The economics of shortsea shipping (SSS)
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the economics of shortsea shipping (SSS) professor enrico musso department of economics maritime and port economics academic year 2004/2005

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the economics of shortsea shipping (SSS)

professor enrico musso

department of economics

maritime and port economics

academic year 2004/2005


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Some referencesE. Musso - U. Marchese, The Economics of Shortsea Shipping, in C.Th.Grammenos (ed.), The Handbook of Maritime Economics and Business, London/H.Kong: Lloyds’ of London PressEuropean Commission (2001), White Paper “European Transport Policy for 2010: time to decide” COM(2001)370 finalMinistero dei Trasporti (2000), Piano Generale dei Trasporti e della LogisticaMinistero delle Infrastrutture e dei Trasporti (2003) Conto Nazionale delle Infrastrutture e dei Trasporti 2002


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An ambiguos definition

  • “Cabotage”: the juridic meaning (link between ports in the same state)

  • “Tailored” and “regional” definitions

  • Tautologic or discretionary (“not DSS”, “not long”)

  • Definitions based on ships’ characteristics

  • Competion with land transport

  • E.U. definitions

    Different criteria: geographic, supply-based, demand-based (competition), function (infraregional or feeder), juridical

    Stats may be not reliable and not comparable


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Key elements for SSS

Competition

  • Is it an alternative to land transport, or a captive market?

    Role

  • Main leg of a regional intermodal route (competing or not with land transport);

  • Feeder leg in a hub-and-spoke cycle based upon DSS (SSS can compete with land transport for hub feedering)


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Market areas

Main

Developing

  • Europe

  • Asia

  • Caribbean

  • Middle East

  • Latin America

Fonte. Drewry (1997)


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Transport of goods in EU: modal split

Source: DG energy and transport EU


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Transport of goods in the EU: modal split

Source: DG energy and transport EU


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Modal split, EU 15 (billions tkm)

Source: DG energy and transport EU


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Transport of goods in Italy: modal split

Source: Ministero dei Trasporti e della Navigazione


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Modal split, Italy (millions tkm)

Source: Italian Ministry of Transports


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The fleet employed in SSS

  • Tankers: no bottom limit, up to 13.000 gt and/or 20.000 dwt;

  • General cargo: no bottom limit, up to 10.000 gt and/or 10.000 dwt;

  • Ro-Ro and combined: from 1.000 gt and/o 500 dwt, to 30.000 gt e/o 15.000 dwt.


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SSS

fleet

%

N.ships

% gross tonnage (gt)

% deadweight tonnage (dwt)

Average gross tonnage (gt)

E.U.

57,3%

7,9%

6,7%

1.654

Rest of Europe

62,7%

11,4%

9,2%

1.882

Rest of the world

68,5%

9,6%

8,9%

1.319

The fleet

Source: Policy Research Corporation


The sss fleet northern europe gt and dwt x 1000 l.jpg

Country

1996

1998

N.

gt

dwt

N.

gt

dwt

Austria

29

60

100

22

68

94

Belgium

17

66

36

7

6

10

Danmark convent.

127

213

88

114

384

105

Danmark – DIS

448

5.318

7.584

479

5.318

7.398

Finland

105

356

338

125

358

385

Germany

373

550

866

431

615

1.113

Ireland

49

98

134

35

88

120

The Netherlands

248

480

680

299

615

870

Sweden

152

103

150

144

104

155

United Kingdom

470

1.365

956

435

964

1.099

Northern Europe

2.018

8.609

10.932

2.091

8.520

11.349

The SSS fleet: Northern Europe(gt and dwt x 1000)

Source: COM (2000) N. 99 def.


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Country

1996

1998

N.

gt

dwt

N.

gt

dwt

France

27

196

310

43

500

619

Greece

515

1.900

563

525

2.000

800

Italy

362

1.036

1.480

476

1.668

2.280

Portugal conv.

15

120

75

15

120

76

Portugal MAR reg.

59

650

1.074

105

659

1.106

Spain

209

900

868

193

830

781

Spain – REC reg.

65

541

750

71

793

1.110

Southern Europe

1.252

5.343

5.120

1.428

6.570

6.772

The SSS fleet: Southern Europe(gt and dwt x 1000)

Source: COM (2000) N. 99 def.


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The “complex cycle”

  • Since the 60s the transport of goods is growingly organised on the basis of complex cycles, not only because of technical constraints but also for economic benefits

  • It is an organisational innovation consequent to other (technical and organisational) such as standardization, ICT, etc.)


