1. Gateways and Corridors: Routes to the Next Economy, Vancouver, November 17-20 2010 The Panama Canal Expansion and its Impacts on Global Shipping Patterns Jean-Paul Rodrigue Associate Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA Van Horne Researcher in Transportation and Logistics, University of Calgary, Canada

2. Factors Impacting North American Freight Distribution in View of the Panama Canal Expansion Aggregate demand changes Structure of production changes Supply chain diversification and differentiation Economies of scale in shipping Shipping costs structure Slow steaming Response from East and West coast ports Response from railways New gateways Response from Suez Canal and Med transshipment hubs

3. Global Shifts: The Unstable Structure of Production, Consumption and Distribution Landbridge Westbound Route Eastbound Route Panama Route East Asia South Asia Indifference Point Southeast Asia

4. What Drives Supply Chain Management? Control Freaks Offshoring Costs / time / reliability Internalize efficiency

5. Supply Chain Differentiation: Pick Your Preference FactorIssues 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. No/limited reliability changes with the expansion.

6. 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 dedicated services 2) Interlining between the America’s coastal systems 3) East coast capacity issues

7. Share of the Northeast Asia – U.S. East Coast Route by Option: Transition Already Completed?

8. Economies of Scale are a Bitch… Photo: Dr. Theo Notteboom

9. Conventional North Atlantic Central Atlantic South Atlantic / Gulf Direct TransshipmentCircum-Equatorial North Atlantic Central Atlantic South Atlantic / Gulf Caribbean Transshipment Triangle North Atlantic Central Atlantic South Atlantic / Gulf

10. Slow Steamin’: What Hath You Brought Us? 28 25 26 25 19 13 14 12 13 22 5 5 5 5 5 5 3 3 4 4 8 8 8 8 5 5 Vancouver Seattle / Tacoma Prince Rupert Oakland Los Angeles Lazaro Cardenas Panama Houston Savannah/Charleston Norfolk New York Chicago Dallas Atlanta Toronto Slow Steaming: More WC transloading More inventory in transit Transit Times from Shanghai and North American Routing Options (in Days)

11. The Toll Conundrum: Potential Diversion between Intermodal and AWR for Asian Imports Expansion (unconstrained) The Toll Conundrum: Financial pressures versus maritime shipping pressures Current Adapted from A. Ashar (2009) Expansion (constrained) Toll increases have already captured 40% of the potential savings of the expansion. The appeal of revenue maximization (NOT traffic maximization). Yield management?

12. Shipping Rate from Shanghai for a 40 Foot Container, Mid 2010 $2,300 $2,110 $2,300 $2,110 Vancouver Los Angeles Houston New York Montreal $1,300 $2,100 $1,300 $2,100 Inbound Outbound $2,620 $1,400 $2,620 $1,400 $3,510 $2,560 $3,510 $2,560 $3,700 $1,830 $3,700 $1,830 $4,040 $3,950 $4,040 $3,950 Inbound rates: function of distance Outbound rates: function of trade imbalances

13. Governance Changes in Port Authorities: Competing over the Hinterland Planning and management of port area. Provision of infrastructures. Planning framework. Enforcement of rules and regulations. Cargo handling. Nautical services (pilotage, towage, dredging). Conventional Port Authority Expanded Port Authority

14. Added Value Activities Performed at an Extended Gateway ActivityFunctions Consolidation / Deconsolidation Inventory management practices. Cargo consolidated (or deconsolidated) into container loads (paletization). Attaining a batch size (group of containers) fitting a barge or a train shipment. Breaking down batches so that they can be picked up by trucks. Transloading Change in to load unit (Maritime / Domestic). Consolidation, deconsolidation and transloading commonly mixed. Postponement Opportunity to route freight according to last minute and last mile considerations (dwell time). Buffer within a supply chain. Light transformations Forms of product and package transformations (packaging, labeling). Customization to national, cultural or linguistic market characteristics.

15. Major Rail Corridors Improved since 2000

16. Intermodal Terminals and Recent Co-Located Logistic Zones Projects Every rail operator involved. Partnership with a major real estate developer.

17. The North-American Container Port System and its Multi-Port Gateway Regions 1 2 6 5 4 3 7 Multi-port gateway regions 1. San Pedro Bay 2. Northeastern Seaboard 3. Southwestern Seaboard 4. Puget Sound 5. Southern Florida 6. Gulf Coast 7. Pacific Mexican Coast The Caribbean Gateway?

18. Emerging Global Maritime Freight Transport System

19. Conclusion: The Complexities of Divergence Aggregate demand changes, structure of production Supply chain diversification and differentiation, economies of scale, Slow steaming Response from East and West coast ports, hinterland factors, tolls No expansion: High impact (trend reversal) Expansion: Maintaining existing trends (AWR)