6.3 – Port Terminals

Authors: Dr. Jean-Paul Rodrigue and Dr. Theo Notteboom

Ports are harbor areas in which marine terminal facilities are transferring cargo and passengers between ships and land transportation.

1. Ports and Port Sites

Ports are points of convergence between the land and maritime domains of passengers and freight circulation. While the maritime domain can involve substantial geographic coverage related to global trade, the land domain is related to the region and locality of ports. The term port comes from the Latin portus, which means gate or gateway. Historically, ports emerged as safe harbors for fishing, and those with convenient locations became trade hubs, many of which of free access and designed to protect trade. As such, they became the nexus of urbanization, with several becoming the first port cities, playing an important role in the economic welfare of their regions. Today, many of the most important cities in the world owe their origin to their port location. The port is a multidimensional entity anchored within geography by its site and situation and depending on its operations, governance structure, and the supply chains it is embedded in.

Due to the operational characteristics of maritime transportation, port location is constrained to a limited array of sites, primarily defined by geography. Since ports are bound by the need to serve ships, access to navigable waterways has been historically the most important site consideration. Before the Industrial Revolution, ships were the most efficient means of transporting goods across all modes. Thus, port sites were frequently chosen at the head of water navigation, the most upstream sites, such as London on the Thames, Montreal on the St. Lawrence River, or Guangzhou on the Pearl River. Ship drafts were small, so many sites were suitable to be used as ports. Sites on tidal waterways created a particular challenge for shipping because of the twice-daily rise and fall of water levels at the berths. This implied that protected areas such as bays were particularly suitable port sites.

By the 18th century, the technology of enclosed docks with lock gates was developed to mitigate several nautical constraints related to tidal variations. Because ship transfers were slow and vessels typically spent weeks in ports, many berths were required. This frequently led to the construction of piers and jetties, often called finger piers, to increase the number of berths per given length of shoreline.

Conventional break-bulk terminals were mainly focused on direct transshipment from the deepsea vessel to inland transport modes. Direct transshipment is associated with short dwell times, the average time the cargo remains stacked on the terminal and waits for some activity to occur. This required only a small temporary storage area on the terminal. Transshipment was very labor-intensive, with operations managed on an ad-hoc basis. It was common, due to the lengthy loading or unloading process, to have goods move directly from the land mode (trucks or rail) to the ship or vice-versa. Ships staying at berth for several days allowed for a continuous, albeit slow, loading or unloading of the cargo.

The growth of the oil industry in the 1920s and 1930s and the fast rise of the chemical industry in the 1950s and 1960s, such as producing petrochemicals such as plastics, led many ports to expand to locations with ample space for the development of vast Maritime Industrial Development Areas (MIDA). In the 1960s, the gradual shift from conventional break-bulk terminals to container terminals brought about a fundamental change in the layout of terminals as well as site selection. Ports increasingly became impacted by global processes, such as sourcing resources, parts, and goods to other parts of the world. Containerized transportation substantially changed port dynamics to favor the emergence of specialized container ports. Compared to conventional break-bulk cargo ships, most containerships did not have onboard cranes, and container terminal facilities had to provide capital-intensive cranes and ample storage space to stack containers dockside. Finger piers were no longer adequate, and berths were redesigned to accommodate quick ship turnaround and more effective dockside operations between the crane and the container storage areas. The usual dwell time of a containership is around 24 hours, implying that a containership spends about ten times less in a port than an equivalent break-bulk cargo ship. Containerization has become a fundamental function of global port operations and has changed the structure and configuration of port terminals that occupy more space. Recently, ports have been challenged to find enough space to create new large-scale logistics zones in the framework of port-centric logistics and free trade and economic development zones.

