Critics, Container Numbers and Transshipment Terminals

A Pan Am Boeing 747
A Pan Am Boeing 747

By Harry Valentine 10-24-2018 10:23:27

Some controversy has been brewing along the North American coast as to whether the numbers of containers being processed supports the development of container transshipment terminals. Numbers tell part of a story of events that have already occurred and may even reveal a trend. Historically, transportation executives have periodically disregarded the numbers and successfully made the equivalent of quantum leaps in the transportation services they offer.


For several years, discussion has been underway at several North American coastal locations in regard to future maritime container transshipment terminals. Regions include the northern Gulf of Mexico area and Eastern Canada. The long-term trend spanning several decades indicates a long and steady growth in maritime container transportation sailing to, from and within North America. During that period, container ships serving American ports steadily increased in size to the carrying capacity of modern neo-Panamax vessels that carry 10 times the load of the original vessels that had been adapted as container carriers.  

Critics of the transshipment terminals have turned to academics to provide expert opinion that involves the numbers of containers being processed at various international ports. On the surface, the numbers appear credible. Except that the numbers may also be open to wider interpretation. Present numbers might not necessarily be a reliable indicator as to market response to a revised service. For example, regulators dismissed the so-called need for bigger intercity buses operating between Canada’s two largest cities. Mega-Bus dropped travel prices when they introduced high-capacity double decker buses to service and filled the seats on most departures.

Bypassing the Numbers

During the middle 1950’s, the American airline company Pan Am proposed to introduce faster and larger airplanes to the trans-North Atlantic service. Critics ridiculed the proposal on the basis that the numbers indicated that there was barely enough customer demand to fill the trans-Atlantic passenger ships that still sailed and the propeller driven airplanes that flew between New York and London, making a fuel stop at St. John’s in Eastern Canada. Undeterred, Pan Am and Boeing collaborated to develop a bigger and faster airplane to operate in what was regarded as an overcrowded market. 

The turbojet-powered Boeing model 707 appeared with swept-back wings that reflected Boeing’s involvement with NASA’s supersonic flight program. Reflecting a maritime tradition in transportation, Pan Am ordered the airplanes with porthole type windows which proved safer than rectangular windows. The new airplane could fly non-stop across the North Atlantic at double the speed of other passenger airplanes while carrying double the number of passengers. Critics predicted the bankruptcy of both Pan Am and Boeing. Within a period of 10 years of the inaugural revenue flight, 10 times the number of travelers crossed the North Atlantic, indicating a new market for a new service.

Challenging the Numbers

A decade after the Pan Am maiden revenue trans-Atlantic jet airplane flight, most major airlines operated the Boeing 707 or its competitor the DC-8. Pan Am and Boeing again sought to disregard the numbers and develop a passenger jet aircraft of double the passenger capacity. Critics loudly questioned the sanity of the executives as the numbers clearly did not support such a radical concept, for which no market could have possibly existed. Pan Am introduced the Boeing 747 to trans-Atlantic service at lower ticket prices than competing airlines. Within less than a decade, other major airlines operated the same large airplane.

In the North American maritime sector, critics have dismissed the operation of mega-size container ships to either a North American east coast port or into the Gulf of Mexico area. They suggest that numbers of containers being processed at various ports do not warrant sailing mega-ships to east coast transshipment terminals on the basis of such operation being impractical and economically unsustainable. Contemporary critics who are unfamiliar with transportation economic history are essentially repeating comments made long ago about the Boeing 707 and Boeing 747 being impractical and economically unsustainable.

Hub and Spoke Transfers

The proposed maritime transshipment terminals represent a hub-and-spoke transportation system, which critics dismiss as being impractical in the North American east coast economic environment. They point out to the airlines that are operating more direct flights that bypass traditional hubs of an earlier era, emphasizing that passengers seek to travel directly to their destinations. However, an exception exists at Dubai where the airport functions as the super-hub for an international hub-and-spoke passenger transportation system. Majority of passengers who arrive at Dubai international airport do so to transfer to other interconnecting international flights.

The precedent of an international passenger transportation hub with a small number of passengers actually flying to or from Dubai could serve as a precedent to develop a maritime transshipment terminal where the overwhelming majority of containers are to be transferred amongst interconnecting ships. Very few if any containers would be destined for the region surrounding the terminal. Dubai airport is at a convenient location for international transfer passengers, ticket prices via Dubai are competitive and Emirates Airlines offers superior onboard service. A maritime transshipment terminal located close to major shipping lanes could sustain short-sea shipping at competitive transportation rates.

Partial Transshipment

The Port of Halifax in Eastern Canada could use its convenient location and layout to offer partial transshipment between neo-Panamax ships and interlining short-sea vessels. While 2-vessels may sail from Europe to ports of Newark and Boston, there is the option to carry a combined load aboard a single larger neo-Panamax ship that is too big to berth at Boston. It would sail across the North Atlantic to briefly stop at Halifax to offload Boston-bound containers that would be transferred to a Boston-bound coastal ship, with other short-sea sailing connections to other ports in the region being possible.

