Pacific Northwest Economic Region (PNWER) 22nd Annual Summit, Saskatoon, Canada, July 15-19 2012

The Containerization of Commodities: Integrating Inland Ports with Gateways and Corridors in Western CanadaJean-Paul Rodrigue

Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA

Van Horne Researcher in Transportation and Logistics, University of Calgary, Canada

Canadian National RailwayCanadian Pacific Railway CentrePort CanadaGlobal Transportation Hub AuthorityGovernment of AlbertaGovernment of British ColumbiaPort AlbertaRocky View County

http://www.vanhorne.info/

Sponsors

An Expected Shift in Containerization Growth Factors

Derived

Economic and income growthGlobalization (outsourcing)

Fragmentation of production and consumption

Substitution

Functional and geographical

diffusionNew niches

(commodities and cold chain)Capture of bulk and break-bulk

markets

Incidental

Trade imbalances

Repositioning of empty containers

Induced

Transshipment (hub, relay and

interlining)

Growth Factors behind the Containerization of Commodities

Growing availability of containers

Rising demand and commodity prices

Fluctuations in bulk shipping rates

Imbalances in container shipping rates (export subsidy)

Empty containers repositioning

IMF All Commodity Index and Average Container Shipping Rates, 2000-2010 (2000=100)

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IMF All Commodity Index

Container Shipping Rates

The Inland Logistics Funnel: The “Last Mile” in Freight Distribution

CapacityFunnel

FrequencyFunnel

CapacityGap

Economies of scale

FrequencyGap

FORELAND

HINTERLAND

Main Shipping Lane

Inland Terminal

INTERMEDIATE HUB

GATEWAY

Atomization

Massification

Market Accessibility of Major North American Inland Load Centres

Trade Corridors and Inland Load Centers, Western Canada

Western Canadian Intermodal Rail System

Main Carriers' Operational Constraints

Imbalanced trade flows and rates

Higher inland freight rates

Location and load mismatch

Contract terms (volatility)

Container weight limitations

Slow steaming and schedule reliability

Asymmetries between Import and Export-Based Containerized Logistics

Many Customers• Function of population density.• Geographical spread.• Incites transloading.• High priority (value, timeliness).

Few Suppliers• Function of resource density.• Geographical concentration.• Lower priority.• Depends on repositioning

opportunities.

GatewayInland

Terminal

DistributionCenter

Customer

SupplierRepositioning

Import-Based

Export-Based

Containerized Weight for Selected Commodities

Commodity Pounds per cubic foot Weight in a fully loaded 20 foot container

Wheat 48 26 tons* (28 tons)Corn 45 26 tonsDry peas, beans and lentils

37 22 tons

Vegetable oil (e.g. canola) 60 26 tons* (35 tons)Coffee (fresh beans) 35 21 tonsLumber (2x4s) 45 26 tonsHay (e.g. alfalfa) 14 8 tonsPotash 80 26 tons* (46 tons)Coal (Anthracite) 70 26 tons* (41 tons)Paper or wood pulp 75 26 tons* (44 tons)

* Exceeds maximum permissible weight.

Rationale of Container Transloading

Consolidation

Weight compliance

Demurrage charges

Equipment availability

Supply chain management

Containerized Imports, Port of Vancouver, 2008-2011 (in metric tons)

2008 2009 2010 20110

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

OthersPrepared Food ProductsBasic MetalsWood ProductsBeveragesChemicalsProduceMachineryIndustrial, Auto and Vehicle PartsConstruction & MaterialsHousehold Goods

Containerized Exports, Port of Vancouver, 2008-2011 (in metric tons)

2008 2009 2010 20110

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

OthersSheets, Panels & BoardsOther CerealsAnimal FeedPaper & PaperboardWaste PaperChemicalsBasic MetalsMeat, Fish & PoultrySpecialty CropsWood PulpLumber

Containers Handled by the Port of Prince Rupert, 2007-2011 (in TEU)

2007 2008 2009 2010 20110

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

Empty (Exports)Empty (Imports)Loaded (Exports)Loaded (Imports)

Price of Selected Commodities on Global Markets, 1991-2012 (Jan 2000=100)

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Rapeseed OilWheatSawn SoftwoodPotash

Monthly Softwood Lumber Shipments to China, 2007-2012

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From Bulk to Containers: Breaking Economies of Scale

• Container as an independent load unit.• Minimal load unit; one TEU container.Entry Barriers

• Limited differences in scale economies for a producer.

• Incremental / linear cost-volume function.

Required Volumes

• New producers (smaller).• Product differentiation (more variety).

Market Potential

Trade and Transactional Facilitation: Functional Pairing of Inland Ports

Hinterland

Foreland

Gateway

Corridor

Functional Pairing

Inland Port

Conclusion: Inland Ports as Logistical Platforms for the Containerization of Commodities

The last mile remains salient(Gateway gap + inland massification)

Co-location as an effective value proposition (inbound / outbound logistics)

Promotion of exports and functional pairing of inland ports

Look at specific commodity chains (e.g. reefers)