58 Abstract This article is a follow-up to one published in December of 2012 (Hamlin and Lazar, 2012). Global trade and related transportation are changing dramatically. Trends are diffi cult to fol- low, but important in the effect on cities, coun- tries and continents. Over the past two decades, rising energy prices, rising wages, environmen- tal concerns and other factors have produced a shift back to ocean shipping as an important transportation mode. While slower than other modes, ocean freighter transport can be lower in cost and create lower carbon emissions. These advantages continue to improve as container freighters are becoming larger. The purpose of the article is to look more closely at the public and private sector response in the key Romania port of Constanţa. The fi rst part will lay out the current situation. The second will update and evaluate the Eastern European responses to the current situation, looking closely at the Port of Constanţa. Keywords: co ntainers, port of Constanţa, shipping industry, transportation modes, canals and sea routes. EUROPE’S SOUTHEASTERN GATEWAY: ROMANIA’S PUBLIC POLICY RESPOSE TO CHANGING PATTERNS OF WORLD SHIPPING Roger E. HAMLIN Roger E. HAMLIN Professor, Urban and Regional Planning Department, School of Planning, Design and Construction, Michigan State University, East Lansing, USA Tel.: 001-517-353.8743 E-mail: hamlin@msu.edu Transylvanian Review of Administrative Sciences, No. 45 E/2015, pp. 58-75 59 1. Introduction This article is a follow-up to one published in December of 2012 (Hamlin and La- zar, 2012). Global trade and related transportation are changing dramatically. Trends are diffi cult to follow, but important in the eff ect on cities, countries and continents. As indicated in the previous research, few countries are on top of what is happening even though these trends are critical to their economic future. The public policy re- sponse to these trends is diffi cult because infrastructure costs are high and the imme- diate benefi t to the general public is not always clear to them. Over the past two decades, rising energy prices, rising wages, environmental con- cerns and other factors have produced a shift back to ocean shipping as an important transportation mode. While slower than other modes, ocean freighter transport can belower in cost and create lower carbon emissions. These advantages continue to im- prove as container freighters are becoming larger. Some container ships now carry 20,000 standard shipping containers (TEU) per ship, more than double the volume of just a few years ago. These advantages are only available to some countries. Even affl uent countries that had good seaports are fi nding that their facilities are rapidly becoming out of date. Just a few seaports are able to accept the largest ships. Only a few ports in North America and Europe accept the next smaller-sized ships, and those ports are often congested. The two most important canal systems of the world, Panama and Suez, are upgrading but behind, and some of the great inland waterways, such as the St. Lawrence Seaway and Danube River require improvement just to handle ‘handoff ’ traffi c. Not keeping up with this ship size escalation could cause a country or a whole continent to fall behind economically, and could be the basis for the redistribution of world wealth (Hamlin and Lazar, 2012). The ‘Great Recession’ of 2008-9, the large drop in oil prices in 2014, and econom- ic slowdowns in several large economies including China, Brazil and Russia during 2015 have created shockwaves in the shipping industry. These shocks have made large infrastructure investments more diffi cult for both the public and private sec- tors. Total shipping volume dropped dramatically, came back slowly and changed in composition. However, ship sizes continue to increase and long-term trends may still strongly infl uence the world economic balance of power. Where does Romania stand in the new global shipping war? The purpose of this article is to update the information found in an article pub- lished in 2012 and follow-up on the implications of changing trends. It will also look more closely at the public and private sector response in the key Romania port of Constanţa. The fi rst part will lay out the current situation. The second will update and evaluate the Eastern European responses to the current situation, looking closely at the Port of Constanţa. 60 2. The current situation The fi rst step is to describe general shipping trends. Then the article will look in more detail at trends in the components of the maritime shipping industry. The cur- rent status of containerization will be followed by a discussion of current ship charac- teristics and the shipbuilding industry. Then we must look more closely at the canals, ports, inlandwaterways and other hinterland infrastructure needed to handle those big ships. 2.1. Global shipping industry The maritime shipping industry has been growing steadily for decades, largely the result of containerization. Growth has consistently exceeded world GDP growth. In the years just prior to the fi nancial crisis of 2008-09 the shipping industry was ex- panding rapidly along with global trade. The economic and fi nancial crisis of 2009 dramatically eff ected total shipping volume. Since then, ‘the slow global economic recovery has continued to impact the overall shipping industry’ according to Svein Engh, Group Head and Managing Director, CIT Maritime Finance.