divergence regionalization final

8/2/2019 Divergence Regionalization Final

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THE IAME 2012 CONFERENCE, 6 8 SEPTEMBER, 2012, TAIPEI, TAIWAN 1

Paper Code: PD-071

THE DIVERGENCE OF REGIONALIZATION: THE

CHALLENGES OF THE MEDITERRANEAN PORTS OF

EUROPE

ELISABETH GOUVERNALa, JEAN-PAUL RODRIGUE1b and BRIAN SLACKc

a Universit Paris-Est, Institut Francais des Sciences et Technologies, des Transports, delAmnagement et des Rseaux, SPLOTT Laboratory, 2 rue de la Butte Verte, Marne-la-

Valle, France.

b Department of Global Studies and Geography, Hofstra University, Hempstead, NewYork, United States, 11549. E-mail: [email protected]

c Department of Geography, Concordia University, Montreal, Quebec, Canada.

ABSTRACT

The regionalization model exemplified by the Northern Range ports in Europe has been devel-

oped to such a degree that those ports now control most of the richest market regions of Europe.

Their dominance of all but the southern and eastern fringes of the continent makes it very diffi-

cult for ports in those regions to compete directly. The Mediterranean ports prior to the 1990s

were largely bypassed by the ships engaged in the Asia-Europe trade. Over the last twenty years

it has been common to see developments in container trade in the Mediterranean through the

establishment of transshipment hubs, whose growth dwarfed the container traffic at the oldhinterland ports in the Northern Mediterranean, and in many cases these hinterland ports were

served by feeder services from the transshipment hubs. This model has served to describe con-

tainer shipping in the Mediterranean, and with the addition of new transshipment hubs on the

coast of North Africa, this view has been reinforced. This paper has argued that this distinction

between the gateway ports of the North and the transshipment hubs in the South is a gross

oversimplification.

Keywords: Port Regionalization, Hinterland, Mediterranean.

1. INTRODUCTIONGlobalization and the setting of global supply chains, as far as Europe and North America are

concerned, imply imbalances in trade flows where imports tend to be dominant. For ports this

has incited an imported-based push in terms of hinterland development often proportional to

the level of trade imbalances. At the port level these imbalances coupled with a growth of the

cargo handled incite port authorities to establish strategies to better access the hinterland, ser-

vice their customers, as well as reconcile inbound and outbound logistics.

1 Corresponding Author.


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Port regionalization relies on strategies pursued by port authorities and inland transport actors

to improve the effectiveness of port / hinterland relations, namely by developing rail and barge

services, satellite terminals, inland ports and logistics zones (Notteboom and Rodrigue, 2005).

While an outcome has been higher levels of competition over hinterland traffic, regionalization

remains bound to commercial considerations by shippers and beneficial cargo owners. Hinter-

land development as a competitive factor is particularly relevant in the European setting due to

the shorter distances involved and therefore a higher propensity to contestability (de Langen,

2007).

At the European level a divergence in regionalization is being observed between the Northern

European and Mediterranean ports. While the impressive growth of the Asia-Europe trade

transiting through the Suez Canal should have represented a substantial opportunity for Medi-

terranean European ports to capture additional traffic and develop the hinterland, evidence un-

derlines that it is Northern European ports that have captured the most this traffic (NEA, 2011).

Shippers opt for ports in the Northern Range as gateways to European freight distribution and

such ports were able to expand their hinterland far inside Europe. This leaves a majority of portsin other regions fulfilling a role of servicing restricted markets over hinterlands that are less

contestable. A great deal of the growth taking place in Mediterranean ports (e.g. Algeciras, Gioia

Tauro and Marsalokk) is mainly attributable to transshipment. For several ports, the setting of a

transshipment function by-passed the regular stage related to hinterland development, leaving

the setting of pure transshipment hubs dependent on the strategies of maritime shipping com-

panies. Since the Mediterranean was a secondary market that still needed to be serviced, ship-

ping lines favored the setting of hub-and-spoke services that were often combined with relay

services along the Asia-Europe trade corridor. The trend is now changing as increasingly larger

ships are calling Mediterranean ports from China; trade volumes are getting significant enough

to justify such services.

