The Big Leap 2014: Challenges and Opportunities for Infrastructure in Colombia Upon New flows of International Trade. Cartagena, 16 February 2012

A Big Step or a Small Leap?The Panama Canal Expansion and Global Supply Chains

Jean-Paul Rodrigue

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

Ship Happens…

Factors Guiding our Steps

Elephants

Paradigms

Funnels

Global Trends: The Proverbial Elephant in the Living (Board) Room

Multiplying Effects of Derived Demand on Container Transport Peaking?

1970 1975 1980 1985 1990 1995 2000 2005 2010100

1,000

10,000

Global Trade and Container Throughput (1970=100)Container Throughput(520.4 Millions TEU)

GDP in current USD($63.4 Trillion)

Exports in current USD($15.2 Trillion)

World Population(6.84 Billions)

China: The Largest Bubble in History?

Iron OreCement

EggsPorkCoalSteelLead

CopperZinc

AluminumNickel

RiceChickens

SoybeansPopulation

WheatGDP (PPP)

OilCattle

0% 10% 20% 30% 40% 50% 60% 70%

54.4%

53.6%

53.6%

49.6%

46.9%

45.8%

42.1%

39.5%

38.2%

34.6%

31.9%

30.2%

25.2%

24.9%

19.7%

16.6%

13.6%

10.4%

6.1%

1.9%

2.1%

7.8%

8.4%

15.2%

4.8%

13.7%

9.1%

1.8%

8.7%

10.1%

0.9%

11.3%

19.9%

4.5%

4.9%

19.7%

21.7%

6.8%Share of the World Commodity Consumption, China and United States, c2009/10

ChinaUnited States

Rebalancing in demand

The Third Oil Shock UnfoldingJa

n-70

Jan-

71Ja

n-72

Jan-

73Ja

n-74

Jan-

75Ja

n-76

Jan-

77Ja

n-78

Jan-

79Ja

n-80

Jan-

81Ja

n-82

Jan-

83Ja

n-84

Jan-

85Ja

n-86

Jan-

87Ja

n-88

Jan-

89Ja

n-90

Jan-

91Ja

n-92

Jan-

93Ja

n-94

Jan-

95Ja

n-96

Jan-

97Ja

n-98

Jan-

99Ja

n-00

Jan-

01Ja

n-02

Jan-

03Ja

n-04

Jan-

05Ja

n-06

Jan-

07Ja

n-08

Jan-

09Ja

n-10

Jan-

11

0

20

40

60

80

100

120

140West Texas Intermediate, Monthly Nominal Spot Oil Price (1970-

2011)

First Oil Shock

Second Oil Shock

Third Oil Shock

Rebalancing in input costs

Global Trade Stalling? (and diverging)

Jan-91

Nov-91

Sep-92Jul-9

3

May-94

Mar-95

Jan-96

Nov-96

Sep-97Jul-9

8

May-99

Mar-00

Jan-01

Nov-01

Sep-02Jul-0

3

May-04

Mar-05

Jan-06

Nov-06

Sep-07Jul-0

8

May-09

Mar-10

Jan-11

Nov-110.0

50.0

100.0

150.0

200.0

250.0CPB World Trade Index, 1991-2011 (volume)

World TradeImports (Advanced Economies)Exports (Emerging Economies)

The Usual Suspects Shifting to Lower Gears

Jan-06

Apr-06Jul-0

6

Oct-06

Jan-07

Apr-07Jul-0

7

Oct-07

Jan-08

Apr-08Jul-0

8

Oct-08

Jan-09

Apr-09Jul-0

9

Oct-09

Jan-10

Apr-10Jul-1

0

Oct-10

Jan-11

Apr-11Jul-1

1

Oct-11

50

75

100

125

150

175

200

225

250

275

300

325

350Monthly Value of Exports or Imports, Selected Traders, 2006-

2011 (Jan 2006=100)

