Minimum Efficient Scale (MES) and preferred scale of container terminals

The decision on the scale of a port terminal affects the terminal’s managerial, operational and competitive position in all the phases of its life. It also affects competition structures in the port in which the terminal is operating, and has a potential impact on other terminals. Port authorities and terminal operators need to know the scale of the terminal when engaging in concession agreements. In economic theory the scale of a plant/firm is typically defined in relation to the Minimum Efficient Scale (MES), the long-run output where the internal economies of scale are fully exploited. However, there are a number of theoretical and empirical indications that in ports the scale of a terminal is commonly guided by a combination of the MES and other determining factors. The “preferred” scale is the result of a complex interaction between the MES, the port governance framework and objectives, the market size and structure, technological change and operational considerations, physical and geographical limitations, and the business patterns of shipping lines. This study analyses the factors resulting in a preferred container terminal scale that in most of the times is different from the MES. The analysis of the technical, market-related and governance-related factors is supported by theoretical and empirical insights that illustrate the presence of a range of actual ”preferred” scales of terminal concessions that usually are different, below or above, MES.     

Simulation-based severe weather-induced container terminal economic loss estimation

Container terminals play a critical role in maritime supply chains. However, they show vulnerabilities to severe weather events due to the sea–land interface locations. Previous severe weather risk analysis focused more on larger assessment units, such as regions and cities. Limited studies assessed severe weather risks on a smaller scale of seaports. This paper aims to propose a severe weather-induced container terminal loss estimation framework. Based on a container terminal operation simulation model, monthly average loss and single event-induced loss are obtained by using historical hazard records and terminal operation records as model inputs. By studying the Port of Shenzhen as the case study, we find that the fog events in March lead to the longest monthly port downtime and the highest monthly severe weather-induced economic losses in the studied port. The monthly average loss is estimated to be 30 million USD, accounting for 20% of the intact income. The worst-case scenario is found to be a red-signal typhoon attack which results in nearly 20% decrease in the month’s income. The results provide useful references for various container terminal stakeholders in severe weather risk management.     

Economic policies and seaports: The economic functions of seaports

This paper argues that the economic functions of seaports are to benefit those whose trade passes through them, i.e. through providing increments to consumers' and producers' surpluses. Whilst recent developments in the technologies of seaports (containers, bigger ships, more rapid handling of bulk cargoes) have increased technical efficiency, they have also provided such economies of scale as to reduce some opportunities for competition and, therefore, the probability that cost reductions are actually passed on in this way. For this purpose port costs need to be considered in their entirety, i.e. as generalized transport costs per tonne, comprising money, time and the risks of loss, damage and delay. Such cost reductions will lead to expanded trade in a variety of ways.

This statement of the economic function of seaports is contrasted with views that they should try to increase employment in their locality, or that they should maximize profits.     

Productivity change in Nigerian seaports after reform: a Malmquist productivity index decomposition approach

ABSTRACT

During the 1990s, Nigerian seaports were considered inefficient, unsafe due to massive cargo theft (wharf rat phenomenon) and one of the most expensive port systems in the world. This resulted in long turnaround times for ships and increased container dwell times. As a result, port operations were transferred to the private sector through concession contracts. This paper employs a Malmquist productivity index (MPI) technique to benchmark pre-and post-reform total factor productivity growth of the six major Nigeria seaports (Apapa, Calabar, Onne, Port Harcourt, TinCan Island and Warri) for the period 2000–2011 which represents six years before (2000–2005) and six years after (2006–2011) the reform. The results indicate progress in technical efficiency of the ports after reform but deterioration in technological progress. Overall productivity growth was higher in the pre-concession period compared to the post-concession period. The source of pre-concession period productivity growth was technological progress while the change in productivity of the post-concession period is generated by an increase in scale efficiency. This suggests that concessionaires have not brought in the much anticipated investment in modern technology to drive port efficiency. The ports of Calabar and Apapa experienced the highest productivity growth while lowest result was Onne.     

Optimal concession contracts for landlord port authorities with different pursuing goals

This paper investigates how landlord port authorities should offer concession contracts to their terminal operators under two different goals, by building a two-stage game for each goal. If maximizing the weighted sum of fee revenues and throughout benefits is port authorities’ goal, then the optimal concession contract can be any of the two-part tariff, the unit-fee, and the fixed-fee contracts. Accordingly, our special cases include previous works assuming that port authorities maximize either fee revenues or throughput benefits. By contrast, if maximizing the social welfare is the goal, then we find that subsidizing terminal operators, instead of charging them, is port authorities’ best choice. This result is not yet discovered in the literature.     

