Container Shipping Service Patterns and Transshipment Potential for

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					                                                                   PROYECTO

                                                                   CRECER




            Container Shipping Service Patterns
  and Transshipment Potential for Port of Callao




March 17, 2005
This publication was prepared for review of the United States Agency for International
Development (USAID). It was prepared by Nathan Associates Inc. under CRECER Project
(Project 527-0411; Strategic Objective 10), within the contract PCE-I-802-00-00013-00 with
Nathan Associates Inc.
The author is the only responsible of the content of this publication.
Contents

Executive Summary                                              1


1. Introduction                                                9


2. Present Service Patterns                                   11

   WCSA Shipping Routes                                       11

   Shipping Patterns by Route                                 12

   Shipping Patterns by Shipping Line                         14


3. Container Cargo Flows                                      21

   Introduction21

   Present WCSA Container Traffic                             22

   WCSA Container Traffic by Country                          24

   Allocation of Cargo to Routes                              26

   Allocation of Cargo to Shipping Lines                      28


4. The Competitive Environment in Container Shipping          33


5. Characteristics of Container Ships Calling at WCSA Ports   35


6. Ports on the West Coast of South America                   37

   Present Characteristics                                    37

   Constraints to Ship Size by Port                           39

   Summary of Constraints to Ship Size                        43


7. Traffic and Service Patterns at Callao                     45
IV




Contents (continued)
     Direct Services on the Pacific Trade Routes     47

     Trans-Panama Direct Services                    48

     Panama/Caribbean Transhipment Feeder Services   49

     East Coast South America Services               50


8. Future Container Cargo Flows                      53


9. Service Pattern Analysis Model                    57

     Model Overview                                  57

     Scenarios                                       58

     Service Pattern Options                         61


10. Future Container Shipping Service Patterns       63

     Key Factors 63

     Model Results                                   65


11. Transshipment at Callao                          71

     Types of Transshipment                          71

     Analysis of Present Transshipment at Callao     72

     Future Transshipment                            73


12. Conclusions                                      77


Glossary of Abbreviations and Maritime Terms         79


Appendix A. Data Tables


Appendix B. United Nations Port Location Codes
                                                                                        V




Contents (continued)

ILLUSTRATIONS

Figures
Figure 9-1. Service Pattern Analysis Model                                             58
Figure 9-2. Service Pattern Hierarchy                                                  61
Figure 10-1. Impact of Increasing Ship Size on End-to-End Services: Vessel Costs for
             Direct Services to Callao by Trade Route                                  67
Figure 10-2. WCSA Demand per Line in Dominant Direction by Trade Route—High
             Growth Compared with Threshold for 4,000 TEU End-to-End Service           68
Figure 10-3. Service Pattern Options—Callao-Asia Vessel Costs by Service as a
             Function of Callao Improvements                                           69
Figure 11-1. Guayaquil–Asia Vessel Costs by Service as a Function of Callao
             Improvements                                                              74
Figure 11-2. Iquique-Asia Vessel Costs by Service as a Function of Callao
             Improvements                                                              75
Figure 11-3. San Antonio-Asia Vessel Costs by Service as a Function of Callao
             Improvements                                                              76



Tables
Table 2-1. West Coast of South America Container Shipping Service Patterns, 2004       14
Table 2-2. West Coast South America Container Traffic, 2003                            23
Table 2-3. East Coast South America Container Traffic, 2003                            23
Table 2-4. Colombia, West Coast of South America Container Traffic, 2003               24
Table 2-5. Ecuador Container Traffic, 2003                                             25
Table 2-6. Peru Container Traffic, 2003                                                25
Table 2-7. Bolivia Container Traffic, 2003                                             26
Table 2-8. Chile Container Traffic, 2003                                               26
Table 2-9. Major Trade Flows in West Coast of South America Container Cargo
           Exports, 2003                                                               28
VI




Contents (continued)
Table 2-10. Major Trade Flows in West Coast of South America Container Cargo
             Imports, 2003                                                           28
Table 2-11. West Coast of South America Shares of Major Shipping Lines, 2003         29
Table 2-12. West Coast of South America Estimate of Annual Full Container
             Capacity, 2004, Three Major Routes (TEU 000)                            31
Table 6-1.   Port Constraints Limiting Entry of Optimal Size Vessels at WCSA Ports   44
Table 7-1.   Port of Callao Service Patterns and Cargo January—November 2004         46
Table 7-2.   Port of Callao Service Patterns, Ships and Containers, January–
             November 2004                                                           47
Table 8-1.   West Coast of South America Export Containers with Cargo Year 2020,
             High Growth Scenario (TEU 000)                                          54
Table 8-2.   West Coast of South America Import Containers with Cargo, 2020,
             High-Growth Scenario (TEU 000)                                          54
Table 10-1. Effect of Changing Determinants on Service Patterns                      64
Executive Summary
Callao is served by container shipping lines that offer services on six major routes, the most
important of which are the east coast of North America, northwest Europe, the Far East, and
the east coast of South America. Indirectly through an intricate system of transshipment at
ports in the Caribbean and on the West Coast of Central America there are regional feeder
services connecting Callao and the WCSA with practically all ports of the world.

Examining the existing patterns it was found that some lines use direct services in an end-to-
end (ETE) service pattern, generally as part of an alliance, while other companies use a system
of transshipment through Panama/Caribbean transshipment (PCT) ports, where they connect
with their east–west services. There are variations to these patterns, with so-called pendulum
services being employed on Far East routes, where a ship stops on the west coast of Central
America or the west coast of North America to supplement its WCSA cargoes with trans-
Pacific cargoes between Central and North America and Asia. There is also a pendulum
service, where ships on the northwest Europe–WCSA route stop on the east coast of North
America, supplementing their WCSA cargoes with those moving across the North Atlantic.

By examining the shipping schedules it was found that certain patterns of port call
predominate, but that there are exceptions. In the discussion it was found useful to separate
southbound and northbound calls, which reflect the export and import traffic patterns and
also other factors, such as competition between the lines. Showing the calls at each WCSA
port reveals immediately the pivotal position of Callao, with practically all shipping lines
scheduling stops southbound. Callao is predominantly an import port and, with an overall
predominance of export container cargo flow for the WCSA, it is convenient for lines to take
advantage of this traffic in order to balance up their directional flows; and also to load empty
containers for shipment to Chile, which has a predominance of container cargo exports.

While the majority of shipping services schedule a call in Callao northbound, two of the five
ETE Trans Pacific Services and the Maersk TA3 service to NW Europe via the east coast of
North America, do not schedule calls. The reason for this is that these vessels have sufficient
Chilean export cargo to justify the express nature of their service.
2                                     CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




It general terms it can be observed that there is an overall tendency for a majority of ships to
call at Buenaventura, Guayaquil, Callao, either Valparaiso or San Antonio, and either San
Vicente or Lirquen on the southbound leg of the voyage and at Callao and one or more
export-oriented ports (Mejillones, Antofagasta, Paita, Manta) on the northbound leg. In
addition several southbound ships call at Arica, with Bolivian cargo and at Iquique, with
cargo for the Free Trade Zone. No northbound ships on the Far East route schedule stops at
Guayaquil.

It was found that 132 ships were engaged on a regular basis on WCSA trades; of these, 53
were employed on Far East routes, demonstrating the importance of the Pacific trades to the
WCSA. The Far East route is also the most competitive with 9 of the 17 shipping lines that are
engaged on WCSA routes participating directly on the WCSA—Far East services and a further
4 lines participating on the route indirectly through transshipment in the Panama/Caribbean
area. It was found that 20 ships were permanently serving as regional feeders.

The Far East route is the longest with an average round trip distance of about 24,000 nautical
miles and average round trip cycles of between 70 and 84 days. The next longest route is NW
Europe with an average round trip distance of about 18,000 nautical miles and cycle times of
between 49 and 77 days. The round trip between WCSA and the East Coast of North America
is about 11,500 nautical miles, and the cycle time is about 42 days. To provide a weekly service
requires between 10 and 12 ships on the Far East route, between 7 and 11 ships on the NW
Europe route and 6 ships on the ECNA route.

Typically, ships on ETE service patterns make five or six calls at ports at each end of the route
and two or three calls at intermediate ports. The principal transshipment ports used by the
ships on the Far East route are: Balboa and Manzanillo, Mexico. On the ECNA and NW
Europe routes ships on WCSA routes transship at: MIT, Panama; Cartagena, Colombia;
Kingston, Jamaica; Caucedo, Dominican Republic and Freeport, Bahamas.

Ten of the 17 lines engaged on WCSA trades have services with ships that pass through the
Panama Canal on east–west routes. The transshipment ports in the Panama/Caribbean area
allow these lines to supplement their east–west volumes with WCSA cargo.

It was estimated that in 2003, the latest year for which complete data is recorded,
containerized exports for the WCSA amounted to just over one million TEU1. Imports were
about three quarters of a million TEU. This compares with two million TEU of exports and
one million TEU of imports on the East Coast of South America.

Peru accounts for about 16 percent of WCSA container cargo exports and 32 percent of
imports. Chile has the largest percentage share of container cargo exports, with 53 percent of
the WCSA total and 41 percent of WCSA container cargo imports.



1 Twenty foot equivalent units, a standard unit of measurement for containers.
EXECUTIVE SUMMARY                                                                            3




About 47 percent of WCSA containerized cargo exports moves on the Pacific routes: the Far
East and the West Coast of North, Central and South America, about 50 percent moves on the
North Atlantic routes, via the Panama Canal: the East and Gulf Coasts of North America, the
Caribbean, NW Europe and the Mediterranean, while about 3 percent moves on the East
Coast South America route, via the Magellan Strait.

It was found that with the relatively low level of present traffic volumes, and with intense
competition among the lines in order to offer a weekly scheduled service, lines have formed
alliances or operate feeder services through Panama/Caribbean.             This allows them to
consolidate traffic from various routes on the feeder leg between WCSA and
Panama/Caribbean.

Detailed data on container cargo movements by line was made available for the major ports of
Peru, Chile and Colombia. It was found that CSAV has a dominant position for containers in
the Chilean ports and at Callao and that MSC has the largest number of containers at
Buenaventura. Furthermore, overall CSAV has the largest market share of containers in these
four ports, followed by Mediterranean Shipping Co. and Maersk-Sealand. It was noted that
the top six companies control almost 70 percent of the containers at these four ports and
CSAV and its sister company CCNI control over a quarter of the total. However, considerable
competition exists among the lines, particularly between the regional carriers, Maersk-
Sealand, Mediterranean, Hamburg Sud and P&O Nedlloyd. The “top six” include two lines
that operate independently of any alliance: Maersk and Mediterranean. The other four lines
cooperate on each of their routes.

An examination of the fleet of containerships calling at WCSA ports revealed that about two
thirds of the ships are between 1,500 and 2,500 nominal TEU capacity and only about
10 percent of the ships exceed 2,500 TEU nominal capacity. It also showed that the fleet has an
average age of 8.2 years and that the older ships are generally smaller.

By examining the characteristics of the ships it was found that to maintain stability of the
vessels, the maximum number of TEU that can be carried with cargo in the average ship is
about 77 percent of the total number of TEU (full and empty) that can be carried.

There are no post-Panamax ships on the WCSA (in contrast to the ECSA where Maersk, for
instance, operates 6 ships each having 37 meters breadth). There are, however, 4 ships that are
absolute Panamax (32.26 meters breadth) and 21 ships have breadths of 32 meters or over. The
maximum summer draft is 12.3 meters. One hundred five ships have drafts in excess of 10
meters, 74 ships in excess of 11 meters and 26 ships in excess of 12 meters, and the average
speed is 19.3 knots, with speed increasing by size.

Another important characteristic about the containership fleet on the WCSA: only 19 ships are
owned by the company that operates them; the remainder are chartered for periods ranging
from about one to five years, although some ships are picked up as replacements for only one
4                                CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




voyage. Also, all ships are equipped with their own gear that is used in several of the ports on
the coast, for lack of shore-side gantry and/or mobile cranes.

To assess the role of ports on the service patterns, a review was made of the situation at all of
the ports handling containers on the WCSA and it was found that lack of appropriate facilities
and cargo handling equipment and inadequate water depth are already adversely affecting
container operations in several WCSA ports.

It was also noted that Callao has by far the greatest length of berth available for
containerships and the highest TEU throughput of all the ports and that the resulting
throughput per linear meter is well below that of the larger Chilean ports. By using tides
some of the larger ports can accommodate Panamax or larger ships with their present
reported depth of water. However, at Guayaquil shipping lines have disputed the depth of
water reported, one of the reasons for the increase in feedering Guayaquil containers through
Callao

Eleven ports have either ship–shore gantry or mobiles cranes, or both. There are only 11
gantry cranes on the WCSA, compared to 35 on the ECSA.

The performance of the dedicated terminals in terms of throughput per linear meter is high
for San Antonio, average for Valparaiso and San Vicente and relatively low for Iquique. Of the
ECSA terminals only TECON Rio Grande, exceeds the levels of throughput per linear meter
registered at San Antonio International Terminal.

The throughput per hectare of container terminal is much higher on the WCSA than on the
ECSA, reflecting the relative lack of space assigned for container handling at ports for the
former.

Shipping lines report that cargo handling operations are efficient and the provision of
equipment sufficient in most of the ports that have been given out to concession, in particular:
San Antonio, Valparaiso and San Vicente. Average lifts per hour at San Antonio and
Valparaiso are higher than those reported by shipping lines for any terminal on the ECSA.

Operations at the recently granted concession at Arica should improve productivity
significantly. Buenaventura has two gantry cranes, but productivity is still rather low in
comparison to the concessioned ports.

In relation to future developments, it is technically possible to dredge to a required 14 meters
at most ports. However, this may not be economic for the river ports of Buenaventura and
Guayaquil and possibly not for Iquique, and at some ports the limited traffic might not
warrant dredging to 14 meters.

Land access is a problem at ports around which major urbanization has occurred, specifically
at Buenaventura, Guayaquil, Callao, Valparaiso and San Antonio. Projects to secure efficient
EXECUTIVE SUMMARY                                                                               5




land access to ports would need to be executed in each of these ports in order to facilitate the
larger cargo lots that would result from larger ship sizes.

Infrastructure is only at international standards at the ports with high traffic volumes and for
which private concessions have been granted: San Antonio and Valparaiso. An important
requirement for other ports to receive larger vessels will be installation of ship-shore gantry
cranes and a fully equipped container terminal, with on site storage areas. Plans for
concessions exist at Buenaventura, Guayaquil and Callao, which offer an opportunity for the
provision of adequate infrastructure.

However, container traffic volumes are likely to be too small at Ilo, Matarani and Arica to
encourage calls by the largest ships. Antofagasta is a special case as the Chilean lines CCNI
and CSAV use combination bulk carrier-containerships to carry both containers and copper
concentrates exports in bulk, which is exported through Antofagasta and Mejillones, which
has specialized bulk loading equipment.

To provide some insight into the reason for existing service patterns as it concerns Callao, and
to aid in the extrapolation of the nature of these patterns in the future, a detailed analysis was
made for the containerships calling at the Port of Callao during the first eleven months of
2004. This information was made available by ENAPU in unedited form and was
subsequently expanded by the Consultants to include information about the shipping lines
and the routes on which their vessels operate.

There were 1,210 calls made by containerships at Callao in the period January to November
2004 and it was possible to determine that almost 30 percent of these were calls by ships on
end to end Pacific routes, another almost 30 percent were made by ships which transit the
Panama Canal and a slightly less percentage were end to end feeder vessels, based on the
West Coast of Mexico, at Panama or in the Caribbean.

The average size of vessel calling at Callao is about 1,650 total TEU capacity, for the Pacific
routes the average ship is about 2,000 TEU capacity, slightly less for the trans-Panama routes.
PCT feeders and ECSA route ships are smaller still and the local feeders are only about 500
TEU capacity. The largest ship, at 2,662 TEU, is found on the Far East route. On the average
slightly less than 500 TEU were exchanged per vessel call, with the ships on the ECSA route
having the greatest number of containers. The largest number of TEU handled per vessel was
for a ship on the ECSA, which turned at Callao. On the average Callao containers take up
about 25 percent of the capacity of ships calling at the port.

Long term forecasts of GDP for the WCSA countries suggest an average annual increase of
about 4 percent. The various free trade agreements with the United States, Europe and Asian
countries, as well as those within Latin America, already agreed, being negotiated and likely,
suggest that this will also be an important feature of WCSA container growth. There is plenty
6                                CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




of scope for the further containerization of break-bulk commodities, particularly for
commodities such as fish - meal and fruits.

For the purpose of testing alternative scenarios for 2020, high, medium and low annual
growth rates starting in the reference year 2003 have been selected, generally 8, 6 and
4 percent for high, medium and low growth respectively. In some cases higher rates have
been selected for exports: Buenaventura, Paita and Callao and Valparaiso and San Antonio,
the ports that serve the Santiago hinterland, and San Vicente and Lirquen on Concepción Bay,
corresponding to expectations that higher export growth will be seen at those ports; and in
the case of Buenaventura to compensate for exceptionally low containerized exports reported
in 2003.

For the high-growth hypothesis in 2020, WCSA containerized exports would reach 4.7 million
TEU and imports would amount to 2.7 million TEU. For this hypothesis imports will be
substantial in Central Chilean ports, Callao, Guayaquil and Buenaventura. Callao is expected
to import the largest number of containers on the ECSA route, which includes Chilean cargo
loaded at Chilean ports on the northbound voyages.

Some ports will remain export oriented, others predominantly imported oriented and yet
others have a balanced mix of imports and exports. The predominantly Export Ports will be
Manta, Guayaquil, Paita, Antofagasta, Valparaiso, San Antonio, San Vicente and Lirquen.
Buenaventura, Callao and Iquique will be predominantly container cargo import ports.

The results of the model show that on the Pacific route, with high load factors, a reasonable
assumption at the current time, for a 2020 scenario in which improvements are made at ports
to accommodate large vessels, there is a cost advantage in favor of the 4,000 TEU ETE vessels
in preference to PCT feeders. If Callao does not improve sufficiently to take large vessels the
PCT feeder has a cost advantage over the 2,500 TEU ETE vessel, the maximum size of vessel
used on several routes currently and also over local feeding through Guayaquil, if that port is
assumed to have carried out sufficient improvements to accommodate 4000 TEU vessels.
Calculations on other routes show the same relationships.

The model was also used to examine the possibilities of Callao developing further as a feeder
port for Guayaquil and north Chile and the possibility of ETE services terminating at Callao
and feeding Central and Southern Chilean from Callao.

For Guayaquil if Callao does not make improvements sufficient to accommodate 4,000 TEU
ships, it was shown that the least cost option would be a PCT feeder service, which is
substantially more economical than the direct use of 2,500 TEU ships. Even with
improvements at Callao, the PCT service was more economical than a combination of 4,000
TEU ships and local feeders through Callao. This reflects the impact of the proximity of ports
north of Peru to Panama, for which Callao is increasingly at a cost disadvantage as a local
transshipment hub.
EXECUTIVE SUMMARY                                                                                7




For northern Chilean ports it was found that if Callao does not improve, the least-cost option
is a PCT feeder, followed by direct calls with 2,500 TEU ships. Another option would be a
combination of 4,000 TEU ships and a local feeder through San Antonio, but this is more
costly than the direct calls by 2,500 TEU ships. The use of a feeder through Callao in
combination with a 2,500 TEU ship is the least economical of the options. If Callao does
improve the use of a combination of 4,000 TEU ships and a local feeder through Callao is
about the same cost as direct calls by 2,500 TEU ships. This would explain why there are
several direct services, particularly from Asia, with ships that make southbound calls at
Iquique. The existing weekly feeder service from Callao to Iquique and Arica is used by many
lines. This is convenient in situations where the cargo destined for the northern Chilean ports
for any one line or alliance is insufficient to warrant a direct port call.

