Special Interest Group on Maritime Transport and Ports
a member of the WCTR Society
Genoa - June 8-10, 2000
Dedicated containers terminals:
costs and benefits
from a port perspective
Drs Benacchio - University of Genova
Drs Cariou - University of Nantes
Professor Haralambides - Erasmus University of Rotterdam
One of the main trends during the last ten years is the emergence
of container dedicated terminal in ports. This paper tries to
analyse the reasons that could explain this new trend and the
implications from the port point of view. A first section presents
an overview of the dedicated terminals in the world and underlines
that a general definition of a dedicated terminal is difficult
to find. A second section stresses through the use of a generalised
port cost function that one of the main factor that could explain
the emergence of dedicated terminals can be the increasing gap
between port and shipping lines objectives. Finally, a third section
analyses, through the use of a simple queuing model, under which
assumptions a dedicated terminal could be a "win-win"
strategy for both port and shipping lines.
The move to dedicated terminal is not a new one in port activities.
In bulk shipping for example, the need for special infrastructures,
the safety regulation
have already implied the segmentation
of port area by activities between liquid terminals, bulk terminals
The development of containerisation and its impact on the
organisation of ports during the sixties also leads to a spatial
differentiation between container terminal area, and others terminals
(, ). The emergence of dedicated terminals is not therefore
referring to the specialisation of terminals that already exists,
but rather to a new trend that leads to the discrimination within
a container terminal between users. The emergence of dedicated
terminals arises in a period of horizontal consolidation between
ship-owners and of vertical agreements (, , , , ).
This evolution is mainly a consequence of the requirement from
shippers of a higher geographic coverage and a better "supply
chain management" (, , , ).
1. The definition and emergence of dedicated terminals
A dedicated terminal can refer to a geographic location,
the use of facilities for a defined part of a terminal, to a temporal
exclusivity, the use of facilities for a certain period, and usually
both. The scope of a dedicated terminal can for example implied
the exclusivity for a shipping line of quay, berth, stacking area,
within port and is difficult to generalise.
In a sense, the use of "windows" for containerships
already represents a time-limited dedicated terminal.
Scope of dedicated terminals
An other difficulty with the definition of a dedicated terminal
arises from the definition of the content of the contract. For
example, what are the equipment (cranes, straddle carriers
and for which duration, the contract takes place?
A unique definition of a dedicated terminal in container
industry is therefore difficult to reach. It implies a private
contractual commitment between the port operators that could be
a stevedoring company and/or a port authority, and the port users
i.e. the shipping lines.
This private contract can lead the Liner Company to do the
stevedoring by itself (see for example Maersk in Algeciras and
Rotterdam) or to let a stevedoring company to run the terminal
(MSC and CP Ships with Hessenatie in Antwerp for example).
A way to analyse the emergence of dedicated terminals is
through the analyse of their locations. Figure 1 presents some
examples of dedicated terminals in Asia, North America and Europe
Figure 1: Main dedicated terminals in Northern America, Asia and
Source: Bank of Japan, Containerisation International, Lloyd's
The main common element when facing the emergence of dedicated
terminals is their strategic location. Two components have to
be considered: the strategic geographic location on the main trades
or in interconnecting points between East-West and North Trade;
the strategic location in the network of the shipowners.
It appears that to be one of the biggest ports in the world
in terms of throughput is an important but not a sufficient condition
for the development of a dedicated terminal. Evergreen or Maersk
for example initially decided to develop a dedicated terminal
in Sines or in Algesiras not because they were the biggest ports
in the world, but because they were to become one of the most
important ports in the organisation of their own network.
The next section discusses some of the reasons that could
explain the emergence of dedicated terminals and underlines some
implications from a port point of view.
2. Cost and benefit from a port point of view
A way to analyse the demand by shipowners of dedicated terminals
can be through the use of the generalised port cost function.
The generalised port cost function integrates the value of time
for users and shows the gap between the level of traffic that
minimises the cost for port (q02) and for the port
and the shipowners (q01).
