The Economics of Domestic Short Sea Shipping SNAME/Maritime Economics Panel and the Transportation Research Board / Marine Board of the National Academies 28 September 2004 Washington D.C.

2 Defining the Economic Framework Market considerations Create more questions than answers

3 Major Thoughts Current and Future Markets Culture Market Expansion An Ideal Port Costs SSS Alternatives (or vice versa) Financing Construction Operation

4 Current and Future Markets Hub(s) and spoke(s) for larger trade Regional trade Agriculture Energy (oil, product, coal) Intermodal: Container, RO/RO Project cargos

5 Culture Blue Water--International Blue Water--US Flag Brown Water Shippers / Freight Forwarders / Third Party Logistics (3PL) Ports This could be the major hurdle

6 Market Expansion Bootstrap vs. Major Investment Singapore model or grass roots model? Lots of “staring at each other.” But some places are doing something!

7 An Ideal Port Access to cargo Friendly “natives” Convenient port facilities Good intermodal connections—physically and operationally Rail Highway Pipelines Other Maritime Memphis is a great example

8 Costs CAPEX Acquisition in time and money Market development, including regulatory and political influence OPEX--Base Crew Insurance and legal Maintenance and repair Material purchasing OPEX--Charterers Components Operations Fuel

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11 SSS Alternatives (or vice versa) Air Highway Rail Pipeline Direct Shipping Market Shift

12 Financing Generally based on charter cover Difficult with specialized vessels and lack of charter liquidity Many shipping companies are not attractive to Wall Street Equity is the holy grail. Control the cargo.

13 Construction Types of Vessels: Tug and Barges (river type) Small ships Tug and Barge (ITB/ATB) Liquid Bulk Dry Bulk Break Bulk Intermodal (Container, RO/RO, LASH)

14 Operation Generally three types of firms: Brown water river operators Blue water ship operators Blue water and coastal ATB/ITB/Tug operators MAJOR DIFFERENCES AMONG ALL OF THEM