1. Caribbean Shipping Association Annual General Meeting, Montego Bay (Jamaica), October 11-13 2010 Global Supply Chains, Maritime Transportation and the Caribbean Transshipment Market: The Challenges of Growth and Rationalization 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. THE PANAMA CANAL EXPANSION: WHATS UP DOC? Non academic title:

3. 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

4. Container Traffic at North American Ports, 1980- 2009: This was supposed to be impossible…

5. Main Export-Oriented Regions and Shipping Routes Servicing North America Landbridge Westbound Route Eastbound Route Panama Route East Asia South Asia Indifference Point Southeast Asia

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 Americas coastal systems 3) East coast capacity issues

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

8. Diversification: Routing Options between Pacific Asia and the American East Coast

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

10. 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.

11. 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)

12. 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?

13. 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

14. 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? (RIMS)

15. Selected MOU between the Panama Canal Authority and American Gulf and East Coast Ports Port AuthorityDateNature Antwerp Port Authority September 2010 Share expertise in the handling of Post-Panamax vessels, including rolling gate locks and tug boats. Mississippi State Port Authority at Gulfport August 2010None specific except as identified by the MOU. Jacksonville Port Authority April 2010None specific except as identified by the MOU. Alabama State Port Authority April 2010 Port improvements to capture the anticipated traffic growth. ASPA completed in 2008 a US$300 million container terminal at Mobile in partnership with APM and CMA CGM. Maryland Port Administration June 2009 Fund a 500-foot berth at Seagirt Marine Terminal in operation when the Panama Canal expansion project is completed in 2014. The Port of Baltimore is currently one of only two US East Coast ports with a 50-foot draft. Broward Countys Port Everglades Department August 2009 (Port Everglades). Increase its capacity to handle larger ships. Develop the cruising industry with a new terminal for large cruise ships (2009). Port of Palm Beach December 2009 Container and cruise segments. South Gate Complex. Inland Port Complex project. South Carolina State Ports Authority July 2006(Charleston). None specific except as identified by the MOU. Port Authority of New York and New Jersey September 2003 Dredging projects to 50 feet. New on dock rail facilities. Bayonne Bridge clearance. Virginia Port Authority June 2003 Construction of the new APM terminal at Hampton Roads. Setting of the heartland corridor. Virginia Inland Port. Georgia Port Authority June 2003Deepening of the Savannah River from 42 to 48 feet (completed by 2014). Port of Houston July 2003None specific except as identified by the MOU.

16. Governance Changes in Port Authorities 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

17. 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.

18. Major Rail Corridors Improved since 2000

19. 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

20. Emerging Global Maritime Freight Transport System

21. The Caribbean Transshipment Market The curse of economies of scale Jones Act + 24 hour rule Anchoring footloose traffic

22. 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)