Mediterranean ports compete with established economies of scale benefiting Northern Europe-

an ports, mainly Antwerp and Rotterdam. It is argued that the proximity advantages of Mediter-

ranean ports, such as Marseille and Genoa, have been bypassed by an effective regionalization

strategy pursued by Northern European ports, enabling them to service hinterlands deep within

Europe. Northern European ports appear to have had an initial advantage because of the size of

their local markets and were able to build economies of scale over ever more extensive hinter-

lands. They benefited from economy of scale, due to larger ships calling their ports compared to

Mediterranean ports. Also, due to the higher volume handled at Northern Range ports, the fre-

quency of service is higher, which promotes more effective supply chain management. Cumula-

tively, they were able to counter the proximity advantage of Mediterranean ports for the Asia

trade by expanding their hinterland accessibility in terms of capacity as well as reliability. The

setting of rail and barges services is therefore more cost effective and reliable than using Medi-

terranean ports. This hinterland service advantage became even more predominant due to the

density and proximity of economic activities in Northern Europe. They have obvious geograph-

ical advantages such as a richer hinterland in proximity to major gateways, a much denser fluvial

network (e.g. the Rhine system) which is not present around the Western Mediterranean (with

Marseille as an exception that has a limited reach; Lyon), but the decisive factor was the multi-

plying advantages of rail services and the setting of inland terminals along corridors.

The paper underlines the divergence regionalization that has taken place in Europe, particularly

vis--vis Northern European and Mediterranean ports. It is argued that the significant factor in


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this divergence relates to the fact that Northern European ports were more effective in their

regionalization, thus building on their hinterland access advantages However, the paper indi-

cates that there are growing distinctions between Mediterranean ports. Some are beginning to

follow a regionalization, albeit at a smaller scale, others are maintaining an early focus on trans-

shipment, while others in the Eastern Mediterranean are still evolving to fulfill a function where

the role of transshipment still remains to be assessed.

2. THE BUILDING OF THE NORTHERN EUROPEAN PORTS ADVANTAGE2.1 Port Ranges and Shifting Traffic Patterns

The port ranges of Europe and the Mediterranean segment the main regional markets serviced

by port activities. Although there is no formal methodology that defines the extent of a port

range, factors related to access to a specific water body, port proximity and hinterland contesta-

bility are usually considered. Figure 1 provides an overview of the Europe and the Mediterrane-

an container port traffic level as well as the main ranges concerned. The division line betweenNorthern and Southern Europe reflects the extent of the respective port hinterlands (as estimat-

ed by NEA, 2011). Although the ranges of Northern Europe are similar to those used in port

range studies (e.g. Notteboom, 1997), the Mediterranean is divided in three distinct ranges.

The Western Mediterranean range extends from Gibraltar to the southern tip of Italy, which co-

vers the major economic regions of Mediterranean Europe. The Eastern Mediterranean / Black

Sea range covers more marginal but rapidly growing economies of Eastern Europe and Turkey.

While conventionally the Southern Mediterranean range was not considered in port studies re-

lated to Europe, it is included here because of its competitiveness to attract transshipment traffic

bound to European ports, implying that a growing volume of the cargo handled relates to Euro-pean derived demand. It is far from being a homogeneous range since there is little, if any, con-

testability between ports, each having its national hinterland.


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Figure 1 : European and Mediterranean Ports Ranges, Average Traffic, 2008-10 (in TEU)

Source: Container traffic from Containerization International.

While the share of the Northern European range is dominant, the Mediterranean ranges have

experienced a remarkable growth of their share (Figure 2) to account for 43.6% of the traffic

handled by the considered port ranges in 2010.


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Figure 2 : Container Traffic by Port Range, Europe and the Mediterranean, 1980-20102

The respective changes in the market share of port ranges masks a dynamic which is very port

and function specific (Figure 3).

2 Includes all the ports in the respective maritime ranges that handled a traffic above 50,000 TEU in 2010.


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Figure 3 : Net Containerized Traffic Changes, Selected European Ports, 2000-10 (in TEUs)

While the most significant growth in containerized traffic in the Northern range concerns its

conventional gateway ports (Antwerp, Rotterdam, Hamburg and Bremerhaven), the Mediterra-

nean ranges show a very different dynamic, since transshipment is the main growth driver. The

only significant hinterland-based (gateway) growth is for Turkey and the Black Sea and for Bar-

celona and Valencia. It is apparent that the hinterland advantage that could have benefited to the

Marseille / Ligurian ports from the surge in trade flows coming from Asia was by-passed by the

regionalization of the northern range ports deep into Europe. For instance, the growth of Genoa

and La Spezia, the most significant ports of the Ligurian range is negligible and even negative in

the case of Genoa over the 2000-10 period. The ports of the Adriatic are faring better with an

improved access to Eastern European growth opportunities. Yet they involve significant devia-

tions from main shipping lanes, implying that they are more likely to be called by feeder ser-

vices.

