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Comparing Maritime Versus Railway Transportation Costs

railway

By Harry Valentine 2017-12-25 18:05:15

Several years ago, two independent studies compared maritime to railway transportation costs involving the movement of containers. It seems possible to expand on those studies to estimate transportation costs of containers arriving from overseas points of origin, at certain North American destinations.

Cost Estimates

A study presented by Sea Point Group suggested that maritime transportation could save some $2,000-per container over railway transportation when moving containers between Long Beach CA and Memphis TN. The railway distance is approximately 2,000 miles while the maritime distance via the Panama Canal is 4,355 nautical miles to New Orleans and another 400 nautical miles along the Lower Mississippi River. At the time, neo-Panamax ships carried containers from Shanghai and Hong Kong to Long Beach at a cost of some $4,800 per container over a voyage of 6,000 nautical miles, or a cost of $0.80 per nautical miles. 

Using that cost between Long Beach and New Orleans suggests a per container transportation cost of $3,500 and indirectly suggesting a per container railway transportation cost of some $5,500 over a 2,000-mile journey, or $2.75 per mile aboard a train carrying double stacked containers. A per container railway transportation cost of $2.50 per mile can be applied to the Long Beach – Chicago (2,100 miles - $5,200) and Long Beach – Newark/New York City (3,000 miles - $7,500) links. When bigger ships entered trans-Pacific container service, transportation costs dropped to some $2,600 per container. 

Railway’s Market Niches

The combination of trans-Pacific maritime transportation and trans-continental railway transportation move priority containers to Newark/New York City at a cost of some $10,000 to $12,000 per container. Low priority containers sailing via the Panama Canal and a distance of over 10,500 nautical miles at $0.80 per nautical mile would incur a cost of $8,000 per container. High priority containers would arrive at Chicago at a cost of $7,700 to $9,700 per container. An all-maritime voyage from East Asia to Chicago would involve container transfers to a Seaway-max ($1.20 per nautical mile) ship at Ports of Virginia (10,300 nautical miles - $8,000) for the 2780-nautical mile ($3,300) voyage to Chicago at $11,300. 

For Canadian service, the trans-Pacific voyage to Vancouver ($2,500 to $4,500) would be followed by a 2,800-mile railway journey to Toronto ($7,500) with comparable cost to Montreal, for an estimated range of $10,000 to $12,000 per container. A voyage via the Panama Canal could involve transferring containers at Newport News ($8,000) followed by 1700 nautical mile ($1,700) voyage to Montreal for a total of $9,700 and $10,000 to Toronto. Switching containers at Newark ($8,400) followed by a railway journey to Montreal (400 miles @ $1,000) would cost $9,400 per container and just under $10,000 to Toronto. 

Containers from Europe

Container ships sail directly from European ports such as Rotterdam to several North American ports, including via the Panama Canal to west coast ports. At present, Ports of New Orleans and Halifax offer container transfers from large ships to smaller ships that sail into inland waterways and smaller ocean coastal ports. A Seaway-max ship ($1.20 per nautical mile) from Rotterdam to Cleveland could incur a per container cost of $4,500 over the 3,750-nautical mile voyage. Switching containers from a 13,500-TEU neo-Panamax ship at Halifax (2,800 nautical miles @$0.80 = $2,300) followed by a 1420-nautical mile ($1,700) voyage to Cleveland could cost a total of $4,000.

Carrying Boston bound containers via Newark (3,300 nautical miles @ $2,600) and a railway journey of 240 miles ($600) would cost $3,200 per container. Switching containers at Halifax ($2,300) followed by a 390-nautical mile voyage to Boston ($500) would cost $2,800 per container. Ships of 2,200 to 3,500 TEU sail to Montreal (3,300 nautical miles @ $1.00) could incur a per container transportation cost of $3,300. Switching containers at Halifax would cost $950 to Montreal for a total of $3250 per container and $3,800 to Toronto. Moving Toronto bound containers through Newark followed by railway transportation would cost some $3,850 per container.

East Coast Super Terminals

Plans are underway in Eastern Nova Scotia to establish two super terminals with a third such terminal being planned for New Orleans, to transfer containers from the largest container ships on the ocean. The future opening of parallel navigation channels at the Suez Canal could invite discussions focused on larger ships passing through the canal, perhaps assisted by bow wave deflection technology. There is also the future possibility of a navigable passage for deep-draft ships becoming available in the Canadian Arctic, between the Beaufort Sea and Baffin Bay that would reduce the sailing distance to Eastern Canada.

While Melford Terminal and Louisiana International Gulf Transshipment Terminal (LIGTT) offer 20-meter depth at low tide, Port of Sydney in Eastern Canada would require additional dredging to receive container ships of up to 28,000 TEUs, built to 18-meter sailing draft by 66.5-meter beam and 450-meter length. Such ships could incur a per container transportation cost of $0.65 per nautical mile on an 11,000-nautical mile voyage from East Asia via the Suez Canal, or $7,000. A future summertime voyage via the Canadian Arctic could incur a per container transportation cost of $6,000 from East Asia to Eastern Canada.

Super-Ships

Future container ships of 28,000 TEUs sailing to deepened west coast ports from East Asia could incur per container transportation costs of $2,000 to $4,000. Such ships arriving at LIGTT would interline with barges that sail along the American inland waterway system as well as with ships that connect to ports located around the Gulf of Mexico and Caribbean Sea. Super-size ships that arrive at Eastern Nova Scotia from Asia would connect to coastal ships that sail to several east coast American ports and seasonally to ports located along the St. Lawrence Seaway.

Cost comparisons based on mega-container ships ($0.80 per nautical mile) interlining with railways ($2.50 per mile) and inland waterways ($1.20 per nautical mile) suggest a competitive edge for East Coast terminals for ships arriving from Hong Kong, Singapore and South India. Containers moving from Hong Kong to Chicago via Long Beach could each cost of just over $10,000, or just over $11,000 via Eastern Canada and waterway ship. Containers moving from Hong Kong to Toronto via Vancouver could each cost $12,000 compared to $10,200 via Eastern Canada and the inland waterway connection.

Cost-Driven Developments

Prior to the development of the Suez and Panama Canals, railway lines had for several years carried transshipment freight between the same route endpoints. At the time, maritime transportation incurred lower transportation costs to move large amounts of freight and resulted in the development of both navigation canals. After a century of ongoing technological improvement and development in both transportation modes, maritime still offers lower transportation costs to move massive volume or extreme weight and resulted in the expansion of the Panama Canal to move containers between East Asia and Eastern North America.

The limitations of the Panama Canal and expansion and future twinning of the Suez Canal along with interest in moving massive volumes of freight between Asia and Eastern North America, prompted development of terminals in Eastern Canada and Gulf Coast USA for the largest container ships afloat. Coupled barge assemblies of up to 2,000 feet (610 meters) in length by 140 feet (43 meters) beam carry massive volumes of freight along the Lower Mississippi River at lower cost than railway transportation. Development of super-ports in Eastern Canada could prompt development of higher capacity interlining vessels to sail into the St Lawrence River.

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.