‘ Broadly speak- ing, global trade is not growing at the same level that it had been growing for the last number of cycles. That means that time charter rates in the shipping sector have not improved dramatically’. Although he says, ‘Certain aspects of the industry are doing bett er than others’ (Javali, 2015). Confl icting indicators portend the situation in 2015. Some claim the industry is making slow but solid gains but with shifting market emphasis, as well as chang- ing fi nancing and organizational structures. Some claim the industry is experiencing chronic over capacity that may last for some time1. The slowing Chinese economy is seen as a major cause. According to offi cial Chi- nese statistics, the economic growth rate for China has dropped from double-dig- it gains in GDP to 7.4% GDP growth in 2014. The fi rst quarter year-over-year GDP growth rate for 2015 was offi cially 7.0%. So, as the world economy continues to strug- gle to recover from the global 2009 slowdown, China represents a new drag on those recovery eff orts more than fi ve years later. Perhaps more importantly, China trade is declining. China’s monthly trade data for March of 2015 indicated that exports fell from a year ago by 15% in US$ terms, compared to expectations for a rise of more than 8%. Imports meanwhile fell 12.7% from March of 2014. This negative trend con- tinued in April of 2015 (China’s Export Numbers, BBC, 2015). Also important are the housing and infrastructure sectors in China. Housing pric- es have been falling in nearly every metropolitan area in China. Overcapacity is caus- ing construction to slow down. Likewise infrastructure investment is slowing, much of that carried out by local governments who raise capital by selling land to develop- 1 In February 2015, for example, the Baltic Dry Index (BDI) dropped to its lowest level since the creation of the index in 1985. The BDI is the global benchmark for freight rates for ships carrying raw materials (Lakshmi, 2015). 61 ers and/or going into debt, much of the debt in the shadow-banking sector. A com- bined tightening of credit standards along with a national crackdown on corruption have caused local governments to be more cautious about investing in infrastructure. All of these factors lead to less steel production and less coal and iron ingots imported from places like Australia as the energy and raw materials for steel production. The chief executive of the world’s largest container-shipping group recently warned that global trade growth could slow this year in spite of low oil prices as Chi- nese, Brazilian and Russian economies disappoint. Milne (2015):‘I’m personally more towards the low end of that [estimates of global trade]’. Søren Skou, Maersk Line’s chief executive, told the Financial Times on March 1, 2015: ‘Growth from a historical perspective is quite sluggish’. His comments have weight as Maersk’s predictions are seen as a good indicator of future global trade. 2.2. Containers Inter-modal containers are large metal boxes used to transport freight. Built to standard dimensions, containers transfer easily between transport modes. Freighter or train capacity is often expressed in twenty-foot equivalent units or TEUs, referring to 20’ long containers (Containerization, 2012; Container Standards). Containerized shipping has existed for more than 60 years (World Shipping Coun- cil, undated) but grew rapidly in the 15 years prior to the global slowdown. Contain- erization grew over the decades because of the substantial reduction in cost it allows at the break-of-bulk point. This growth has been cited as a cause of long-term growth in world trade. Historically, oceans and waterways were the preferred mode of transportation, particularly for heavy freight. The break-of-bulk point, where men carried goods from one mode of transportation such as ships to another mode on land,was so la- bor intensive that the world’s great cities typically formed near good harbors. And, routes of internal land transport often developed to feed into those points. As world wage levels rose, these labor-intensive methods of transferring goods between modes became too expensive. Containerization has released the shipping world from this impediment, while liberalization of longshoremen labor contracts has allowed con- tainerization to accelerate. Goods not regularly containerized include dry bulk goods such as corn and coal, and liquids such as oil. Even these categories are experiencing increased containeriza- tion with the advent of tanker containers and infl atable rubber liners for containers called bladders (Global Security.org, undated). A variety of types of containers make up the world inventory. Historically, dry containers comprised about 93%. The other 7% is split between insulated refriger- ation containers and tank container (diff erent from tanker ships). Reefers make up approximately 6.25% of the global fl eet. Tank containers, for transporting various liq- uids, occupy the remaining 0.75% (Drewry Maritime Research, 2014). Increases in terrorism and other