Intermodal connections and networks the challenge and opportunity for Latin American A railroads
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1 Intermodal connections and networks the challenge and opportunity for Latin American A railroads by Anthony J. S cotti, Adam K. Prokopowicz and Jan A. B erg-andreassen International Infras tructure and Trans port G roup, LLC Adam.Prokopowicz@Infratransgrp.com 1
2 Containerized Cargoes vers us Logis tics Chains Container shipments must provide efficiency in transportation from origin to final destination Inland transportation Maritime shipment Inland transportation; including container stuffing, transhipment, container unloading, customs, etc. Maritime and land transportation (rail, road, inland waterway) are closely connected 2
3 Cargo concentration necessary to insure effective and profitable container shipments Shipping lines decide about containerized cargo routes Ports should be efficient load-centers for high volume regional containerized cargo Cargo concentration is a chance for rail transport 3
4 The Chicken and Egg Conundrum Shipping lines Cargo flows What comes first? Suitable port Cargo concentration (load-center) Transhipment capacities Inland transportation systems 4
5 Current deficiencies of Latin American containerized carg o market (1) Latin American ports are predominantly post- breakbulk ports Limited number of ports capable of accommodating post-panamax vessels A number of small and medium size ports with limited (lack) of continental load centers Reliable vessel schedules are difficult problems at ports Insufficient container handling capacities at ports Slow and unpredictable customs procedures at ports Inability of many carriers to obtain accurate documentation and timely shipment information Disturbed economics of supply chains 5
6 Current deficiencies of Latin American containerized carg o market (2) Limited rail capacities at ports - insufficient number of on-dock rail facilities Limited number of rail inland intermodal facilities. Relatively slow pace for upgrading rail infrastructure (track, signaling, etc.) even under concessions Lack of double-stack train capacities because of historical (technical) reasons and limited cargo concentration Limited availability of preferential intermodal rail rates truck shipments are often price competitive (Ma and Pa companies) Lack of government long-term policies supporting the development of rail intermodal transportation 6
7 Rail privatization and intermodal trans portation in Latin America (1) In 2005, The World Bank evaluated about 40 case studies of rail privatization Latin America cases: Argentina (5 cases) Bolivia Brazil (7 cases) Chile (3 cases) Colombia Mexico (4 cases) Peru In Latin America mainly integrated infrastructure/train operating concessions. 7
8 Rail privatization and intermodal trans portation in Latin America (2) Results of rail privatization: Positive results especially for freight Strong increase in efficiency of production Achieved higher traffic volumes and market share; not fully used possibilities for cargo growth - intermodalizm Contributed to reduced government operating and capital subsidies. Insufficient levels of investment including intermodal transportation Terms of contracts (concessions) often have often not been met: infrastructure development, network upgrade, service frequency, developing modern intermodalizm. Lack of sufficient, effective cooperation with the maritime sector (intermodalizm). 8
9 Rail privatization and intermodal trans portation in Latin America (3) Is the private sector capable of providing efficient intermodal rail transport systems? The role of government is in creating positive climate and incentives for the development of intermodal connections: regulations, tax, incentive programs, ensuring equal competitive conditions for rail and road transportation. Political support alone is not sufficient, Necessary environment must be created to insure that the development of rail intermodal transportation is economically attractive (financially and economically interesting). 9
10 Rail privatization and intermodal trans portation in Latin America (4) Creating competitive environment for intermodal rail shipments? Is that possible within current concessions? (Example: Port Veracruz) Regulate track access rights for freight train operations: Contracts: 25% U.S. network is subject to trackage rights Legally mandated (specific): Mexico specific lines to ports and cities to create competition; Canada 30 km beyond company lines Legally mandated (general rights): Europe 10 See: Paul Amos, The World Bank, Rail freight and development. March 2007, Slide presentation