Maritime policy and management--30 years issue for Prof. James McConville Editorial: IMO--The economics of intimidation

Organizational Effectiveness (OE) is a rather new concept in the port business literature and not widely studied before. From the systems perspective, this concept focuses on the goals of the organization, the resources needed to achieve these goals, and the relationship between the organization and its environment. The reason behind choosing a systems approach is the significant role of seaports as open systems affected by changes and developments in world trade, supply chain and logistics trends, maritime transport, and technological developments. While seaports are multi-faceted organizations that constitute different interdependent and integrated units in their structure, they can also be regarded as the subsystems of the supply chain system. As being the social and technical systems, port organizations have unique characteristics that should be examined in detail to assess their effectiveness. To assess the effectiveness of port organizations, principally a set of effectiveness measures applicable to seaports should be determined. The main aim of this study is to assess the relative importance of the main effectiveness criteria in seaports and to determine the significance of main inputs and port subsystems which can be referred as the means to achieve effectiveness. By using the systems approach, the inputs, the processes, and the outputs of the port organizations are clearly defined with a conceptual model. Thirty-three statements have been developed under the main categories in the systems model and a two-round delphi survey is conducted, and qualitative analysis of the experts’ opinions is carried out. The results of the delphi survey show that the main port inputs are port infrastructure, equipments, technology, and port labor; the major port processes are ship and cargo operations together with the logistics services, safety and security, information technologies, and marketing; and the most important effectiveness measures for the seaports are productivity, efficiency, service quality, adaptability, information and communication management, profitability, human resource quality, and customer satisfaction.     

The impact of dry port operations on container seaports competitiveness

The concepts of intermodal logistics and distribution networks have made integration of the inland freight distribution system essential for an efficient container seaport system. Inland components, such as dry ports, which exist within the seaport system, have become important in shaping the performance and competitive strategies of container seaports. Owing to the importance of interdependence between dry ports and container seaports, this paper aims to investigate the impact of dry port operations on container seaport competitiveness. It conducted an empirical study in Malaysia through 120 online surveys to key stakeholders of dry ports, including freight forwarders, shippers, seaports, rail operator, shipping lines, and haulers. The data collected were analysed using exploratory factor analysis (EFA). The results from EFA show that Malaysian dry port operations have impacts on seaport competitiveness. These include enhancing seaport performance, increasing service variations for seaports, improving seaport-hinterland proximity, increasing seaport trade volume, and enhancing seaport capacity.     

Regional governance of port development in China: a case study of Shanghai International Shipping Center

When China enters the World Trade Organisation (WTO) and becomes more involved in the global economy, her major seaports will be pivotal places where the international shipping and terminal operators interact, conflict and co-operate with the local and the central governments. To demonstrate and understand these interactions, this article analyzes the case of the Yangtze River Delta (YRD), where the competition, co-operation and governance of Shanghai and Ningbo, the two largest ports on Chinese mainland, concern all stakeholders from the central and local governments of China to the container terminal operators and shipping lines overseas.

This paper first develops a conceptual framework for analyzing port development in a regional context. The article then introduces the case of the Shanghai International Shipping Center with a focus on the efforts of the Shanghai Government to establish a regional hub port, which also involves two nearby provinces. This case study reveals the course of the decision-making processes and the power networks currently governing the port development in the YRD. Two domains of port governance are discussed: the role of port authorities in port internal governance, and the crucial influences of local and central governments on the port external governance. It provides evidence that the power of shipping lines and international terminal operators are not as prevalent as in many ports in western countries. It is suggested that the lack of good regional port governance in the region is due to structural problems in administration.     

基于中国企业视角的越南港口投资研究

中越陆上交通基础设施领域合作日趋密切,但在越南港口投资领域,中方企业却身影难觅。针对这一现状,本文基于中国企业视角,概述越南宏观与区域经济发展形势,较为全面地研究越南港口布局规划,对其中值得中企投资重点关注的港口与港区进行总结,并具体分析中企投资越南港口注意事项,提出中企投资越南港口项目的模式和建议。     

Widening the Panama Canal and U.S. ports: historical and economic impact analyses

