U.S. Ports' Market Share Analysis

Abstract

The rapid growth of world trade has increased demand on ports and transportation services that distribute freight throughout the country. User fees have been considered as a method to invest in new infrastructure to better meet this demand. This paper demonstrates a method for evaluating the potential impact of such fees on ports' market shares. The paper summarizes multiple analyses of the potential impact of fees on competitive ports' traffic volume and market share. The goal is to estimate if/how additional fees would affect port demand, and ultimately port revenues. Besides measuring ports' market shares via PIERS 1 , transportation costs were estimated for alternative routes between overseas Trade Regions and inland market areas. A regression model compares the costs of routing through competitive ports and their respective shares. The model also helped evaluate the impact of all-water routings, size of the port market and the logistics resources near the port. Introduction and Executive Sum m ary Studies and observation confirm that ports' connectivity to their traffic generating hinterlands, i.e., their effectiveness in intermodal interchange between ships and trucks and/or trains, has become a primary determinant in their success. Port create value for their worldwide shippers as transfer points between international (ocean) transportation services and the inland logistics network of intermodal rail, drayage trucking and/or warehouses and distribution centers. This is a shift from decades ago when port saw themselves as the primary originators and terminators of cargo. They would boast of the shipping lines that served them and the foreign ports they serve. With the continued expansion of global retailers supported by advanced logistics, the most effective ports are essentially connection within larger logistics chains. Ports' effectiveness at attracting traffic may be measured quantitatively. Investment made to change towards an ideal of more ocean services, larger terminal capacity, less congestion, and improved logistics infrastructure can be evaluated against the likely traffic it is expected to attract based on formulae developed from similar current and historical observations of similar investment. Benefits can be compared against the potential loss from increased fees or charges to pay for the improvements. For