to +7% in scenario A, -21% to 3% in scenario BÍ and • West Africa-SE Asia: up to 41% cost disadvantage. -20%/+5% in scenario B2. Also from West Africa to Southeast Asia the Cape route becomes an interesting alternative (from up to The above conclusions are problematic given that the flows to/ +41% cost disadvantage in the base case to -1 5 /+ 1 8 in scenario from Asia are the thickest. While the transit time analysis was A, -16/+12 in scenario BÍ and -18/+10 in scenario B2). The Cape quite favourable for interlining via Ngqura, the cost analysis seems route now becomes even more competitive on the shipping to reverse many of the transit time results. The main reasons for connections between W est Africa and East Africa (i.e. a cost advan the weaker cost position of the Cape route relate to clear differ tage of up to 54% in scenarios BÍ and B2), SAEC-East Africa (cost ences in vessel scales (see base scenario in Table 7) w hich give advantage ranging from 10% to 55% in scenarios BÍ and B2) and 172 T.E. Notteboom /Journal o f Transport Geography 22 (20Í2) 164-178
-30%- Interlining via Ngqura takes Interlining via Ngqura takes less time, but is more
than interlining via Algeciras than interlining via Algeciras
c/5 CO 05Ü 05 < CO > u>c c
« -40% -30% - 20% - 10% 10% 20% 30%
than interlining via Algeciras ------4Q%-1------Base case (year 2008)Average transit time difference (base = interlining via Algeciras)
Fig. 5. Competition between the Suez route and the Cape route based on transit time and costs (port-to-port basis) - base case 2008. Note: WAfrica = West Africa, EAfrica = East Africa, SAmerEC = South America East Coast, India/Pak. = India/Pakistan, MEast = Middle East, EAsia = East Asia, SEAsia = Southeast Asia.
Interlining via Ngqura takes less Interlining via Ngqura takes time, b u tis more expensive more time and is more than interlining via Algeciras expensive than interlining via Algeciras 30% -
o CD 05 20% < .2 > 05C c 10% -
05 >AmerEC-MEast C WAfrica-EAsia tfrica-S EAsia WAfrica-lndia/Pak. 05 ■o% 1 -40% -30% _20%^AmerEC-EAs[i 10% 20% 30% SAmerbfiçS EAsia 05O SAn erEC-lndia/Pak. 0)C 0) - 10 % - = Pure interlining traffic
C/5 Interlining via Ngqura takes O WAfrica-Oceania o less time and is cheaper = Interlining traffic, but hub-and- 05 than interlining via Algeciras -20^ spoke solution (feeder) also possible 05 2 0) SAmerEC-Oceania = Area of strongest competition < between Suez route and Cape route -30% WAfrica-EAfrica Interlining via Ngqura takes more time, but is less SAmerEC-EAfrica expensive than interlining via Algeciras ------40%-J------Scenario A Average transit time difference (base = interlining via Algeciras)
Fig. 6. Competition between the Suez route and the Cape route based on transit time and costs (port-to-port basis) - cost model estimation for scenario A.
SAEC-Australia (15-36% cost advantage in scenarios BÍ and B2). 6. Conditions for interlining/relay via a hub near the Cape route The overall absolute costs do not increase very significantly as the increased bunker costs and other cost increases in scenarios Under scenarios BÍ and B2, two scenarios that are strongly BÍ and B2 are partly compensated by scale increases in vessel size based on increases in vessel scale, high bunker costs and slow and slow steaming practices. steaming practices, interlining via the Cape clearly outperforms T.E. Notteboom /Journal o f Transport Geography22 (20Í2) 164-178 173
Interlining via Ngqura takes less time, Interlining via Ngqura takes but is more expensive more time and is more than interlining via Algeciras expensive than interlining via Algeciras 30% t/5 E 'o0) U) 20% < .2 ‘> U) c 'c 10% - 05 C WAfrica-S EAsia a) « 1 -40% -30% - 20 % 10% 20% 30% a> SAmehSQ-EAsia wAfrica-EAsia u SAmerEC-MEast c 0) SAmerEC-S EAsia - 10% a> = Pure interlining traffic WAfrica-lndia/Pak. V) o o = Interlining traffic, but hub-and- SAmerEC-India/Pak. - 20 ° / a> WAfrica-Oceania spoke solution " aiso possible a) SAmerEC-Oceania = Area of strongest competition < between Suez route and Cape route -30% - WAfrica-EAfrica Interlining via Ngqura takes Interlining via Ngqura takes less time and is cheaper more time, but is less SAmerEC-EAfrica than interlining via Algeciras expensive than interlining via Algeciras ------404^ ------Scenario B1 Average transit time difference (base = interlining via Algeciras)
Fig. 7. Competition between the Suez route and the Cape route based on transit time and costs (port-to-port basis) - cost model estimation for scenario BÍ.