2.2 The Impacts of Transshipment

Transshipment has become an important feature in contemporary container shipping. Even the

hinterland ports of the Northern Range have developed transshipment business. However, care

has to be taken in in identifying transshipment hubs, because as, Gouvernal and Gouvernal

(2012) have noted transshipped containers are double counted, so that even a port with more

than 50% of its traffic comprising transshipments, it is hinterland traffic which is the still the

most important source of containers. Thus only ports for which transshipments account for

more than 66.5% of their traffic can be said to be transshipment hubs since it is only above that

figure that ship to ship transfers represent more than gateway traffic. Such is the case in the

southern Mediterranean. Since the Mediterranean was a secondary market that still needed to


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be serviced, shipping lines favored the setting of hub-and-spoke services that were often com-

bined with relay services. The major transshipment hubs were established close to the main

shipping lanes through the Mediterranean Sea and Zohil and Prijon (1999) observed a relation-

ship between deviation from the shortest path and transshipment totals. Other Mediterranean

ports, especially those in the Northern Basins were fed by feeder services. Over time this has

changed. While feeder services from the transshipment hubs still serve other ports, the trend

over the last decade is for carriers to replace feeder services with direct calls from Asia using

5,000-8,000 TEU vessels, and where local markets are large enough such as Barcelona, Marseille,

Constanza and Ambarli with 12,000 TEU ships. There are three major clusters of transshipment

hubs that accounted for much of the growth between 2000 and 2010 (Figure 4).

Figure 4 : Containerized Cargo Transshipped and Transshipment Incidence, Selected Ports, 2007-

09 (in TEU)

Source: Drewry Shipping Consultants.

The vicinity of the Suez Canal, with Damietta and Port Said, and of the Strait of Gibraltar, with

Algeciras, Malaga and Tangiers Med, represent two of the clusters. The third cluster comprises

Cagliari, Giaoa Tauro, Marsaxlokk and Taranto and occupies a key position of centrality in the

Mediterranean. These hubs combine feeder and relay transshipment functions with negligible

hinterland traffic because of the limited extent of their local markets. A more recently developed

outlier is Constanza on the Black Sea. Transshipment has also become an important component

of traditional hinterland ports. Barcelona, Valencia, Piraeus, Ambarli and Beirut are good exam-

ples in the Mediterranean, but many of the major Northern Range ports too have seen their

share of transshipments increase over the decade.


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Mediterranean hubs represent a salient case of foreland-based regionalization where the feeder

port hub effectively becomes a component of the hub port hinterland (Notteboom and Rodrigue,

2010). If transshipment traffic is removed from traffic figures, than the share of Northern Eu-

rope increases while the share of Mediterranean ports declines substantially (Figure 5). For in-

stance, without transshipment, the share of Mediterranean ports drop from 43.6% to 34.5% of

the TEU handled in 2010. This underlines that hinterland traffic does not play a significant role

in the dynamics of those Mediterranean ports with short deviations from the main shipping lane.

Figure 5 : Share of Container Traffic by Port Range, 20103

2.3 The Hinterland Effect

The hinterland continues to play the determining role in container port development, except for

a few dedicated transshipment hubs. The ports of the Northern Range exploit the richest market

areas on the continent. They were thus able to exploit scale economies most effectively and es-

tablish an almost uncontestable position as gateways to large areas of the rest of Europe. Bene-

fitting from road, rail and barge connections they extended their dominance over wide swathes

of Central and Eastern Europe (Figure 6). They were able to benefit from a higher hinterland

density but as well as from the continuity in this hinterland density. The most representative

strategies taking advantage of this continuity were the setting of container rail shuttle services

(permitted by deregulation). For instance, the Rhine system shows a continuous high density

level that is un-parallel at the European level. More recently barge services (mostly from Rotter-

dam and Antwerp) have been illustrative of a new dynamics in hinterland accessibility. Inland

ports, many of them set by port authorities, terminal operators, shipping lines and rail operators

have been a salient factor in hinterland divergence. For instance, the inland port of Duisburg

now handles in the range of 1 million TEU per year, which includes barge, rail and truck traffic. It

3 Traffic without transshipment is estimated by removing from every port of the range transshipment

traffic based on transshipment incidence figures. Transshipment incidence figure could not be obtainedfor all ports, but all the major hubs are covered, which therefore accounts for the bulk of the transship-

ment activity.


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acts as a major distribution platform anchoring and expanding the reach of the Rhine/Scheldt

delta ports in Europe.