As terminals, ports handle the largest amounts of freight, more than any other type of terminal combined. For handling freight, port infrastructures must jointly accommodate transshipment activities and thus facilitate convergence between land transport and maritime systems. In many parts of the world, ports are the points of convergence from which inland transport systems, particularly rail, were laid. Most ports, especially those that are ancient, owe their initial emergence to their site as most harbors take advantage of a natural coastline or a natural site along a river. Four major elements define a port site:

  • Maritime access. Refers to the physical capacity of the site to accommodate ship operations. It includes the tidal range, which is the difference between the high and low tide, as normal ship operations cannot handle variations of more than 3 meters. Channel and berth depths are also very important to accommodate modern cargo ships. A standard Panamax ship of 65,000 deadweight tons requires a draft of more than 12 meters (40 feet). However, about 70% of world ports have depths of less than 10 meters and are unable to accommodate ships of more than 200 meters in length. Many ports are also impacted by sedimentation, particularly ports in river deltas. This requires continuous dredging, which adds to the costs of port operations. Some river ports may be impacted by periods of flooding and drought, while other ports may be impeded or closed during winter because of ice conditions. While inland port sites (such as at the end of a bay or along a river) generally have the advantage of being closer to the final market, they imply longer deviations from maritime shipping routes.
  • Maritime interface. Indicates the amount of space available to support maritime operations, namely the amount of shoreline with good maritime access. This attribute is critical since ports are linear entities. Even if a port site has excellent maritime access, namely deepwater waterways, there may not be enough land available to guarantee its future development and expansion. Containerization has expanded the land consumption requirements of many ports. Therefore, it is not surprising to see that contemporary port expansion projects involve significant capital investments to create artificial port facilities providing, through land reclamation, more room for this interface.
  • Infrastructures and equipment. The port site must have infrastructures such as piers, basins, stacking or storage areas, warehouses, and equipment such as cranes, all of which involve high levels of capital investment. In turn, these infrastructures have a footprint, which must be available to ensure port expansion. Keeping up with the investment requirements of modern port operations has become a challenge, particularly considering containerization, which requires substantial amounts of terminal space to operate. Modern container terminals rely on a unique array of infrastructure, including portainers, stacking yards serviced by gantry cranes, and the vehicles used to move containers around the terminal, such as straddle carriers. Container ports have also developed infrastructure for refrigerated containers (reefers) with separated stacking areas. Many terminals are also becoming automated, particularly for stacking areas with automated cranes and vehicles.
  • Land access. Access from the port to industrial complexes and markets ensures its growth and importance. This requires efficient inland distribution systems, such as fluvial barges, rail unit trains, and roads handling intense heavy truck traffic. Land access to ports located in densely populated areas is facing increasing congestion. For instance, the ports of Los Angeles and Long Beach have invested massively to develop the Alameda rail corridor to promote inland access and reduce truck congestion. A similar trend has occurred in Europe, where ports such as Rotterdam and Antwerp have been involved in setting up inland barge and rail shuttle services.

Economies of scale have incited the construction of larger ships, namely tankers, bulk carriers, and containerships. An outcome is that many port sites can no longer provide suitable maritime access to cargo operations. Since container terminals were constructed much more recently, they have a better nautical profile, as depth and available space were fundamental factors in site selection. There are thus incentives to increase channel depth where possible, but this is a costly and environmentally controversial endeavor. Berths and access channel depth have become important constraints for maritime operations considering growing ship sizes.

There is also an array of problems related to port infrastructures. Ports along rivers continuously face dredging problems, and the width of rivers strongly limits their capacity since it provides constraints to navigation. Rarely a port along a river is able to handle the new generation of mega-ships, namely Post Panamax containerships. These ships have put additional pressure on port infrastructures to accommodate growing operational constraints in terms of volume and throughput. Ports next to the sea commonly face a lateral spread of their infrastructures. Several ports have growth problems, forcing them to spread their infrastructure far from the original sites. Older port sites associated with the centrality of cities are facing congestion problems where the transport network has the least capacity to be improved.

The city and the port often compete for the same land, creating prioritization problems. Ports thus have a complex set of relationships, sometimes conflicting, with the cities they service, often a function of the port and city size. While ports are sources of employment and commercial interactions, they also generate externalities such as noise and congestion near their access points. The pressure of many ports on their sites is even more demanding than that of airports because they must be adjacent to deep water. Such sites are very limited and may give rise to conflicts with the city that sees waterfront land as potential high-value residential and commercial areas, park space, or as environmentally sensitive. Many ports are now constrained by urban and environmental pressures, which did not exist when their initial facilities were developed.

