The Great Lakes: The World’s Most Underutilized Waterway
An economic analysis of the potential of container transportation on the Great Lakes
By H.M. Verboon, Erasmus School of Economics/Master Urban Port and Transport Economics, July, 2012
Abstract
The goal of this thesis was to provide an overview of the economic opportunities of container shipping in the Great Lakes basin, with the objective to intensify trade between key markets in North West Europe and the U.S. Midwest, through the ports of Cleveland, Toledo and Rotterdam. In order to identify these economic opportunities of container shipping, an analysis has been made on doorto-door transportation rate and the transit time of the existing services on the transatlantic versus a direct service into the Great Lakes based on publicly available data from the ocean carriers and an economic model to calculate expected transportation rates and time for a 14 and 18 knots direct service, next to a feeder service briefly discussed as scenario.
From a door-to-door transportation rate perspective, the direct service from Rotterdam into the Great Lakes proves to be an economically feasible alternative for container shipping compared to the existing services in its current situation, although exceptions exist. Also under the different scenarios of lower Harbor Maintenance Tax and higher hinterland transportation rates for road and rail haulage, the direct service is able to offer competitive transportation rates. Although seasonality of the system impacts the supply chain of shippers and consignees, the economical benefits that they receive are sufficient to switch to an alternative routing during the closure of the Seaway. Also on transit time, the direct service is able to compete with the existing services on a door-to-door basis. As a result of longer in-direct routings or longer container dwell time scenarios, the 14 knots and 18 knots service is able to give shippers and consignees a substitute for existing services.
Although 4 additional shipping days does not seem a lot, it could have a severe impact on the timesensitive production or distribution lines if switching from the 18 knots direct service to the existing service. Based on the analysis, it seems that slow steaming has a larger impact in terms of transit time than longer dwell times in the ports and strongly contributes to the competitive position of a 14 knots direct service, which is assumed comparable to existing services in the base situation. Based on these two factors, a direct service from Rotterdam into the Great Lakes would be competitive enough versus the existing services, although smaller vessels are used than existing services as a result of the lock specification. Although the seasonality of the system is an issue, the economic benefits of using a direct services exceeds the additional switching costs during the period of the closure of the system, independently of the various scenarios that have been analyzed.
Especially as this period is considered to be months with a low volume of shipping as a result of
seasonal production volumes, this problem can be overcome. The feeder service on the other hand was not competitive versus the existing services. As a result of additional container handling charges and the North-American rail structure, the feeder service is not competitive on these two factors.
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