Finally, for San Antonio it was found that the ETE direct service is less costly than a PCT
feeder or an express PCT feeder. If Callao improves to accommodate 4,000 TEU ships it would
still not be able to offer a combination of the ETE 4,000 TEU ships and local feeder service
through Callao; in fact this option is the costliest of all. This should help to dispel the notion
that Callao might serve as the transshipment hub for Central and Southern Chile.
1. Introduction
At the request of the Autoridad Portuaria Nacional (APN), CRECER was asked to conduct a
comprehensive study to advance much needed Peruvian port reform, “Report on the Progress
of Nathan’s Technical Analysis Services for Peru’s National Port Authority“. This technical
report is one of the products of this major effort. The original findings and conclusions were
first vetted informally with Peruvian port authorities in February.

The purpose of this study is provide an indication, for the medium to long term, of the
configuration of service patterns of liner container shipping on the west coast of South
America (WCSA), with a view to determining the need to provide appropriate infrastructure
for container ships likely to call at the Port of Callao in the medium to long term and to
determine the role that this port might play as a transshipment center.

The study is concerned with container liner shipping that is, of ships that carry containers and
observe a preannounced schedule.

Containerships generally service particular routes and the West Coast of South America is
seen by the shipping lines as a distinct route, much as in the same way as the lines view the
east coast of South America (ECSA); the majority of lines on the WCSA are also present on the
ECSA. For this reason several of the largest lines make operational decisions for their ships on
both coasts from one regional office in South America, which for several of the larger
companies is located in Sao Paulo.

As the lines consider their operations from the viewpoint of routes, for the analysis of
container shipping service patterns for the Port of Callao it is advisable to look at the entire
WCSA, rather than Callao in isolation.

Shipping lines make decisions, among other things, on which ports their ships will call, the
type of service pattern that they will employ and the size and characteristics of ships that they
will use. It will therefore be convenient also to approach the analysis from the point of view of
the lines.

The study seeks to answer the following questions:
10                                  CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




• How will service patterns on the WCSA be affected by:

       ⎯ The development of a dedicated container terminal at Callao

       ⎯ Callao as a sub-regional transshipment hub

       ⎯ Planned developments in other WCSA ports

       ⎯ Increases in the size of vessels

       ⎯ Expansion of the locks on the Panama Canal

• What is the effect on the Port of Callao

       ⎯ With a dedicated container terminal

       ⎯ Without a dedicated container terminal

• What are the prospects of Callao becoming a transshipment port

To answer these questions the study covers the following areas:

• Present and future service patterns of liner container shipping and of the principal factors
     that influence the nature of those patterns

• Estimates of present and likely future container cargo flows

• The competitive environment of international container shipping as it affects the WCSA

• Pertinent characteristics of the containerships presently calling at WCSA ports and likely to
     call in the future

• Infrastructure, superstructure and productivity of WCSA ports and future plans for
     development

• Transshipment patterns

Future service and transshipment patterns have been analyzed with the aid of a quantitative
model, which allows the determination of the effect on transport costs of different service
patterns, ship sizes and port developments. The model, named the service pattern analysis
(SPA) model, has been developed on spreadsheets and allows the use of a wide range of
different assumptions. While quantitative analysis of this sort is limited by the need to make
average assumptions that may not fully capture the behavioral and non-quantifiable factors
that influence decisions by shipping lines, it nevertheless serves as an important point of
reference in the analysis carried out in this study.
2. Present Service Patterns
An analysis of schedules published by individual shipping lines provides information on
container shipping service patterns. These schedules can be found on each line’s internet
website.

Container shipping lines may operate independently or in association with other lines, in
which case they form an “alliance.” Examples of alliances on the West Coast of South America
include the Eurosal alliance on the WCSA - NW Europe route, which consists of two German,
one Anglo-Dutch, one Chilean and one French shipping line; and the Americas alliance on the
East Coast of North America (ECNA) route, which includes two Chilean and one German
shipping line. Lines that operate independently of other lines on WCSA routes include,
Maersk-Sealand (M-S), Mediterranean Shipping Company (MSC) and Evergreen, the three
largest container shipping companies in the world.




WCSA Shipping Routes
The shipping schedules revealed that there are six identifiable direct major WCSA routes:

• East Coast North America (ECNA)
• Northwest Europe (NW EUR)
• Mediterranean (MED)
• Far East (Asia)
• West coast of North America (WCNA)
• East coast of South America (ECSA)

In addition there are eight international WCSA feeder routes2.




2 Based on ports at Panama, the West Coast of Mexico and in the Caribbean; local feeders based on Callao; and
  one international cabotage carrier that serves the WCSA, based in Chile. Domestic services, normally referred
  to as “cabotage,” which serve exclusively the Chilean coast have not been included in this study.
12                                  CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




Shipping Patterns by Route
Table A1 shows how each shipping line structures its service pattern to serve each of these
routes and four additional regions: the United States Gulf Coast, (USGC), the Caribbean
(Carib), the west coast of Central America and Pacific coast of Mexico (WCCA) and the west
coast of South America (WCSA). These additional regions are serviced within the schedules of
the six major routes. For example ships on the ECNA route call en route at Caribbean ports
and ships on the ASIA route call at ports on the Pacific coasts of Central and North America.
Ports have been named according to the United Nations Location Code (LOCODE). An annex
table shows the corresponding LOCODE for each of the ports mentioned in this report.

Several things may be noticed from examining Table A1:

• There are several different types of service patterns

• Shipping lines differ in the number of routes on which they provide service

• There is a considerable use of transshipment, particularly in the Caribbean area, at Panama
     and on the West Coasts of North and Central America

• There is only one direct WCSA service at present to ports, other than transshipment ports,
     in the Caribbean area

• There is only one line serving the USGC directly

• The major route serving the Far East, and the West Coasts of North, Central and South
     America has the largest amount of service coverage

The shipping schedules suggest the following categories of service patterns:

• Route end-to-end, with intermediate transshipment. Typically a round trip cycle consists of
     northbound calls at several WCSA ports, at an intermediate transshipment port and several
     port calls at the northern end of the route, with a similar pattern of call southbound. Prime
     examples of this type of service are the Americas and Eurosal alliances on the ECNA and
     NW Europe routes, respectively and all of the alliances southbound on the Far East route.
     Graphics A1 and A2 provide a schematic representation of this service pattern for the
     ECNA and NW Europe routes, respectively. On the ECNA route the vessels in these
     alliances call at the Caribbean transshipment ports of Cartagena and MIT Panama and, in
     addition to these ports, the NW Europe vessels call at Kingston, Jamaica, also a
     transshipment port. On the Far East route vessels call at the transshipment port of
     Manzanillo, Mexico.

• Route end-to-end, with no intermediate transshipment. The Asia Express and Lacas alliances
     northbound connect WCSA directly with the Far East. Asia Express vessels northbound
     proceed directly to Yokohama after leaving Paita and vessels of the Lacas alliance proceed
     directly to Yokohama after leaving Callao. Graphics A3 and A4 show the routing of typical
     vessels of the Asia Express and Lacas alliances.
PRESENT SERVICE PATTERNS                                                                                 13




• Pendulum. In a pendulum service ships connect ports in two continents with intermediate
  calls at a third continent. These intermediate calls may or may not include also a
  transshipment port. There are three examples that are pertinent to this study, two of which
  are on WCSA - Far East routes: the AMPAC II and the Asia Central America alliances. In
  the former case calls are made at WCNA and WCCA ports, in the case of the latter calls are
  made only at WCCA ports. Graphics A5 and A6 show the routing for vessels of these
  alliances. The third example of a pendulum routing is the Maersk-Sealand TA3, service,
  which connects NW Europe with WCSA via ECNA. The only WCSA port of call for ships
  on this route is San Antonio, Chile. Graphic A7 shows this pendulum service pattern and
  Maersk-Sealand’s other WCSA services.

• Circumferential. This is analogous to the “round-the-world” services on the east–west routes
  connecting Europe, North America and the Far East. In the case of WCSA, the
  circumnavigation is in a clockwise direction of South America. Vessels on the Hamburg
  Sud Magellan service depart NW Europe for the East Coast of South America then transit
  the Straits of Magellan before proceeding back to NW Europe via the WCSA and the
  Panama Canal.

• Industrial Carrier. Typically for the WCSA these are carriers of fruit in containers on an end-
  to-end service, but they generally carry only small amounts of backhaul cargo. The banana
  producer Dole operates three fast banana ships from Ecuador to the WCNA on a weekly
  schedule, which includes also a call at Paita, where reefer containers with fruits and
  vegetables are loaded.

• Feeder end-to-end (Panama/Caribbean Transshipment). Four shipping lines engage in this type
  of feeder service on the WCSA: Maersk-Sealand (MS), Mediterranean Shipping (MSC),
  which has two services, P&O Nedlloyd (PONL) and Evergreen. MS operates ships on a
  loop between Los Angeles and Peru (Callao and Paita), calling at ports in Central America
  and at Balboa. MSC has a loop from the Pacific Coast of Mexico to Peru (Callao and Paita),
  Chile, Ecuador and Pacific Coast of Colombia3; the PONL loop runs between the MIT
  terminal in Colon and Lirquen in Chile, stopping at Valparaiso, Callao and Guayaquil; and
  the Evergreen loop operates between its terminal in Colon and Valparaiso in Chile, with
  calls at Buenaventura, Guayaquil, Callao, Matarani and Iquique. MSC also has a loop
  between Freeport, Bahamas and San Vicente, Chile, with calls at San Antonio, Callao and
  Buenaventura.




3 Beginning on December 23, 2004 MSC made a radical change by dropping the Mexico – WCSA feeder and
 starting a direct transpacific service with the following rotation: HKHKG/CNCHW/CNSHA/KRPUS/
 MXZLO/COBUN/CLSAI/CLSVE/MXZLO/USLGB/HKHKG with Peru and Ecuador served by
 transhipment through Buenaventura. This is a classical use of relay transhipment with cargo being carried
 north to and south from Buenaventura on vessels of the end to end feeder service based on Freeport,
 Bahamas. With the new arrangements Callao lost a service. MSC has insufficient volume of WCSA cargo to
 make a viable WCSA trans Pacific service, but with the addition of cargo between the Far East and
 WCNA/Mexico this would be possible. Significantly this move allows MSC at a stroke to increase its capacity
 share on the WCSA-ASIA route. This will be a successful tactic if MSC correspondingly increases its cargo
 share.
14                                     CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




• Local Feeder. There are two local feeder services based on Callao. One is operated by CSAV,
     which on a 10 day rotation feeds to and from Guayaquil and Buenaventura4. The other is
     operated by Transmares and utilized by PONL, and other lines, and calls at the northern
     Chilean ports of Arica and Iquique. MS also runs two feeder services based on Balboa, one
     to Manta and Guayaquil in Ecuador and the other to Buenaventura.

Table 2-1 shows the relative importance of each of these types of service, in terms of ships
allocated and nominal and full TEU annual capacity5.




Table 2-1
West Coast of South America Container Shipping Service Patterns, 2004 (TEU 000 per annum)

             Service Pattern     Ships        Nom TEU            Full TEU         Ships (%)          TEU (%)
     End to End T/S                  47               576               445                35                  34

     End to End no T/S               25               248               185                19                  14

     Pendulum                        29               321               251                22                  19

     Circumferential                  3                 9                   7                 2                 1

     Industrial                       3                47                   38                2                 3

     Feeder End to End               21               369               266                16                  20

     Local feeder                     4               157               115                   3                 9

     Total                          132             1,726             1,307               100                100



The table shows that the traditional end-to-end (ETE) multiple port call services still dominate
WCSA routes but that pendulum services and PCT/ETE feeder services together make up
almost 40 percent of the total. Local feeder services account for a rather small part of the total.




Shipping Patterns by Shipping Line
A total of 17 shipping lines have been identified that participate in international services on
the West Coast of South America. For each of these a summary has been prepared indicating
the type of services that they operate.

To document the services patterns as they relate to WCSA ports and to quantify the carrying
capacity of ships engaged on the WCSA routes several tables have been drawn up. Tables A2
and A3 in Appendix A show the north- and southbound sequence of ports of call, respectively


4 This service was terminated at the end of 2004. Containers for Guayaquil are now relayed through Callao,
 delivered to that port on northbound ships that call at both Callao and Guayaquil.
5 There are two measurements of carrying capacity commonly cited utilizing the twenty foot equivalent
 container unit (teu): nominal and stability teus. Nominal teus are the number of teus that can be carried
 physically on a ship. Stability (or “full” as used in this report) teus are the maximum number of full
 containers that can be carried, while maintaining stability for the vessel. Most container ships will be down to
 their maximum draft with 80 per cent or less of the number of their containers full of cargo.
PRESENT SERVICE PATTERNS                                                                                      15




for each shipping service. Table A4 shows the calculation of annual capacity by shipping
service, Table A5 shows the same by trade route and Table A6 shows this by shipping line.
Table A7 provides information on round trip time for each service, differentiated by time at
sea and time in port and Table A8 shows which major shipping lines with east–west services
have ships that pass through the Panama Canal and their transshipment ports on the West
Coast of Mexico, Panama and in the Caribbean.



COMPAÑIA CHILENA DE NAVEGACIÓN INTEROCEANICA
(CCNI)
This Chile-based company covers nine of the ten areas served directly on WCSA trade routes;
the only area it does not serve is the ECSA. CCNI has a total of 19 ships in service on its
routes, of which 11 ships are committed to WCSA-Far East trade routes. The line operates
only ETE services. Ships of the line call at the transshipment ports of Cartagena, Colombia;
Manzanillo, Panama; Kingston, Jamaica; Caucedo, Dominican Republic and Manzanillo,
Mexico. CCNI is partly owned by CSAV. The line specializes in the so-called north–south
routes, that is, it does not have ships allocated exclusively to the major east–west trades
connecting the high-density traffic routes between Asia, North America, and Europe,
although its participation in the AMPAC II alliance, which calls at WCNA ports on the way to
and from the Far East, suggests that it may have an interest in greater participation in east–
west services in the future. The line has partnerships on each of the routes in which it is
engaged. CCNI (and CSAV) operate some con-bulk ships, which are able to carry both
containers and bulk cargoes6. This enables the carriage of bulk copper exports out of
Mejillones, principally to the Mediterranean, northwest Europe, and the Far East.



COMPAÑIA SUDAMERICA DE VAPORES (CSAV)
CSAV is also a Chilean based company; it is the nineteenth largest container shipping line in
the world, with 75 ships and 123,000 TEU in service as of late 2003. It serves nine of the ten
areas on WCSA trade routes. The line has a total of 21 ships in service on WCSA routes, the
only area at which CSAV ships on these routes do not make calls is the WCNA. Most of CSAV
services are end-to-end. The line briefly operated a local feeder based on Callao which served
the ports of Guayaquil and Buenaventura. CSAV transships through Cartagena, Colombia;




6 Details of the Conbulker CCNI Potrerillos can be found at www.ship-technology.com.
8 CSAV announced in January 2005 that as of February 2005 its Andex service to the Far East will be provided
  solely by CSAV, and not as previously as a joint service with NYK. The line will put 10 x 2,500 teu ships on a
  weekly service and the voyage cycle will be reduced from 77 to 70 days. There will be calls at Callao both
  north and southbound. Calls at Buenaventura will be every two weeks and only southbound. The complete
  sequence will be: HKHKG/MXZLO/COBUN/ECGYE/PECLL/CLIQQ/
  CLSAI/CLMJS/PECLL/MXZLO/JPYOK/KRPUS/CNSHA/CNNGB/TWKEL/CNCWN/HKHKG.This
  move seems to be a response to that made by MSC, noted above. The call at Mejillones would suggest that
  CSAV may use Conbulkers to supplement their northbound containers with additional cargo. It is unlikely
  that CSAV would have sufficient WCSA container volumes to justify this service on that basis alone. The
16                                   CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




Manzanillo, Panama; Kingston, Jamaica; and Manzanillo, Mexico. The Line also operates a
feeder service within the Caribbean. CSAV is predominantly a north–south operator, but has
a wholly owned subsidiary, Norasia Container Lines, which engages exclusively in east–west
services, including the WCNA. It would seem likely that the synergies of operation in the
east–west and north–south trades will be explored in the future more fully than at present.
The Line is one of the major shipping lines on both the West and the East Coast of South
America and on both coasts it has had partnerships on each of the routes on which it is
engaged.8.



HAMBURG SUD (HS)
This is a German based company that has had liner services to South America since 1871.
Initially with services to South America on the ECSA, in the 1990s HS started operating on
WCSA routes within the Eurosal alliance. The line currently participates on nine of the ten
WCSA trade routes, with no direct service only on the Mediterranean route. It has a total of 17
ships assigned to WCSA routes, of which 8 ships are committed to WCSA-Far East alliances.
In 2003 HS purchased the Taiwan-based company Kien Hung, thereby acquiring a significant
market share of WCSA and ECSA-Far East container traffic. Traditionally a north–south
carrier, HS through its participation on WCSA-Far East trade routes has made a step towards
becoming an east–west carrier. With the purchase of Kien Hung HS acquired significant intra-
Asian routes, and it has had for a long time a high market share on the ECNA and WCNA-
Australasia trade routes, positioning the company well for a more important east–west role.
HS has a WCSA-ECSA service that initially came no further north on the WCSA than
Valparaiso; recently the service was extended north to Callao and it is expected that in the
future calls will also be made at WCSA ports further north.



INTEROCEAN LINES AND TRINITY SHIPPING LINE
These lines operate a joint service on the ECNA–WCSA trade route, to which they have
assigned 2 small multipurpose ships. I/O and Trinity are essentially niche carriers, operating
on an ETE service terminating at Callao, and calling at a single ECNA port–Port Everglades.




 possibility of additional containers, for example between Mexico and the Far East and of bulk copper
 concentrates might provide viability.
PRESENT SERVICE PATTERNS                                                                      17




MAERSK SEALAND (MS)
This is the largest container ship operator in the world, with 328 containerships and 845,000
TEU in service as of late 2003. The line commands a high percentage of traffic on both the
WCSA and ECSA, having the largest market share of refrigerated container traffic on both
coasts. MS serves the WCSA with three feeder and one pendulum service: an End-To-End
service between Los Angeles and Callao, with a northbound call at Paita, and transshipment
at Balboa, Panama; a pendulum service connecting the port of San Antonio with North West
Europe via ECNA, with transshipment at Balboa; and two local feeder services, one a shuttle
between Balboa and Buenaventura and the other between Balboa and the Ecuadorian ports of
Guayaquil and Manta. MS has total of 13 vessels assigned to WCSA routes, with four vessels
serving Callao. As well as being a major north–south carrier, MS is also one of the principal
east–west carriers, with direct interface between its east–west and WCSA services at Balboa;
Manzanillo, Mexico; and Miami.



MEDITERRANEAN SHIPPING COMPANY (MSC)
MSC is the second largest container shipping company in the world, with 217 containerships
and 517,000 TEU in service as of late 2003. Until recently MSC was predominantly a north–
south carrier, but is now heavily involved in east–west trade routes. The line serves the
WCSA with two End-To-End feeder services one, based in Freeport, Bahamas, covers the
WCSA as far as San Vicente, Chile. The other connects Manzanillo, Mexico with the WCSA,
also an End-To-End service, terminating at San Vicente. A total of 10 ships are assigned to the
WCSA feeder routes. MSC transships at Freeport and Manzanillo, Mexico as well as at
Caucedo, Dominican Republic and at Cartagena9.