2. Port Functions and Traffic

Ports are defined by their traffic since it is their primary function to supply services to freight (warehousing, transshipment, etc.) and ships (piers, refueling, repairs, etc.). Consequently, it is misleading to strictly consider a port as a maritime terminal since it acts concomitantly as a land terminal where inland traffic originates or ends. Ports are cargo-oriented facilities involving a wide array of activities related to their management and operations. The cargo base of a port can expand through the intensification of its fundamental hinterland, the expansion of its hinterland to new areas, and the development of transshipment. In addition to significant cargo-related functions, many ports are involved in other activities such as fishing, ferries, cruises, and recreational activities, including marinas.

Ports are becoming increasingly regional in their dynamics, representing a new development from their traditional local function, namely as industrial clusters. For instance, the port of Hong Kong owes its wealth to its natural site and its geographical position as a transit harbor for southern China. Shanghai assumes a similar function serving central China through the Yangtze River system. For its part, Singapore has been favored by its location at the outlet of the strategic Strait of Malacca and is, therefore, a point of convergence of Southeast Asian transportation. More than 90% of the traffic it handles is strictly transshipments, which involve cargo moving from one maritime service to another without exiting the port terminal. New York has traditionally acted as the gateway of the North American Midwest through the Hudson / Erie Canal system, a function that Western European ports such as Rotterdam or Antwerp perform with access to the Rhine system.

A port throughput is linked to various local and regional industrial activities, as the largest ports in the world are gateways to large industrial regions. However, comparing ports on a tonnage basis requires caution as it does not indicate the nature and value of the cargo. For instance, a mineral port (e.g. iron ore), an energy port (e.g. coal or oil), and a container port could handle a similar tonnage but significantly different value levels. They will also be related to different supply chains as bulk ports are separate entities from container ports. Regarding the freight they handle, ports can be classified into monofunctional and polyfunctional ports.

Monofunctional ports (resource ports) transit a limited array of commodities, most often dry or liquid bulks (raw materials). They have specialized piers designed to handle specific commodities and where the flows a commonly outbound, implying that they are usually load centers.

Polyfunctional ports are vast harbors where transshipment and industrial activities are present. They have a variety of specialized and general cargo piers linked to a wide range of modes that can include containers, bulk cargo, or raw materials. They tend to be more inbound-related facilities.

The oil ports of the Persian Gulf or the mineral ports of Australia, Africa, and, in some measure, Canada are monofunctional.

About 3,700 commercial ports operate worldwide, but only less than one hundred ports can be considered gateways or hubs of global importance. Of this, there are about 680 container ports, with 150 handling traffic above a million TEU. Maritime traffic has a high concentration of port activity, a process mainly attributed to maritime access and infrastructure development. Major ports have established themselves as gateways of continental distribution systems and have access to high-capacity inland freight distribution corridors, notably rail. Such a position is difficult to challenge unless a port faces acute congestion, forcing maritime shipping companies to seek alternatives. Gateways, as locations of high accessibility to maritime and inland transportation networks, have seen the development of port-centric logistics activities that support export and import-based activities.

The world container throughput is the summation of all containers handled by ports, either as imports, exports, or transshipments. As of 2022, about 866 million TEUs were handled by container ports, including the notable growth in containers transshipped at intermediate locations, as well as the repositioning of empty containers. This means that a container is at least counted twice. First, as an import and export, and second, each time it is handled at an intermediary location, such as at a transshipment hub, where it will be counted when unloaded and reloaded. Empty containers, most of them being repositioned, account for about 20% of the world’s throughput. Thus, throughput should ideally be counted in container moves, but both port authorities and terminal operators prefer to communicate throughput figures in TEU for commercial and strategic reasons. The world container traffic is the absolute number of containers being carried by sea, excluding the double counts of imports and exports as well as the number of involved transshipments. The throughput reflects the level of transport activity (handles and rehandles subject to revenue), while the traffic reflects the level of trade activity (imports and exports).

3. Port Authorities and Port Holdings

Ports are subject to active governance and management. Due to the growing complexity of port operations, public port authorities were created at the beginning of the 20th century. For instance, the London Port Authority, the world’s first, was established in 1908 by consolidating all the existing harbor facilities. Such a governance structure became a standard adapted to many other ports, leading to adaptation to local political and jurisdictional realities. For North America, in 1921, the States of New York and New Jersey created the Port Authority of New York and New Jersey, which has become one of the world’s most diversified port authorities with a portfolio including port facilities, bridges, airports, and public transit systems. Administratively, port authorities regulate infrastructure investments, their organization and development, and their relationships with customers using its services.