ABSTRACT

The economic history of the U.S. illustrates how the role of many cities has been changed by being seaports or located on navigable rivers or lakes. Based on the widening of the Panama Canal in 2016, the West Coast ports that include the west coast seaports of California, Oregon, and Washington were expected to become less important, while the freight shares of the East Coast and Gulf ports would increase. By how much it has been not easy to measure or predict so far, but this study attempted to define some of the key parameters in the measurement. As well as several relevant background topics, both the demand- and supply-side versions of the National Interstate Economic Model, have been applied for the measurement of economic impacts. U.S. port authorities and policy makers at the local and national levels who respond and develop plans for coping with the new realities of the Panama Canal are able to understand the extent to which changes in shippers’ and land-mode transporters’ behaviors would undermine the logistics and the costs of their activities. Therefore, this study is important for a diverse spectrum of port development strategies in the U.S. to respond to the Canal expansion.     

Port economic impact model (PIM) and its planning applications

The provision of adequate port capacity has been essential for Korean economic development, as its foreign trade has been predominantly seaborne. In this respect, efforts have been directed to the development of seaports in order to provide a sufficient level of service for greater national control of foreign trade. The port planning and development process in Korea, however, has not been a total success. This is underlined by the fact that the seaport industry in Korea has not coped with the increased demand, and total seaport capacity has lagged behind need. This paper examines the validity of the port input-output model (PIM) as predictive tool to future planning. Further the value of the PIM as a forecasting tool to the port transport industry in Korea is identified.     

The relations between dry port characteristics and regional port-hinterland settings: findings for a global sample of dry ports

This paper aims at defining generic characteristics of dry ports by carrying out an analysis using a large sample of dry ports from around the world. The dataset includes details on 107 inland terminals worldwide. All dry ports in the database have been selected from studies in the extant literature before being shortlisted to fit our research scope. Data collected include terminologies used, actors driving the development, terminal throughput, total area, services provided and the relation with the corresponding seaport(s). Using statistical analysis, the paper examines how dry port parameters are influenced by (1) a different terminal set up, like sea-driven and land-driven development, developed and developing system, dry port functions; (2) specifications of the seaport with which the dry port is connected, i.e. seaport traffic, connectivity, utilization, etc. and (3) the transport leg linking dry ports and seaports. The findings could be applied to the planning and development of inland nodes from the perspectives of different stakeholders.     

后方陆域窄小的海湾港口发展模式

海港大型化、深水化发展要求港口大型船舶提供更深的水域和更广的后方陆域。在深水岸线资源紧缺的情况下,探讨了水深条件良好而后方陆域窄小的海湾港口发展模式,通过建设物流通道来扩展港口活动的空间,从而带动地区经济的发展,并从集聚角度论证了该发展模式能有效降低社会物流成本。     

Environmental sustainability in seaports: a framework for successful innovation

Environmental sustainability in the port industry is of growing concern for port authorities, policy makers, port users and local communities. Innovation can provide a solution to the main environmental issues, but often meets resistance. While certain types of technological or organisational innovation can be satisfactorily analysed using closed system theories, in the case of seaports and in particular in the area of environmental sustainability, more advanced conceptual frameworks have to be considered. These frameworks need to be able to account for the multiple stakeholder nature of the port industry and of the network and vertical interactions that environmental sustainability calls for. This article investigates successful innovations improving environmental sustainability of seaports. The proposed framework builds in part on research concepts developed in the InnoSuTra EU FP7 project. From a methodological perspective, this article develops a method for quantifying the degree of success of innovation with respect to a set of specific objectives. Several case studies are used to test the framework against real innovation examples, such as onshore power supply, or alternative fuels. In this article, we argue that only those innovations that fit dynamically port actors’ demands and the port institutional environment stand a chance to succeed.     

Methodological solutions for increased efficiency of modelling and simulation of seaports and inland freight terminals

The paper outlines the results of research aimed at developing an efficient simulation modelling capability for seaports and inland freight terminals. By providing the domain-oriented process of simulation modelling with a uniform and coherent methodological basis and integrating it with artificial intelligence concepts, it was possible to construct a powerful tool—Transnode. This is a decision-support expert system which enables efficient and fast modelling and simulation of any seaport or inland freight terminal, or a group of terminals, large or small, multipurpose or specialized, at optional scale. It produces simulation results which enable a comprehensive analysis of the port or inland terminal to be made as an element of the total transportation framework. Both methodological aspects of the developed solutions and practical features of the Transnode system are discussed in the paper.     