SEABOARD MARINE (SM)
This company operates small multipurpose ships on end-to-end services from Houston and
Miami to the WCSA as far south as Valparaiso.



CMA-CGM THE FRENCH LINE
This is the fifth largest container shipping line in the world, with 150 vessels and 299,000 TEU
in service as of late 2003. CMA-CGM is a major carrier on east–west routes. Although it has
ships engaged only on the NW Europe and Far East WCSA routes, through transshipment at
Caribbean ports and at Manzanillo, Mexico the line can offer services to all WCSA routes.
CMA-CGM assigns six ships to WCSA routes, of which five are in the Asia Central America
pendulum service and the remaining ship in the end-to-end NW Europe service.




9 The recent changes in MSC service patterns are noted above.
18                                     CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




HAPAG LLOYD CONTAINER LINE (HLCL)
This line is the fifteenth largest container shipping line in the world with 41 vessels and
155,000 TEU in service as of late 2003. It has three ships assigned to the NW Europe route and
through transshipment in the Caribbean it can offer direct services to 6 of the 10 WCSA
shipping routes.



P & O NEDLLOYD (PONL)
The fourth-largest container shipping line in the world, with 157 vessels and 420,000 TEU in
service as of late 2003, PONL has 11 vessels assigned to WCSA trade routes, 2 in the Eurosal
alliance on the NW Europe route, 6 vessels in the Lacas alliance on the Far East route and 3
vessels on an End-To-End feeder route with a base at the MIT Terminal in Panama and
covering ports on the WCSA as far south as Lirquen. PONL is a major east–west carrier and
interconnects with WCSA routes at MIT, Panama; Cartagena, Colombia; and Kingston,
Jamaica.



NIPPON YUSEN KAIKA (NYK)
NYK is the ninth largest container shipping line in the world, with 91 vessels and 234,000 TEU
in service as of late 2003. It plays an important role on east–west routes to and from Asia. The
Line has assigned 4 ships to the Andex alliance and uses Manzanillo, Mexico as a
transshipment port. It is able to serve the four Pacific Basin routes and the ECNA with this
arrangement.10



MARUBA
This line is based in Argentina and has assigned 14 ships to WCSA routes, of which 8 are
engaged in services between WCSA and the Far East. It participates in the Ampac II and Asia
Central America pendulum alliances on the Far East route and cooperates with CSAV in the
Conosur end-to-end service connecting WCSA and ECSA.



MITSUI OSK (MOL)
Mitsui OSK or MOL is the 10th largest container shipping company in the world with 72
vessels and 223,000 TEU in service as of late 2003. It has extensive east–west routes to and


10 With the break-up of the Andex alliance NYK recently announced a new service: Asia Latin America Express
 Service (ALEX), which is weekly with a round trip cyle of 70 days. The sequence of calls will be
 HKHKG/JPNGO/MXZLO/PABLB/COBUN/ECGYE/PECLL/CLIQQ/CLSAI/PECLL/PABLB/MXZLO/J
 PTOK/KRPUS/CNSHA/TWKEL/HKHKG. There are several changes in comparison to the Andex port call
 sequence: there are calls both north and southbound at Balboa; Buenaventura and Guayaquil are fed out of
 Callao; it appears that ship size has been reduced to about 1,600 nominal teus. The success of this service will
 depend heavily on coordination with East-West services passing through the Panama Canal.
PRESENT SERVICE PATTERNS                                                                          19




from Asia. The Line has assigned two ships to the Lacas alliance. It interfaces its WCSA
service and its east–west services through transshipment at Manzanillo, Mexico.



K LINE
This is the 12th largest shipping company in the world, with 63 vessels and 186,000 TEU in
service as of late 2003. It has a large participation in the east–west trade routes. K Line has
assigned 2 vessels to the Lacas alliance and there is transshipment at Manzanillo, Mexico
between its WCSA southbound ships and ships on its east–west services.



EVERGREEN
Evergreen is the 3rd largest container shipping line in the world, with 152 vessels and 442,000
TEU in service as of late 2003. It is an important line on both east–west and north–south
routes. The Line serves the WCSA with an End-To-End feeder service out of its container
terminal in Colón, Panama. The service covers WCSA ports as far south as Valparaiso.

In summary the WCSA shipping routes are served by three distinct categories of lines:

• The major east–west carriers (Maersk, Mediterranean, Evergreen, P&O Nedlloyd, CMA-
  CGM, Hapag Lloyd, NYK, MOL and K Line) for which the WCSA trade routes supply
  cargo to supplement their main east–west traffic flow.

• The predominantly north–south carriers, all of which seem to have east–west ambitions
  (CSAV, CCNI, Hamburg Sud and Maruba). Three out of the four are South America based
  and the fourth has a very long history of service to South America.

• The “niche” north–south small multipurpose carriers (Seaboard Marine and
  Interocean/Trinity) with ships that call on each service at only one port in the origin
  continent, and that combine containers with other cargo.

• Until recently only the very largest lines and a small niche carrier had individual services,
  with feeders from the West Coast of Mexico, Panama and the Caribbean. Very recently one
  of these (MSC) has started an individual End to End service between WCSA and the Far
  East and two lines (CSAV and NYK) that previously cooperated on the WCSA—Far East
  route have started their own individual services. In all three cases there are different
  patterns of port calls and each has chosen a distinct ship size, although all three have
  established a 70 day round trip cycle.

The analysis revealed that shipping lines progress through various shipping patterns as they
build up traffic. First a line will charter space with other lines or alliances; then as its traffic
grows it will become a member of an ETE alliance; as its traffic share increases, if it is an east–
west carrier with services through the Panama Canal, it will establish a feeder service based
on Panama, the West Coast of Mexico and/or the Caribbean; still further growth in traffic will
20                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




encourage the line to return to ETE services this time without partners. If the line is based in
the region and without east–west services that pass through the Panama Canal, it will
progress from chartering space to participation in an ETE alliance and finally to providing an
ETE service without partners.
3. Container Cargo Flows

Introduction
An important task in determining service patterns and the size of ship likely to be common on
the coast in the future, is to examine the container traffic existing today.

The information used in this Study is derived from a number of sources and includes some
primary data, for example for the Port of Callao. This was supplemented by secondary data,
primarily interviews with shipping lines, from international organizations such as the
Economic and Social Commission for Latin America and the Caribbean (ECLAC), the United
Nations Commission for Trade and Development (UNCTAD) and from the shipping industry
trade press. Several shipping publications, such as Containerisation International, Shipping
Digest and Fairplay publish regional or trade route reviews, which frequently include
calculations of container flows on particular trade routes. The following paragraphs discuss
the nature of primary data sources.

There are basically three sources of primary data on container cargo flow:

• International trade data
• Port statistics
• Ships’ manifests

The advantages of international trade data are that it is usually up-to-date, can be readily
obtained, and provides information by country of origin and destination for individual
commodities. The disadvantages are that it requires a considerable amount of extraction of
data, each commodity that is containerizable has to be identified and estimates made of the
percentages of each containerizable commodity that is actually containerized. This is
complicated for some commodities as there may be vigorous competition between
containerships and non-containerships, for example for the carriage of Peruvian fish-meal and
Chilean fruits. Furthermore, the data in some cases does not allow identification of the trade
route over which a commodity moves, for example for Columbian exports and imports,
which might move through either Pacific or Caribbean ports.
22                                    CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




The advantages of statistics provided by ports, are that they record numbers and details of
containers, including empty containers, and information about the route on which a ship is
engaged. The disadvantages are that generally ports only imperfectly record data, there is
usually little information about commodities carried in the containers or about the final
country of origin and destination of the cargo in the containers. Origin and destination data is
not necessarily deducible because of the widespread practice of transshipment. A container
loaded in Callao on a ship proceeding to the ECNA, might be off-loaded at a port in the
Caribbean where it may be reloaded on a ship, usually of the same line or alliance, for
example to North West Europe.

Ships’ manifests are the most complete source of information on the origin and destination of
container cargo by destination, by trade route and by overseas port of origin and destination
and frequently ports of transshipment and inland origins and destinations. The major
disadvantages are that processing the data is extremely laborious, requiring the establishment
of a codified database, and the data are usually confidential and therefore generally
unavailable to third parties.

In addition to the analysis of container cargo shipping lines need to consider empty
containers, which are related to imbalance of flow in exports and imports, the size of
containers and the type of container used, principally for “dry” or “reefer” (refrigerated)
cargo. In this study the primary concern is the flow of container cargo, the arrangements for
‘positioning” of sufficient empties and of the different types of container involves details of
logistics that each individual company solves according to the availability of containers in its
worldwide system. Solutions include reserving a certain amount of space for empty
containers aboard its regular liner vessels, swapping containers with other companies or
chartering non-liner vessels specifically for the carriage of empty containers.

Present traffic is examined first at the country level. Overall totals for the west coast of
Columbia and for Ecuador, Peru, Bolivia11 and Chile have been estimated, for both containers
with cargo and empties. Annual data is used for 2003, the latest full year for which all WCSA
countries are reporting.




Present WCSA Container Traffic
In 2003 it is estimated that on the WCSA about 1.0 million TEU with cargo were exported and
about 0.8 million TEU imported for a total of 1,8 TEU. This can be compared to the estimated
traffic on the East Coast of South America (ECSA), which in the same year consisted of about
3.1 million TEU of containers with cargo, of which 2.1 million TEU were exported and 1.0



11 Bolivian containers move through the Chilean ports of Arica and Antofagasta and are reported as transit
  movements in the data for those ports.
CONTAINER CARGO FLOWS                                                                                         23




million TEU were imported12. Container traffic in 2003 for the West Coast of South America is
summarized in Table 2-2; that for the East Coast of South America is summarized in Table 2-3.




Table 2-2
West Coast South America Container Traffic, 2003 (TEU 000)

          Container Traffic                        Exports       Imports     Total
  Containers with Cargo                      1,013              743        1,756

  Empty Containers                           297                547        844

  Total                                      1,310              1,310      2,620

  Sources: Consultants estimates based on official statistics


About 31 percent of containers on the WCSA were empty. On the ECSA there was a much
higher proportion of empties—about 44 percent of the total. The heavy imbalance of traffic
favoring exports means that empty containers have to be “repositioned” in the region in order
to be available for the greater volume of export traffic.

The data above does not include transshipment, which for the WCSA is important at Callao
and at Buenaventura. About 70,000 TEU were transshipped at Callao in 2003. On the ECSA
transshipment is important at Montevideo, Rio Grande and Santos.




Table 2-3
East Coast South America13 Container Traffic, 2003 (TEU 000)

          Container Traffic                        Exports       Imports     Total

  Containers with Cargo                      2,082              1,022      3,104

  Empty Containers                           672                1,732      2,404

  Total                                      2,754              2,754      5,508

  SOURCE: Consultants’ estimates, based on data from individual ports.




12 Comparison with the East Coast of South America is useful as most of the same shipping lines are present on
  both coasts, and there are quite a few analogous situations in the ports. However, due regard must also be
  made for essential differences between the situations on the WSCA and the ECSA. In particular service
  patterns on the ECSA are still very much influenced by the effects of the “River Plate crisis” of 2002:
  containerized imports for Argentina and Uruguay had only partially recovered in 2003 from the effect of the
  economic crisis of 2002 in the River Plate countries, which saw a reduction of 44 per cent in relation to 2001
  for Argentina and 39 per cent for Uruguay.
13 Covering the range of ports from Buenos Aires in Argentina to Fortaleza/Pecem in Brazil.
24                                             CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




WCSA Container Traffic by Country

PACIFIC COAST COLOMBIA
In 2003 official statistics showed that about 278,000 TEU were handled at the Port of
Buenaventura, the only Colombian public container port on the WCSA. On this basis it is
estimated that containers with export and import cargo accounted for 100,000 and 67,000
TEU, respectively. About 6,000 empty TEU were imported and about 39,000 TEU exported14.
The data on container movements through Buenaventura is provided in detail in Table A9,
which shows that considerable transshipment cargo is reported. The extreme variation from
year to year of import and export cargo is also noteworthy. Table 2-4 provides a summary of
container traffic at Buenaventura in 2003.



Table 2-4
Colombia, West Coast of South America Container Traffic, 2003 (TEU 000)

                 Container Traffic                     Exports        Imports      Total

     Containers with cargo                                       67        100        167

     Empty containers                                            39          6         45

     Total                                                    106          106        212

     Excludes transshipment, transit and shifting.
     SOURCES: Port of Buenaventura Port Authority.



ECUADOR
The total number of containers moving through Ecuadorian ports (Guayaquil and Manta) in
2003 is estimated to be 516,000 TEU, of which about 234,000 TEU were containers with exports
and 84,000 TEU were imports15. An estimated 174,000 TEU of empty containers were
imported and 24,000 TEU exported. Table 2-5 summarizes these findings.




14 For this report, adjustments are made in most cases to show total containers exported equal to total
  imported, which has to be the case over an average of years, unless there is disappearance of containers,
  transborder movements by road.
15 A great deal of Ecuador’s containerized exports are bananas, most of which move in industrial carriers.
  There is scope for the lines to capture a larger portion of this traffic.
CONTAINER CARGO FLOWS                                                                              25




Table 2-5
Ecuador Container Traffic, 2003 (TEU 000)

             Container Traffic                  Exports              Imports    Total
  Containers with cargo                               234                  84      318

  Empty containers                                        24              174      198

  Total                                               258                 258      516

  SOURCES: Consultants estimates.



PERU
In 2003 about 434,000 TEU of containerized cargo passed through Peruvian Pacific Coast ports
(Callao, Paita and Ilo), of which about 380,000 TEU were imports and exports and 54,000 TEU
were transshipped. In addition there were about 176,000 empty TEU, of which 15,000 were
transshipped and 15,000 moved along the coast. Container movement at the Port of Callao
over the period 1998 –2003 is shown in Table A10. Callao accounts for almost 90 percent of
port container movements in Peru and showed a strong growth over the past few years.
Exports have been increasing at an average of almost 11 percent per year and imports
increasing at more than 7 percent per year. Most of the balance of international trade is at the
Port of Paita, through which significant quantities of fruit, vegetables and fish meal are
exported in containers. Table 2-6 summarizes 2003 container traffic for Peru.




Table 2-6
Peru Container Traffic, 2003 (TEU 000)

          Container Traffic           Exports        Imports            Total   T/shipment    Cabotage

  Containers with Cargo                    158                 222        380            54

  Empty Containers                         114                  32        146            15          15

  Total                                    272                 254        526            69          15

  SOURCE: ENAPU



BOLIVIA
Bolivian exports and imports on the West Coast of South America pass mainly through the
Chilean ports of Arica and Antofagasta and are reported as transit cargo in the statistics of
those ports. It is estimated that Bolivian container traffic in 2003 totaled 46,000 TEU, of which
13,000 TEU and 22,000 TEU were containers with export and import cargo respectively. About
two thirds of Bolivian WCSA cargo passed through Arica, slightly less than one third through
Antofagasta. There is a small amount transiting the port of Iquique. Table 2-7 summarizes
Bolivian container traffic in 2003.
26                                       CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




Table 2-7
Bolivia Container Traffic, 2003 (TEU 000)

              Container Traffic                         Exports              Imports        Total

  Containers with Cargo                                           13              22             35

  Empty Containers                                                10               1             11

  Total                                                           23              23             46

  SOURCE: Chilean Navy. Maritime Statistics 2004




CHILE
Chilean exports and imports of container cargo through the ports of Arica, Iquique,
Antofagasta, Valparaiso, San Antonio, Lirquen, Talcahuano/San Vicente and Punta Arenas in
2003 totaled about 856,000 TEU, of which 541,000 TEU were exports and 315,000 TEU were
imports. Additionally, 316,000 empty TEU were imported and 90,000 TEU exported. Table
A11 provides detailed estimates of container traffic through Chilean ports in 2003. Over the
past ten years container exports and imports through Chilean ports increased on the average
at rates of about 20 and 8 percent respectively. Table 2-8 summarizes Chilean container traffic
in 2003.




Table 2-8
Chile Container Traffic, 2003 (TEU 000)

           Container Traffic             Exports            Imports                Total
  Containers with Cargo                        541                     315                 856

  Empty Containers                                 90                  316                 406

  Total                                        631                     631             1262

  SOURCE: Chilean Navy. Maritime Statistics 2004




Allocation of Cargo to Routes
The next step is to determine the general patterns of traffic flow. Comparing this traffic flow
to existing service patterns is a necessary, though not sufficient, step in providing an
understanding of why shipping lines operate on their existing service pattern configuration
and why they use specific ship sizes. It is not a sufficient explanation because the conclusions
have to be modified to take into account the economics of container ship operations, the
constraints that are present at ports on the route and the dynamics of inter-shipping line
rivalry.
CONTAINER CARGO FLOWS                                                                                       27




A preliminary allocation of containers with cargo to WCSA trade routes suggests that for
exports the Far East is the most important destination, followed by the East Coast of North
America and then by North West Europe. The most important sources of imports are North
West Europe and Asia, followed by the East Coast of North America. Table A12 shows
estimates of containers with cargo and the percentage breakdown in 2003 for the WCSA by
continent of origin and destination.16 Table A13 shows the percentage distribution by WCSA
country to each of the continents and Table A14 shows the importance of containerized cargo
with each continent. This data was originally produced in the year 2000 and revised in July
2002. As the regional distribution is by continent it does not in most cases indicate traffic on
specific routes; to do this requires examination of other evidence. For the definition of areas of
origin and destination it should be noted that Europe includes both Atlantic and
Mediterranean coasts and North America combines all three coasts: Pacific, Atlantic and Gulf.
Furthermore, information for Colombia, Mexico and Central America, which is included
under “Latin America”, aggregates both the Pacific and Caribbean coasts. Nevertheless, this
information provides a useful starting point for the distribution of cargo to the trade routes.

Several things that are important for shipping service patterns can be observed from Tables
A12 through A14:

• For WCSA, North America is the most important source of containerized imports and the
  most important destination for exports. This is true for each individual WCSA country,
  except Chile, for which Asia Pacific is more important.

• Asia Pacific is also an important source of imports for Peru, but less so for Colombia, and
  for the aggregate of Ecuador and Bolivia. Of particular note is the relatively low level of
  exports to Asia Pacific from Colombia and to a lesser extent from Peru and
  Ecuador/Bolivia.

• Europe is next to North America in importance for WCSA exports, but significantly less
  important as a source of imports.

• While the WCSA countries export more to the rest of Latin America than they import (Table
  A12), in percentage terms exports are significantly lower (Table A14), as total containerized
  exports are 60 percent greater than imports.

• Chile is the country with the highest amount of exports accounting for 57 percent of the
  WCSA total. Peru accounts for about 10 percent of the total.

• For imports Chile is again the country that imports the largest amount of containerized
  cargo (32 percent of the total), closely followed by Colombia. Peru imports about 23 percent
  of the WCSA total.




16 This information is from Global Insight and is posted on the website of the ECLAC: www.eclac.cl. It is
  derived from a data base of 77 commodities moving in international trade, it is regularly updated and
  available through purchase.
28                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




Pulling together other available and up-to-date evidence it was possible to make a rough
estimation of export and import container traffic on the WCSA. It should be noted that
transshipment, while considered to be an additional operation for ports, is contained within
WCSA exports and imports, otherwise there would be double counting of the trade route
flows. Tables 2-9 and 2-10 below provide these estimates, which are consistent with the
estimates of exports and imports by country, as reported elsewhere in this study.




