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Examining new ways of getting cargo from China into the rich hinterlands of Europe and America

At a time of trade tensions, getting cargo from China where it wants to go in Europe and America cheaply has never been so critical given the threats arising from what some call the "new normal".

One critical factor is port choice. And for shippers, it might be worth examining options that have not occurred to them because shipping tradition has been so tied them to the tried and true it has been disinclined to see them as viable options.

But such is no longer acceptable. Ship sizes have gone up, as have fuel costs, while crew sizes and slot costs have plummeted. The arithmetic has changed. Much of this has been factored in and dealt with, though not fully appreciated.

Many have overlooked concomitant factors that have emerged, many byproducts of new economies of scale. Consider the implications of the growing size of ships, the biggest being 14,000 TEU 15 years ago compared to 23,000-TEUers today. Not just the biggest of them, but the increase in the average size of vessels, from 5,000 to 10,000 TEU, far more significant a factor given the cargo volumes they collectively carry.

This has brought on the enlarging of the Panama and Suez canals, which in turn brought on the dredging that opened previously closed ports to larger ships and in doing so larger supply chain opportunities that did not exist before.

Georgia's Port of Savannah was the first to exploit these opportunties. But mistakenly Savannah thought they were so far ahead that it would take them 15 years to catch up - the same length of time it took them to fight court battles and debate environmental assessment reports before Georgia ports were shovel-ready.

But no, much to Savannah's chagrin, it had laid the groundwork for rivals. What took Savannah 15 years, only took rivals two or three. Sooner than expected, they - who could only take 4,500-TEUers before were now docking the likes of the 18,000-TEU CMA CGM Benjamin Franklin. Not only by way of dredging, but by removing obstacles, such as raising the air draft of New York's Bayonne Bridge from 155 to 215 feet.

The use of the Port of Prince Rupert in northern British Columbia has been long appreciated as a conceptual scoop - reviving an old 1911 railway line in a new way. It sheared two to three days off Chicago delivery by shortening a sea voyage from northern China and having a fine rail line whisk freight through the Canadian wilderness through to the now unified petty railways of southern Illinois. Such things were game changers that crept up on the industry.

Another case of looking at the old and familiar in a new way involves the Port of Rotterdam, which is hardly a newcomer to a shipper's consideration. But that can be viewed afresh by shippers who still mistakenly see German ports as the best way to enter Germany, the richest of the EU states.

Our second case is La Spezia, or indeed a whole range of European Mediterranean ports from Greece to Spain. But for our purposes, we shall narrow our focus to demonstrate the concept of the Med turnaround on this otherwise obscure port east of Genoa as it offers more options to more shippers given the vastness and richness of the hinterland it serves.

Next we shall look to America to check out the Florida challenge, and the unique position it finds itself following the expansion of the Panama Canal, vis-a-vis other rival ports in the south eastern United States.

But first Rotterdam. The River Maas that runs into the Rhine at the German border, becomes a defacto canal system. Rival Hamburg has good road and rail, but little to match Rotterdam's barges. Antwerp is more of a barge challenge, but ships there face limiting tidal conditions on the River Scheldt.

The big part of the Rotterdam's hinterland is Germany, but the Netherlands is not Germany. That makes it hard to sell the idea that it is often better to reach the consumer-rich German interior through a Dutch port than through a German port like Hamburg, Wilhelmshaven or Bremerhaven. That's because while the road and rail links from German ports can match what Rotterdam has to offer, nothing can beat its inland barges that can access Germany's industrial heartland, the Rhineland.

But however illusory, the idea of getting to Germany through Germany is powerful, and Rotterdam has a hard time making the point that it is often better to go through Holland. "Shippers have a friend, a business associate, or they are prisoners of their customer, and we have an issue because we can't look at the optimilisation of your network per se," said Rotterdam port logistics and container chief Hans Nagtegaal.

Our third case is the Med. Any layman familiar with a map of western Europe, will be surprised to learn that most ships access western Europe avoid Mediterranean ports and sail right past Gibraltar, go around the Iberian Peninsula, crossing the stormy Bay of Biscay, then navigate through the congested English Channel to get to the Northern Range ports - Le Havre, Antwerp, Rotterdam and Hamburg. Why? Because that is where most affluent Europeans live, and where road and rail links are shorter, cheaper and better than in the pastoral south.

Today, emissaries from the north Italian Port of La Spezia say that is no longer true because of game-changing technologies and techniques. La Spezia now has much improved rail service, the advent bigger ships and dredging to accommodate 14,000-TEU vessels, which mean lower slot costs.

This is expected to bring an end to punitive Asia-Med rates, traditionally the result of the lack of cargo, and the need for smaller ships to deliver it. As evidence, La Spezia points out Asia-Med and Asia-North Europe rates were equal or lower in 2018 during 28 weeks out of 52. "Add to that, the THC [terminal handling charges] in south Europe are 10 per cent cheaper compared to the northern range," said La Spezia marketing chief Daniele Testi.

And of course there is the obvious saving of 2,000 nautical miles by docking at La Spezia, rather than turning the ship around in faraway Rotterdam. And with all the talk of carbon emissions today, that matters more than it did to ecologically sensitive retail shippers.

Much bigger ships can now access the freshly dredged La Spezia, with its 15 metres alongside, to go to 16 metres at four mega berths next year. "As for hinterland, we are talking Austria, Switzerland, Germany and the advantage customers gain bringing cargo via La Spezia," he said.

"Compared to Rotterdam, which is 34 days, or 31 days and three days and transport by train means that you can save seven or eight days. It's 23 per cent of the total transit time," said Mr Testi.

La Spezia, he said, was the first port in Italy to welcome the ultralarge containerships back in 2011. So when we consider the new big tonnage coming from Asia we now have to cope with 14,000 TEU as well as 16,600, which is the Asia-Med maximum.

Now we turn to the other side of the world to access to America's consumer-rich zone from the Mississippi east to the Atlantic. The deep water ports in the State of Florida have found that the size and affluence of their hinterland has grown so that it no longer makes sense to ship things in from out of state.

To this end, the ports of Miami, Everglades, Jacksonville and Tampa Bay have made a pact to induce ocean carriers to dock closer to their Florida customers, who are growing in number and disposable income.

Embracing an all-for-one-and-one for-all approach these deep water ports teamed up to make Florida a major US shipping hub rather than a satellite of the northern ports of Savannah, Charleston and Norfolk as they are today.

Florida has a population of 21 million, and is now bigger than New York State. It has 126 million visitors, many semi-residential tourists, who stay three to six months in winter. Florida also has a large military establishment, many of whom will retire in the state at a young age when they have many years of work in them. Add to that a steady inflow of richly-endowed pensioners from the snowbound lands of the north.

Parallel to these developments, big box retailers had growing concern of dock strikes. With this in mind, they adopted the "four corners concept", that of having massive distribution centres at the four corners of the continent. Being first in the east coast Asia import game, Savannah, Georgia staked its claim to the south east sector.

And that's the situation the four Florida ports are determined to change in their favour, "because a very large percentage of Florida bound cargo goes into Savannah, LA-Long Beach, and then comes into Florida overland", said Port Miami executive director Eric Olafson. 

The Florida port pact is now pressing the likes of Walmart and Amazon to move south where the population is growing and where there is ample labour. The trend towards next-day and same-day delivery, resulting from the e-commerce boom, is yet another reason to move cargo closer to customers.

If nothing else, one can conclude that there is more ways than the traditional way of getting cargo from China into the markets of the consumer-rich zones of America and Europe.

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