Figure 6 : European Hinterland Potential (GDP), 20074

Mediterranean ports were by-passed by their Northern European counterparts as the dominant

gateways to the European market. Hinterland access was the central factor behind this paradox

since Mediterranean ports do not benefit much from economies of scale advantages (Medda and

Carbonaro 2007). Figure 7, using a simple summation of GPD potential within a radius of 250

km, called the Hinterland Potential Index (HPI), underlines the level of economic activity in the

vicinity of several major European ports. Northern Range ports benefit from an enormous hin-

terland potential. For instance, because of its closer proximity to Ile de France, the main cluster

of economic activities in France, Antwerp has slightly higher HPI for a range of 250 km than Rot-

terdam. Yet, both ports have the highest HPI observed in the sample. Felixstowe, ranks high due

to its immediate access to the core regions of Great Britain. Comparatively, Mediterranean ports

have a much lower HPI than their Northern Range counterparts. The only exception is Genoa

with its immediate access to the core economic region of Milan, and yet this advantage is in-

creasingly being captured by the regionalization strategies of Northern Range ports.

4 The GDP potential is calculated using the Kernel Density methodology from NUTS (Nomenclature of

Territorial Units for Statistics) level 3 units on a grid where each cell has a diameter of 20 km.


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Figure 7 : Hinterland Potential Index (250 km), Selected Ports, 20075

This leads to the assertion of conventional geographical constraints that are clearly to the ad-

vantage of Northern Range ports since outside the Rhone, there are no Mediterranean river sys-

tems reaching far into the hinterland. Western Mediterranean ports and most in the East have

limited alternatives outside rail and trucking for hinterland access, which is challenging since

economies of scale have more limitations in rail than for barge services. The double disad-

vantage of lower hinterland density and more limited capabilities to service this hinterland thus

becomes more salient. Furthermore, rail services with the Mediterranean ports have poor levelsof reliability, and without scale economies equivalent to those in services from Northern Euro-

pean ports, cannot compete in service cost, frequency and reliability in markets relatively close

by. This is best exemplified by the case of the largest market potential in Italy, around Milan,

which despite its proximity to Genoa and La Spezia is a contested market for Rotterdam and

Antwerp (Debrie and Gouvernal, 2006).

The exceptions are the two Spanish ports, Barcelona and Valencia. Both have been able to ex-

ploit domestic markets that are too far from the influence and competition of the Northern

Range ports, a factor accentuated by of the change in rail gauge at the border. The economic im-

portance of Catalonia and Madrid represent significant markets, and Barcelona in particular is

establishing a regionalization over North Eastern Spain and Southern France comparable to

some degree to that of the Northern Range ports but has known recently a decrease of traffic

due to the crisis with a drop of 19% between 2008 and 2009

5 The Hinterland Potential Index is based on the summation of cells of the GDP potential grid (see Figure6) that are within a continuous Euclidean land distance of 250 km from the port. The higher its value for a

port, the more potentially richer is the hinterland in its immediate vicinity.


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3. MEDITERRANEAN CHALLENGES3.1 An Enduring Relative Weakness of the Hinterland

Historically, there were a large number of small ports that had limited hinterlands along the

Mediterranean. Because of the nature of trade flows, Mediterranean ports would have been the

logical choice as gateways to Europe, but this did not take place. They were unable to expand

because of physical constraints both at the ports and on the hinterland (geography). Many have

a high deviation from main shipping lane of Suez to Gibraltar. Unlike the Panama Canal, the Suez

Canal did not present readily limitations to the size of containerships (limited to about 4,500

TEU for Panama), implying for maritime shipping lines, the additional cost effective incentive to

go directly to the ports the closest to the final destination of the cargo. In North America, the size

limitations of the Panama Canal enabled West Coast ports to more effectively capture transcon-

tinental traffic through double stack rail services since the all-water route could not as effective-

ly capitalize on economies of scale as the Suez route.

A further constraint in many Mediterranean ports is the lack of land for expansion. Backed bymountains Mediterranean port cities have limited expansion possibilities. While Northern range

ports have had difficulty in securing expansion because of environmental and cost issues, they

have been successful in implementing major expansion projects. Improving hinterland accessi-

bility becomes a matter of economics, real estate and the mitigation of environmental externali-

ties. Economies of scale are a driving force as the hinterland copes with a growth in traffic vol-

umes as well as larger ships. The availability of land is also a constraint, but pans very differently

according to the concerned ports. For instance, while land in Genoa is highly constrained due to

the Maritime Alps, Fos near Marseille has ample land allocated for logistics. While land also re-

mains a salient constraint for Northern Range ports, their more effective regionalization enable

them to mitigate this scarcity better than their Mediterranean counterparts.