Table 2-9
West Coast of South America Container Cargo Exports, 2003 Major Trade Flows (TEU 000)

      Country         Pacific Rim        Via Panama        WCSA/ECSA             Total
                      Northbound         Northbound        Southbound

  Colombia                          13             49                    5                 67

  Ecuador                           64            160                   10                234

  Peru                              87             57                   14                158

  Bolivia                            4              8                    1                 13

  Chile                          279              246                   16                541

  Total                          447              520                   46               1,013




Table 2-10
West Coast of South America Container Cargo Imports, 2003 Major Trade Flows (TEU 000)

      Country         Pacific Rim        Via Panama        WCSA/ECSA             Total
                      Southbound         Southbound        Northbound

  Colombia                          26             71                    3                100

  Ecuador                           17             60                    7                 84

  Peru                              96             94                   32                222

  Bolivia                            9             10                    3                 22

  Chile                          162              128                   25                315

  Total                          310              363                   70                743



These tables show that the greatest amount of traffic moves in a northerly direction for the
Pacific Rim, via the Panama Canal (SW to NE), as well as for container traffic moving along
the West Coast of South America and between the continent’s east and west coasts.




Allocation of Cargo to Shipping Lines
It has been possible to obtain some information on the allocation of containers to ships calling
at the ports of Valparaiso, San Antonio, Callao, and Buenaventura. This data includes both
CONTAINER CARGO FLOWS                                                                                                  29




containers with cargo, empties and transshipment, and probably shifting of containers. For
Callao the ENAPU database provides detailed information on exports and imports, containers
with cargo and empties, transshipment and shifting of containers.

Table 2-11 shows the market share for each of the largest shipping lines for the four major
WCSA ports and for all these ports combined, along with the TEU that this represents.




Table 2-11
West Coast of South America Shares of Major Shipping Lines, 2003

   Shipping Line       Valparaiso       San Antonio        Callao       Buenaventura            Total         Total TEU
                                                                                              (Percent)        (000)

  CSAV                         11%               25%           21%                    9%            18%               327

  Mediterranean                                  12%           10%                  23%             11%               200

  Maersk-Sealand                                 21%            8%                  11%             11%               197

  Hamburg Sud                  13%                5%           10%                  13%             10%               171

  CCNI                          8%               12%            9%                    6%             9%               163

  P&O Nedlloyd                 17%                             10%                  11%              9%               152

  Maruba                                          8%           10%                    6%             7%               123

  Evergreen                    13%                              4%                    5%             5%                82

  NYK                                             4%            4%                    3%             3%                56

  Hapag Lloyd                   8%                              2%                    4%             3%                51

  K Line                        5%                              2%                    1%             2%                31

  Mitsui                        4%                              2%                    2%             2%                31

  Others                       21%               13%            8%                    7%            12%               209

  Total                       100%              100%          100%                 100%            100%             1,792

  Sources: Consultants’ estimates based on databases of ENAPU and Port of Buenaventura and Port of San Antonio: “Informe de
  Cargas V Región 2000—2003.”
From this table it can be seen that:

• CSAV has a dominant position for containers in the Chilean ports and at Callao; MSC has
  the largest number of containers at Buenaventura.

• Overall CSAV has the largest market share of containers in these four ports, followed by
  Mediterranean Shipping Co. and Maersk-Sealand.

• The top six companies control almost 70 percent of the containers at these four ports and
  CSAV and its sister company CCNI control over a quarter of the total.

However it may be noted that:

• Considerable competition exists among the lines, particularly between the regional carriers,
  Maersk-Sealand, Mediterranean, Hamburg Sud and P&O Nedlloyd.

• The “top six” include two lines that are “lone wolves”: Maersk and Mediterranean. The
  other four lines cooperate on each of their routes.
30                                    CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




To roughly illustrate the importance of the main trade routes for WCSA containerized exports
and imports in terms of availability of cargo for services on each of the shipping routes, Tables
A15 and A16 have been prepared showing the weekly amount of containers to and from each
country and for WCSA as a whole, and the amount of containers available for each shipping
line or alliance, on the average, given the number of competing lines and alliances on each of
the major trade routes17. The tables overstate the amount of cargo available to each of the
competing alliance/lines on the average for North America and Europe, as there are three
North American routes and two European trade routes (NW Europe and the Mediterranean).
Some interesting observations can be made from this data, bearing in mind the limitations of
this information in its present form:

• The volumes on most routes are quite small; weekly exports total about 6,752 TEU to all
  three coasts of North America and if there are three competitors this would imply on the
  average only about 2,251 TEU for the whole of WCSA for the three North American routes.

• The competition on the Far East route is much greater, with eight alliances and lines
  participating. The weekly traffic per alliance/line is even smaller, although there are reports
  that substantial increases occurred in Chilean exports to the Far East in 2004.

• The relatively small volumes of containers with cargo have prompted the major lines to
  pool by both forming alliances on the various routes and by operating feeder services based
  on hubs outside of the WCSA.

• Some lines have also created pendulum services that pick up cargo at intermediate ports
  and that take on cargo on east–west routes (North and Central America-Asia and North
  America-Europe), rather than relying entirely on WCSA cargoes alone on their ETE
  services.

• Lines seem to have been very good at matching ship size and the amount of cargo available
  to them, so that ship size today is relatively small on the WCSA. The ability to match
  cargoes with ship size is facilitated by the fact that almost 90 percent of containerships on
  WCSA routes are chartered, from third parties, from periods of one voyage to five years.

Another way of estimating the participation of the various lines is to determine the
assignment of capacity by major route. This is complicated by the use of feeders on the
WCSA, such as those of Maersk-Sealand, Mediterranean Shipping, Evergreen and P&O
Nedlloyd that carry cargo to be distributed at transshipment ports among various trade
routes. Bearing this in mind, Table 2-12 provides an assignment of capacity by shipping line
for TEU with cargo.

These capacity calculations provide a good guide as to the amount of cargo that each line will
command; some lines will be relatively more successful than others in filling their capacity, so




17 This information is taken from the Global Insight data mentioned above.
CONTAINER CARGO FLOWS                                                                         31




the precise amount of cargo cannot be calculated. It should be noted that Table 12 does not
include local feeder services, which are discussed further in the section on transshipment.




Table 2-12
West Coast of South America Estimate of Annual Full Container Capacity, 2004, Three Major
Routes (TEU 000)

   Shipping Line     Pacific Rim      Via Panama      East Coast South America       Total

  Maersk                   54,397           161,349                                      215,746

  CSAV                     60,096            89,687                     47,699           197,483

  CCNI                     73,230            58,444                                      131,674

  Hamburg Sud              58,038            58,504                     13,057           129,598

  Mediterranean            42,165            86,837                                      129,001

  P&O Nedlloyd             74,564            36,160                                      110,724

  Maruba                   56,288                                       45,124           101,413

  Evergreen                41,659            13,886                                       55,545

  CMA-CGM                  28,616            10,854                                       39,470

  Dole                     37,960                                                         37,960

  Others                   68,651            35,200                                      103,851

  Total                   595,664           550,921                    105,880         1,252,465
4. The Competitive Environment in
Container Shipping
Container shipping is a mixture of cooperation and competition. Cooperation is usually
common until lines have a critical mass of cargo sufficient to operate their own services or
corner a “niche” trade. Lines that are able to operate independent of partners on the WCSA
are: Maersk-Sealand, Mediterranean Shipping, Evergreen and Seaboard Marine. All other
lines make some sort of arrangement to cooperate. The most common arrangement is the
alliance, which is very much in evidence on the WCSA routes. The alliance usually involves
an agreement to share shipping capacity and sometimes for the distribution of revenues and
costs. These alliances are not permanent, as witnessed in 2003, when there was a
rearrangement of several alliances on the Far East route.

In addition to competing for increased market share, lines also compete on delivery time and,
to some extent, on price, although there may be agreement within alliances to maintain a
common price structure. Little is known publicly about charges for moving containers,
although there are published rates. However, the actual rates are the result of negotiation
between individual shipping lines and shippers and this information is generally not made
public.

Delivery times can be deduced from shipping schedules and directly from the websites of the
shipping companies. On the high traffic density intercontinental east–west routes there is
intense competition between the lines to develop schedules that allow faster delivery time
than the competition. Scheduling to achieve this and at the same time to obtain a maximum
amount of cargo per ship requires careful consideration of the merits of calling at particular
ports. There are also alternatives of serving a route directly, with few calls, with a maximum
number of calls or through feeder arrangements. Direct express service on a long haul, for
instance across the Pacific, combined with a direct feeder service to WCSA from the
transshipment port, for example, Manzanillo, Mexico, can, if carefully coordinated, allow a
line to beat its rivals in delivery time. However, feeder services must be very carefully
coordinated with the mainline service in order to avoid missing connections and inordinately
long periods of transit time at the transshipment port.
34                                CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




To illustrate the advantages and disadvantages of feeder vs. direct end-to-end services, two
graphics have been prepared. In Figure A8 a comparison is made between the delivery times
offered by end-to-end service and a service using transshipment for containers between
Callao and Salerno, Italy. The ETE service is provided by the CSAV/CCNI alliance, and the
transshipment service by Maersk-Sealand. For export cargo CSAV/CCNI is able to offer
delivery port to port in 23 days, Maersk-Sealand, which transships through three ports en
route (Balboa, Charleston, Gioia Tauro), is able to offer only 31 days. For imports, however,
Maersk-Sealand, even though transhipping through three ports, is able to offer 28 days
delivery, as opposed to 35 days for CSAV/CCNI.

Figure A9 shows the delivery times for exports from San Antonio/Valparaiso to Hong Kong
by lines involved in each of the various alliances and services. It can be seen that the fastest
delivery times are offered by the Asia Express and Lacas alliances and by Maersk-Sealand and
Evergreen. The first two direct services call at few ports on the route; in the case of Lacas there
are four intermediate ports and for Asia Express there are only three. Maersk-Sealand has a
fast transit time to Balboa, but six days are spent in transit at that port, cutting down on the
advantage of fast sea transit on both legs.

In summary, there are various levels of competition and cooperation among the shipping
lines, the degree of which is influenced to a large extent by the amount of traffic that a line can
command. Transit time is also an important factor in determining service patterns. However,
there is no definitive general rule indicating preference for transshipment service or direct
delivery from the point of view of transit times on any particular route, rather each situation
has to be considered on its own merits. As traffic on a particular leg builds up there would be
increasing incentive to reschedule services to allow better coordination of the east–west and
north–south services.
5. Characteristics of Container Ships
Calling at WCSA Ports
For the purpose of assessing the needs for port superstructure and infrastructure it is
important to know the type and size of ship that the port will need to accommodate. Key
variables include:

• Length
• Breadth
• Maximum draft
• Geared or gearless
• Mainline or feeder

In Table A17 a profile is given of the general characteristics for containerships classified by
type and by capacity in nominal TEU. It should be noted that the dispersion about the average
can be quite large. For example, Panamax size containerships, which vary from 3000 to 4000
plus TEU nominal capacity and may have a summer draft of anything between just over 10
meters to 13 or even 14 meters.

A feature of Panamax ships, where breadth is constrained to 32.26 meters, is that in order to
preserve stability they are generally longer and deeper than would be the case if the
maximum breadth were not a constraint. Furthermore Panamax ships generally carry much
more water ballast than post-Panamax ships of similar nominal carrying capacity—restricting
the number of TEU with cargo that can be carried.

Table A18 shows the size distribution and principal characteristics of the fleet of 132 ships
operating in mid 2004 on the West Coast of South America. Several things of interest derive
from the table, or from the data that it summarizes:

• About two thirds of the ships are between 1,500 and 2,500 nominal TEU capacity and only
  about 10 percent of the ships exceed 2,500 TEU nominal capacity.

• The fleet has an average age of 8.2 years. The older ships are generally smaller.
36                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




• To maintain stability of the vessels, the maximum number of TEU that can be carried with
  cargo in the average ship is about 77 percent of the total number of TEU that can be carried.

• There are no Post-Panamax ships on the WCSA (in contrast to the ECSA where Maersk, for
  instance, operate 6 ships each having 37 meters breadth). There are, however, 4 ships that
  are absolute Panamax (32.26 meters breadth) and 21 ships have breadths of 32 meters or
  over.

• The maximum summer draft is 12.3 meters. 105 ships have drafts in excess of 10 meters, 74
  ships in excess of 11 meters and 26 ships in excess of 12 meters.

• The average speed is 19.3 knots, with speed increasing by size.

Another important characteristic about the containership fleet on the WCSA: only 19 ships are
owned by the company that operates them, the remainder are chartered in for periods
ranging from about one to five years, although some ships are picked up as replacements for
only one voyage. Also, all ships are equipped with their own gear that is used in several of the
ports on the coast, for lack of shore-side gantry and/or mobile cranes.
6. Ports on the West Coast of South
America

Present Characteristics
Lack of appropriate facilities and cargo handling equipment and inadequate water depth are
already adversely affecting container operations in several WCSA ports. Table A19 provides
an overview of the situation at the most important container ports, although the information
should be interpreted with caution. For example, it is not meaningful to compare dedicated
container facilities with those designed for general or bulk cargo; furthermore, the practice of
using ships’ gear makes it difficult to make conclusions about port operational efficiency. The
table suggests the following:

• The very large availability of the number and linear meters of berth for containerships at
  Callao relative to any other port on the WCSA

• Callao has the highest TEU throughput of all the ports but the resulting throughput per
  linear meter is well below that of the larger Chilean ports

• By using tides some of the larger ports can accommodate Panamax or larger ships with
  their present reported depth of water. For Guayaquil shipping lines have disputed the
  actual depth of water, one of the reasons for the increase in relaying and, until recently,
  feedering Guayaquil containers through Callao

• Eleven ports have either ship-shore gantry or mobiles cranes, or both. There are only 11
  gantry cranes on the WCSA, compared to 35 on the ECSA.

• In comparing performance, allowance must be made for the naturally low productivity at
  public wharves that are not designed to handle containers.

• The performance of the dedicated terminals, which are more legitimately comparable, in
  terms of throughput per linear meter is high for San Antonio, average for Valparaiso and
  San Vicente and relatively low for Iquique. Of the ECSA terminals only TECON Rio
38                                    CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




  Grande, exceeds the levels of throughput per linear meter registered at San Antonio
  International Terminal.

• The throughput per hectare of container terminal is much higher on the WCSA than on the
  ECSA, reflecting the relative lack of space assigned for container handling at ports for the
  former.

• Average lifts per hour at San Antonio and Valparaiso are higher than those reported by
  shipping lines for any terminal on the ECSA.

Some of the above suggest the nature of the problems facing the ports on the WCSA and the
reason for the continued use of vessel with their own cargo handling gear. As several of the
large ports, except Callao, have the capability of handling containers with shore-side cranes, a
decision to provide cranes at Callao would encourage shipping lines to change over to
gearless ships. The lines in turn would exert pressure on other ports on the WCSA to
supplement their shore-side crane capability accordingly. It is not so clear that the lack of
infrastructure or superstructure is the most important factor in determining the size of ship.
The amount of cargo commanded by each shipping line seems to be a more crucial
determinant.

In addition to considering port characteristics, information has been prepared on the number
of ships calling at each port, both in the southbound and northbound directions. This was
derived from shipping schedules for the year 2004 for each of the 132 ships18 that were
identified as being permanently assigned to the various trade routes. The results are shown in
Tables A20 and A21, from which it can be seen that:

• Both southbound and northbound Callao has the greatest number of calls, by far, of any
  port on the WCSA

• The two regional lines, CSAV and CCNI have the most port calls of all the shipping lines.

• There are a considerable number of calls at Callao by CSAV, and to a lesser, but significant,
  extent by MSC.

• Ships call much more frequently southbound than northbound at Buenaventura, Iquique
  and Antofagasta, and to a lesser extent at Arica, these being predominantly import oriented
  ports. Valparaiso and San Antonio have more southbound than northbound calls, as many
  vessels continue to San Vicente and Lirquen and bypass the former two ports on the
  northbound leg. There are no calls at all at Manta, Matarani or Chañaral in the southbound
  direction; and at Paita only Dole calls southbound, as this is where its vessels turn.

• Ships call much more frequently northbound at Manta, Paita, Mejillones and Chañaral,
  these being almost exclusively export ports. San Vicente and Lirquen are also almost




18 Ships from time to time are added or withdrawn from specific routes. There is also regular replacement for
  ships that undergo their annual surveys.
PORTS ON THE WEST COAST OF SOUTH AMERICA                                                       39




  exclusively export ports, at which vessels finish their southbound and begin their
  northbound leg.

• Callao has approximately the same number of northbound and south bound calls, reflecting
  its role as an import port southbound and as a transshipment port.



Constraints to Ship Size by Port
As argued above there is an immediate need to improve the infrastructure and superstructure
at several ports on the WCSA including Callao, Buenaventura and Guayaquil. Such
improvements would encourage shipping lines to introduce gearless ships, improve port
productivity and decrease delivery times and the cost of ocean transport. These
improvements would also provide an incentive to increase ship size, but the factor most
influencing this decision will most likely be the availability of container cargo to a particular
shipping line or alliance. There is also a need to improve channel and alongside berth water
depth, initially to avoid delays waiting for tides and subsequently to accommodate an
expected increase in the size of ships of some lines or alliances as cargo volumes increase.

Plans for upgrading and expanding container related infrastructure and superstructure have
been announced for several major ports on the WCSA. Possible constraints to the handling of
the largest ships likely to serve WCSA trade routes have been identified for each of the ports
below:



BUENAVENTURA
As the major port for Colombia on the West Coast it can be expected that every effort will be
made to keep it in condition as a port for mainline calls. Tidal conditions are such that it may
not be economical to maintain a water depth of much more than 10 meters, but with tidal
variations this should be sufficient to allow ships of 12 meters fully loaded draft and a size of
up to about 4,000 TEU nominal capacity to utilize the port. These ships would have to meet
their schedules in accord with tidal conditions for arrival and departure, which can constrain
the flexibility carriers normally require for rotations and frequency. It may suit some lines to
operate feeder services between Buenaventura and the Pacific Coast of Panama, especially
lines in the east–west trade routes that are not presently in the WCSA trade. The Port is
already providing shore side gantry cranes. In addition to the two berths at present available
for containers, other berths can be made available and suitably prepared for efficient
container handling.     However, the port’s capacity is currently constrained because it
effectively serves as a multipurpose terminal, though there is a dedicated container area.
Because of this, there is some discussion of constructing a new port, perhaps in the vicinity of
Malaga to the north of Buenaventura, which will place it in a much better position to capture
Panama Canal oriented transshipment cargo.
40                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




MANTA
There once were ambitious plans for Manta to be transformed to a transshipment port, but
given its relatively low cargo volumes and geographic disadvantage to commercial markets
relative to Guayaquil, Manta’s ambition has changed course. Manta is competing more
effectively with Esmeraldas, but not necessarily for the container trades. Manta is located
close to the shipping routes connecting Panama with the Southern Pacific and has relatively
deep water at present, with good possibilities for dredging to at least sufficient depth required
by the largest containerships on the WCSA routes envisioned for the medium to long term.
Still, it’s location is inferior to Buenaventura’s with respect to Panama transshipment traffic.
At present container cargo volumes in Manta are sufficient to encourage calls by only a very
few lines. In any case as domestic traffic volumes increase an increasing number of lines on
the WCSA routes could find Manta an attractive port of call to load export cargoes
northbound and/or drop off import cargoes southbound.



GUAYAQUIL
One of the major ports on the WCSA, Guayaquil has the disadvantage of being located on a
river subjected to heavy silting. Combined with problems of daily tidal fluctuations and low
productivity, the port is currently not favored by shipping lines and several lines have limited
services or use feeder vessels for serving Guayaquil.