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Sea-land intermodality and transport costs

  • The modal change implies higher costs due to:

    • Higher terminal costs

    • Transhipment times

    • Lower reliability of nodes and of the whole cycle

WHICH BENEFITS COMPENSATE THESE COSTS?


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ROAD

HAULAGE

CONTRACTOR

ROAD

HAULAGE

CONTRACTOR

LINER

port

port

S

H

I

P

P

E

R

C

O

N

S

I

G

N

E

E

TERMINAL

OPERATOR

SHIPPING

AGENCY

TERMINAL

OPERATOR

FREIGHT FORWARDER


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Benefits of sea-land intermodality

  • Optimal mode (performance, size, speed, costs) for the amount of cargo

  • Optimal modes are different for different traffic volumes

  • Geographical distribution of flows allows economies of scale on certain routes (hub-hub)


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The hub-and-spoke system

  • Feeder ships trasport single shipments to a hub port where they are transhipped to a bigger ship, and viceversa at the destination hub

  • Intermodal cycle different legs use different transport modes (normally, the main leg is by rail or ship or air for high-value goods; the feeder legs are by road)


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COST

PER

TON

Sea Transport

Rail Transport

Road Haulage

KM

p

q

t

0

Critical threshold for distance

  • Competitiveness of different transport modes varies according to the distance, due to the incidence of terminal costs

  • Road transport is normally best for short distances, rail for medium distances, sea transport for longer distances


Distances and intermodality l.jpg

a’

TOTAL

COSTS

b’

a b

b

O

A

B

D

b’

TOTAL

COSTS

a’

a’ b’

A

B

O

D

Distances and intermodality


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Volumes and economies of scale

The average cost per km (mile) and per unit of quantity varies in different proportion for different modes (ships have more economies of scale than rail, and rail more than road): if the transport employed on the main leg has bigger economies of scale, then the increase in demand (in traffic volume) makes the slope of bb’ less sharp

The critical threshold distance AB becomes lower

Given the distance, higher traffic volumes will

cause a higher the scope for intermodality and SSS


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The scope for a sea-land transport cycle

Normally the complex cycle implies a longer distance:

A

m2

m1

B

m1

O

m1

D


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The comparison of (generalised) costs

Total costs of a simple cycle OD (per cargo unit)

C + tm1 · OD + S

Total costs of a complex cycle OABD (per cargo unit)

C + tm1 · OA + T + tm2 ·AB + T + tm1 · BD + S

The complex cycle is better when:

tm1 · (OD - OA - BD) - tm2 · AB - 2T > 0

Threshold:

If AB = x

And OD - OA - BD = y


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y

x

O

Complex cycle is better when…

The scope for an intermodal cycle increases when…:

  • …Transhipment costs/times decrease (e.g.: standardization)

  • …Cost per km or mile of the “main” transport decreases

    • …the economies of scale of the main transport are bigger and volumes increase

  • …cost per km or mile of the feeder transport increase

  • … total distances increase


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The scope for sea-land intermodality and SSS:

Parcel size

Economic

Distance

(threshold)

Dispersion /

Concentration

Of flows

Sea-land

Intermodality

SSS


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Implications of the sea-land cycle

  • The complex cycle implies two needs:

    • To reduce costs of nodes

    • To maintain a unique relationship between the shipper and the carrier(s)

  • Main implications:

    • Unitization (standardization) of cargo

    • Singleness of management and control of the transport chain




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Pros and cons of SSS

Cost efficiency ;

Flexibility (increase in volume does not require infrastructure enhancement);

Sustainability;

Good ratio energy/efficiency.

  • Low frequency;

  • Low reliability (departure and arrival times);

  • Needs port infrastructure;

  • Higher risks of damages for transported goods;

  • TRADE OFF QUALITY-EFFICIENCY


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Total (monetary) transport cost

Gioia Tauro – Basilea


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TEU

FEU

Road haulage

830,70 €/LU

1.661,40 €/LU

Maritime Transport

304,60 €/LU

495,60 €/LU

Total saving

526,10 €/LU

1.165,80 €/LU

% Saving

63,3 %

70,17 %

Total (monetary) transport cost

Gioia Tauro – Genova VTE


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The economic scope for sea-land intermodality

  • Increase in world trade

  • Economies of scale in ships

  • Specialised transport technologies

  • Transport more and more capital intensive, with high fixed costs and need for investment

  • Innovatinos in cargo handling with lower costs and times in terminals

ECONOMIES OF SCALE AND SEARCH FOR EFFICIENCY


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SSS, production and users

  • SSS implies a trade off between efficiency and effectiveness (lower costs, higher times and lower reliability)

Market organisation is crucial for the diffusion of

benefits of SSS among users

Higher accessibility, lower costs, external economies


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