Port Authority. An entity of state or local government that owns, operates, or otherwise provides wharf, dock, and other marine terminal investments and services at ports.

The primary rationale behind the setting of many port authorities was their ability to manage port facilities more efficiently as a whole rather than privately owned and operated terminals. Since port facilities were becoming more complex and capital-intensive, it was perceived that public agencies would be better placed to raise investment capital and mitigate the risk of such investments. Port authorities tend to be vertically integrated entities as they are involved in most of the activities related to port operations, from constructing and maintaining infrastructure to marketing and managing port services. Yet, their activities are limited within their jurisdictions, an attribute that became increasingly at odds with the transformations of the maritime shipping industry as globalization accelerated in the latter part of the 20th century.

Occasionally, terminals were leased to private companies, but throughout the greater part of the 20th century, public ownership and operation of ports were dominant. Most port authorities are owned by federal, state, or municipal agencies. From the 1980s, privatization marked a reversal in this trend since many became inefficient, unable to cope with market expectations (performance, reliability, and quality of service), and provided adequate financing for infrastructure and equipment, becoming increasingly capital intensive. As public agencies, many port authorities were seen by governments as a source of revenue. They were mandated to perform various non-revenue generating community projects, or at least to provide employment. Recently, port authorities have been called upon to facilitate the port community in coping with the challenges and opportunities brought by the sustainability debate, energy transition, and digital transformation.

The emergence of specialized and capital-intensive container terminals servicing global trade has created a new environment for managing port terminals, both for port authorities and terminal operators. Port authorities are gradually incited to look at a new array of issues related to the governance of their area. They are increasingly acting as cluster managers, interacting with various stakeholders and marketing the port. With the availability and diffusion of information technologies, port authorities have been proactive in developing port community systems enabling many key actors to interact better and share information, such as customs, freight forwarders, and carriers. For port operations that port authorities have conventionally assumed, an increase in the role of private operators has been a dominant trend where major port holdings have emerged to manage a wide array of terminals, the vast majority of which are containerized.

Port holding. An entity, commonly private, that owns or leases port terminals in a variety of locations. It is also known as a port terminal operator.

In an era characterized by lower levels of direct public involvement in managing transport terminals and port terminal privatization, specialized companies involved in managing port terminals are finding opportunities to develop. They thus tend to be horizontally integrated entities focusing on terminal operations in a variety of locations. The primary tool for global port operators to achieve control of port terminals has been through concession agreements.

A concession agreement is a long-term lease of port facilities involving the requirement that the concessionaire undertakes capital investments to build, expand, or maintain the cargo-handling facilities, equipment, and infrastructure to agreed-upon standards.

Several issues are involved in the decision of a terminal operator to invest in a particular port, namely the transparency of the bidding process and the quality of infrastructures (port and inland). The market potential, however, remains one of the determining criteria. The range of port terminals controlled by port holdings covers several of the largest freight markets. As globalization permitted the emergence of large multinational corporations managing assets in a variety of locations, global port holdings are a similar trend concerning the management of port terminal assets.

The emergence of global terminal operators has changed the parameters of port competition. Ports have always, to some extent, been competing to service their hinterland, known as inter-port competition. For large ports, concessions agreements have permitted the presence of more than one terminal operator competing over the port foreland and hinterland. This is known as intra-port competition.

4. Port Regionalization and Transshipment Hubs

In the current stage of their development, ports are going beyond their facilities to help accommodate additional traffic and the complexity of freight distribution, namely by improving hinterland transportation. Port regionalization is such an outcome and indicates a higher level of integration between maritime and inland transport systems, particularly by using rail and barge transportation, which are less prone to congestion than road transportation. The development of global supply chains increased the pressure on maritime transport, port operations, and inland freight distribution, which has incited the setting of satellite terminals and transloading activities in the vicinity of port terminals.