Interlining via Ngqura takes less time, Interlining via Ngqura takes but is more expensive more time and is more than interlining via Algeciras expensive than interlining via Algeciras 30% rat/5 o _C5 20% < CO ■> c05 'c 10%
c
ÍAfrica-S EAsia
1 -40% -30% - 20 % 10% 20% 30% WAfrica-EAsia SAmerEC-MEast o SAmerEC- EAsia c SAmerEC-S EAsia - 10% WAfrica-lndia/Pak. = Pure interlining traffic
SAmerEC-India/Pak. oc/5 o = Interlining traffic, but hub-and- - 20 ° / spoke solution ...... also possible u¡ SAmerEC-Oceania to ai WAfrica-Oceania = Area of strongest competition > between Suez route and Cape route < Interlining via Ngqura takes less time and is cheaper -30% than interlining via Algeciras Interlining via Ngqura takes more time, but is less WAfrica-EAfrica JJ expensive SAmerEC-EAfrica than interlining via Algeciras ------40% ------Scenario B2 Average transit time difference (base = interlining via Algeciras)
Fig. 8. Competition between the Suez route and the Cape route based on transit time and costs (port-to-port basis) - cost model estimation for scenario B2.
the Suez route on the routes West Africa-Oceania, West Africa- time differences between the two interlining options are small so East Africa, South America East Coast-Oceania and South America that intense competition between the two routes can be expected. East Coast-East Africa. All other routes w ill be positioned within The actual positioning of interlining via the Cape compared to the and close to the competitive range, i.e. the cost differences and Suez route w ith in this com petitive range w ill be m ainly 174 T.E. Notteboom/Journal of Transport Geography 22 (2012) 164-178 determined by an interplay of forces which either relate to clear the global coverage of their respective liner service networks. threats to the dom inant position o f the Suez route (see section 7) The development of interlining/relay business near the Cape de or weaknesses o f and challenges to the Cape route. mands a targeted strategy on the main shipping lines in the region. These carriers w ill have to be able to generate a critical mass so 6.1. Availability o f ship services that connectivity between several deepsea services at an accept able frequency and low in-between time is possible. Given the re Shipping lines value the availability of a range of ship services. sults of the distance analysis, the desired carrier(s) should have a While nautical services often appear where new port activity takes strong profile w ith respect to liner services in relation to the east place, the competitiveness of the Cape route in attracting interlin coast of South America and West Africa. The first major tranship ing/relay business w ill depend on the existence of one or more ment hub in the region is likely to benefit from first mover advan hubs which offer a full range of ship chandling services, bunker tages compared to potential competing hubs that might emerge services and extensive ship repair facilities. Supply of such services later. Early-mover advantages are mainly caused by the high con in southern African ports is expected to remain rather limited com nectivity early adopters can develop in terms of supply and fre pared to the major relay/interlining node Singapore, but is compet quency of liner services calling at the port. itive compared to other transhipment hubs such as Freeport Bahamas, Kingston (Jamaica), Algeciras, and Jeddah. 6.4. Low cost
6.2. Cargo availability The revenue per container move in interlining and tranship ment - which entails both a discharge and a loading - is generally Having a local cargo base is a strength. It allows to combine the lower than achieved in the import/export sector. Thus, if there is a relay/interlining function w ith a gateway function. Compared to is straight choice between these two sectors, terminal operators typ land locations (cf. Mauritius and Madagascar), the South African ically seek to maximize revenue by focusing on import/export ports give the advantage of generating a large gateway traffic as flows at the expense of transhipment. Significantly, if there is a well amounting to above 3 million TEU in 2010. This might make shortage of capacity then these pressures w ill intensify. However, the relay/interlining business that might develop in a South African the cost involved in developing a transhipment/interlining hub is hub less ‘footloose’. invariably less than providing the same scale of facility at a port which is largely dependent on land access. This implies that any 6.3. Market structure hub in southern Africa is challenged