Maritime shipping isn’t complete without modal logistics. Inland transport is by far the most used alternative around the world, and some ports with extensive coastal geography have implemented short sea transportation. Chile has an exceptional coast line along the South Pacific, but has yet to cross the line to a short sea logistics corridor.
An interesting proposal is made by TRB paper 17-00885 A Chilean Maritime Highway: Is It a Possible Domestic Transport Option? by Mary R. Brooks and Gordon Wilmsmeier, where the authors evaluate a short sea coastal corridor for Chile, as a modal shift. Of course, for that to happen there’s the issue with cabotage that needs to be solved and the fact that land transport has even surpassed the rail option.
Empty truckloads, empty sea lanes
Many empty containers are transported from port to port as part of the repositioning work, a task that could be easily replaced by short sea shipping, “particularly on those liner services that call at several Chilean ports (Iquique, Antofagasta, Valparaiso, San Antonio, Talcahuano and San Vicente) should the transportation of the international lines’ empty containers and/or current road traffic be switched to the maritime mode”. But, as the paper shows, “at the moment, international liners are precluded from repositioning their own equipment within Chile by sea, and there is no incentive for trucking companies to use a maritime leg for moves on a lane without a backhaul cargo (assuming a drop or unaccompanied trailer service would be exempted from cabotage regulation)”.
The document continues to analize the situation adding that “considerations for shippers to switch from road to SSS include price, departure/arrival schedule, reliability, and transit time. To keep the price competitive and transport cost reasonable, regular service offerings with reliable, scheduled times are essential for shippers moving goods on a time-based service”.
Is modal shift possible?
“Given the current regulatory environment”, -the paper reads- “freight rates for national cargo in the identified corridors are high and it can be expected that, under a liberalization scenario, the rates offered by international shipping companies would be significantly cheaper than the current prices charged by national shipping and trucking companies (…) Road transport freight rates are significantly lower than maritime rates offered by national shipping companies, and reflect the current lack of competitiveness of maritime cabotage services in the general freight cargo sector”.
The analisys continues to note that while cabotage restrictions can make sense in specific, low-volume or remote subsidized markets, “they often contribute to inefficiency in transport and logistics operations. Where there is sufficient volume, a market-oriented competitive offering will arise naturally in the absence of cabotage”. Thus, reductions in cabotage restrictions can offer savings along the supply chain in terms of specific freight costs as well as overall logistics costs, but are a cause for concern amongst incumbents whose business model requires the protection to be profitable. In this case, the consumer pays as higher costs are passed on.
“The bias towards road transport and the flexible departure times it offers has translated into a weak ‘unimodal’ transport system at the national level for Chile. A decoupling of transport growth from economic growth, which indicates greater transport productivity in terms of GDP, has not occurred. Furthermore, a coherent effort regarding the internalization of external costs of the different transport modes is absent. An emerging question is whether this traditional cabotage framework impedes economic development, and thus internal and external competitiveness of the country”, the document adds.
Seems as if the playing field is set to continue operating in the same way, although it may not be the best alternative for the future… it’s just the way thing have always been done.
Supply Chain 2017
Primer Seminario Internacional en Gestión Estratégica de la Cadena de Suministro, Abastecimiento y Logística