0. Foreland-Based Regionalization: Integrating Intermediate Hubs with Port Hinterlands Theo Notteboom ITMMA - University of Antwerp and Antwerp Maritime Academy Jean-Paul Rodrigue Department of Global Studies & Geography, Hofstra University IFSPA Conference Hong Kong Polytechnic University, Hong Kong – May 2009

1. Content PORT REGIONALIZATION REVISITED
THE ROLE AND FUNCTION OF INTERMEDIATE HUBS
IN SEARCH OF COMPETITIVE ADVANTAGE
RECONCILING FORELANDS AND HINTERLANDS
AN UNFOLDING PARADIGM? 1

2. 1. Port Regionalization Re-visited
Globalization
Fragmented production and consumption systems.
Maritime side:
Economies of scale and frequency of service along major pendulum routes.
Inland side:
Spatial deconsolidation (or consolidation).
Local constraints
Congestion and limited amount of land.
Port growth and expansion issues.
Freight activities:
Used to take place in proximity of port terminal facilities.
Setting of a network of inland terminals. 2

3. Port Regionalization Re-visited The Spatial Development of a Port System
Phase 1: Scattered ports
Phase 2: Penetration and hinterland capture
LAND
SEA
Phase 3: Interconnection & concentration
Phase 4: Centralization
Phase 5: Decentralization and insertion of ‘offshore’ hub
Phase 6: Regionalization
Source: Notteboom, T. and J-P Rodrigue (2005) “Port Regionalization: Towards a New Phase in Port Development”, Maritime Policy and Management, Vol. 32, No. 3, pp
Freight corridor
Hinterland-based (Regional load centre network)
Load center
Interior centre
Deepsea liner services
Shortsea/feeder services
Foreland-based 3

4. Coastal concentration Landbridge connections Coastal concentration
1. Port Regionalization Re-visited Regionalization and Hinterland Setting
North America
Western Europe
East and Southeast Asia
Source: Adapted from Lee, Song and Ducruet (2006)
Coastal concentration
Landbridge connections
Inland concentration
Coastal gateways
Coastal concentration
Low hinterland access 4

5. 1. Port Regionalization Re-visited
Path dependency:
Building on previous phases and ‘memory effects’.
Follow a similar evolutionary development path.
Degree of contingency:
Deviate from existing development paths.
Consequences:
Port systems do not follow the same sequence of stages.
Some level of disparity among port system developments. 5

6. 1. Port Regionalization Re-visited
“Terminalization”
Higher level of integration within freight distribution systems through terminals.
Terminals and terminalization:
A buffer to be used for temporary storage.
A constraint inciting various forms of satellite/inland terminal use and inventory in transit practices.
Extended gateways and extended distribution centers.
The need to look at intermediate hubs. 6

7. 2. The Role and Function of Intermediate Hubs
Emergence
Since the mid 1990s in many port systems.
Critical factors:
Excellent nautical accessibility.
Proximity of major shipping routes (deviation).
Land for future expansion.
Mostly owned by port holdings or carriers.
Not in all port systems:
Prevalent in the Mediterranean and Pacific Asia / Middle East.
Limited in the Americas (avoid flag restriction).
“This is only a significant factor in the development of US offshore hubs, and most directly in Freeport, Bahamas. By transhipping there (and the same applies to Kingston) lines can feed cargo to/from any US port with vessels of any flag, whereas if transhipping at, say, Miami, then coastal feeding to other US ports (including empty containers) can only be effected on (very expensive and very rare) US flag ships.” 7

8. 2. The Role and Function of Intermediate Hubs
Multiply shipping options.
Optimization of vessel movements:
Hubs, relay or interlining locations.
Points of convergence of regional shipping
Connect the same hierarchy levels and improve connectivity within the network (relay and interlining)
Some intermediary locations strictly perform cargo handling functions and have a non-existent hinterland 8

9. The Insertion of Intermediate Hub Terminals
Hub-and-Spoke
Relay
Interlining
Deep-sea line
Feeder
Hub
85% of Transshipment Traffic
15% of Transshipment Traffic 9

10. World’s Main Intermediate Hubs, 200710

11. World’s Main Transshipment Markets, 200711

12. Transhipment flows in Europe
Transhipment hubs in Med
(85-95% transhipment incidence)
Gioia Tauro, Algeciras, Taranto, Cagliari, Malta

13. 2. The Role and Function of Intermediate Hubs
Regional shipping networks
Ports feel that serving feeder vessels means a loss of status.
Feeder options:
Direct feeders between hub and feeder port:
Lowest transit time but requires more feeders and smaller feeder vessels.
Indirect feeders via line-bundling loops including more than one feeder port:
Economies of feeder vessel size, but incur longer distances and longer transit times. 13