to keep terminal operating costs and port dues low. The port hierarchy is determined by the decisions of individual container shipping lines (operating as independent carriers or in 6.5. High reliability groupings). The decisions of these lines regarding the hierarchy of the ports of call is rarely identical. Hence, a port may function The smooth synchronization of deepsea services requires a high as a regional hub for one liner operator and as a feeder port for an schedule integrity. Relay/interlining business depends a lot on high other (Table 9). Interlining/relay only takes place between services reliability. This factor can even outweigh transit time as such. of the same carrier or carrier combination (e.g. strategic alliances such as the G6 Alliance and the CYKH-alliance). These carriers of ten rely on a dedicated terminal to combine gateway, hub-and- 6.6. Vessel size and draft conditions spoke and interlining/relay traffic. The carrier involved in interlin ing/relay business is often the dominant player in the port. A good Any hub along the Cape route should be able to accommodate example is MSC in Antwerp which handled approximately half of large vessels and offer a fast vessel turnaround (high terminal the total container throughput in Antwerp on its dedicated MSC productivity, high crane density). Major transhipment/interlining Home Terminal. Maersk Line is by far the dominant player in term inals around the w orld offer a draft o f at least 14 m (Table 10). Algeciras, Tanjung Pelepas and Salalah, partly because o f the In Africa, only few ports offer such draft conditions. Opportunities involvement of sister company APM Terminals in terminal opera should thus be created for shipping lines to further increase the tions. European shipping lines such as Maersk Line, MSC and vessel size deployed for relay activities in the African port system CMA CGM have the strongest focus on relay/interlining due to (draft of at least 14 m).
Table 9 Main transhipment hubs of the top ten container shipping lines. Source: own elaboration based on carrier information.
Northern Europe Med Middle East/ Southeast Asia Far East Central America Indian sub-continent Main transhipment hubs of the top 10 carriers Maersk Rotterdam/Bremerhaven/ Algeciras/Port Said/Gioia Salalah/Dubai Tanjung Pelepas/ Kaohsiung/Yantian Balboa/Kingston/ Zeebrugge Tauro Singapore MIT MSC Antwerp/Le Havre/Bremerhaven Valencia/Las Palmas Dubai/Jeddah Singapore Ningbo/Busan Freep ort/ Manzanillo CMACGM Rotterdam/Zeebrugge/Hamburg Marsaxlokk/Damietta Khorfakkan Port Klang Ningbo/Chiwan MIT/Kingston Hapag-Lloyd Rotterdam/Hamburg Gioia Tauro/Damietta Dubai Singapore Kaohsiung MIT Cosco Rotterdam/Hamburg Port Said West/Naples Dubai Singapore China Rotterdam/Hamburg Port Said East/Barcelona Port Klang Yantian MIT Shipping Evergreen Rotterdam/Hamburg Taranto/Port Said West Dubai Tanjung Pelepas Kaohsiung CCT APL/NOL Rotterdam/Hamburg Dubai/Salalah Singapore Kaohsiung/Hong MIT/Balboa Kong Hanjin Rotterdam/Hamburg Port Said West Khorfakkan Singapore Busan/Hong Kong NYK Rotterdam/Hamburg Gioia Tauro/Damietta Dubai Kaohsiung MIT T.E. Notteboom/Journal of Transport Geography 22 (2012) 164-178 175
Table 10 Draft in ports around the world (in m). Source: Own elaboration.
Draft at some major transhipment/interlining hub terminals Draft at African ports Port Country Max berth depth (m) Main shipping line Port Max berth depth (m) Mediterranean Algeciras Spain 16.0 Maersk Line Durban 16.0 Marsaxlokk Malta 15.5 CMA CGM Cape Town 14.0 Gioia Tauro Italy 15.0 - Ngqura 16.5 MITH-Cagliari Italy 14.0 - Port Elizabeth 12.2 Sines Portugal 17.0 MSC Taranto Italy 16.0 Evergreen Tema 11.5 Port Said Egypt 16.0 Maersk Line Abidjan 11.5 Mombasa 11.0 Northern Europe Dar Es Salaam 10.5 Home Terminal Antwerp Belgium 15.0 MSC Reunion 14.5 APM TZeebrugge Belgium 15.0 Maersk Line Walvis Bay 11.5 APM T Rotterdam Netherlands 16.7 Maersk Line Luanda 12.8 NST - Bremerhaven Germany 15.0 Maersk Line Douala 10.5 Alterwerder Hamburg Germany 14.5 - Djibouti 12.0 Maputo 11.5 Middle East Mauritius 14.0 Aden Yemen 16.0 - Salalah Oman 16.0 Maersk Line Caribbean and South America Manzanillo Panama 13.0 - Free port Bahamas 16.0 - Sepetiba Brasil 18.5 - Asia Colombo Sri Lanka 16.0 - Tanjung Pelepas Malaysia 16.0 Maersk Line Kitakyushu Japan 15.0 - Gwangyang South Korea 15.0 Hanjin/HMM
Notes: A deepening program in Durban completed in 2010 increased the harbor entrance from 110 m to 225 m, deepening the outer channel to 19 m and the inner channel from 12.2 m to 16 m. Mauritius w ill be dredged to 14.5 m.
