Multimodal Transport of Iron Ore in Northeast China

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• Multimodal Transport of Iron Ore in Northeast
  China
• AKC Beresford, Y Liu, SJ Pettit
• Transport and Shipping Research Group
• Cardiff Business School, Cardiff University
• International Association of Maritime Economists
  Conference
• 11th 14th July 2006
• Melbourne

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• INTRODUCTION
• China, one of worlds biggest markets, especially
  for raw materials
• Also now locked into globalisation
• Opportunities for overseas exporters
• Integration of logistics and production
  strategies
• Downward pressure on costs
• Upward pressure on service and production
  standards Tailoring of transport services to
  provide time, costs, risk or resource optimum
  solutions
• IRON ORE Large regular consignments from
  Northwest Australia
• Multimodal transport (MMT) now emerged as best
  response to customer needs

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• RESEARCH METHODOLOGY
• METHODOLOGY In-depth interviews Semi-
  structured questionnaire Some open-ended
  questions for flexibility
• LOGISTICS COSTS Real data on costs, schedules,
  service measures
• IMPORT OPTIONS evaluated on commercial criteria
• ROUTE RELIABILITY derived from interviewees
  responses
• THIS RESEARCH tests the Beresford Cost Model
  against operations of a long supply chain
• examines routeing options for iron ore from
  Northeast Australia

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• TRANSPORT INFRASTRUCTURE
• Major influence on freight routeing and modal
  choice
• In China, Ministry of communications (MOC) has
  seen road construction as vital
• Both multimodal freight transport and personal
  mobility benefit
• Length of classified roads up 38.4 in 5 years
• Graded highways expanded by 50.7 since 1999

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• TRANSPORT INFRASTRUCTURE (Cont.)
• Development of rail-based MMT
• e.g. expansion of rail container service network
  to 23 locations (Kowloon Canton Railway
  Company)
• Sea-rail services improving, but still inferior
  to sea-road
• Rail facilities often inadequate or services
  inconsistent
• Ultimately, rail service schedule not reliable
  enough

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• TRANSPORT INFRASTRUCTURE (Cont.)
• Ports being developed continuously, but expansion
  not keeping pace with growth in trade/maritime
  traffic
• 35,108 ship berths in China (2004 data)
• 944 are deep-draught
• Developments at Shanghai and other locations
  intended to establish them as foci for shipping
  waterway MMT corridors
• Four rivers account for 80 of inland waterway
  traffic Yangtze dominant

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• IRON ORE IMPORTS, AUSTRALIA CHINA
• Iron ore products form important part of
  Australian exports
• 2005 - 53 of Australian iron ore exports routed
  into China (122 of 210 million tonnes)
• Chinese steel companies, acting as MTOs, keen to
  find most cost-effective and reliable supply
  channel
• Six MMT routes identified from Cost Model
• Each has different modal combination yielding
  range of costs and different level of service

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Lingshan
Steel Co
Bayuquan
Qinhuangdao
Dalian
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Table 1 Routeing alternatives for iron ore,
Northeast Australia - China
Commercial sources
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• Table 2. Distance and Transit Times to China

Commercial sources
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• Table 3. Qinhuangdao to Steel Company

trains owned by National Railway
Bureau trains owned by steel company Source
Authors
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Rail
Rail
Qinhuangdao
Sea
Port Hedland
Rail
15
Rail
Rail
Qinhuangdao
Sea
Port Dampier
Rail
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• Table 4. Dalian to Steel Company

trains owned by National Railway
Bureau trains owned by steel company Source
Authors
17
Rail
Rail
Dalian
Sea
Port Hedland
Rail
18
Rail
Rail
Dalian
Sea
Port Dampier
Rail
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• Table 5. Bayuquan to Steel Company

Source Authors
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Road
Bayuquan
Sea
Port Hedland
Rail
21
Road
Bayuquan
Sea
Port Dampier
Rail
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• ROUTE VIA QINHUANGDAO BY SEA / TRAIN
• BHP Port Hedland - train 5.3 of distance
• 25.5 of cost
• 1 of time
• Port Hedland Qinhuangdao - sea 88 of distance
• 31.8 of cost
• 80 of time
• Qinhuangdao Steel Plant 6.7 of distance
• 23.6 of cost
• 2.5 of time
• Customs Vessel load unload 0 distance
• 19.1 of cost
• 16.5 of time

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• ROUTE VIA DALIAN BY SEA / TRAIN
• BHP Port Hedland - train 5.6 of distance
• 29.3 of cost
• 1 of time
• Port Hedland Dalian - sea 90 of distance
• 36.6 of cost
• 78.8 of time
• Dalian Steel Plant 4.4 of distance
• 17.1 of cost
• 1.8 of time
• Customs Vessel load unload 0 distance
• 17 of cost
• 18.4 of time

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• ROUTE VIA BAYUQUAN BY SEA / TRAIN
• BHP Port Hedland - train 5.5 of distance
• 29.5 of cost
• 1.1 of time
• Port Hedland Bayuquan - sea 92.8 of distance
• 36.8 of cost
• 85.6 of time
• Bayuquan Steel Plant 1.7 of distance
• 14.7 of cost
• 0.5 of time
• Customs Vessel load unload 0 distance
• 19 of cost
• 12.8 of time

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• INTERPRETATION
• Iron ore is high volume high weight
• 6 alternative intermodal routes examined
• Sea leg dominant road and rail options for land
  haul
• Routes via Bayuquan are shortest, cheapest and
  quickest
• Sea freight rates and port handling times are not
  always stable
• Rates especially depend on global supply / demand
  balance

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Transport costs and transit times
Source Authors
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• INTERPRETATION
• Sea transport expected to be cheapest per
  tonne-km
• Rail intermediate
• Road most expensive
• However, service reliability for rail in China
  rather poor
• Freight rate for sea transport fluctuates
• Reliability of road transport in China and rail
  in Australia mostly good

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• CONCLUSIONS
• Rail Sea Rail suitable for iron ore transport
  most of the time
• Unlike container transport, volumes are always
  large and supply chains always long
• Iron ore not in standard packing units
• Volume capability of transport modes needs to be
  large
• Iron ore comparatively low value so cannot bear
  expensive freight rates or complex intermodal
  handling

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• CONCLUSIONS Cont..
• Road transport can be effective substitute for
  rail over short distances
• In China rail often congested due to passenger
  transport priority
• Road haulage a flexible substitute for short
  distances
• Return journey can be used for other compatible
  cargoes e.g. steel products and route
  triangulation helps boost load factors

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• CONCLUSIONS Cont..
• Transhipment for iron ore is very time, energy
  and cost consuming
• To benefit from economies of scale, best to
  concentrate volume onto one mode for each segment
  of journey
• Controlling the whole supply chain is the best
  way to counteract risk
• Complete control by one company probably best
  solution for iron ore, not necessarily true for
  high value cargoes
• Cost model very useful tool in analysing cost
  structure of MMT supply chains