Seaports and the structural implications of the economic crisis

The 2008 credit crunch and the subsequent economic crisis ended a period that lasted over two decades wherein international seaports around the globe experienced double-digit volume increases. This chapter provides an analysis of the structural effects that the crisis has on seaports, focusing mostly on developments in Europe. It does so via an examination of (a) the crisis implication for each of the four major types of transport flows that account for the vast majority of port throughput worldwide; (b) the prospects for future capacity organisation and development, given the realignment of the involvement strategies that the various stakeholders (i.e., governments, port authorities, service providers, users, investors) endorse in reaction to the financial tsunami; and (c) the adjustment opportunities, that the trade downturn unintentionally provides, allowing for correction of existing misallocations in the sector via the deployment of relevant adjustment strategies by the related actors. Recapping the identified structural consequences, the final section concludes on the changing role and responsibilities of port authorities and the ‘new issues’ that will require further investigation in the post-financial tsunami era.     

Port competition in Latin America and the Caribbean: the role of concessions and competition policy

Appropriate port regulation and competitive forces tend to be related to higher levels of operational and economic performance of ports. From a policy-making perspective, pursuing efficiency and securing competition in ports to reach a level playing field is a two-step process requiring (1) ex-ante regulations to set the rules that maximize the competition for the market, especially when the policy objective is to attract private operations to ports on competitive concession processes and (2) ex-post competition policy to monitor and preserve competition in the market. This paper studies port regulation in Latin America and the Caribbean (LAC) from a competition perspective, analyzing both ex-ante and ex-post policies implemented in the region. The analysis reveals that the competitive environment in LAC is low, giving room for possible anticompetitive practices in the LAC port sector. Since the end of the 1990s, approximately 80% of container terminals in the region were granted to only five companies. Chile and Mexico have been found to be the best practices in the region, with better conditions assuring robust competition in the market. The main policy implication from this analysis is the need for a stronger involvement of antitrust agencies throughout the port concession processes.     

(New York: Vintage) pp. 45-55.

Over the past generation seaports have undergone a transformation from traditional cargo handling to logistical support centers and changed from bulk shipping and processing to high value-added management centers in an increasingly competitive global environment. Many have reorganized to become leaders of their region's economic development strategies. This paper reviews these changing roles and their impact on organizational issues. This organizational assessment is applied to the port of Kaohsiung and its envisioned role as a commercial hub and operations centre on the Pacific Rim. Issues such as split lines of responsibility, authority and jurisdiction across different levels of government are considered. Competing goals such as economic development, urban waterfront development, metropolitan urban structure, logistical integration, and infrastructure investment are discussed in this context.     

Institutional reform in ports of developing countries: the case of Lebanon−part I: the plan

Upon the expiry of the concession contract signed between Lebanon and a private company for the Port of Beirut operation (in December 1990), the Government appointed a temporary commission to operate the port under the rules of the expiring concession. The legality of this measure has since always been questioned, while the temporary commission underwent three major personnel changes which clearly prevented any long-term thinking or planning. In 1998, the temporary commission entered into a 20-year joint venture for the establishment of a container terminal. Meanwhile, Lebanon's two main ports were facing major regional competition, while competing against each other to some degree. Thus, the need became urgent to end the temporary status and propose reforms to the entire sector. To that end, the Ministry of Public Works and Transport was commissed by the Government to propose a permanent institutional framework for the port of Beirut while assessing the need for a national maritime sector regulator. This paper presents the recommendations for the institutional reform of the Lebanese maritime transport sector.     

Dynamics of Russian dry ports

The transportation of cargos in containers has been intensively developing over the last decades. The world pace of growth in container transport is about 11% annually while in the Russian Federation from 2003 to 2007 the average growth was 21%. Container transportation is going to increase due to the construction of huge infrastructure projects for the Winter Olympics games in Sochi 2014, which implies the transportation of the required material flow. Foreign car assembly on Russian territory is developing, supplied by component parts delivered from Japan and the Republic of Korea, as well as from China that now bring 21.3% import container transport to Russia. About 60% of Russian container traffic passes through seaports Saint Petersburg, Novorossiysk and Vladivostok. The scenarios for increasing capacity to meet demands ahead are enhancing the productivity of seaports sites or leading to the creation of terminals in the hinterland. Although the phenomenon of dry ports is spread all over the world, in Russia none of the seaports has sufficient number of these facilities. The inland terminals of Russian seaports will be analysed from a dry port perspective. Despite the impediments, there are ecological and economical benefits that are discussed in the article. The advantages to the transport chain suggest that dry ports are a promising area for Russian seaports’ welfare.