6.7. Logistics factors shippers and might thus benefit the future position of the Cape route. Relay/interlining traffic is in essence linked to the decisions of First of all, the recent wave of piracy acts has generated great the shipping line w ith regard to liner service network optimization. concern among shipping lines and cargo owners (Mo, 2002). The Relay/interlining does in principle not take place because of ship number of reported attacks near Somalia and in the Gulf of Aden pers’ requirements. However, the position of a hub for relay/inter increased from only 10 in 2006 to 111 in 2008 and 199 in the first lining traffic can improve and become less vulnerable when the 9 months of 2011 (figures of the International Maritime Board). hub provides shippers with the possibility of using the hub for The security threat linked to piracy increased insurance fees for added-value logistical activities, particularly if the hub is a low cost vessels transiting the region (i.e. war risk insurance, additional location before entering high distribu tion cost areas. Free trade P&I fees and higher premium on cargo insurance) and increased zone status can trigger development of value-added services. operating costs in terms of additional manning costs, costs related Theys et al. (2008) provide a more detailed discussion on the po to a licensed security guard and deterrent equipment. De Monie tential of intermediate locations in attracting logistics activities. (2009) estimates that these additional costs typically amount to Following their model, the chance for southern Africa to develop USD 100,000-115,000 per transit. For container vessels operating logistics activities on transhipment cargo is partly determined by on the Europe-Far East trade, vessel rerouting via the Cape Good the status of hinterland corridor development in Sub-Saharan Afri Hope is an expensive solution to avoid piracy. The additional cap ca. This region is characterized by a large number of smaller mar ital or vessel charter costs (more vessels needed to guarantee a kets w ith many local ports offering a lim ited access to the distant weekly call in each port along the loop), additional voyage and hinterland. This is positive for the consolidation of logistics activi bunker costs (sailing time increases with 5-7 days) and additional ties in a maritime-based logistics hub in the region. Poorly devel cargo inventory costs would not outweigh the savings in Suez Ca oped corridors in other countries of Sub-Saharan Africa provide nal fees and security costs (De Monie, 2009). The Cape route does opportunities for a logistics hub in South Africa to act as a turntable not eliminate security costs completely as security threats also ex for the distribution of products to Sub-Sahara African markets. A ist off the coast of Nigeria (40 attacks in 2008) and potentially also free trade zone status of such a logistics hub can facilitate the in Tanzania, Mauretania and Kenya. Somalia pirates operate up to development of logistics activities near a transhipment hub. Free 500 nautical miles from the coast. trade zones lower the costs related to the inclusion of a central dis Second, the Suez Canal has a finite capacity. For the foreseeable tribution point in the network and are particularly useful as buffers future there are no serious capacity constraints or no draft lim ita in supply chains and as (deKonsolidation points in networks. tions for container vessels. However, the single-lane character of the Canal continues to constrain the number of transiting vessels per day due to peaks in ship arrivals. As soon as the Canal is near 7. Threats to the position of the Suez route ing its full capacity, SCA might have to consider a capacity manage ment strategy based on a variable pricing system, i.e. high transit W hile the Suez Canal w ill undoubtedly remain a very im portant fees on peak moments and low er fees w hen demand is lower. oceanic canal, the Suez route is confronted w ith a num ber o f chal Moreover, the Panama Canal example has demonstrated that oper lenges which determine the Canal’s appeal to shipping lines and ating at full capacity leads to higher fees per transit. 176 T.E. Notteboom/Journal of Transport Geography 22 (2012) 164-178