Abandoning its plans to concession the port to a single terminal operator, it is now official
policy to concession cargo handling activities at Guayaquil to various operators to induce
competition.   This may result in improvements in efficiency in the near term, provided
concessionaires are required to install gantry crane service along with mechanized yard
systems. The problem with dredging, however, is likely to remain. Recognizing this, there is
growing interest in assessing the feasibility for constructing a new container terminal at the
river’s entrance, tying this investment to the concession to be awarded for the existing
terminals.   In absence of the construction of a new major deep water port to serve the
Guayaquil hinterland, the largest containerships will not call at Guayaquil. This could
encourage a large scale feeder operation based on Callao or Balboa.



PAITA
This port today is frequented northbound by several shipping lines on the WCSA routes,
including those of the Eurosal alliance, the Asia Express alliance, Mediterranean Shipping,
Dole and Maersk Sealand. The National Port Development Plan has forecast a doubling of
export cargo to the year 2020, which appears reasonable. A minimal requirement for mainline
containerships calls at Paita in the medium term would be the installation of mobile cranes
and other supplementary container handling equipment, as it is likely that there will be a
move to gearless ships, as traffic on the WCSA increases. Failing this Paita traffic would have
PORTS ON THE WEST COAST OF SOUTH AMERICA                                                      41




to move by road or through a feeder system, possibly based on Callao, both of which would
be disadvantageous for exports originating in the Paita hinterland, in the first case as a result
of the increase in cost and in the second case in an increase in delivery time to final
destination.



CALLAO
It is reasonable to expect that Callao will, in the medium term, provide necessary land side
installations, as specified in the National Port Development Plan, complete with ship-shore
gantry cranes and adequate on site storage space and that dredging will be carried out to
permit the largest ship likely to serve the WCSA in the medium to long term. In this case
Callao will remain as one of two dominant ports on the WCSA, continuing to receive calls
both northbound and southbound on many of the major WCSA routes. With improvements
in efficiency, sufficient water depth and solution of problems with land side access, Callao
would not pose a constraint on shipping lines in their choice of ship size, but rather encourage
them to use the largest and most economical ship consistent with the volume of traffic. This
portends well for Callao giving sustained growth in container trades.           In fact, today’s
domestic volume is is substantial enough to encourage transshipment activity if dedicated
fully mechanizd container terminals are developed, particularly with improvements to
Muelle 5, new construction in the south within the confines of the existing port, and re-
development of the other berths to accommodate dedicated container activity. Even with
these changes in the port, however, Callao is facing capacity shortages in the near-to-mid term
future.



MATARANI/ILO
Presently there are only occasional calls by Evergreen, CSAV and Hamburg Sud at these
ports. The National Port Development Plan forecasts only 13,000 TEUs for Ilo and 18,000
TEUs for Matarani in the year 2035, which would indicate that heavy investment for
additional infrastructure and gantry cranes or mobile cranes dedicted entirely to the handling
of containers is unlikely.



ARICA
Since October 1, 2004 a concessionnaire has been operating the main terminal at this port. The
concessionaire is committed to land-side investments which include the provision of mobile
cranes for handling of containers between the ship and shore. Arica will probably continue to
be an important port for Bolivian containerized exports and imports. The largest
containerships will probably not make direct calls at Arica in the medium term as water depth
and ship-shore handling equipment might be inadequate and traffic is insufficient to justify
such calls.
42                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




IQUIQUE
The future of Iquique lies in the continuance of large scale manufacturing and processing at
the industrial zone, which presently enjoys free trade zone privileges. Part of the port is
concessioned and traffic volumes are sufficient to encourage southbound calls by mainline
ships, particularly on the Far East route. The port is to be expanded, additional container
handling equipment purchased and dredging will be carried out to 12.5 meters. If there is
continued success of the industrial zone, then some of the largest mainline ships calling at
Iquique can be expected.



ANTOFAGASTA
The ports of Antofagasta and Mejillones, the latter located only a few kilometres to the south
of the former, are important for the export of copper, particularly in concentrate form, some of
which moves in containers. To take advantage of this important export, CCNI and CSAV
operate combination container/bulk carriers in which both containers and bulk ore can be
carried. These two ports have the potential to provide sufficient depth of water for the largest
containerships likely to call on WCSA routes, though the industry in Chile does not expect
substantial container volume growth.



VALPARAISO
Both Valparaiso and San Antonio serve the populous Central Region of Chile, and in
particular the capital Santiago. The largest containerships on WCSA routes would be
accommodated at Valparaiso, where the main container terminal is operated under a
concession.



SAN ANTONIO
San Antonio has the greatest throughput of containers with cargo on the WCSA. There are
ambitious plans to expand the port to accommodate ships with 12—13 meters draft. Recently,
two post panamax ship-shore gantries have been purchased. Export traffic is growing at well
above average rates for the WCSA and this port will essentially determine the largest ship
likely to be engaged on WCSA trade routes. The main container terminal is operated under a
concession.



SAN VICENTE
Located about 500 kilometers on the Panamerican Highway south of Santiago, this port is
operated under a private concession, and commands a significant amount of container traffic,
primarily exports. There is presently almost 12 meters depth at the container terminal and
PORTS ON THE WEST COAST OF SOUTH AMERICA                                                     43




there should be no problem accommodating the largest container vessels on the WCSA coast.
As seen in Tables A2 and A3, several lines/alliances call at San Vicente.



LIRQUEN
Located on the West side of Concepcion Bay, close to San Vicente, this port has also attracted
several of the major lines/alliances and also should have no problem with draft limitations for
the largest container vessels on the WCSA. Traffic at this port can also be expected to increase
substantially.




Summary of Constraints to Ship Size
Table 6-1 summarizes these findings, indicating the ports that would have problems attending
the very largest (4,000-plus TEU nominal capacity, 13 meters maximum depth) which, at
present rates of traffic growth, would be put into service on the WCSA in the next few years.
Most of the major shipping lines on the WCSA either have these vessels in their fleet already,
are having them built, several on the basis of guaranteed long-term charters from their
beneficial owners, or would acquire them on the charter market. These vessels, which will be
fast and with considerable reefer capacity, will only call at a limited number of ports on the
WCSA: definitely at Valparaiso or San Antonio and one of the southern Chilean ports in
Concepcion Bay (Lirquen or San Vicente). Whether or not they call at other WCSA ports
would depend on constraints to their economical operation at those ports being removed
from their service patterns.

The table assumes that WCSA ports that can be dredged to the required 14 meters will in fact
be dredged, but that other constraints may not necessarily be removed.

Water depth to accommodate the largest vessels expected in the medium term is inadequate
at all ports on the WCSA at present to permit vessels to be at their maximum draft, and not to
have to rely on tidal variation, However, at most of the ports it is technically possible to
dredge to a required 14 meters. However, this may not be economic for the river ports of
Buenaventura and Guayaquil and possibly not for Iquique. At some ports the limited traffic
might not warrant dredging to 14 meters.

Land access is a problem at ports around which major urbanization has occurred, specifically
at Buenaventura, Guayaquil, Callao, Valparaiso and San Antonio. Projects to secure efficient
land access to ports would need to be executed in each of these ports in order to facilitate the
larger cargo lots that would result from larger ship sizes.
44                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




Table 6-1
Port Constraints Limiting Entry of Optimal Size Vessels at WCSA Ports

           Port     Water      Land       Infrastructure   Operations   Equipment     Traffic
                    Depth     Access                                                  Volume

     Buenaventura    X           X              X              X            X

     Manta                                      X              X            X            X

     Guayaquil       X           X              X              X            X

     Paita                                      X              X            X            X

     Callao                      X              X              X            X

     Matarani                                   X              X            X            X

     Ilo                                        X              X            X            X

     Arica                                      X                                        X

     Iquique                                    X

     Antofagasta                                X              X            X

     Valparaiso                  X

     San Antonio                 X

     Lirquen                                    X              X            X

     San Vicente                                X



Infrastructure is only at international standards at the ports with high taffic volume and for
which private concessions have been granted: San Antonio and Valparaiso. An important
requirement for other ports to receive the larger vessels will be installation of ship-shore
gantry cranes and a fully equipped container terminal, with on site storage areas. Plans for
concessions exist at Guayaquil and Callao, which offer an opportunity for the provision of
adequate infrastructure.

Shipping lines report that cargo handling operations are efficient and the provision of
equipment sufficient in most of the ports that have been given out to concession, in
particualar: San Antonio, Valparaiso and San Vicente. Productivity should improve
significantly at the recently granted concession at Arica. Buenaventura has two gantry
cranes, but productivity is still rather low in comparison to the concessioned ports because of
the conflicting movements associated with handling various cargo types within the same
terminal area.

Finally, container traffic volumes are likely to be too small at Ilo, Matarani and Arica to
encourage calls by the largest ships. Antofagasta is a special case as the Chilean lines CCNI
and CSAV use Conbulkers to carry both containers and copper concentrates exports in bulk.
7. Traffic and Service Patterns at
Callao
An examination of service patterns inevitably has to consider the role of individual shipping
lines. Over time each line has acquired a market share that it can successfully defend or
expand, if it can provide service equal to or better than its competitors in terms of reliability,
speed of delivery and cost. As seen earlier in this report, competition is fierce among the
several lines on each of the routes. It was also seen that, without distorting reality too much,
the trade routes may be aggregated into three major routes covering, broadly, the Pacific, the
North Atlantic and the South Atlantic.

To provide some insight into the reason for existing service patterns as it concerns Callao, and
to aid in the extrapolation of the nature of these patterns in the future, a detailed analysis was
made for the containerships calling at the Port of Callao during the first eleven months of
2004. This information was made available by ENAPU in unedited form and was
subsequently expanded by the Consultants to include information about the shipping lines
and the routes on which their vessels operate, useful for the analysis of service patterns.

Referring to the period January—November 2004 an examination is made of the export and
import trade flows and the shipping patterns that have evolved to carry them. This involves
discussion of the cargo, the containers, the ships, the number and frequency of calls, the
direction that a ship is travelling when it makes the call, the size of ship and its capacity. In
addition to the tables presented here in the text, several annex tables have been prepared to
present the results. Tables A22 through A24 show the number of calls, the total number of
TEU and the average TEU handled per call, by line and by type of service. Tables A25 and
A26 show container exports and imports with cargo by route and by line and alliance, Tables
A27 and A28 show export and import of empty containers by line and alliance.
Transshipment cargo, only reported by ENAPU inbound, is shown in Table A29 and
46                                     CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




transshipment empties are given in Table A30. Finally, Table A31 compares container traffic
at Callao for the full year 2003 and the 11 months of 2004.19

There were 1,210 calls made by containerships in the period January to November 2004 and it
was possible to determine that almost 30 percent of these were calls by ships on end to end
Pacific routes, another almost 30 percent were made by ships which transit the Panama Canal
and a slightly less percentage were end to end feeder vessels, with bases on the West Coast of
Mexico, at Panama or in the Caribbean. These percentages, as seen in Table 7-1, are roughly
replicated by the percentage of TEU loaded and discharged at Callao. It can also be seen that
the number of TEU is about 50 percent greater than the number of units, reflecting the mix of
20 foot and 40 foot containers at Callao.




Table 7-1
Port of Callao Service Patterns and Cargo January—November 2004

          Type             Route            Calls          TEU            Units       Calls (%)       TEU (%)
  End to End           Pacific                  352        182,485         120,955       29.1%            31.7%

  End to End           Trans-Panama             344        177,388         120,096       28.4%            30.8%

  End to End           Feeders                  326        132,766          90,102       26.9%            23.0%

  End to End           ECSA                      99          66,821         44,336        8.1%            11.6%

  Callao base          Feeders                   57          14,886         10,158        4.7%             2.6%

  Unidentified         Unknown                   33           1,648          1,076        2.7%             0.3%

  Total                Total                  1,210        575,994         386,723      100.0%           100.0%

  SOURCE: ENAPU


The average size of vessel calling at Callao is about 1,650 total TEU capacity, for the Pacific
routes the average ship is about 2,000 TEU capacity, slightly less for the trans-Panama routes.
Feeders and ECSA route ships are smaller still and the local feeders are only about 500 TEU
capacity. The largest ship, at 2,662 TEU, is found on the Far East route. On the average slightly
less than 500 TEU are exchanged per vessel call, with the ECSA showing the highest numbers.
The largest number of TEU handled per vessel, was for a ship on the ECSA route, which
turned at Callao. On the average Callao containers take up about 25 percent of the capacity of
ships calling at the port. Table 7-2 shows these relationships by type of service and by route.




19 The data covers 99.7 percent of the ships carrying containers. Some ships have not been identified by route,
  line or alliance and these have been excluded from the analysis. It should be emphasised that the data base on
  which this is based only registers transhipment, cargo and containers, inbound and to this extent there is
  under-reporting of cargo and containers.
TRAFFIC AND SERVICE PATTERNS AT CALLAO                                                         47




Table 7-2
Port of Callao Service Patterns, Ships and Containers, January–November 2004

      Type            Route      Avge Nom        Max Nom    Max Draft   Avge TEU/    Max TEU/
                                    TEU            TEU        (m)         Call         Call

  End to End      Pacific                2,000      2,662          12          518       1,990

  End to End      Trans-Panama           1,909      2,602          12          516       1,365

  End to End      Feeders                1,417      2,097          12          407       1,660

  End to End      ECSA                   1,291      1,730          11          682       2,419

  Callao base     Feeders                 524        560            7          261         713

  Unidentified    Unknown                 487       1,540          12          50          266

  Total           Total                  1,649      2,662          12          476       2,419

  SOURCE: ENAPU




Direct Services on the Pacific Trade Routes
The Pacific trade routes consist of those covering the Far East, and the West Coast of North
America, Central America and South America.

As a point of reference, as shown in Tables 2-9 and 2-10 for 2003, it was estimated from
secondary sources that Peru exported 87,000 TEU and imported 97,000 TEU with cargo on
Pacific routes. This cargo would have moved on direct services: the Andex, Asia Central
America, Asia Express and Lacas alliances and on feeders that transshipped at other ports on
the west coast of South, Central and North America, operated by MSC, Maersk, Evergreen
and P&O Nedlloyd.

In the first 11 months of 2004, 71 different ships called at Callao on direct Pacific services.
There were 352 calls by ships in these direct services. There is a notable difference in the
number of calls by direction. There were 219 southbound calls and only 133 northbound calls.
Ampac II and Asia Express alliances do not schedule northbound calls and some scheduled
northbound calls by the Andex and Lacas alliances were missed.

The analysis revealed the following:

• Direct services accounted for about 38,000 TEU of exports to the Pacific Region and 61,000
  TEU of imports from the Region.

• For domestic (non-transshipment) cargo, ships loaded an average of 160 full TEU per call
  on northbound voyages and 65 full TEU on southbound voyages. They discharged an
  average of 73 full TEU on northbound voyages and 231 full TEU on southbound voyages.

• As a result of ships making fewer calls northbound than southbound a considerable
  amount of export cargo for destinations north of Callao in fact was loaded on ships
48                                     CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




  proceeding southbound. Exactly how much is not determinable from the available data as
  cargo loaded at Callao on the southbound voyage also includes exports to Chile.

• Empty containers accounted for about 44 percent of total domestic outbound TEU
  (excluding transshipment) for ships on northbound voyages and 51 percent on southbound
  voyages. Empty import containers accounted for only 12 percent and 16 percent
  respectively of the totals on north and southbound voyages.

• In terms of total TEU P&O Nedlloyd had a 21 percent market share, followed by Maruba
  and NYK with 14 percent each and CCNI and CSAV with 13 percent each. Hamburg Sud
  has a 10 percent market share. The top six therefore account for about 86 percent of the
  direct Pacific services.

• However, with nine competing lines, eight of which are totalling independent of each other,
  it can be maintained that competition among direct carriers on the Pacific routes is high.



Trans-Panama Direct Services
The trans-Panama trade routes consist of those covering the East and Gulf Coasts of North
America, the Caribbean, the Mediterranean, and Northwest Europe.20

As a point of reference, as shown in Tables 2-9 and 2-10, for 2003, it was estimated from
secondary sources that Peru exported 57,000 TEU and imported 94,000 TEU of containerized
cargo on trans-Panama routes. This cargo would have moved on ships of: the Americas
alliance and the direct end to end services of Interocean, Trinity and Seaboard Marine for the
East Coast of North America; the Eurosal alliance, the Condor Express service of CCNI, the
TA-3 service of Maersk Sealand for North West Europe and the Mediterranean joint venture
of CCNI and CSAV for the Mediterranean. Cargo would also have moved on MSC, Maersk,
Evergreen and P&O Nedlloyd feeders, with transshipment at ports in Panama and the
Caribbean.

In the first 11 months of 2004, 49 different ships called at Callao on direct trans-Panama
services. There were 344 calls by ships in these direct services, 24 of which were ships turning
at Callao. There were more calls southbound than northbound, although most lines called at
Callao in both directions and two lines, Interocean and Trinity, went no further south than
Callao. The Magellan service of Hamburg Sud calls only northbound on its circum-
navigational route of South America and Seaboard Marine only called southbound at Callao.
There were 187 southbound calls and only 157 northbound calls.

The analysis revealed the following:




20 The MSC end to end service, based on Freeport, Bahamas, is included in the feeder service analysis, as this is
  essentially a feeder serving the East-West routes of that company.
TRAFFIC AND SERVICE PATTERNS AT CALLAO                                                                 49




• Direct services accounted for about 45,000 TEU of export and 75,000 TEU of import cargoes.

• For domestic (non-transshipment) cargo, ships loaded an average of 220 full TEU per call
  on northbound voyages and 40 full TEU on southbound voyages. They discharged an
  average of 117 full TEU on northbound voyages and 278 full TEU on southbound voyages.

• Some export cargo for destinations north of Callao is loaded on Seaboard Marine ships
  proceeding southbound. Exactly how much is not determinable from the available data as
  cargo loaded at Callao on the southbound voyage also included exports to Chile. Cargo
  discharged on northbound voyages mostly originates in Chile.

• Empty containers accounted for about 24 percent of total domestic outbound TEU
  (excluding transshipment) for ships on northbound voyages and 71percent on southbound
  voyages. Ships on trans-Panama routes carried important numbers of empties (20,000 TEU)
  to Chile. Empty import containers accounted for only 4 percent and 12 percent, respectively
  on north- and southbound voyages.

• In terms of total TEU CSAV had a 32 percent market share, followed by Hamburg Sud with
  22 percent, CCNI with 17 percent, P&O Nedlloyd with 8 percent, Hapag Lloyd with 7
  percent and Interocean with 4 percent. The top six therefore accounted for about 90 percent
  of the direct services.

• However, with nine competing lines, eight of which are totally independent of each other, it
  can be maintained that competition among direct carriers on the trans-Panama routes is
  high.



Panama/Caribbean Transhipment Feeder Services
These PCT feeder services are based at transshipment ports at junctions with the major east–
west trades and are located in the Caribbean, Panama and the West Coast of Mexico. Five out
of the six services are operated by major east–west shipping lines; the sixth is a “grand
cabotage”,21 service based in Chile, which operates on the West Coast of South America. Two
of the services, Evergreen and P&O Nedlloyd, are based on the Atlantic side of the Panama
Canal. Tables A2 and A3 show the ports of call of these services.

The feeders pick up and drop off cargo at WCSA ports that will move subsequently, or
previously has moved, in mainline east–west vessels on diverse routes. They also carry
regional cargo that has been collected and distributed at the transshipment ports, through a
local feeder network, for example at MIT on the Caribbean Coast of Panama for the Caribbean
area.