Inland accessibility has become a cornerstone in port competitiveness since it can be serviced by several road, rail, and barge transportation systems. Those three options a particularly present in Europe, while North America is dominated by road and rail hinterland access. Port regionalization is characterized by strong functional interdependency and joint development of a specific load center and logistics platforms in the hinterland. This ultimately leads to the formation of a regional load center network, strengthening the position of the port as a gateway. Many factors favor the emergence of this phase, namely:

  • Local constraints. Ports, especially large gateways, are facing a wide array of local constraints that impair their growth and efficiency. The lack of available land for expansion is one of the most acute problems. This issue is exacerbated by the deepwater requirements for handling larger ships. Increased port traffic may also lead to diseconomies as local road and rail systems are heavily burdened. Environmental constraints and local opposition to port development are also of significance. Port regionalization thus enables to circumscribe partially local constraints by externalizing them.
  • Supply chain management. Global production and consumption have substantially changed distribution with the emergence of regional production systems as well as large consumer markets. No locality can efficiently service the distribution requirements of such a complex web of activities. For instance, globally integrated logistics zones, including Free Trade Zones (FTZ), have emerged near many load centers. However, seeing logistics zones as functionally integrated entities may be misleading as each activity is part of a specific supply chain. Port regionalization thus permits the development of a distribution network that corresponds more closely to fragmented production and consumption systems.

Cargo at ports always required some transshipment to smaller ships used feeders to smaller ports. For economic reasons, it is impossible to connect all possible port pairs directly, so transshipment is required to ensure connectivity within the global trading system. Transshipment was initially developed to service smaller ports unable to accommodate larger containerships, which is common because of the limited draft and port infrastructure. However, as maritime networks became increasingly complex, specialized transshipment hubs emerged. Transshipment requires significant yard space as containers are stored up for a few days while waiting for the connecting ship(s) to be serviced.

An intermediate hub (or transshipment hub) is a port terminal used for ship-to-ship operations within a maritime transport system. These operations do not take place directly, which requires the temporary storage of containers in the port’s yard, usually for one to three days. The term offshore hub has often been used to characterize such locations because the cargo handled at the port of destination is transshipped at a location commonly in a third country.

The growth in global trade has involved greater quantities of containers in circulation, which has incited maritime shipping companies to rely more on transshipment hubs to connect different world regions. In such a context, many gateway ports faced the challenge of jointly handling export, import, and transshipment containers. This went on par with the growing share of transshipments to around 28 to 30% of maritime containerized traffic.

Maritime shipping companies elect for transshipment as a way to use their networks rationally as more ports are serviced without increasing ship assets. A typical maritime range, such as the American East Coast or Northern Europe, involves several port calls in a conventional deep-sea container service. If the volume is insufficient, this may impose additional costs for maritime companies facing the dilemma between market coverage and operational efficiency. The growing size of containerships incites a lower number of port calls, with smaller ports usually dropped. Using an intermediate hub terminal with feeder shipping services can reduce the number of port calls and increase the throughput of the port calls left.

A geography of transshipment hubs has emerged along with several regional markets and with different levels of specialization. The most common market pattern is hubbing, where an intermediate hub links regional port calls to mainline long-distance services. Intermediate hub terminals can thus become effective competitive tools since the frequency and possibly the timeliness of services can be improved. By using an intermediate hub terminal in conjunction with short sea shipping services, often organized along a sequence, it is possible to reduce the number of port calls and increase the throughput of the port calls left. Transshipment also comes with a level of risk for the cargo since containers are handled more times than for direct services.

The intermediate hub enables a level of accessibility that incites them to look beyond their conventional transshipment role. This includes actions to extract more value from cargo passing through and, as such, get more economic rent out of transshipment facilities. Such strategies have led some transshipment hubs, such as Gioia Tauro and Algeciras, to develop inland rail services to capture and directly serve the economic centers in the distant hinterlands. The multiplying effects of being an intermediate hub regarding the frequency of port calls and connectivity to the global economy can thus be leveraged for developing hinterland activities.

As they were throughout history, ports remain as important in the 21st century, supporting the massive commercial exchanges of the global economy. Since maritime shipping is the highest capacity and lower cost form of transportation, including energy consumption, ports allow the connectivity between the land and maritime geography to take place. They remain terminals strongly bound by geography, from the characteristics of their sites to their connectivity to forelands and hinterlands.

Related Topics


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