Third, our analysis showed that bunker price evolutions remain route. Shipping via the NSR could save about 40% of the sailing dis an im portant factor to the success o f the Suez Canal. Low bunker tance from Asia (Yokohama) to Europe (Rotterdam) compared to prices make shipping lines less concerned about nautical distances. the traditional Suez route. In cost terms the route today is still less High bunker prices give an incentive to shipping lines to slow favourable due to the need for ice-classed ships and ice breaker steam and cut sailing distance. Our cost analysis demonstrated that assistance, non-regularity o f liner services, slower sailing speeds, a scenario of ever higher bunker prices is likely to lead to a partial navigation difficulties and Russian transit fees (Drent, 1993; Liu rerouting o f in te rlin in g business from the Suez route to the Cape and Kronbak, 2010). route. The competitiveness of the NSR improves somewhat when bun Fourth, the macro-economic geography has contributed signifi ker prices are high. In 2011, the Russian government announced its cantly to the success o f the Suez Canal. Hence, the Europe-Far East commitment to make the NSR route more competitive. Schoyen container trade, the Canal’s key trade lane, surged in the last dec and Brathen (2011) conclude that the uncertainty in schedule reli ades and even accelerated in the period 2002-2008. The Europe- ability via the NSR (caused by seasonality) makes that this route Far East route overtook the transpacific route in 2007 to become should primarily be explored for bulk rather than for liner shipping. the largest containerized trading lane. The Europe-Far East trade The commercial potential of the east-west rail corridors, a set of totaled 16.82 million TEU in 2009 compared to 4.4 million TEU railway lines connecting East Asia and the western part of Russia in 1995, 7.11 m illio n TEU in 2000 and 13.74 m illio n TEU in 2005 w ith the Eastern part o f Russia, was already identified in the early (UNCTAD, 2002, 2008, 2011). However, the Suez Canal is chal works of Helle (1977) and Hayuth (1982). The main arteries are the lenged by a changing economic geography in world trade. Next Trans-Siberian Railway, the Trans-Manchurian Railway, the Trans- to the rise o f Asia, other regions such as South America and Sub- Mongolian Railway and the Baikal Amur Mainline (BAM - opened Saharan Africa are expected to take up a more prominent role in in 1991). The ‘Trans-Siberian in Seven Days’ program sets a target global trade patterns. Container flows between Asia on the one speed of 1500 km a day by 2015. Large ports in Europe such as Rot hand and the South American East Coast and W est and South Africa terdam, Antwerp and Hamburg are already benefiting from im on the other hand are now typically being interlined in tranship proved land bridge connections. For example, in the Spring of ment hubs like Algeciras and Valencia in Spain and further up 2011, the port of Antwerp established a rail service to Chongqing north in Antwerp, Le Havre and Rotterdam. As demonstrated ear in China passing via Duisburg. Rail land bridges in principle offer lier in this paper the dependency of these container flows on the lead time advantages to shippers, but capacities remain low com Suez route is not guaranteed in the longer term when considering pared to container liner services. According to a 2011 study on an operational environment characterized by rising bunker costs, Intercontinental Combined Traffic (ICOMOD) by the International slow steaming practices and scale increases in vessel size. Union of Railways (UIC), Euro-Asian rail transport volumes could This paper focused on competition between the Suez route and reach 1 million TEU annually by 2030, mainly coming from East the Cape route for attracting interlining business. The results show Asia/China. In addition, traffic from South Asia could add another that the Suez route is expected to remain the logical and dominant 150,000 TEU annually. Hilletofth et al. (2007) demonstrated that choice for connecting Asia w ith Europe. Still, this finding does not rail land bridges in principle offer lead time advantages to shippers, imply the Suez route w ill not face a certain degree of competition but inefficiencies in the intermodal chain hinder these alternatives from a number of other routing alternatives that are being planned from reaching their full potential. Vernya and Grigentinc (2009) or are in operation to accommodate part of the trade volumes adopted a model schedule between Shanghai and Hamburg to ana between Europe and Asia (Fig. 9). A detailed discussion on these lyse the relative costs of various axes in the Asia-Europe transport routing options goes beyond the scope of the paper. We lim it the network. Their results show that shipping through the Suez Canal discussion to the North Sea Route (NSR) and the Euro-Asian rail is still by far the cheapest option. The North Sea Route and the transport corridors volumes. Trans-Siberian Railway appear to be roughly equivalent second- The Northern Sea Route (NSR) is a set o f all-w ater shipping tier alternatives. The North South land corridor, a landbridge from lanes between the Atlantic Ocean and the Pacific Ocean along the the Persian G ulf via Iran to Russia, is considerably more expensive Russian coast of Siberia and the Far East. Future ice cap reductions than the Suez route in case the destination is in Northern Europe would open new possibilities for commercial shipping on this (Mohsenpour, 2006).