Due to the high level of fixed cost for the port, as long
as the throughput is increasing, the cost per ton is going to
decrease till a certain point where the congestion costs imply
an increase in the average cost. For the ship, the value of time
in port is going to increase with the size of the vessel and the
kind of cargoes it carries .
Figure2: Effect of the increase in vessel size
A direct consequence of the growth in vessel size that has
occurred during the last ten years (, ) can be seen in
the increase of the value of ship time cost in port (from Ship
time cost 0 to 1 in the figure). This increase induces a wider
gap between port and shipowners objectives (q02 - q11
> q02 - q01).
From this relation, it can be stressed that for the shipowners
who aim at minimising the ship time cost, the use of a dedicated
terminal can be a way to control the previously exogenous factors
that play on the time in port for the ships. The dedicated terminal
gives the shipowners the opportunity to reduce the expected impact
of queuing time in port, to minimise the impact of a delay in
the arrival of its vessels, to plan in a more efficient way its
schedule, and notably to co-ordinate mother and feeder vessels.
The willingness for shipowners to "secured" space and
time within a terminal can not solely be motivated by physical
aspects. The fear for example of information sharing and the need
to protect confidentiality could also lead to a demand for dedicated
The development of dedicated terminals is therefore generally
present as the consequence of a higher shipowners' pressure on
At the same time, the emergence of dedicated terminals can
also be seen as an attractive factor of competition among smaller
ports. Evergreen chose for example Sines (Portugal) and Tarento
(Italy) because of the possibility to create dedicated terminals
in those ports rather than in ports close to full capacity.
It can be also argued that, over a certain level of throughput
q02, the cost per ton is going to increase. Under the
assumptions of a level of traffic higher than this breakeven point
and of fixed capacity in the short run, the reduction in occupancy
rate does not automatically imply a loss for a port.
Furthermore, the pressure on ports implied by the consolidation
of shipowners can not be analysed as a pure exogenous factor for
a port. Its ability to undertake for example new investments,
new railway connections or inland terminals can reduce the gap
between shipowners and port' operators objectives. Therefore,
the need of shipowners to secure space and time can also be fulfilled
by port operators' actions.
Finally, it appears that the stevedoring companies and the
port authorities also play an important role in the emergence
of dedicated terminals. They arose in a general context of worldwide
investments in new capacities and disengagement of public funding
(port authorities, regional, state). In order to secure investments,
the new concession tenders take into account the possibility from
potential operators to bring goodwill (see for example the concession
in Antwerp for MSC/Hessenatie, CP Ships/Hessenatie) and are also
encouraging stevedoring companies to choose for dedicated terminals.
3. The dedicated terminal: conflicting or common interest?
A way to show the trade off between shipowners' and port
operator' objectives in the emergence of dedicated terminal is
through the use of the Queuing Theory (, ).
In a general queuing theory system, the occupation rate is
defined according to the probability of arrival rate λ and service
times μ (usually, a Poisson distribution). In the simplest case
(one stage, infinite queue and First In First Out), we can consider
the choice for a port to keep a multi-user terminal with m servers,
or to split the terminal with (d) dedicated servers and (m-d)
From the port's point of view, the effect of moving from
the first situation (pure multi-user) to the second one (multi-user
and dedicated) is equivalent to comparing the occupation rate
for the first (1)
and the second (2) case
If we assume that the service rate is not going to change
with the numbers of servers (constant economies of scale on services
rates), and if the split of ships follows the repartition of servers
between (m-d) and d then:
Under the assumptions of constant returns to scale for service
rates and a perfect repartition of the number of vessel on servers,
the port is therefore indifferent between a multi-user option
and one to dedicate a server within the terminal. The situation
is not indifferent for the shipowner calling at the dedicated
and the multi-user terminal however, as long as their waiting
time is higher in the second case.
The most important feature is therefore to discuss the assumptions
of the previous case, in order to know when the port and the shipowners,
the ones who use the dedicated and the ones who used the multi-user
terminal, are not indifferent between the two situations.
The first assumption is that service times are going to remain
the same when using one berth, two berths or m berths (μd=μm-d=μm).