21 Cabotage relates to shipping within national boundaries, Grand cabotage would include neighboring
 countries.
50                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




In the first 11 months of 2004 thirty-three different ships called at Callao on these PCT feeder
services. There were 326 calls by ships in these direct services, sixty-five of which were by
ships turning at Callao. There were slightly more calls northbound than southbound,
although all of these feeders either called at Callao in both directions or turned at Callao.
There were 124 southbound calls and 137 northbound calls, in addition to the 65 calls of the
Maersk and Transmares ships that turned at Callao.

The analysis revealed the following:

• These feeder services accounted for about 42,000 TEU of export and 57,000 TEU of import
  cargo.

• For domestic (non-transshipment) cargo, ships loaded an average of 191 full TEU per call
  on northbound voyages and only 21 full TEU on southbound voyages. They discharged an
  average of 45 full TEU on northbound voyages and 248 full TEU on southbound voyages.

• Some import cargo, which originates at ports north of Callao, is unloaded from MSC ships
  of the Mexico-WCSA Shuttle proceeding northbound. Exactly how much is not
  determinable from the available data as cargo unloaded at Callao on the northbound
  voyage also included imports from Chile.

• Empty containers accounted for about 18 percent of total domestic outbound TEU
  (excluding transshipment) for ships on northbound voyages and 68 percent on southbound
  voyages. Ships on PCT feeder routes carried about 8,000 empty TEU to Chile. Empty import
  containers accounted for only 10 percent and 12 percent respectively on north and
  southbound voyages.

• In terms of total TEU the two MSC services gave that line a 44 percent market share of end-
  to-end feeder services at Callao, Maersk has a 35 percent share, Evergreen a 17 percent
  share and P&O Nedlloyd, which began this service on a regular basis only in mid 2004, a 4
  percent share.

• It should be noted that MSC, Evergreen and Maersk serve Callao only with feeder services
  and that these are the three largest containership lines in the world. P&O Nedlloyd, ranked
  4th in the world has also recently started a feeder service, having previously participated
  only in end-to-end routes within alliances.



East Coast South America Services
East Coast South America Services are end-to-end routes and at present attract only three
shipping lines: CSAV, based in Chile, Maruba, based in Argentina and Hamburg Sud.

In the first 11 months of 2004 fifteen different ships called at Callao on direct trans-Panama
services. There were 98 calls by ships in these direct services, thirty-two of which were ships
turning at Callao. Maruba, which was the only line for which the direct service proceeded
TRAFFIC AND SERVICE PATTERNS AT CALLAO                                                    51




further north on the WCSA, registered 33 calls in both directions. The Hamburg Sud Andes
service was extended to Peru in November and only one vessel had called at Callao by the
end of that month. The Line has announced that it intends to extend the service further north
than Callao.

The analysis revealed the following:

• ECSA direct services accounted for about 6,000 TEU of export and 28,000 TEU of import
  cargo.

• For domestic (non-transshipment) cargo, ships loaded an average of 29 full TEU per call on
  northbound voyages and 68 full TEU on southbound voyages. They discharged an average
  of 405 full TEU on northbound voyages and 20 full TEU on southbound voyages.

• Some export and import cargo was destined for and originated in other WCSA ports.
  Exactly how much is not determinable from the available information.

• Empty containers accounted for less than 1 percent of total domestic outbound TEU
  (excluding transshipment) for ships on northbound voyages and 81 percent on southbound
  voyages. Ships on the ECSA trade route carried important amounts of empties (19,000 TEU)
  to Chile. Empty import containers accounted for less than 1 percent and 10 percent
  respectively on north and southbound voyages.

• In terms of total TEU Maruba had a 68 percent market share and CSAV had 31 percent.
8. Future Container Cargo Flows
It can be observed that on a worldwide basis the long-term growth of container traffic bears a
relationship to the growth of GDP, the influence of globalization and free trade and other
trade-enhancing agreements and a gradual encroachment of containers into breakbulk
shipping markets, in particular for refrigerated cargoes. While there are large year-on-year
variations to this general observation, over the longer period the first component consists of
an organic growth rate approximately equal to increases in GDP, generally about 3-4 percent
per year; the second component accounts for between 2 and 3 percent growth per year; and
the increases due to capturing additional breakbulk cargoes amounts to also between 2 and 3
percent per year. Growth on particular routes will also be influenced by relative exchange rate
fluctuations, which are difficult to predict, even in the short term.

Long term forecasts of GDP for the WCSA countries suggest an average annual increase of
about 4 percent. The various free trade agreements with the United States, Europe and Asian
countries, as well as those within Latin America, already agreed, being negotiated and likely,
suggest that this will also be an important feature of WCSA container growth. There is plenty
of scope for the further containerization of breakbulk commodities, particularly for
commodities such as fish - meal and fruits.

For the purpose of testing alternative scenarios for the year 2020 high, medium and low
growth rates annual growth rates starting in the reference year 2003 have been selected,
generally 8, 6 and 4 percent for high, medium and low growth respectively. In some cases
higher rates have been selected for exports: Buenaventura, Paita and Callao and the ports that
serve the Santiago and Concepción Bay hinterlands, corresponding to expectations that higher
export growth will be seen at those ports; and in the case of Buenaventura to compensate for
exceptionally low containerized exports reported in 2003.

The resulting traffic flows under these three hypotheses of growth are shown in Table A32
and Tables 8-1 and 8-2 in the text summarize these traffic flows for the high-growth
hypothesis.
54                              CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




Table 8-1
West Coast of South America Export Containers with Cargo Year 2020, High Growth Scenario
(TEU 000)

     Ports/Hinterland     Pacific Routes       Trans-Panama     ECSA Route           Total

  Buenaventura                         66               247                25                338

  Manta                                22                52                                  74

  Guayaquil                           215               540                37                792

  Paita                               101                78                                  177

  Callao                              338               197                71                606

  Arica                                56                37                                  93

  Iquique                              22                19                  7                48

  Antofagasta                          30                56                11                96

  Santiago                            838               747                61            1,646

  Concepcion Bay                      444               399                                  843

  Total                             2,132              2,370              212            4,713




Table 8-2
West Coast of South America Import Containers with Cargo, 2020, High-Growth Scenario (TEU
000)

     Ports/Hinterland     Pacific Routes       Trans-Panama     ECSA Route           Total

  Buenaventura                         96               263                11                370

  Manta

  Guayaquil                            63               222                26                311

  Paita                                    4              4                                    7

  Callao                              352               344               118                814

  Arica                                26                33                  7               67

  Iquique                             111                56                  4               170

  Antofagasta                              7              7                  4               19

  Santiago                            468               396                89                951

  Concepcion Bay                       22                19                                  41

  Total                             1,147              1,343              259            2,749




Examining the high-growth hypothesis it can be seen that export containers with cargo will
reach substantial levels in the Central and Southern Chilean ports, Callao, Paita, Guayaquil
and Buenaventura. Although for the purpose of testing the model, uniform growth rates for
each route have been applied, it can be expected that the Pacific routes will assume a
progressively more important role in the trade of each of the WCSA countries.
FUTURE CONTAINER CARGO FLOWS                                                                                      55




For this hypothesis imports will be substantial in Central Chilean ports, Callao, Guayaquil
and Buenaventura. It can be seen also that Callao is expected to import the largest number of
containers on the ECSA route, which however includes Chilean cargo loaded at Chilean ports
on the northbound voyages.

Another feature of this hypothesis is that some ports are export oriented, others
predominantly imported oriented, and yet others have a balanced mix of imports and
exports.22 Specifically these are:

1.      Predominantly export ports
        ⎯ Manta (Pacific and trans-Panama routes)

        ⎯ Guayaquil (Pacific and trans-Panama routes)

        ⎯ Paita (Pacific and trans-Panama routes)

        ⎯ Antofagasta (Pacific and trans-Panama routes)

        ⎯ Valparaiso and San Antonio (Pacific and trans-Panama routes)

        ⎯ Concepción Bay (Pacific and trans-Panama routes)

2.      Predominantly import ports

        ⎯ Buenaventura (Pacific route)

        ⎯ Callao (trans-Panama and ECSA routes)

        ⎯ Iquique (Pacific and trans-Panama routes)

3.      Balanced exports and imports

        ⎯ Buenaventura (trans-Panama route)

        ⎯ Callao (Pacific route)

The amount of container traffic with cargo and the relative importance of exports and imports
provide important indications of the types of service patterns that might be seen by the year
2020.




22 Service patterns are affected differently by the export or import orientation of container trade. The
     importance of perishable reefer cargo in the WCSA export trades results in a great deal of attention being
     paid by shjipping lines to speed and reliability, particularly for fruits and vegetables, which nowadays are
     loaded in ripened condition and delay, in some cases of only one day, can result in the rejection of the cargo
     by the consignee.
9. Service Pattern Analysis Model

Model Overview
A model has been developed as part of this study to analyze potential changes in service
patterns and their impact on shipping economics. The service pattern analysis (SPA) model is
designed to simulate different future scenarios regarding shipping service patterns serving
the West Coast of South America (WCSA) as well as to measure and compare the ship
transportation cost of each. This will help to predict possible developments in container
shipping services in response to key factors.

The service patterns described previously have been determined by the amount of traffic
available on WCSA routes, the number of shipping lines and the characteristics of their east–
west networks, the number and characteristics of ships engaged on the routes, WCSA port
conditions and the nature of competition and strategic cooperation among the lines. While
many of these determinants are behavioral and are therefore too complex to model
successfully, it is possible to show the effects of several of the determining factors; specifically
the amount of traffic that a line or alliance commands and port conditions.

The SPA model is presented graphically by the schematic in Figure 9-1. The model has been
developed in an Excel spreadsheet and is comprised of several distinct modules that are
linked to each other. The key components and structure of the model are:

• A Vessel Module contains details concerning ship characteristics and serves as a database for
  estimating future vessel operating costs. In it a series of ship types are defined covering a
  broad range of sizes of container ships, from 500 TEU feeders to 6,000 TEU Post Panamax.
  The database draws on information obtained from a variety of sources, including the US
  Army Corps of Engineers Economic Guidance Memorandum on Deep Draft Vessel
  Operating Costs. It lists vessel operating costs at sea and in port for each ship type. 2002
  costs have been adjusted to reflect more recent component cost information.

• A Ports Module lists the major ports in the WCSA region and key attributes that may affect
  their role under future service pattern scenarios. These include restrictions on port
58                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




  infrastructure, equipment and productivity that might affect their ability to handle different
  vessel sizes and traffic volumes.

• A Demand Module contains data on cargo flows in and out of the region. It consists of a Base
  Year Origin-Destination (OD) tables in which both import and export flows are organized
  by major pairs of zones, matching WCSA regions with overseas regions. Based on growth
  assumptions, Forecast Year OD tables are calculated. This enables the model to project
  growth in capacity and identify whether different service pattern scenarios will be feasible.

• A Service Pattern Deployment Module is comprised of several components that simulate
  service patterns under each scenario analyzed. Different service pattern options are
  identified and the detailed assumptions regarding their operation are made. This includes
  different types of ETE and feeder services.

• Finally, in the Service Pattern Economics component, the model results in the calculation of
  total vessel operating costs. By making assumptions about load factors and combinations of
  services, costs per TEU are estimated.



Figure 9-1
Service Pattern Analysis Model

                                       Ports Module
                                  –Development
                                  –Competition
                                  –Productivity                             Demand Module
     PROYEC
                                                                           –Base Year OD

     CRECE                                                                 –Forecast Year OD
                                                                           –Trade Growth

                                          Service Pattern
                                        Deployment Module
                                      –Service combinations




                                       Service Pattern
                                           Economics
                                  –Vessel costs per TEU




Scenarios
There are several key factors that may influence future changes to shipping patterns and
maritime transport economics. The SPA model has been designed to capture these factors and
measure their influence. These include:
SERVICE PATTERN ANALYSIS MODEL                                                                   59




• Growth in demand, as the volume of cargo flows may determine the size of vessels and
  frequency of service that are feasible;

• The influence of a potential expansion of the Panama Canal, as it would likely change the
  size of vessels that operate on Trans-Canal services and the nature of worldwide service
  patterns; and

• Improvements in the infrastructure and efficiency of regional ports, including Callao and
  other potentially competitive ports, as this may affect the size of vessels that are able to
  operate in the region and which ports function as regional transshipment hubs.

Increase in traffic growth will lead to increases in ship size and would encourage lines that are
presently not in WCSA trades to enter. If ship size is restricted as a result of limitations of
draft at WCSA ports, this would tend to lead to increases in Central America/Caribbean
based feeder services, where there is scope to increase the size of vessel used. For the east–
west carriers with options to transship at a Central American or Caribbean port, it would
become increasingly disadvantageous to maintain small ships on end-to-end routes.

Another result of increases in traffic will be market differentiation with relation to specific
ports and with relation to specific types of cargo. For example, it can be expected that specific
services will be established to serve the ports that have Santiago as their hinterland together
with the ports in the south of Chile on Concepción Bay. Increasingly ships would call only at
either Valparaiso or San Antonio and in addition either Lirquen or San Vicente. At present
there is only one service of this type, but in the future there will be more. These ships would
most likely not call at other WCSA ports. These vessels could be feeders or route end-to-end.
Related to this is the likely increase in express services for time-sensitive cargoes, particularly
reefer cargoes, which could follow a similar pattern of targeting specific geographical areas.

Examining the geographical distribution of future traffic shows three possible centers of
traffic concentration: Pacific Coast Colombia; Ecuador, Peru and Northern Chile; and Central
and Southern Chile. As traffic volumes increase there will be a tendency for these markets to
be served separately by some of the largest shipping lines, thus reducing lengthy delivery
times, which are a feature of route end-to-end services. Maersk has shown a lead in
developing these patterns on the WCSA.

Limiting the size of vessel in general implies a higher cost of transport than would be the case
if the optimal size vessel could be utilized. Limiting the size of vessel that could enter a
specific port would adversely affect that port also through reduced direct calls at that port
and increased delivery times.

In considering these factors, the following scenarios have been defined:
60                                    CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




DEMAND GROWTH SCENARIOS
Growth in volumes of containerized cargo trade between the WCSA region and overseas
markets has been estimated across a range from pessimistic to optimistic views on the future.
With a forecast horizon of 2020, three scenarios have been defined as follows:

         Growth Scenario           Annual Growth Rate            2003–2020 Growth Factor

         Low                               4%                             1.95

         Medium                            6%                             2.69

         High                              8%                             3.70



Essentially, this range of growth assumptions means that current volumes will grow by 2020
to somewhere between twice and four times current levels.



VESSEL SCENARIOS
The future of vessel sizes will depend on worldwide trends in ship building and deployment.
One of the key factors that could influence the deployment along WCSA routes is the
potential expansion of the Panama Canal, which could lead to an increase in the maximum
size of vessels that are able to transit the canal. This would affect both east–west routes that
could potentially serve WCSA via regional feeders of ETE services. The following vessel
scenarios are considered, with the High Vessel scenario implicitly assuming a Canal
expansion.

                                 Predominant Vessels
         Vessel Scenario     End to End Services to WCSA       Major East–West Routes through Panama Canal23

         Low                 2,500 nom. TEU                      3,500–4,000 nom. TEU

         High                4,000 nom. TEU                      5,000 nom. TEU




PORT DEVELOPMENT SCENARIOS
Assuming that the future brings a demand for deployment of larger vessels along WCSA
services, driven in part by increases in traffic volumes and in part by the expansion of the
Panama Canal, individual ports will be forced to respond. Some may be expected to make the
improvements in infrastructure and efficiency that are necessary to accommodate larger
vessels, while some may not. The following scenarios capture a range of possible port




23 The proposed Panama Canal expansion would enable the passage of containerships of at least 8,500 and
 maybe as large as 12,500 TEU nominal capacity. For the purpose of the analysis it has been assumed that the
 vessel is a smaller post Panama vessel of 5,000 TEU capacity, but the model allows larger ships to be
 included. The additional economies of scale for the larger ships on east-west routes would favor greater use
 of Central America/Caribbean (PCT) feeder services for the WCSA.
SERVICE PATTERN ANALYSIS MODEL                                                                                                 61




development responses, keying on the impact of relative improvements made by Callao and
its potential competitors.

      Port Scenario                    WCSA Ports serving 4000 TEU Ships                    WCSA Ports serving 2500 TEU Vessels

      Status Quo                      No major ports                                               All major ports

      Weak Callao                     South/Central Chile, Buenaventura, Guayaquil                 Callao

      Weak Guayaquil                  South/Central Chile, Buenaventura, Callao                    Guayaquil

      All Improve                     All major ports                                              No major ports




Service Pattern Options
The primary means of modeling different future scenarios is to analyze different
configurations of service patterns to serve the WCSA markets. The services currently in
operation have been discussed previously and defined by class of service. Figure 9-2 presents
graphically a hierarchy of service patterns that represents the major options for each route. It
is presented in the form of a decision tree whereby the universe of containerized cargo would
be distributed among discrete options.




Figure 9-2
Service Pattern Hierarchy


                                                                  Total Trade
 Long Distance Line Haul




                                                                   by Region




                                             End-to-End                                Panama/Carib
                                          (Route End-to-                               Transshipment
                                          End, Pendulum,                              (Feeder End-to-
                                          Circumferential)                                 End)




                                      Local               Direct                   Direct                Local
Local Distribution
Local Distribution




                                    Transship             Service                 Service              Transship




                            Relay            Hub and                                           Relay                 Hub and
                           Replay                                                             Replay
                                              Spoke                                                                   Spoke
62                                 CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




We start with the total volume of cargo in TEU that is projected for a given trade in a given
forecast year. The first step in the process of “allocating” cargo by service is the long-distance
line haul portion of the service. We define this as the trip from the out-of-region port
(destination in the case of exports, origin for imports) to the WCSA. Assuming the potential
for multiple legs on the same trip, this is the one that would enable the consolidation of cargos
onto large vessels to take advantage of the economies of scale in vessel operating costs.

There are two classes of options by our definitions: end-to-end services, which essentially
terminate in one or more out-of-region ports and one or more WCSA ports. This includes the
three classes of services currently in operation and identified previously, that have been
defined as route end-to-end, pendulum and circumferential. The second class is defined as
Panama/Caribbean transshipment (PCT) services, in which the long distance line haul segment
brings cargo to a major transshipment port in the Caribbean region, close to the major east–
west trans-Canal routes. Since WCSA cargo would piggyback on ships carrying large volumes
of cargo along the east–west routes, it offers great opportunity for economies of scale along
the long distance line-haul leg of the trip.

The second step in the allocation process is defined as local distribution, in which incoming
cargo finds its way to its final port of call (vice versa for exports). For some ports on some
trades, the ETE service will take the cargo directly to the termination port. For others, some
degree of local transshipment will be required. Depending on a variety of factors local
transshipment may be achieved by means of either a hub-and-spoke or relaying system
(described previously).

In the case of the cargos that have shipped via the Panama/Caribbean Transshipment route,
there are two major local distribution options. First, the direct feeder services operating out of
the Caribbean port can bring cargo directly to the final port of call. The second option would
be for cargo to be transshipped to one or more local transshipment ports on the WCSA from
which local feeder services would be used to bring it to its final destination. Once cargo has
reached a WCSA transshipment port, the options for transshipment remain between the hub-
and-spoke and relaying types of service. This option essentially requires two transshipment
moves, one at a Panama/Caribbean hub and a second at a local WCSA transshipment hub.

Again, this hierarchy represents and classifies the services that are currently in operation.
What may change in the future is the distribution of cargoes among these services and the
characteristics of the services themselves. Of particular interest is how the future might
change the fortunes of major regional ports like Callao depending on economics of local
transshipment through local or regional hubs.
10. Future Container Shipping
Service Patterns

Key Factors
The current service patterns, which have been described above, have been determined by the
amount of traffic available on WCSA routes, the number of shipping lines and the
characteristics of their east–west networks, the number and characteristics of ships engaged
on the routes, WCSA port conditions and the nature of competition and strategic cooperation
among the lines. While many of these determinants are behavioral and are therefore too
complex to model successfully, it is possible to show the effects of several of the determining
factors; specifically the amount of traffic that a line or alliance commands and port conditions.
These scenarios address these important factors.