Northwest Passage Northern Sea Route
East-West rail corridors
Panama Canal route
Legend a = Trans-Siberian Railway b = Trans-Manchurian Railway c = Trans-Mongolian Railway Cape Route d = Baikal Am ur Mainline (BAM) e = New Asia-Europe Land-Bridge
Fig. 9. The main routing alternatives between East Asia and Northern Europe. T.E. Notteboom/Journal of Transport Geography 22 (2012) 164-178 177
Suez Canal
0 M a in port regions for intercontinental interlining/relay
East-West mainline routes
" North-South and diagonal routes (mostly secondary)
M arket potential fo rth e Cape route
Fig. 10. The market potential of the Cape route depicted against existing mainline routes via the equatorial beltway and the north-south and diagonal trade lanes.
While the market shares of these alternative routes between transit fees, better vessel economics, higher bunker costs, slow Asia and Europe are expected to grow (particularly for time steaming practices and subject to a more competitive terminal sensitive products), the overall importance compared to the Suez pricing strategy of southern African transhipment facilities in view route is expected to remain rather low. The increasing availability of attracting interlining flows. In scenarios BÍ and B2, the Cape of alternative routes, however, opens opportunities for global route outperforms the Suez route on the routes West Africa-Ocea- supply chains to benefit from an increasing routing flexibility nia, West Africa-East Africa, South America East Coast-Oceania and thus to reduce the risks associated with an overreliance on and South America East Coast-East Africa. All other routes w ill the Suez route. be positioned within or close to the competitive range, i.e. the cost differences and time differences between the two interlining op 8. Conclusions tions are small so that intense competition between the two routes can be expected. The future positioning of interlining via the Cape This paper discussed the market potential for interlining/relay compared to the Suez route w ith in this com petitive range w ill be services via the Cape route as an alternative to the dominant Suez determined by port-based factors (i.e. the availability of supporting route. At present, the remoteness and the limited cargo potential of services, port productivity and reliability, the volume of local car southern Africa seem to make the ports in the region no match for go, the ability to handle large vessels and liner connectivity the traditional relay/interlining centres located at the cross-roads through an extensive mainline-feeder network), factors related to of east-west and north-south trade. However, a highly dynamic the market structure, terminal-based factors (i.e. rates, reliability, market environment and the search of shippers and shipping lines draft and vessel turnaround time) and logistics factors related to for cost efficiency, manageable risks and increased routing flexibil value-added services. ity might give some room for alternative routes, such as the Cape The results of the route competition analysis do not suggest the route, to take up a more significant position in the global container Cape route w ould overtake the Suez route as the dom inant ship shipping network. The southern route offers ample capacity to ping link between east and west. The expected emergence of the accommodate ship movements. We not only analysed the current Cape route should be seen as the em bodim ent o f a prom ising competitive position of the Cape route, but also elaborated on the development of south-south trade volumes between Asia, conditions that need to be met in order to make the Cape route a Sub-Saharan Africa and South America. viable com petitor o f the Suez route. This paper attempted to open a new research avenue with The distance analysis resulted in 11 trade lanes for which the respect to the geography of global shipping networks. The discus Cape route could serve as an alternative to the Suez option. sion on the future role o f the Cape route is far from closed. Further Fig. 10 provides an overview of these routes. The high-volume Eur- research is needed to quantify the container volumes that could be ope-Asia trade lane, the backbone o f vessel traffic through the Suez captured by the Cape route as well as the competitiveness of indi Canal, is not one of these. The distance analysis and transit time vidual ports and planned terminal projects in Sub-Saharan Africa analysis based on 2008 data revealed that interlining via the Cape as major interlining/transhipment hubs. There is also a macro- offers a potential alternative to the Suez route (and interlining via economic dimension which needs further investigation. Hence, Algeciras) on quite a number