This assumption is challenged by some theoretical and recent empirical
studies (, ,, ). If economies of scale are continuous
over the range of throughput, i.e. μd<μm-d<μm,
the occupation rate for port with the introduction of a dedicated
is going to decrease with the magnitude of the losses in port
efficiency (service time μ). The assumption of constant economies
of scale can be considered in a pure transhipment terminal where
the economies of organisation implied by a better co-ordination
between mother and feeder vessels could be more important that
the diseconomies of scale coming from the reduction of the size
of the terminal.
An others interesting case to discuss is that the total queuing
waiting time can be reduced if it implies in the same time, a
reduction in the variance of service . In a general case, if
the variance s is negatively exponentially distributed, var. (s)
is s² and the global queuing time is (q) then:
If it is assumed that V(s) = 0, the waiting time can be reduced
by half, and the interest of a dedicated terminal can become more
accurate for the ship-owner using the dedicated terminal.
Table 1 shows, in the case of SeaLand dedicated terminal
in Rotterdam. The homogeneity of ships calling at the terminal.
This homogeneity and the reduction in the number of ships to be
operated could lead to a routine in port operations that support
the assumption of a reduction in the variance of service time.
Table 1: SeaLand' vessels calling in Rotterdam
|Service - June 1999||Number
|North Europe to US East Coast / US Gulf / US West Coast
|Europe / Asia full container services||1
|Europe / Asia full container services||3
Source: Alphaliner - 1999
It can be therefore considered that a better co-ordination
between ships and port operations in the dedicated terminal is
a way to reduce service variance and improve services (learning
The requirement by a shipping line of a dedicated terminal
therefore does not automatically imply an increase in the queuing
time. The previous example shows that, for the shipping line using
the dedicated terminal the efficiency in terms of waiting time
and through the reduction of service variance can compensate the
losses induced by the decrease in service rate from m servers
to d servers.
The example also underlines that losses (the increase in
waiting time) could be mainly born by other shipowners moving
from a multi-user terminal with m servers to a multi-user terminal
with (m-d) servers. The problem with the choice of a dedicated
terminal has therefore two main aspects.
a) The technical issues regarding losses and gains that could
arise from the separation of terminal in different servers. b)
The implication for all port users of dedicating a terminal. In
order to internalise all the costs, the price for the shipowner
that uses a dedicated terminal has not only to take into account
its potential gains, but also the potential losses born by the
other shipowners that suffer from the reduction in scale of the
In an extreme case, the best situation would be if the increase
of revenue induced by the dedicated terminal gave port operators
the opportunity to expand through new investments or to improve
the organisation of the multi-user terminal. This solution can
also be as well achieved through higher involvement of the shipping
line in providing infrastructure, superstructure and management
of the dedicated terminal.
A second assumption in the previous example is that ships
are perfectly allocated to servers with a ratio of (d/m) and ((m-d)/m).
From this assumption, the main interesting point is to make a
distinction not between the number of ships (arrival rate), but
between the characteristics of those ships and especially their
value of time. We can for example consider the case where the
queuing time in not infinite and a distinction exists between
the insensitivity of ships to quit the queue according to their
size. It can be therefore argued that the separation between "high
speed servers" (dedicated) and "low speed servers"
(multi-user) through the existence of dedicated terminals is a
way for the port to keep, through differentiation, all the clients
without expansion in capacity.
From the above discussion, it can be seen that the probability
for a port to be indifferent between developing or not a dedicated
terminal is low when its objective is to maximise occupation rate,
under fixed prices. If one assumes that the port is maximising
total revenue, it could be indifferent between the two previous
situations, even if the occupation rate is lower, as long as the
increase in price is going to compensate the decrease in volume.
This solution could also be achieved through a higher involvement
of the shipping line in providing infrastructure, superstructure
and management of the dedicated terminal. At the same time, competition
between ports presents a limit for this case as long as an increase
in price could mean the departure or shipping lines from one port
to another, in a highly competitive environment. The emergence
of dedicated terminals can therefore be rather seen as a way for
ports to secure futures traffics thanks to a higher involvement
of shipping lines in port operations than to increase revenue
through an increase in price.
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