Japan (Exports)

Korea (Exports)

Germany (Exports)

Canada (Exports)

USA (Imports)

Latin American Traders Shifting to Higher Gear

Jan-06

Apr-06Jul-0

6

Oct-06

Jan-07

Apr-07Jul-0

7

Oct-07

Jan-08

Apr-08Jul-0

8

Oct-08

Jan-09

Apr-09Jul-0

9

Oct-09

Jan-10

Apr-10Jul-1

0

Oct-10

Jan-11

Apr-11Jul-1

1

Oct-11

50

75

100

125

150

175

200

225

250

275

300

325

350 Monthly Value of Exports, Selected Latin American Traders, 2006-2011 (Jan 2006=100)

Chile (Exports)

Peru (Exports)

Brazil (Exports)

Argentina (Exports)

Colombia (Exports)

The Elephants…

Energy and Resources

Debt and sovereign defaults

Aging & HealthCare

Ports and Maritime Shipping in a Paradigm

An Expected Shift in Containerization Growth Factors

Derived

Economic and income growth

Globalization (outsourcing)

Fragmentation of production and consumption

Substitution

Functional and geographical

diffusion

New 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)

World’s Major Container Ports, 2010

Geography of production and consumptionGateways and intermediary hubs dynamics

Gateways and Transshipment Hubs: Different Dynamics Monthly Container Traffic (Jan 2005 =100)

Ports and Maritime Shipping in the “Post-Bubble” Period: An Enduring Cognitive Dissonance?

Supply Demand

Maritime Shipping

Port Operations

Financialisation (dumb money)

Paradigm

Shift in economic geography

Linear inference

Macroeconomic shifts

Changes in shipping network configuration

(gateways vs transshipment)

Supply Chain Differentiation: Selective Performance Preferences

Costs (38%)Stability of the cost structure.Relation with the cargo being carried.

Time (12%)Influence inventory carrying costs and inventory cycle time.Routing options in relation to value / perishability.

Reliability (43%)Stability of the distribution schedule.Reliability can mitigate time.

Reliability Remains Somewhat Elusive…

-4 -3 -2 -1 0 1 2 3 4 5 6 7 8 9 100%

10%

20%

30%

40%

50%

60%

70%

80%

0.4% 1.1% 1.7%7.0%

45.3%

19.3%

9.1%5.3% 4.0% 1.6% 1.5% 1.7% 1.3% 0.5% 0.2%

Schedule Reliability in Container Shipping, 2010

TotalAsia/EuropeTransatlanticTranspacific

Difference from ETA in days (ETA=0)

Shar

e of

Por

t Cal

ls

Some Key Issues in Liner Shipping

Renewed risk for overcapacity.

18,000 TEU vessels and their

ramifications on ports.

Slow steaming: using a green argument to

hide a green ($) bottom line?

Overcapacity absorbing potential is

weakening

Impact of bunker price evolution and

low-sulphur fuel

The Six Flags Index…

0

2,000

4,000

6,000

8,000

10,000

12,000 Baltic Dry Index, Monthly Value, 2000-2012

Enjoy the ride

New supply above demand growth

The North American East and West Coasts Dominate…

Millions

… but Growth has Shifted to South America / The Caribbean

Million TEUs

Panama Canal Expansion: Triangles and Funnels

Transshipment Volume and Incidence by Major Ports, 2007-09

Asia – Mediterranean CorridorCaribbean Transshipment Triangle

East Asia Cluster

Northern Range

Transshipment in the Caribbean: From A Triangle to a Funnel

63.1%

4.9%

16.4%

15.6%

Economies of scale involve less tolerance for deviation

Components of the Logistics Performance Index, Selected Latin American Countries, 2010

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

Emerging Global Maritime Freight Transport System: Changes in Routing and Density?

Macroeconomic Factors (Elephants)

Operational Factors (Funnels)

Competitive Factors (Paradigms)