New transhipment terminal project in the Caribbean

In the past, the shipping transportation was characterized for using direct call ports where goods were delivered by vessels which originally loaded the cargo from one origin to the destination without shifting the cargo enroute. Since globalization, free trades and open markets opportunities, the shipping industry have evolved and new models of transportation have been proposed.

One of the proposed models is the transhipment or hub and spoke system which consists in the transfer of goods from the origin to the destination using a hub or intermediate point where the cargo pauses and it is handled. However, traditional maritime economists, port and shipping lines have considered container transhipment to be more expensive than direct call services, mainly by virtue of the extra feeder costs and container lift charges involved. Notwithstanding, increase in ship size has affected the decisions as to whether direct call multiport or hub and spoke services schedules assigned due to the technical requirement of new bigger ships.

According to the lecture transhipment can offer substantial operating and capital cost advantages compared with multiport direct call services: the explanation for transhipment advantages relates to diseconomies both at sea and in port associated with multiport styles itineraries, coupled with container handling costs and productivity advantages pertaining to pure transhipment terminals added to enhance feeder ships economies of scale.

One reason for increased interest in hub and spoke networks is the trend towards bigger ships. The major world trades are now dominated by post panamax ships of 4,000 – 6,000 TEU and above. Due to the Panama Canal Expansion project panamax vessels will pass through the canal impacting the global freight distribution.  

While East Asia has been a driver for global economic growth for decades, it is the Chinese economy that has the most deeply impacted the global structure for production and trade. Therefore, US East Coast ports see the expansion of the Panama Canal as an opportunity to increase cargo volume and gather a greater share of the transpacific trade, which was the dominant growth factor in containerized transportation.  

In terms of network configuration, it is a hard decisions for the maritime shipping companies and terminals operators the impact of the Panama Canal. In the Asia-US East Coast route several configurations are possible, ranging from direct point to point calls from Pacific Asia to the usage of transhipment hubs in the Caribbean. According to Rodrigue (2010) in his study “Factors Impacting North American Freight Distribution in view of the Panama Canal Expansion” suggests potential shipping configuration of all-water routes serving the East Coast, post Panama Canal Expansion.

The figure 1 shows two network configurations. In the Direct route the East Coast can be served by three or more different direct services, each focusing on a specific sub range as the North Atlantic, Central Atlantic and South Atlantic / Gulf coast. In the Transhipment route is very similar to Direct route but with the insertion of a transhipment hub where deviation from major shipping lanes is reduced. The regional services become feeder loops with smaller ships but higher frequencies. When the transhipment hub offers a strategic location that significantly reduces mainline vessel deviation time and costs and the small number of routes lead to more efficient transportation use of resources, there is no penalty for vessels. Therefore, the transhipment option is better than the direct call to serve US East Coast because of the connectivity and the feeder routes established. 

Figure 1. Two network configurations; Direct and Transhipment. 

The figure 1 shows two network configurations. In the Direct route the East Coast can be served by three or more different direct services, each focusing on a specific sub range as the North Atlantic, Central Atlantic and South Atlantic / Gulf coast. In the Transhipment route is very similar to Direct route but with the insertion of a transhipment hub where deviation from major shipping lanes is reduced. The regional services become feeder loops with smaller ships but higher frequencies. When the transhipment hub offers a strategic location that significantly reduces mainline vessel deviation time and costs and the small number of routes lead to more efficient transportation use of resources, there is no penalty for vessels. Therefore, the transhipment option is better than the direct call to serve US East Coast because of the connectivity and the feeder routes established.