The Economics ofDomestic Short Sea Shipping

SNAME/Maritime Economics Panel

and the

Transportation Research Board /

Marine Board of the National Academies

28 September 2004

Washington D.C.

2

Defining the Economic Framework

Market considerations

Create more questions than answers

3

Major Thoughts Current and Future Markets Culture Market Expansion An Ideal Port Costs SSS Alternatives (or vice versa) Financing Construction Operation

4

Current and Future Markets

Hub(s) and spoke(s) for larger trade Regional trade

Agriculture Energy (oil, product, coal) Intermodal: Container, RO/RO Project cargos

5

Culture Blue Water--International Blue Water--US Flag

Brown Water

Shippers / Freight Forwarders / Third Party Logistics (3PL)

PortsThis could be the major hurdle

6

Market Expansion

Bootstrap vs. Major Investment

Singapore model or grass roots model?

Lots of “staring at each other.”

But some places are doing something!

7

An Ideal Port Access to cargo Friendly “natives” Convenient port facilities Good intermodal connections—physically and

operationally Rail Highway Pipelines Other Maritime

Memphis is a great example

8

Costs CAPEX

Acquisition in time and money Market development, including regulatory and political influence

OPEX--Base Crew Insurance and legal Maintenance and repair Material purchasing

OPEX--Charterers Components Operations Fuel

9

10

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SSS Alternatives(or vice versa)

Air Highway Rail Pipeline Direct Shipping Market Shift

12

Financing Generally based on charter cover

Difficult with specialized vessels and lack of charter liquidity

Many shipping companies are not attractive to Wall Street

Equity is the holy grail.Control the cargo.

13

Construction Types of Vessels:

Tug and Barges (river type) Small ships Tug and Barge (ITB/ATB)

Liquid Bulk Dry Bulk Break Bulk Intermodal (Container, RO/RO, LASH)

14

Operation Generally three types of firms:

Brown water river operators Blue water ship operators Blue water and coastal ATB/ITB/Tug

operators

MAJOR DIFFERENCES AMONGALL OF THEM