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  • Coal, Rails, and Ships

    Posted by David Foster on February 15th, 2011 (All posts by )

    …may not be the most glamorous segments of the world economy. But, in a very real sense, they underlie everything else.

    Colombia, in partnership with China, is looking at a potential land-bridge railroad which could serve as an alternative to the Panama Canal. Ships arriving at a coastal terminus would offload their cargoes to the railroad, which would carry them 137 miles overland, and the process would be reversed at the other end.

    The benefits of this “dry canal” for Atlantic-to-Pacific connection, and vice-versa, seem a bit questionable given the costs and delays of offloading and onloading containers and other freight–unless, of course, the Panama Canal reaches an extreme state of congestion and/or the canal fees are substantially increased. It appears, however, that one major motivating factor behind the project has to do with COAL. Columbia has substantial quantities of high-quality and easily-worked coal near the Caribbean end of the proposed route.

    “Progressives” and establishment liberals have praised China’s progress in “green technology,” suggesting that the future energy supply for that country will come from solar, wind, and helpful leprechauns turning cranks while being supervised by wise unicorns. But if China’s leadership is serious about investing in a project like the Colombian land-bridge, then it’s pretty clear that they see a long-term future for coal as an energy source–clean or otherwise.

    And I doubt it has escaped their attention that achieving/maintaining low electricity prices establishes a powerful competitive advantage in a whole range of manufacturing industries.

    (link via Commonsense & Wonder)

     

    14 Responses to “Coal, Rails, and Ships”

    1. Shannon Love Says:

      With modern container shipping, a dry canal is quite feasible these days.

      From my reading, loading and unloading cost have shrunk considerably has a percentage of total ocean shipping cost. In the past, they could be the major cost and now they are far down the list.

    2. Robert Schwartz Says:

      I can’t imagine that such an operation would work for coal. Ships in the water is always the cheapest way to transport something. Going around the Cape or the Horn will add a few weeks to the trip, but not much cost. Unloading, moving a train over mountains, and re-loading will cost a lot more.

      If you are talking about goods that need to be in a market timely, the land bridge could save enough time to make the extra cost worthwhile. But coal is dumb stuff that has no real need to be there fast.

    3. Andrew X Says:

      “Progressives and establishment liberals” will grow concerned with the Chinese gov’s environmental policies about the same time they grow concerned about freedom and human rights in Castro’s Cuba…. which is about the same time those leprechauns and unicorns will show up.

      The fact is, one of two basic statements about progressives and establishment liberals is true —

      Either they have serious concerns about human rights, the environment, peace and justice, etc…. and will hate whatever governments and entities in this world violate same, including their own governments and societies in the West (i.e. the USA, etc).

      OR — They have a natural antipathy if not hatred of their own societies and governments exclusive to the Western world (i.e. the USA and allies), and will trumpet such things as human rights, the environment, peace and justice, etc, when and ONLY when it serves that antipathy. When such issues do not serve same, you will hear the crickets chirp.

      I need not elaborate further. Every reader here can look at the political world in general, past and present, and draw their own conclusions as to which of those two scenarios is true.

    4. Robin Goodfellow Says:

      This idea doesn’t seem workable for one very simple reason: empty ships are expensive. Ships aren’t going to show up to or leave any location completely empty, that’s financial suicide. Imagine two ships that you are trying to pretend pass through the dry canal, each with cargo bound for a port the other can reach. Each ship docks at the appropriate terminus of the dry canal and offloads their goods, which are transfered to the other ship which then goes on its merry way. Such a scenario is tricky because you have to synchronize two ships and if you mess up you don’t just delay one shipment you delay two.

      If you add a buffer of cargo to each terminus that doesn’t necessarily make things better. Ship A would go to the Pacific terminus, offload goods which get sent to the Atlantic terminus, load new goods, and return to sailing. Seems efficient enough except that in order to make it work well from a per-ship perspective you need a sizable buffer, which works out to an increase in shipping latency from manufacturing to delivery. Again, just like empty ships that’s pure money being wasted right there.

      Given how tight a business oceanic shipping already is I don’t see a compelling reason why anyone would choose the dry canal option.

    5. Will Says:

      Sure hope them Chinese fellers are friendly however it plays out, hehehe, they are building a serious-as-a-heart-attack blue water Navy. I mean, China is on the other side of the world, I can’t see them having regular liberty calls in Caracas or Havana…or Me-hee-kho even…

    6. David Foster Says:

      RobertS…it’s true that water transport is generally cheaper even than rail; however, the coal needs to get to the port in the first place, so rail service will be needed to the mines, and it can then be hauled to the west coast almost as easily as to the east.

      Robin…good point about the additional problems/costs involved in synchronization. Note that it is more economical to maintain stockpiles for goods which are relatively low dollar (or yuan!) value per weight/volume, since less money will be tied up for inventory relative to the cost of transport.

    7. David Foster Says:

      Lots of information about Chinese activities in Latin America here. The article suggests that China also sees at lot of potential for its exports in Colombia.

    8. Robert Schwartz Says:

      “however, the coal needs to get to the port in the first place, so rail service will be needed to the mines, and it can then be hauled to the west coast almost as easily as to the east.”

      Only if the coal is coming from inland, and it does not have to be inter-modaled.

    9. David Foster Says:

      In this case, it appears that the coal will go directly from mine to rail…no intermodal transfer until loading the ships on the other coast.

    10. Robert Schwartz Says:

      So it is not a canal competitor, it is a railroad from mine to port.

    11. David Foster Says:

      The same line can of course serve both purposes…in principle, to the extent that the line is not fully utilized by the mining traffic, it makes sense to offer deeply-discounted canal-alternative service in order to help cover the fixed costs…as long as loading/offloading costs aren’t so high that even dirt-cheap transport winds up costing more than the canal service. Maybe there is some kind of bulk cargo for which that is the case.

      In any event, it gives China a hedge against future Panama Canal congestion and/or price increases.

    12. Michael Kennedy Says:

      Are not coal slurry or coal log pipelines an option ? I seem to remember something about this.

    13. Robert Schwartz Says:

      The Chinese should buy Nicaragua and build an alternative to the Panama Canal.

    14. Jim Bennett Says:

      Rail land bridges have been around for a while. Here’s an interesting proposal.

      http://www.uh.edu/engines/epi1777.htm

      The Mexicans have been studying a more conventional rail land bridge across Tehuantepec for several decades now.