The year 2020 has been taken as the reference year for each of the scenarios, which reflect
different types of service patterns.

Increase in traffic growth will lead to increases in ship size and would also encourage the
entry of additional lines into the WCSA routes. Some of the most likely lines that would enter
the WCSA routes would already have east–west services passing through the Panama Canal;
a list of these lines is contained in Table A8.

The model calculates the ship-related costs of moving containers on the various WCSA routes.
By varying the values in the model, several aspects of service patterns can be explained. The
model allows changes in the following:

• Ship cost end-to-end services
• Ship costs east–west services passing through the Panama Canal
• Ship cost regional PCT feeder services
• Ship costs local feeder services
• Ship costs express feeder services
• All major components of the above ship costs
64                                     CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




• Load factors on all services
• Number of ports of call on routes
• Transshipment port costs

The values in the model reflect the situation as encountered at the present time and the future
values are those likely given the perspectives for traffic growth and WCSA port
developments.

The scenarios that can be tested are practically infinite, given that so many things can be
changed in the parameters of the model. But realistic values can be entered and the
subsequent results will indicate the relative costs of comparing different situations. In Table
10-1, the effect on three different service patterns of changes in the main determinants of these
patterns are examined.




Table 10-1
Effect of Changing Determinants on Service Patterns

      Increase in               ETE             EXETE             RFEED            EXRFEED            LFEED
  Traffic Growth          Positive          Positive          Positive          Positive          Positive

  Load Factors ETE        Positive

  Load Factors RFEED                                          Positive

  Load Factors LFEED                                                                              Positive

  T/S Port Costs          Positive

  WCSA Port Costs                                                               Positive          Positive

  Water Depth             Positive

  Ship Costs ETE                                              Positive

  Ship Costs RFEED        Positive

  Ship Costs LFEED        Positive                            Positive

  Ship Size ETE           Positive

  Ship Size RFEED                                             Positive

  Ship Size LFEED                                                                                 Positive

  Panama Canal Width                                          Positive

  Competition             Positive

  Note: ETE = End to End; EXETE = Express End to End; RFEED = Regional Feeder EXRFEED = Express Regional Feeder;
  LFEED = Local Feeder


• An increase in traffic growth, other things remaining equal, will have a positive effect on all
  of the service patterns, and will not favor any of the services patterns.

• Increases in load factors will tend to increase the attractiveness of the service pattern with the
  higher load factors. For example a line that is indifferent between PCT feeders and
  participating in an ETE service on a particular route will subsequent to an increase in load
  factors on the ETE be more inclined towards the ETE service.
FUTURE CONTAINER SHIPPING SERVICE PATTERNS                                                         65




• An increase in transshipment costs if of sufficient magnitude will also lead to more use of
  ETE services.

• An increase in port costs, for any reason, including congestion, low productivity rates,
  wating for tides etc. will increase the probability that a port will be feed with smaller ships,
  either regionally or locally.

• An increase in water depth at WCSA ports will tend to increase the use of ETE services, which
  will favor the economies of scale of the larger ships on the longer routes.

• An increase in ETE ship costs will favor the greater use of regional feeders. Conversely, an
  increase in regional feeder costs will favor the greater use of ETE services.

• An increase in local feeder ship costs will favor the greater use of both regional feeders and
  ETE services.

• An increase in ship size will favor the services on which the ships are employed.

• An increase in the width of the Panama Canal locks will tend to increase the use of regional
  feeders as the freight cost on the east–west services will fall.

• An increase in competition, by the entry of new lines, will tend to favor a greater use of ETE
  services, as the new lines make alliances to secure sufficient cargo to make their services
  profitable. A recent example on the ECSA is the establishment of a new service by CMA-
  CGM and Hapag Lloyd between Itajai, a port with very large frozen poultry exports, and
  Kingston, Jamaica, where both companies can transship. These companies are both
  participants in the Eurosal alliance between WCSA and NW Europe, which also calls at
  Kingston.



Model Results
The model has been run for various combinations of these scenarios to try to identify likely
changes in service patterns that can be expected under different circumstances. The results of
the model are described as follows.



CALIBRATION
Since the output of the model is measured in terms of vessel transportation costs per TEU for
a range of future scenarios, it is important to reconcile the model’s results with known tariffs
and costs under current conditions. Vessel transportation cost is only one component of the
total cost of moving goods from point of origin to destination. In fact, it is generally not even
the most significant. Furthermore, market prices, or freight rates, do not always respond
directly to theoretical economic costs, as market forces come into play.
66                                    CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




A calibration run of the model has been carried out to make sure that the influence of model
parameters is consistent with current experience. Vessel and route characteristics for average
services along the three major trade routes were assumed as indicated in Table 10-2. Results
were compared with information on current services.




Table 10-2
Model Results and Current Services for Vessel and Route Characteristics for Average Services
along the Three Major Trade Routes

           Calibration Run                          WCSA Trade Route

                                          Asia          Europe            ECNA

                          M O D E L     R E S U L T S

  Vessel Size (TEU)                         2,000            2,000           2,000

  Vessel Speed (Knots)                        20                 20             20

  Round Trip Duration                         66                 64             45

  Vessel Cost (US$/TEU)                      688              647              433

                      C U R R E N T      S E R V I C E S

  Vessel Size (TEU)                         2,030            2,039           2,200

  Round Trip Duration                         70                 68             42

  Ocean Freight (US$/TEU)                                             2,000 - 3,500



The total round trip duration predicted by the model is comparable to current practices,
within 6 to 7 percent for each of the major routes. It is difficult to calibrate the resulting vessel
costs. The cost of vessel operation per the model ranges from US$433 to US$688 per TEU for
the three services. This compares with freight rates of between US$2,000 and US$3,500 per
TEU. It is worth noting that the freight rates vary widely dependant on direction of shipment,
size of container, whether or not refrigerated, etc. Previous studies have found that the vessel
transportation component generally make up about one third of the total cost structure. The
predicted vessel costs are consistent with this relationship.



VESSEL ECONOMICS
The impact of operating large vessels along WCSA routes was examined. Figure 10-1 shows
the costs per TEU for ETE services along the four major trade routes (including ECSA along
with the other three: Asia, ECNA, Europe), for both 2,500 and 4,000 TEU vessels.

We see that the conventional wisdom about economies of scale of large vessels holds true, as
the 4,000 TEU vessels yield costs that are 20–30 percent lower that the 2,500 TEU vessels.
These cost savings in shipping can be realized only if demand is sufficient to induce shipping
FUTURE CONTAINER SHIPPING SERVICE PATTERNS                                                     67




lines to deploy the vessels and ports have made the necessary improvements to accommodate
them.




Figure 10-1
Impact of Increasing Ship Size on End-to-End Services: Vessel Costs for Direct Services to Callao
by Trade Route

        700

        600

        500

        400

        300

        200

        100

        -
                     Asia              Europe               ECNA               ECSA

                  2500 TEU Vessels                                 4000 TEU Vessels




DEMAND THRESHOLD ANALYSIS
The model has been adapted to evaluate the evolution of containerized cargo flows in the
WCSA market and determine when it meets the threshold required to justify regular ETE
services with 4,000 TEU vessels. This analysis starts with the estimate of a minimum level of
cargo that would be required for an individual shipping line or alliance to deploy a string of
vessel on a regular service. Assuming load factors considered acceptable for a viable service, it
is estimated that at least 120,000 TEU in the dominant direction would be required. This
carries with it the implicit assumption of an 80% effective load factor in the dominant
direction.

The forecast of containerized cargo flows under the low, medium and high growth scenarios
was then analyzed. With growth rates ranging between 4 percent and 10 percent, depending
on the region and direction of trade, the overall level of volume is expected to grow by a
factor of between 2 and 4 by 2020. For a given forecast year, the volume of cargo in the
dominant direction (exports for the Pacific and Trans-Panama trades, and imports for ECSA
trade) is divided by the number of lines/alliances in operation. This yields an average volume
per line. If it exceeds the minimum threshold, then a service can be considered viable. Figure
10-2 summarizes the results of the analysis for the high growth scenario.
68                                                                  CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




The three curves show the growth of cargo per line in the dominant direction for the three
trades. The horizontal dashed line shows the threshold of 120,000 TEU per line. From the
points of intersection we see that the Trans-Panama and Pacific trades are expected to reach
the threshold as early as 2010 and 2011 respectively, while the ECSA trade would not
approach it even as late as 2020. This indicates that for the main trades, the demand
conditions required to justify the deployment of larger vessels are on the verge of being
satisfied. The prospects for ECSA trade are remote. An additional sensitivity analysis was run
for the high growth scenario, assuming more accelerated growth through 2008 of 15% and
10% per year for exports and imports, respectively, followed by the high scenario growth
rates through 2020. This results in demand reaching the threshold by 2007 and 2008.




Figure 10-2
WCSA Demand per Line in Dominant Direction by Trade Route—High Growth Compared with
Threshold for 4,000 TEU End-to-End Service



                                  400
     Demand per Line ('000 TEU)




                                  300
                                                                       2010
                                                                                       2011

                                  200



                                  100



                                  -
                                              04

                                                    05

                                                          06




                                                                   14

                                                                   15
                                                                   07

                                                                   08

                                                                   09



                                                                   11

                                                                   12




                                                                   17

                                                                   18



                                                                   20
                                        03




                                                                   13




                                                                   16
                                                                   10




                                                                   19
                                      20

                                             20

                                                   20

                                                         20

                                                               20




                                                                20

                                                                20

                                                                20

                                                                20
                                                                20

                                                                20



                                                                20

                                                                20




                                                                20

                                                                20

                                                                20
                                                                20
                                                                20




                                                   Pacific           Trans-Panama          ECSA           4000 TEU Threshold




SERVICE PATTERN OPTIONS FROM THE CALLAO PERSPECTIVE
A series of service pattern options to serve Callao has been examined and is compared in
Figure 10-3. This includes the situation if Callao improves to accommodate 4,000 TEU ships as
well as the scenario of maintaining the status quo. The three lower bars in the graphic indicate
possible service patterns if Callao does not improve, but other ports in the region do. ETE
direct service with 2,500 ships calling on Callao will cost US$631 per TEU. This is substantially
more costly than the US$509 that the Panama/Caribbean transshipment option yields. As
trends lead to the deployment of larger vessels along east–west routes, Panama transshipment
FUTURE CONTAINER SHIPPING SERVICE PATTERNS                                                       69




(assumed through Balboa) may become a preferred means of serving those WCSA ports that
do not improve.

Even so, the ETE direct service is still superior to an option of a direct service to an improved
Guayaquil (or other Ecuadorian port) with 4,000 TEU vessels with local feedering to Callao.
Given these costs and an unimproved Callao, it is unlikely that Guayaquil would beat
Panama as a transshipment hub serving Peru.




Figure 10-3
Service Pattern Options—Callao-Asia Vessel Costs by Service as a Function of Callao
Improvements

   ETE Direct - 4000 TEU
                                               486
           Ships
  Pan/Carib Transship w/
                                                509
     Regional Feeder
   ETE Direct - 2500 TEU
                                                       631
           Ships
  Pan/Carib Transship w/
                                                509
     Regional Feeder
ETE (4000 TEU) w/ feeder
                                                            679
     from Guayaquil

                           0    100      200          300         400      500      600    700   800
                                                             US$ per TEU


                                             Callao improves      Callao doesn't improve


The top two bars show the situation if Callao improves. Assuming an improved Callao, the
ETE direct service drops in per TEU cost from US$631 to US$486. This makes it marginally
superior in cost to the PCT option. It would not only improve current shipping economics to
Peru shippers, but it would also set Callao up to compete more effectively against regional
competitors for transshipment cargo.

The results of the model clearly show that with Callao improvements an ETE service with
4,000 TEU ships would be the lowest cost of the various service patterns. For different lines,
however, it can be expected that PCT feeder services and Express PCT services might be more
appropriate, as some lines are able to secure higher than average load factors than their rivals.
While the model demonstrates convincingly that there would be tendency to larger vessels,
there will always be opportunity for a mix with multipurpose services such as Interocean,
Trinity and Seaboard Marine finding a niche role. It would seem imperative for Callao to
adapt its facilities and its water depth to accommodate post-Panamax gearless ships, which
have a water depth requirement of up to 14 meters, as the various growth scenarios clearly
demonstrate that several lines will have sufficient traffic to justify the use of these vessels on
70                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




the Pacific routes, and with the expansion of the Panama canal, large vessels will be used also
for ETE services on the major ECNA and NW Europe routes. It may be noted that Hamburg
Sud are scheduled to introduce their six new 5,580 TEU post Panamax ships on the ECSA—
NW Europe route this year. The traffic level for ECSA as shown in Table 3 above, is about 2
million TEU northbound and one million TEU southbound. These levels of traffic will be
reached on the WCSA with a medium growth scenario, in the first few years of the next
decade.
11. Transshipment at Callao

Types of Transshipment
There are three principal types of transshipment:

• Interchange of cargo between major shipping routes
• Hub and spoke distribution
• Relaying

The interchange of cargo between routes occurs primarily at a junction of two or more trade
routes. On WCSA routes this happens, for example, in the Caribbean at Kingston, Panama
and Caucedo and in the Pacific at Manzanillo, Mexico and at Balboa. In each of these cases the
heavy volume east–west route crosses with north–south routes. Many of the large
transshipment ports, for example Salalah in Oman and Algeciras, on the south coast of Spain,
both of which are used by Maersk—Sealand, develop at these crossroads.

Hub and spoke distribution in container shipping can exist either at crossroads or on mainline
routes. In this type of system large vessels are utilized to make the long haul ocean crossing
calling at a very limited number of ports at each end of the route. At some of these ports
feeder vessels are based which on carry cargo to nearby ports that are not served directly by
the mainline vessels. There is a perfect analogy with the passenger airline industry in which
large planes are engaged on a limited number of routes between hubs and smaller planes
ferry passengers to and from regional airports. Singapore and Busan in South Korea are
classic examples of major hub ports; based at the former is a large fleet of feeder vessels that
serves ports in nearby countries. Busan serves as a hub port for ports in mainland China. A
danger to the hub and spoke system is the likelihood of poaching by carriers that offer direct
service to ports that are normally fed through the hub.

Relaying is becoming more important as shipping lines seek to rationalize their services. This
type of transshipment occurs when incoming vessels unload cargo that is destined for routes
other to that to which the vessel is assigned. This cargo is then loaded on another vessel of the
line or alliance that will carry the cargo either to its final destination, or to a transshipment
72                                  CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




port at which it can then be transferred to an appropriate vessel. Some containerized cargoes
loaded in the south of Chile are relayed through Callao.

There are large expectations at Callao, and at other ports on the WCSA, for significant
quantities of transshipment cargo in the future.

There seems to be a good chance that Callao could attract both hub and spoke and relay
transshipment but not transshipment at the intersection of trade routes.

This is because Callao is not situated at a crossroads of trade routes. There are Southern
Hemisphere routes that pass Callao, for instance those connecting Australia and New
Zealand, via the Panama Canal, with the Caribbean and East Coast of North America, which
is the most southerly route of major importance and the route on which ships pass closest to
Callao. However, an examination of the great circle course that ships on these routes follow
reveals that they pass Callao at a minimum distance of 600 nautical miles. To call at Callao
would involve additional sailing time of about 24 hours for a 25 knot ship. It would be more
appropriate to establish a crossroads interchange at a location directly on the sailing route, for
example at Panama, which also intersects with northern hemisphere Pacific routes.




Analysis of Present Transshipment at Callao
An analysis was made of transshipment cargo at the Port of Callao for eleven months of 2004.
To be meaningful, it was important to distinguish the northbound and the southbound ship
calls, and also calls for ships that are turning at Callao.

There is a limitation to this analysis as ENAPU only records transshipment cargo discharged.
This means that while it possible to know the route of the ships which discharges
transshipment cargo it is not possible, given the present configuration of the ENAPU data
base, to know how it is forwarded on from Callao. Tables A29 and A30 show transshipment
containers discharged at Callao by alliance and shipping company and by route on which the
ships are engaged, with cargo and for empties, respectively. Examining the tables in
conjunction with Tables A2 and A3 reveals the following:

• All lines and alliances had some transshipment cargo

• Three services in particular had large amounts of transshipment: CSAV Conosur service,
     Transmares and Maersk Sealand, all of which turned at Callao. This transshipment,
     together with that of the short-lived CSAV Sudamericano Pacifico feeder service accounted
     for almost 40 percent of transshipment of containers with cargo discharged at Callao. For
     these ships Callao serves as a hub for distribution to Northern Chile, Ecuador and Pacific
     Coast Colombia.
TRANSSHIPMENT AT CALLAO                                                                         73




• An additional 40 percent of transshipment cargo at Callao is discharged from ships arriving
  from the Far East, NW Europe and the ECNA. This cargo is also for distribution to ports
  north and south of Callao. In some cases ships scheduled to call at Guayaquil by-pass that
  port and drop off Guayaquil imports at Callao for subsequent shipment on a northbound
  ship. In other cases, ships are not scheduled to call at Northern Chilean ports, or the amount
  of cargo for those ports may be insufficient to warrant a direct call, in which case the cargo
  is dropped off at Callao and put on the Transmares feeder vessel or on another southbound
  ship.

• About 10 percent of transshipment cargo at Callao consists of relaying of cargo between
  northbound vessels on different routes.

• About 30 percent of transshipment containers are empties. Most of these are brought to
  Callao on southbound ships, primarily on the Far East route.

Transshipment occurs at Callao for several reasons:

• On some voyages the amount of cargo for nearby ports may be insufficient to encourage a
  shipping line to have a ship make a call on a particular trip

• Cargo may be insufficient for nearby ports to justify regular calls

• Problems (insufficient water depth, labor problems) at nearby ports make it preferable not
  to put in a large ship, where delays would be costly, but rather engage a smaller less
  expensive feeder vessel

• To rationalize services, particularly northbound, it is may be more economical ships to
  minimize the number of port calls in Chile by transshipping between ships on different
  routes at Callao. In order for this to happen, Callao has to offer faster transfer rates and/or
  lower cost for transshipment than competitor ports.



Future Transshipment


SERVICE PATTERN OPTIONS FROM THE GUAYAQUIL
PERSPECTIVE
Similar comparisons to those made for Callao were also made from the Guayaquil perspective
and are displayed in Figure 11-1. The two bottom lines show the options for an unimproved
Guayaquil, as a function of conditions in Callao. The two bottom lines show two major
options with no improvements in Callao. The ETE direct is significantly more costly than the
PCT option (US$631 versus US$464). If ETE services for the overall region trended towards
larger vessels, it is likely that ports such as Guayaquil would be served by PCT services as
smaller ETE services either disappear or decline in frequency.
74                                  CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




Figure 11-1
Guayaquil–Asia Vessel Costs by Service as a Function of Callao Improvements



  ETE (4000 TEU) w/ feeder
        from Callao
                                                      679




     ETE Direct - 2500 TEU
             Ships
                                                    631




     Pan/Carib Transship w/
        Regional Feeder
                                            464



                              0   100     200     300        400      500     600     700    800
                                                        US$ per TEU
                                           Callao improves   Callao doesn't improve




If Callao were to improve in such a scenario and be included along the ETE direct route with
4,000 TEU ships, then it might potentially serve as a transshipment option for Guayaquil. Our
analysis estimates a cost per TEU for this scenario of US$679, which is still greater than the
ETE direct cost of US$631 and substantially more than the PCT service. This reflects the
impact of the proximity of ports north of Peru to Panama, for which Callao is increasingly as a
cost disadvantage as a local transshipment hub.