of south-south routes. The cost anal hub development in Sub-Saharan Africa linked to a stronger Cape ysis, however, demonstrated that these shorter distances and route w ill lower the remoteness of this region in global shipping shorter transit times most often go hand in hand w ith higher costs and trade relations. The associated reduction in generalized logis compared to the Suez route. This is m ainly caused by vessel eco tics costs can trigger high economic impacts in terms of an im nomics and the competitive pricing strategy of interlining hub proved export potential, lower costs for imports and a better Algeciras. The presented scenarios showed that interlining via a position of the region in attracting foreign direct investments. In hub near the Cape is expected to become more competitive com the end, this should enable Sub-Saharan Africa to make an ever pared to the Suez route due to a com bination o f higher Suez Canal stronger mark on global trade. 178 I.E. Notteboom /Journal of Transport Geography 22 (2012) 164-178
References Mo, J., 2002. Options to combat maritime piracy in Southeast Asia. Ocean Development & International Law 33, 343-358. Mohsenpour, M., 2006. Cost comparison between the North-South Corridor and the Baird, A., 2006. Optimising the container transhipment hub location in northern Suez Canal Route. Presentation at the 4th Asian Ports and Shipping 2006 Europe. Journal of Transport Geography 14 (3), 195-214. Malaysia Conference, 6 June 2006. De Monie, G., 2009. Economic consequences of piracy and armed robbery on Notteboom, T., 2006. The time factor in liner shipping services. Maritime Economics shipping. Presentation at Seminar on Piracy and Armed Robbery against & Logistics 8 (1), 19-39. Shipping, European Commission, Brussels, 21 January 2009. Notteboom, T., Vernimmen, B., 2009. The effect of high fuel costs on liner service Drent, J., 1993. Commercial shipping on the Northern Sea Route. The Northern configuration in container shipping. Journal of Transport Geography 17, 325- Mariner/Le Marin du nord 3 (2), 1-17. 337. Dynamar, 2008. The North West Europe & Mediterranean West Africa Container Notteboom, T., 2010. From Multi-Porting to a Hub Port Configuration: the South- Trade. Dynamar, Alkmaar, September 2008. African Container Port System in Transition. International Journal of Shipping Fagerholt, K., 2004. Designing optimal routes in a liner shipping problem. Maritime and Transport Logistics 2 (2), 224-245. Policy and Management 31 (4), 259-268. Notteboom, T., 2011. The impact of low sulphur fuel requirements in shipping on Fleming, D.K., Hayuth, Y., 1994. Spatial characteristics of transportation hubs: the competitiveness of roro shipping in Northern Europe. WMU Journal of centrality and intermediacy. Journal of Transport Geography 2 (1), 3-18. Maritime Affairs 10 (1), 63-95. Guy, E., 2003. Shipping line networks and the integration of South America trades. R.K. Johns & Associates, 2005. Suez Canal Pricing Forecast 2005-2025. Study in Maritime Policy and Management 30 (3), 231-242. Framework of Panama Canal Expansion. Hayuth, Y., 1982. Intermodal transportation and the hinterland concept. Tijdschrift Rodrigue, J.-P., Notteboom, T., 2010. Foreland-based regionalization: integrating voor economische en sociale geografie 73 (1), 13-21. intermediate hubs w ith Port Hinterlands. Research in Transportation Economics Helle, R., 1977. Future of raii container transport in Eurasia. Geojournal 1 (3), 55-60. 27 (1), 19-29. Hilletofth, P., Lorentz, H., Savolainen, V., Hilmola, O.-P., Ivanova, O., 2007. Using Schoyen, H., Brathen, S., 2011. The Northern Sea Route versus the Suez Canal: cases Eurasian landbridge in logistics operations: building knowledge through case from bulk shipping. Journal of Transport Geography 19 (4), 977-983. studies. World Review of Intermodal Transportation Research 1 (2), 183-201. Theys, C., Ryoo, D.K., Notteboom, T., 2008. Towards a generic framework for the Kernohan, B., 2009. Massive Boost for Coega. The Herald 6 July 2009. development of logistics in seaports: lessons from the Busan case. Journal of Liu, M., Kronbak, J., 2010. The potential economic viability of using the Northern Sea International Logistics and Trade 6 (2), 1-22. Route (NSR) as an alternative route between Asia and Europe. Journal of UNCTAD, 2002/2008/2011. Review of Maritime Transport. UNCTAD, Geneva/New Transport Geography 18 (3), 434-444. York. McCalla, R., Slack, B., Comtois, C., 2005. The Caribbean basin: adjusting to global Vernya, J., Grigentinc, C., 2009. Container shipping on the Northern Sea Route. trends in containerization. Maritime Policy and Management 32 (3), International Journal of Production Economics 122 (1), 107-117. 245-261.