11 What has been done? Approach to improving competitive pos ture of Latin American railroads for intermodal cargo o (1) Shipping lines concentrate on: Providing specialized intermodal services in North America Vessel schedules Large number of small and medium size ports limited cargo concentration main load centers in the US and Caribbean. Ports: Santos, Manaus, Rio de Janeiro, Imbituba, Rio Grande, Suape - Brazil; Puerto Cabello, Venezuela; Cartagena, Colombia; Colon, Panama (Manzanillo), Buenos Aires, Tampico and Veracuz Mexico, etc. Historical problem everybody wanted to have a small to medium size breakbulk port 11
12 What has been done? Approach to improving competitive pos ture of Latin American railroads for intermodal cargo o (2) Insufficient interest in improving Latin American portion of logistic chains: : in that rail connections : International organizations (limited regional cooperation) Governments (lack of policies and financial support) Railroads (maximize profits from current assets) Railroads: lack of regional railroad and strategy 12
13 What can we expect in Latin American markets in the future? Are there needs for rail container shipments? 13
14 Containerized Cargo Growth for Latin America 14
15 15
16 Cargo containers by country East Coas t of S outh America (ECS A) (thous ands of TEU) 16
17 Cargo containers by country West Coast of S outh America (WCS A) (thous ands of TEU) 17
18 Expected rates of growth of containerized trade Latin America and C aribbean (full and empty) Annual average increase 5.4 percent 53 percent increase in eight years to 57 million TEU 5% annual increase for Central America and Caribbean 6.9% annual increase ECSA 5% annual increase WCSA CAC %; % ECSA %; % WCSA %; % 18 Source: Korean Maritime Institute, ESCAP 2009, Workshop on port planning techniques, October 2009, Panama
19 There is a strong need for public s upport to the development of intermodal transportation solutions (rail transportation) 19
20 Examples of Rail Intermodal S upport Programs (US A) The Congestion Mitigation and Air Quality Improvement Program (CMAQ) by U.S. Department of Transportation Objective: Partnership rail, truck, ocean carriers Shift traffic to the private sector rail or marine shipping network Obtain envirinmental benefits by employing cleanest possible technologies A flexible funding source for state and local governments to support transportation projects to meet the Clean Air Act (CAA) 20
21 The Congestion Mitigation and Air Quality Improvement Program (CMAQ)- Projects (Examples) Bensenville Rail Yard Improvements,, Chicago, IL - $2.1 million (track, interlocking switches, signals, grade crossings) Third Rail Line, Cincinatti, OH $5 million (CMAQ) plus $10 million private funds to build a new rail line and relieve congestion of trains in a corridor. Waterville Intermodal Facility,, Waterville, ME, - truck-to-rail transfer facility (storage areas, staging, etc.) Cost: $3 million in that $1.2 million in CMAQ funds 21
22 Marco Polo Program European Union (1) Road freight transport is entirely dependent on fossil fuels and is thus a major CO2 contributor. Greater recourse therefore needs to be had to intermodality which makes better use of existing infrastructure and service resources by integrating short sea shipping, rail transport and inland waterways into the logistics chain. The program aims to relieve congestion of road infrastructures and improve environmental performance of transport system by shifting part of road freight to short sea shipping, rail and inland waterway 22
23 Marco Polo Program European Union (2) - Projects Projects to shift road traffic to other modes of transport by providing start-up aid for new non-road freight transport services (Maritime, rail and inland waterway services need a load factor of about 70 to 90 percent to stay viable. Funding up to 30 percent. Catalyst actions to overcome structural barriers in the market for example: high quality international rail freight services, operated on a one-stop shop basis. (Change of non-road operations) 35 percent of the project. Common learning actions. The aim is to promote cooperation and know-how exchange among operators in the freight logistics market to improve environmental performance. 50 percent financing of EU. Budget: : 75 million euros, : 450 million euros 23
24 Ques tions and Is sues Can co-modality benefit railroads? Truck friend or foe? Competitor. Co-modal solutions that work best for Latin America cargo concentration. Optional cities in Latin America for intermodal connections maritime and land cargo concentration Create intermodal networks competition Environmental advantages of rail. Co-modal partnerships between shipping lines and rail companies (similar to the US and Canada) 24
25 Thank you!! 25
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