security issues have also improved the relative cost advantage of containerization. Containers can be inspected and sealed at their 62 origin and remain sealed, electronically monitored and tracked until they reach their destination (Lick and Hamlin, 2012). A disadvantage is the weight of the container, but use of new composite materials can reduce container weight. A second disadvan- tage is the need to dead-head empty containers or just to dispose of or reuse contain- ers for other purposes. Demand for container shipping dropped dramatically after the Great Recession, and has been slow to recover. Container demand rose by about 4 per cent in both 2013 and 2014 (Milne, 2015). Maersk Line, the Danish group that ships about 15 percent of the world’s seaborne freight, expects it to increase 3 to 5 percent in 2015 (Milne, 2015). Container demand used to expand at up to 10 percent a year before the fi nancial cri- sis, but Mr. Skou, CEO of Maersk, said those days were behind the industry. He said, in a recent interview, that increase in demand would more closely mirror global GDP growth in the future, much like shipping volume in general (Milne, 2015). 2.3. Ships Container ships are described in terms of their container capacity. Container ships are divided into seven major size categories: (1) small feeder, (2) feeder, (3) feeder- max, (4) panamax, (5) post-panamax, (6) new panama, and (7) ultra-large (Hayler and Keever, 2003).The word ‘panamax’ refers to the maximum size of a ship that is able to pass through the Panama Canal. As can be seen by the listing, several categories are too large to fi t in the existing canal, and cannot dock at many existing ports. In 2000 the global container ships fl eet numbered over 6,800 vessels (Global Se- curity.org, undated, Container Types). More than 70 percent of these were built to carry ocean-going containers. This world-wide fl eet had a capacity of about 6 million TEUs in 2000. According to Drewry Maritime Research, prior to 2009 annualized fl eet growth had been more than 10% (Drewry Maritime Research, 2014). Despite the slowdown in trade, the global container fl eet reached 32.9 million TEU in 2012, or nearly fi ve times the 2000 fi gure. Continued growth in the fl eet is, in part, an issue of lag time. Ship orders take so long to fi ll that levels of commitments contin- ued after the fi nancial crisis. Growth in the overall container equipment fl eet was under 5% in 2012 and slower in 2013, ultimately refl ecting the impact of weaker trade growth and liner effi ciency gains in overall equipment demand (Drewry Maritime Research, 2014). In terms of the number of containers each can hold, ship size has grown rapidly in the last decade and a half. Nearly 3/4th of the fl eet in 2000 consisted of ships with under 1,000 TEU capacity. But, Super Post-Panamax vessel of 4,500 TEU, were already grow- ing rapidly as a portion of the total (Global Security.org, undated, Container Types). At the end of 2003 about 100 container ships in use already had a capacity of 8,000 TEU. The Samsung shipyard was building a container ship with a capacity of 9,200 TEU for use in 2005. Samsung delivered a 9,600 TEU ship in 2006. That size increased to 15,000 in 2010 and the maximum size is now 20,000 TEUs (Schumacher Cargo.com, undated). 63 Korea’s Daewoo Corporation built the world’s largest ship for Mærsk line. The ship cost about US$190 million, and holds 18,000 TEU containers. The ship design is called the Triple E. To understand how much is carried by a single container ship of this size, if the same number of containers were loaded on a train, the train would be 110 km long (Martin, 2011; Hamlin and Lazar, 2012). The claim is that superior econ- omies of scale enable the new ships to exceed the record for both fuel effi ciency and CO2 emissions. In 2012, Maersk planned to put ten such ships into service between 2013 and 2015 (Martin, 2011). However it did not order any new ships after 2011. De- spite Maersk CEO Mr. Skou’s recent warning of slow economic and shipping growth, Maersk recently ordered from Daewoo new ships for the fi rst time since 2011 when it bought 20 Triple E’s from Daewoo in May 2015. The 20 new ships are Triple Es mod- ifi ed to hold 20,000 TEUs (Wilmington, 2015). World trade and shipping volumes have fl uctuated in the last decade, but one trend remains clear. New container ships are gett ing much larger. It seems that in good economic times freighter lines are willing to use excess cash to invest in bigger ships to improve capacity. In diffi cult economic times, they want to use bigger ships to increase effi ciency (Kremer, 2013). 