Over the last fifteen years there has been a growing interest by the carriers in extending direct

services to the more established ports in the northern part of the Western Mediterranean. Mar-

seille, Genoa, La Spezia, Barcelona and Valencia serve populous port cities and growing local

hinterlands that justified direct calls. Here a divergence occurred. The first three mentioned

ports found their expansion beyond their local markets increasingly difficult because of poor

service by rail, small scale economies and by the overwhelming competition from the Northern

Range ports.

3.2 Eastern Mediterranean Ports

The development of the Eastern Mediterranean and Black Sea ports has been more recent. Like

the North-western Mediterranean ports at the beginning, they were reliant on feeder services

from the hub ports. Over the last decade, with economic growth in the Balkans and Black Sea

regions and a settlement of the conflicts in the former Yugoslavia traffic has built up to the ex-

tent that the carriers are now serving some of the ports in the region directly. As the markets

have built up, so vessel size has increased. Ports at the northern end of the Adriatic, in The Black

Sea and most notably in Turkey have experienced traffic growth. Like the ports elsewhere their

future growth will be tied to the degree with which they can extend their access to interior mar-

kets. Unlike the ports in the North-Western Mediterranean they face less intense competition

from the Northern Range ports, although the reach of Hamburg extends as far as Austria and the

Czech Republic.


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Originally serviced largely by feeders from the transshipment hubs in the southern Mediterra-

nean, ports in the Northern Adriatic and Black Seas are increasingly attracting direct service

calls that has led to traffic growth at several ports, including Trieste, Koper, Novorossiysk, Izmir,

Ambarli and Constantza. This reflects economic development in the Balkans, Russia and, in par-

ticular, Turkey. With the exception of Ambarli, their local hinterlands are limited at present, but

it remains to be seen how successful they will be in in expanding their inland services to tap

more distant markets.

It is interesting to note the parallel in the development of this region and of the hinterland ports

in the Western Mediterranean. There too, an early phase of feeder service was replaced with

direct services. The pattern is being repeated, albeit at a later stage in the Eastern Mediterrane-

an. The question is whether these ports can be more successful than the Ligurian ports in pene-

trating more distant hinterland markets.

3.3 The Pull of Southern Mediterranean Transshipment Hubs

It is true that a number of ports in the southern Mediterranean have as their dominant functionthat of ship to ship transfers. They represent a distinct class, however, and show no signs of de-

veloping a hinterland trade component. They occupy very strategic locations in the basin and

serve the interests of the carriers rather than their customers. Tangier Med was initially success-

ful, but labor issues incited Maersk to shift in 2011 a substantial amount of traffic to Algeciras.

The traffic balance between Southern and Northern Mediterranean ports remains a zero-sum

game and underlines the footloose character in the selection and retention of transshipment

activities.

4.

CONCLUSION: TOWARDS A NEW EQUILIBRIUM?The regionalization model exemplified by the Northern Range ports in Europe has been devel-oped to such a degree that those ports now control most of the richest market regions of Europe.

Their dominance of all but the southern and eastern fringes of the continent makes it very diffi-

cult for ports in those regions to compete directly. The Mediterranean ports prior to the 1990s

were largely bypassed by the ships engaged in the Asia-Europe trade.

Over the last twenty years it has been common to see developments in container trade in the

Mediterranean through the establishment of transshipment hubs, whose growth dwarfed the

container traffic at the old hinterland ports in the Northern Mediterranean, and in many cases

these hinterland ports were served by feeder services from the transshipment hubs. This model

has served to describe container shipping in the Mediterranean, and with the addition of new

transshipment hubs on the coast of North Africa, this view has been reinforced.

The paper has argued that this distinction between the gateway ports of the North and the

transshipment hubs in the South is a gross oversimplification. For example, many of the North-

ern Range ports have developed transshipment trade (in the case of Bremerhaven over 50% of

its containers are transshipped), and in absolute numbers, the 26.5% transshipment traffic of

Rotterdam exceeds the transshipment totals of most of the hub ports.

In light of all these developments, including an observed divergence in the port regionalization

process of Europe, several questions remain unanswered. First, it is relevant to ask if the North-ern hinterland advantage permanent. With developments taking place in the shipping industry


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such as larger ships and the practice of slow steaming, how the existing balance would shift?

Second, Mediterranean ports are conscious of their disadvantages and are prioritizing strategies

and investments accordingly with regionalization strategies that were previously less consid-

ered. Are these strategies going to be able the recapture some parts of the contested hinterland?

5. REFERENCESDebrie, J. and E. Gouvernal (2006) Intermodal Rail in Western Europe: actors and services in a

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