SERVICE PATTERN OPTIONS FROM THE IQUIQUE PERSPECTIVE
A similar analysis has been carried out from the Iquique perspective (Figure 11-2), which
shows how northern Chile ports are affected by changes in service patterns and
improvements in Callao. The bottom four bars show the situation without Callao
improvements. It is assumed that a 4,000 TEU ETE direct service would bypass Iquique,
which would be served either by a 2,500 ETE direct service or transshipment through another
regional port, such as San Antonio to the South, Callao to the north, or a PCT service via a
port such as Balboa.

We see that PCT yields the lowest cost at US$585 per TEU, followed by an 2500-TEU ETE
direct service at US$631. Feedering out of San Antonio from a 4,000-TEU ETE service would
be slightly higher at US$669. In spite of its relative geographic proximity, Callao
transshipment would be even more costly at US$753, as it would depend on the more costly
2,500-TEU ETE direct service.
TRANSSHIPMENT AT CALLAO                                                                           75




Figure 11-2
Iquique-Asia Vessel Costs by Service as a Function of Callao Improvements



       ETE (4000 TEU) w/
                                                 632
       feeder from Callao




       ETE (2500 TEU) w/
                                                           753
       feeder from Callao




     ETE (4000 TEU) w/
                                                     669
   feeder from San Antonio




    ETE Direct - 2500 TEU
                                                 631
            Ships




    Pan/Carib Transship w/
                                               585
       Regional Feeder



                             0   100   200      300         400      500       600    700   800
                                                      US$ per TEU

                                        Callao improves      Callao doesn't improve



If Callao were to improve such that the 4,000-TEU ETE direct service were to call, then the
cost to feeder Iquique out of Callao would decline to US$632. This becomes virtually
equivalent to the cost of direct service to Iquique and less than the San Antonio transshipment
option. This demonstrates Callao’s natural superiority over Central and Southern Chile’s
ports as a regional transshipment hub to serve Northern Chile.



SERVICE PATTERN OPTIONS FROM THE SAN ANTONIO
PERSPECTIVE
Finally, this analysis was carried out from the San Antonio perspective to identify the
potential impact of Callao improvements. The results are displayed in Figure 11-3. With no
improvements to Callao, we see in the three lower bars (red) that the 4,000-TEU direct service
to San Antonio is superior to various options of feedering out of Panama and the Caribbean,
with either express or regional feeder services (US$476 versus US$507 and US$585,
respectively). This shows that as the distance from Panama increases moving down the
WCSA coast, the PCT option declines in strength.
76                                  CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




Figure 11-3
San Antonio-Asia Vessel Costs by Service as a Function of Callao Improvements



     ETE (4000 TEU) w/ feeder
                                                            620
           from Callao




 ETE Direct - 4000 TEU Ships                        476




       Pan/Carib Transship w/
                                                     507
          Express Feeder




       Pan/Carib Transship w/
                                                           585
         Regional Feeder



                                0   100       200          300         400         500     600   700
                                                            US$ per TEU

                                              Callao improves     Callao doesn't improve



The top bar shows a situation in which Callao improves and shipping lines opt to turn its ETE
services as Callao and use it as a transshipment hub serving points south, including central
and southern Chile. We see that the cost is still well above that of the options involving direct
calls on San Antonio. This helps to dispel the notion that Callao might serve as the
transshipment hub for southern Chile.
12. Conclusions
This study has examined and quantified present service patterns, cargo flows present and
future, ship characteristics, competition and cooperation among shipping lines, and the
present and likely future conditions at the ports on the West Coast of South America. A model
was developed to help to explain likely future service patterns.

One objective of the study was to determine the effect on service patterns of a dedicated
container terminal and, inverting the question, the effect on the Port of Callao of providing or
not a dedicated terminal. A dedicated container terminal operating at international standard
of efficiency and throughput would ensure that the port remains an essential port of call on
southbound and most northbound voyages. There is no doubt that the increase in traffic and
the port conditions at Central and Southern Chilean ports will result in the use of larger
vessels, post Panamax size, certainly before the end of the decade. These vessels will be
gearless. The model clearly demonstrated the disadvantage to Callao of only being able to
accept smaller 2,500 TEU vessels. Without a dedicated container terminal it is likely that the
larger vessels will serve only Chilean ports with sufficient water depth and other ports on the
WCSA to the north of Callao that have been improved sufficiently to accommodate the larger
vessels.

The study also looked at the prospects of Callao as a sub-regional transshipment hub and
concluded that under certain scenarios this might be possible for feeder services to northern
Chile, although other options were competitive. The prospects for attracting some feeder
traffic through Callao will be increased if there is an efficient container terminal, through
which transshipment can take place at low cost.

An    important source of transshipment would be relay cargo, which results from the
rationalization of ETE services. Some lines for reasons of economy would prefer to transship
containers at Callao between their vessels on different routes in order to rationaize their
services, which might include a reduction in the number of port calls in Chile. This relaying
activity is very important on the ECSA at Rio Grande, allowing vessels to call at either
Montevideo or Buenos Aires, thereby avoiding the costs of one port call. In the case of Chile,
vessels with northbound cargo could choose to call at either a port in the Santiago hinterland
78                                CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




(Valparaiso or San Antonio) or at a southern port (Lirquen or San Vicente) pick up all cargo
for all destinations at these ports and sort out the cargo by route through transshipment at
Callao. Relaying would also allow a better stowage of cargo, as it could combine Central and
Southern Chile exports and Callao exports in one loading operation, with better placement of
heavy cargo lower in the ship, thus enabling the carriage of less ballast and therefore more
cargo weight. MSC has just started relaying through Buenaventura, cutting out its west coast
Mexico-WCSA service. To capture relay cargo would require maximum efficiency of
operations at Callao in order to compete with other WCSA ports to the north.

The model demonstrates the effects of improvements at other ports and of increases in vessel
size, quantifying the adverse effect on Callao if, as other ports improve to the point where
they can accept the post Panamax vessels, Callao does not improve.

A dedicated container terminal at Callao is a sine qua non for the port to maintain its position
as an essential port of call for ETE services. Callao currently is able to attract most of these
services because some other ports operate at a similar, or ever lower, levels of efficiency and
have high costs. The recent loss of one of the MSC services is related to the low levels of
efficiency and the high total cost of operations at Callao.

Expanding the Panama Canal to allow the passage of post Panamax vessels           would reduce
the cost of PCT services and also allow the use of larger vessels on the trans-Panama WCSA
routes, thus reducing the cost of ETE services on the NW Europe and the ECNA routes.
Glossary of Abbreviations and
Maritime Terms
Alliance—An arrangement among shipping groups to provide a joint service.

Beam—The maximum width of a ship. An important dimension is 32.3 meters beam, the
present maximum for ships transiting the Panama Canal; ships with a greater beam are
termed Post-Panamax.

Berth-days—The number of days that a ship or ships occupy a berth.

Breakbulk—General cargo that is stowed loose in a ship’s hold.

Bulk cargo—Single dry or liquid commodities carried in bulk.

Cabotage—Cargo or shipping within national boundaries

CCNI—Compañía Chilena de Navegación Interoceánica

Classification Society—An organization that provides technical specifications and inspections
for vessels as a prerequisite for their insurance. The most well known classification society is
Lloyd’s of London.

Con-bulker—A ship designed to carry both containers and dry bulk cargoes.

Container ship—A vessel that is dedicated to the carriage of containers.

Container units—Containers regardless of their size.

CSAV—Compañía Sudamericana de Vapores

Deadweight tons—The maximum weight of cargo, stores and fuel at the load line.

Deep sea —Vessels on international routes, excluding those that are engaged in cabotage or
inland waterway transport.
80                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




Discharge—Unload.

Draught or draft—The distance between the keel (bottom) of the ship and the waterline.

ECNA—East Coast of North America

ECSA—East Coast of South America

Effective capacity—The maximum teus with cargo permitted aboard a vessel.

Effective TEUs—The same as effective capacity, sometimes referred to as “stability” teus, as
carrying a greater number of teus with cargo would threaten the stability of the vessel. Also
referred to as “full” teus.

ENAPU—Empresa Nacional de Puertos, Peru

ETE—End to end

EXETE—Express End to End

EXRFEED—Express regional feeder

FE—Far East

Feeder vessels—Vessels that distribute or feed cargo from a hub port.

FETE—Feeder end to end, also referred to in this report as Pacific/Caribbean Transhipment
(PCT) feeders.

Flag—The country in which a ship is registered, which may be different than that of domicile
of its owners or operators.

Gantry crane—A purpose-built quayside crane on rails specifically for the loading and
discharge of containers.

GDP—Gross domestic product

Grand cabotage—Coastal shipping serving more than one country.

Great circle—The line measuring the shortest distance between two points on the earth’s
surface.

Gross registered tons—A measurement of vessel size in terms of cubic feet.

Gross service time—The amount of time that a ship is alongside the berth and engaged in
cargo operations.
GLOSSARY                                                                                     81




Hatch cover—The cover to a ship’s hold.

HLCL—Hapag Lloyd Container Line

HS—Hamburg Sud, a German based shipping line.

Hold—The space below deck in which cargo or containers are stowed.

Hub port—A port, generally but not necessarily, on trading route crossroads, which receives
cargo for further distribution by sea in feeder vessels.

I/O—Interocean Lines, a US based shipping line.

Knot—An indicator of ship’s speed; a nautical mile per hour.

L Class—The six Maersk-Sealand 3,700 teu capacity ships; the name of each beginning with
the letter L. With 37.4 meters beam, these are the only Post-Panamax container ships
operating currently on the East Coast of South America.

LFEED—Local feeder

Load factor—The relationship expressed as a percentage between the actual teus with cargo
aboard a ship and the maximum permissible amount.

Load line—A mark on a ship’s side, the height of which is determined by a classification
society, indicating the maximum permissible depth to which a ship can load. This height of
this mark differs for a vessel in fresh or salt water, according to geographical areas of
operation and season.

Loading—The transfer of a container or cargo from the quay to the ship.

LOCODE—United Nations Location Code

Longshoremen—A group of persons engaged in handling cargo or containers between the
ship’s side and the storage place in the terminal.

Loop—The ports on a trade route at which vessels call.

Mainline vessels—Vessels that call at main ports on a trade route.

Manifest—An official document that itemizes and provides details of all of the cargo aboard a
ship.

Med—Mediterranean.

MIT Panama—Manzanillo International Container Terminal
82                                CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




Mobile crane—A crane that is self-propelled and can be used at various locations within a
port or sent by road to locations outside the port.

MS—Maersk – Sealand

MSC—Mediterranean Shipping Company.

Nautical mile—Standard unit of nautical measurement. It equals 1,852 meters (1.852
kilometers), or one minute (1/60th of a degree) of latitude or longitude on the equator

Net registered tons—Gross registered tons, excluding certain defined non-revenue earning
spaces.

Net service time—Gross service time less time for stoppages in cargo operations.

NM—Nautical mile,

NW Europe—Northwest Europe. The geographical area covering the Atlantic Coast of
Europe and adjacent seas and rivers from the latitude of Southern Portugal to that of
Northern Norway.

NYK—The Japanese shipping company Nippon Kaisha Yusen.

Occupancy rate—The percentage of time that a berth is occupied by a vessel.

Owned containers—Refers to those containers undertaken for shipment by a particular
shipping group, whether in their own vessels or those of other shipping groups.

Pallets—Small, generally wood, platforms on which cargo is placed to facilitate loading and
unloading of loose (breakbulk) cargo.

Panamax—The maximum size ship that can fit in the locks of the Panama Canal, currently
about 32.26 meters breadth.

PONL—The Anglo-Dutch shipping line P&O Nedlloyd.

PCT—Panama/Caribbean Transhipment. Refers to feeder ETE services that are based on
ports in Panama, the west coast of Mexico or the Caribbean.

Pilot—Professional charged with advising on the safe navigation of a ship between the berth
and a specific location with deep water outside a port. Pilots are also engaged for the
navigation of channels.

Post Panamax—Ships that have a breadth exceeding 32.26 meters.

Public wharves—Berths owned by a public authority.
GLOSSARY                                                                                          83




Queue—A waiting line. In the text this refers to a line of ships waiting for a berth, or trucks
waiting to enter the terminal. The length of the queue can be predicted by “queuing theory.”

Reefer—Refrigerated. Used especially with reference to containers, specialized ships, storage
space and equipment.

Reefer ship—A vessel that carries reefer (refrigerated) cargo. This may be entirely in
containers, on pallets or in breakbulk.

RFEED—Regional feeder, also Panama/Caribbean transhipment feeder (PCT)

Relay —Transhipment between mainline ships on different routes, generally of the same
shipping group or alliance.

RETE—Route end to end.

Roll-on/Roll-off ship—A container ship that also has the facility to permit containers or other
cargo to be rolled-on and rolled-off, for example, a car carrier.

Rubber tire gantries—A gantry crane that is self-propelled, for stacking containers in a
container yard that can be used at various locations.

Shifting—The movement of containers from one location to another on a ship.

Shippers—The owners of cargo, or their agents.

Shipping company—An organization that owns and/or operates vessels. In many cases
individual companies are part of a larger shipping group.

Slot charter—The agreement by a shipping group to place a certain number of container slots
on their ship at the disposal of another shipping group or shippers.

SM—Seaboard Marine, a U.S.-based shipping line.

Space charter—The agreement by a shipping group to place a part of its vessel’s capacity at
the disposal of other shipping groups or shippers.

Stability TEUs—The same as effective or full teus.

Stacking—The placing of containers in stacks in a container terminal.

Stevedores—A group of persons engaged in handling cargo or containers between a ship and
the shore.

Straddle carrier—A vehicle used for moving and stacking containers.
84                               CONTAINER SHIPPING SERVICE PATTERNS AND TRANSSHIPMENT POTENTIAL




String—Ships of a particular group or alliance serving a loop or trade route.

TECON—Brazilian term for container terminal

TEU—Twenty-foot container equivalent. The internationally accepted standard of comparison
used for measuring numbers of containers.

Time alongside—The amount of time that the ship is alongside the berth.

Trade route—A specific route linking two or more geographical areas on which ships sail.

Transhipment cargo—Cargo that is brought in to a terminal on one ship and shipped out on
another, without leaving the port area.

Transit cargo—Non-hinterland cargo that passes through a port, either entering or departing
the port by land.

TRG—The private container terminal at Rio Grande, Brazil.

Unloading—The transfer of a container or cargo from the ship to the quay.

USGC—United States Gulf Coast

Waiting time—The amount of time, from time of arrival, a ship waits before proceeding to a
berth.

WCCA—West Coast Central America

WCSA—West Coast of South America

WCNA—West Coast North America
Appendix A. Data Tables
Appendix B. United Nations Port
Location Codes
                 Port                       LOCODE

                        A R G E N T I N A

Bahia Blanca                      ARBHI

Buenos Aires                      ARBUE

Mar del Plata                     ARMDQ

Puerto Madryn                     ARPMY

Puerto Deseado                    ARPUD

San Antonio Este                  ARSAE

Ushuaia                           ARUSH

Zarate                            ARZAE

                          B E L G I U M

Antwerp                           BEANR

                           B R A Z I L

Paranagua                         BRPNG

Rio Grande                        BRRIG

Rio de Janeiro                    BRRIO

Santos                            BRSSZ

Septiba                           BRSPB

Vitoria                           BRVIX

                         B A H A M A S

Freeport                          BSFPO

                          C A N A D A

Vancouver                         CAVAN

                            C H I L E

Antofagasta                       CLANF

Arica                             CLARI
B-2                                                             APPENDIX B




                  Port                            LOCODE

  Chacabuco                           CLCHB

  Chañaral                           CLCNR

  Iquique                            CLIQQ

  Lirquen                             CLLQN

  Mejillones                          CLMJS

  Puerto Montt                        CLPMC

  Punta Arenas                        CLPUQ

  San Antonio                        CLSAI

  San Vicente                        CLSVE

  Valparaiso                         CLVAP

         C H I N A ,     P E O P L E ’ S      R E P U B L I C

  Chiwan                             CNCWN

  Ningbo                             CNNGB

  Shanghai                           CNSHA

  Shekou                             CNSHK

                          C O L O M B I A

  Buenaventura                       COBUN

  Cartagena                          COCTG

                         C O S T A    R I C A

  Caldera                            CRCAL

  Puerto Limon                       CRLIO

                           G E R M A N Y

  Bremerhaven                        DEBRV

  Hamburg                             DEHAM

                D O M I N I C A N     R E P U B L I C

  Caucedo                            DOCAU

  Rio Haina                          DOHAI

                           E C U A D O R

  Guayaquil                          ECGYE

  Manta                              ECMEC

                         H O N G     K O N G

  Hong Kong                          HKHKG

                             S P A I N

  Barcelona                          ESBCN

  Bilboa                             ESBIO

  Vigo                               ESVGO

  Valencia                           ESVLC
U.N. PORT LOCATION CODES                                    B-3




                   Port                            LOCODE

                               F R A N C E

  Dunkerque                             FRDKK

  Le Havre                              FRLEH

                     G R E A T        B R I T A I N

  Felixstowe                            GBFXT

  Liverpool                             GBLIV

  Thamesport                            GBTHP

  Tilbury                               GBTIL

                           G U A T E M A L A

  Puerto Quetzal                        GTPRQ

                                I T A L Y

  Gioia Tauro                           ITGIT

  Genoa                                 ITGOA

  Livorno                               ITLIV

  Salerno                               ITSAL

                              J A M A I C A

  Kingston                              JMKIN

                                J A P A N

  Moji                                  JPMOJ

  Kobe                                  JPUKB

  Yokohama                              JPYOK

                          S O U T H    K O R E A

  Busan                                 KRPUS

                              M E X I C O

  Altamira                              MXATM

  Lazaro Cárdenas                       MXLZC

  Mazatlán                              MXMZT

  Veracruz                              MXVER

  Manzanillo                            MXZLO

                           N I C A R A G U A

  Corinto                               NICIO

                          N E T H E R L A N D S

  Rotterdam                             NLRTM

                              P A N A M A

  Balboa                                PABLB

  Manzanillo                            PAMIT
B-4                                                          APPENDIX B




                   Port                             LOCODE

  Colón                                  PAONX

                                   P E R U

  Callao                                 PECLL

  Ilo                                    PEILQ

  Matarani                               PEMRI

  Paita                                  PEPAI

                                 P O L A N D

  Gdynia                                 PLGDY

                          P U E R T O     R I C O

  San Juan                               PRSJU

                            S I N G A P O R E

  Singapore                              SGSCT

                          E L    S A L V A D O R

  Acajutla                               SVAQJ

                                 T A I W A N

  Keelung                                TWKEL

                                U R U G U A Y

  Montevideo                             URMVD

                        U N I T E D     S T A T E S

  Baltimore, MD                          USBAL

  Charleston, SC                         USCHS

  Houston, TX                            USHOU

  Los Angeles, CA                        USLAX

  Long Beach, CA                         USLGB

  Miami, FL                              USMIA

  New Orleans, LA                        USMSY

  New York, NY/NJ                        USNYC

  Norfolk, VA                            USORF

  Philadelphia, PA                       USPHL

  Port Everglades, FL                    USPVS

  Savannah, GA                           USSAV

  Seattle, WA                            USSEA

  San Francisco, CA                      USSFO

                           V E N E Z U E L A

  Puerto Cabello                         VEPBL