Upon arrival at both Newark and Boston, per container transportation costs would be lower than if 2-ships had sailed across the North Atlantic. Replacing a ship of 8,000-TEU sailing via Panama Canal from Hong Kong area to Newark with a ship of 12,000-TEU sailing via Suez Canal could include a brief stop at Halifax where it would be partially unloaded to transfer container to multiple domestic ships assigned to short sea sailing service. Upon arrival at Newark, transportation cost per container would be lower than if a smaller ship had carried the load from Hong Kong.

Different Numbers

Transshipment economics involves a different set of numbers than the numbers used by critics who oppose the idea of transshipment terminals. Executives of Pan Am and Boeing, who developed and introduced the Boeing 707 and 747 aircraft into commercial trans-Atlantic passenger service, based their decisions on a very different set of numbers than the numbers used by critics who suggested that the market was overcrowded. Mega-size ships carrying containers over extended ocean distance interlining with smaller vessels sailing short-sea service can offer competitive transportation costs between ports of origin and destination.

As the ocean sailing distance of the mega-ship increases, it becomes more feasible to extend the sailing distance of interlining short-sea vessels and still offer competitive rates. The market niche for transshipment terminals depends on the ability to offer more competitive transportation rates. While the critics look at the number of containers being processed at various container ports internationally, a different set of numbers reflects the transportation cost per container arriving at various destinations. There are customers who seek the lowest per container transportation cost, even if container arrival is delayed for a few days.

Customer Preferences

East coast customers seeking fast delivery of containers from eastern Asia would have those containers transfer from ship to railway at a Pacific coast port, then pay premium rates for railway transportation. Customers seeking savings on transportation costs wait four additional days for maritime delivery of containers to East Coast ports. While the maritime voyage via Suez Canal between Hong Kong and Newark may require an additional 24 hours sailing a ship carrying 50 percent greater payload at 10 percent greater operating cost, it would yield lower per container transportation costs for customers courtesy of partial transshipment at Halifax interlined with short-sea shipping.

At Gulf of Mexico, the planned Louisiana International Gulf Transfer Terminal (LIGTT) could receive neo-Panamax, Suez-max and Cape-max container ships to transfer containers to river vessels, coastal and inter-coastal waterway vessels that connect across much of the south-central United States. Along the inland waterway, river transport carrying 80 TEUs becomes cost competitive with railway transportation and container-on-barge (COB) tows of 15 barges sailing north of Memphis can each carry 96 TEUs. For customers willing to wait a few days for container delivery would realize substantial savings in transportation costs on the evolving COB system.

Seasonal Market

The majority of containers arriving at North American ports involve the retail trade. Majority of retailers experience peak demand during the latter months of the year, with peak sales occurring prior to Christmas and while northern inland waterways are open for navigation. Railway companies seek to negotiate to carry the winter minimum of intermodal container transportation throughout the year, leaving seasonal peak traffic to the inland waterways. While the arrangement assures year round traffic at intermodal maritime-railway terminals that serve neo-Panamax ships, Canada’s transportation department seeks to divide that traffic between two railway companies.

During the off-speak season, freight forwarders from India and China could collaborate to combine container loads from smaller vessels at either ports of Vizhinjam or Colombo, to sail mega-ships carrying trade from India and China to North American transshipment terminals. Such operation would reduce per container transportation costs. Canadian regulations would determine if Panamax size ships could sail the Sydney-Montreal interline service, otherwise in the absence of a railway line to Sydney, those interline ships would sail to Boston or Newark to connect with railway service. Revised regulations could reduce the cost of Sydney-Montreal short-sea shipping.

Eastern Canadian Transshipment Super Ports

The business plans of proposed Eastern Canadian transshipment ports for neo-Panamax and Suez-max ships include maritime – railway intermodal terminals and also a transshipment terminal intended to transfer containers from Suez-max container ships to a small fleet of domestic coastal ships. Within the next few years following the completion of twinning the Suez Canal, future Suez-max container ships could carry double the load of neo-Panamax ships and offer very competitive per-container transportation costs sailing from Hong Kong area and from southern India. Transportation economics would determine the commercial success of the super-port terminals.

There could be three intermodal maritime–railway ports located within close proximity on the east coast to serve neo-Panamax ships and connect to some of the same main inland destinations. By railway distance, Port of Newark is geographically closer to Montreal and Toronto than either of Saint John or Melford Terminal and could capture a sizeable portion of the interlined maritime-railway to those destinations. For transshipment between vessels, Halifax would service neo-Panamax ships sailing either from Europe of via Strait of Gibraltar. On the basis of competitive transportation costs, Port of Sydney would serve mega-ships sailing from Asia.


While numbers may reflect existing market activity or a long-term trend related to such activity, the number may not necessarily reflect possible market changes that result from innovation in service delivery. Pan Am and Boeing proved repeatedly that existing market data provides little guidance insofar as introducing game-changer innovation in service delivery. The revised service delivery involved reductions in transportation costs that in turn attracted more customers. Larger container ships sailing via the Panama Canal indicates the existence of a market segment that seeks lower transportation costs, a market segment that could support mega-ships interlining with short-sea shipping. 

The size of that market segment would determine the future viability of transshipment ports that connect container mega-ships that sail extended trans-oceanic distances with small vessels sailing domestic short-sea shipping to multiple regional ports. Both LIGTT at Gulf of Mexico and Super-Port Cape Breton in Eastern Canada seek to serve such market segments by developing transshipment terminals.

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