14. 2. The Role and Function of Intermediate Hubs
Vulnerability of intermediate hubs to container growth and decline
Direct end-to-end or line-bundling services versus hub-and-spoke: a hub can become a redundant node in the network
Footloose behaviour of transhipment/relay volumes 14

15. Transhipment Hubs in the West Mediterranean
Taranto
Valencia (MSC)
Cagliari
Piraeus (?)
Algeciras
Gioia Tauro
Malta
NOTE: Theo, this appears incomplete as several major transhipment hubs are missing. E.g. Algeciras. With data, I could create a better map for the Mediterranean. 15

16. Market shares of ports in the West Mediterranean according to the diversion distance (1975-2008)
Theo, please provide the raw data and I could rebuild the graph.
Source: Notteboom (2009) 16

17. Competition from new port developments in Med
Tanger Med II
APMT/Akwa: + 3 mln TEU (2012)
PSA: +2 mln TEU (2012)
Tanger Med
APMT: mln TEU
Eurogate: +1.5 mln TEU
Port Said (Egypt)
Traffic: 3.2 (2008)
Capacity: +2.5 (2011)
Ambarli (Turkey)
Traffic: 2.26 (2008)
Haifa (Israel)
Traffic: 1.39 (2008)
Beirut (Libanon)
Traffic: 0.95 (2008)
Damietta (Egypt)
Capacity: +4 (2012)
Mersin (Turkey)
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)
Container throughput in million TEU, capacity extensions in million TEU
PLAN OF TANGER MED
Rades (Tunisia)
Traffic: 0.3 (2007)
Enfidha (Tunisia)
Capacity: +1 (2011)
+2.5 (period )
+2 (period )
Misurata (Libya)
Initial plans
Source: Notteboom (2009)

18. 3. Foreland-Based Regionalization: In Search of Competitive Advantage
Vulnerability of intermediate hubs:
Narrow focus on transhipment only
Competition on basic resources such as location, nautical accessibility, terminal infrastructure and on terminal productivity
Sources of competition can rather easily be imitated by competitors => hard to create a sustainable competitive advantage 18

19. 3. Foreland-Based Regionalization: In Search of Competitive Advantage
Intermediate hubs likely to play a more important role beyond pure transhipment:
Capitalize on scale increases of vessels:
Undermining the serviceability of some ports (lack of connectivity)
Hubs offer advantages of consolidation + support a level of traffic not feasible otherwise
Extracting more value/economic rent from cargo passing through:
Using the hub for added-value logistical activities (see e.g. Theys et al, 2008)
Low-end to high-end value added activities (e.g. mass customization of products)
Low cost location before entering high distribution cost areas
Free-trade zone status can trigger development of value-added services 19

20. 3. Foreland-Based Regionalization: In Search of Competitive Advantage
Integration of intermediate hubs in regional shipping networks.
The maritime foreland of the intermediate hub is functionally acting as a hinterland.
Reconciling operational characteristics of forelands and hinterlands
Inland Terminal
HINTERLAND
FORELAND
Main Shipping Lane
INTERMEDIATE HUB 20

21. 4. Foreland-Based Regionalization: Reconciling Forelands and Hinterlands
Different momentums
Maritime momentum (carriers’ needs):
Economies of scale.
Optimal network configuration (concentration).
Inland momentum (shippers’ needs):
Spatial coverage (deconcentration).
Frequency and flexibility.
A growing disparity:
Massification versus atomization.
At a certain traffic level; inland diseconomies of scale. 21

22. The “Last Mile” in Freight Distribution
Gateway
Inland Terminal
Distribution
Center
Capacity
Frequency
Corridor
Customer
“Last Mile”
Segment
GLOBAL
HINTERLAND
REGIONAL
LOCAL
Shipping Network
Massification
Atomization 22

23. Functional and Geographical Diffusion of Containerization: Globalization and Regionalization
Foreland Traffic
Hinterland Traffic
Regionalization
Cost per TEU-KM
Volume 23

24. 4. Foreland-Based Regionalization: Reconciling Forelands and Hinterlands
Reconciliation
Hinterland-based regionalization permitted inland freight traffic to keep up with volume and network configuration changes.
Foreland-based regionalization enables small and medium-sized ports an integration to an intermediate hub:
Long distance volatile transshipment traffic complemented with more stable regional traffic.
Functional gateway of a regional port system.
Competitiveness of a maritime range. 24

25. Port Regionalization Clusters in Pacific Asia
Hinterland-based regionalization
Foreland-based regionalization 25

26. 5. An Unfolding Paradigm?
Changing role of intermediate hubs in regional shipping networks ?
Competitive strategy to cope with risks:
Footloose operators and shifts in maritime shipping networks.
Secure traffic from smaller regional ports.
Capture added value.
Perception of the feeder function
Ports prefer direct calls.
Option: link to more than one hub.
Transition phase?
Foreland-based regionalization appears to be a distinct phase on its own. 26

27. Thank you for your attention !