2.4. Canals and sea routes The advent of the mega-ship also aff ects shipping routes. Most container shipping is within Asia. There, ship size and port capacity are growing rapidly. The greatest volume of intercontinental shipping, historically, has been between North America and Europe. Yet, the shipping routes from Asia to the North American west coast are expanding in volume with a high percentage of that trade being one-way from Asia. Shipping from Asia to Europe can follow one of two routes, depending on the ca- pacity of the world’s two most important canals, Panama and Suez. Both canals have challenges. The only alternatives are (1) to pass around the southern tips of South America or Africa, which can add weeks to the journey, or (2) a much more expensive overland route, typically by rail. Panama. The Panama Canal is still the preferred route for East Asians but this is being challenged as ships get larger. The Panama Canal has been so important that, as mentioned earlier, ship size categories are based on whether they can pass through that canal. However, an ever increasing number of ships are larger than the old Pan- amax size. The size of a panamax vessel is limited by the size of the Panama Canal’s locks. The ‘post panamax’ category has historically been used to describe ships with larger hulls. The Panama Canal is currently being enlarged at an expense of over $US 6 billion. The multi-billion dollar project will expand the canal’s capacity, both in volume and ship size. Completion of the project was projected for approximately 2014 (Panama Canal Authority, 2006). While the project has been delayed and is over budget, it is now expected to be completed in 2016. 64 Panama is so important that the expansion project is causing some changes in ter- minology. The ‘new panamax’ size category indicates the ship-size that will be able to pass through the new third set of locks currently being built (United Nations Confer- ence on Trade and Development, 2010).The new locks can accommodate a ship with approximately 12,000 TEUs (Panama Canal Authority, 2006). The Panama project may also greatly impact trade patt erns. Not only will East Asian ships be more likely continue to use Panama rather than Suez to get to Europe, they may also want to ship directly to customers on the U.S. East Coast rather than to the West Coast with a rail transfer. However, the New York/New Jersey port is con- gested and needs upgrading of transfer capacity. Other ports such as Halifax, Norfolk and Baltimore are looking for ways to get in the big-ship game (see ports below) (Fi- nancial Times, 2015). Nevertheless, when the Panama Canal project is completed, it will still not accom- modate the largest ships currently in use. Even this multi-billion dollar expansion will only accommodate ships 1/2 to 2/3rds the size of those soon to be built. Some say that the new Panama Canal will be out of date the day it opens. Suez. For the growing economies of South Asia, the Suez route to Europe is most likely. Suezmax is also a term describing ship sizes. It refers to ships capable of pass- ing through the Suez Canal. The term is primarily used to classify tankers. Since the canal has no locks, the most serious limiting factors are the maximum depth below waterline, and height due to the Suez Canal Bridge. A few supertankers fi lled to ca- pacity are too deep to fi t through. They have to transfer part of their cargo to other ships or to a pipeline terminal before passing through (Hamlin and Lazar, 2012). The Suez might have limitations with respect to the new mega container ships. Also, once ships get to the Mediterranean Sea, they may face a 10 to 20 day trip around Europe to the west and north to get to ports that can handle the larger ship size and cargo volume. The ‘New Maritime Silk Route’ proposed by China would also increase East Asian shipping volume going west to Europe. In a speech in 2013, Xi Jinping of China an- nounced the intention to create a maritime silk road, along with the Asian Infrastruc- ture Investment Bank (AIIA) (Yale, 2015). These initiatives have gained traction as well as controversy in the succeeding years but clearly represent a ‘look west’- att itude on the part of the Chinese and the initiative’s partners. The Indian Ocean and the Suez are destined to become more important for transport to Europe (Want China Times, 2015). 2.5. Ports Obviously, with ship size increasing rapidly sea ports must be built to accommo- date the larger ships. And, with the increase energy and cost effi ciency off ered, ser- vicing larger ships could be important to a city or country’s competitive advantage. The costs and time lags associated with building port facilities is much greater even than for the ships themselves. 65 Container ports are dominated by Asian ports, with 7 of the top 11 in China. West- ern nations are far behind in both port capacity and amount of trade. European ports that make the list are Rott erdam (#10), Antwerp (#14), Hamburg (#15) and Bremen/ Bremerhave (#23). North American entries are Los Angeles (#17), Long Beach (#18), and New York/New Jersey (#20). Other North American and European ports in the top 50 are: Valencia, Spain; Flexstowe, UK; Algeciras, Spain; GioiaTauro, Italy; Savan- nah, US; and Vancouver, Canada. Listed ports can handle the Panamax ships, but not necessarily the newest me- ga-ships. Going farther down the list, ports might only be able to deal with smaller ships. Norfolk, VA has low TEU volume but deepwater larger ship capacity (Allen, 2012). Halifax is developing its deep water port to handle 18,000 TEU ships, but does not currently make the top 10 in volume. ‘All of the consequences of [ship] size might not be immediately obvious for na- val architects looking for optimum carrying capacity or for ship owners seeking to reduce costs’, says Diana Illing, IHS Maritime & Trade Consultant. ‘Not only must ports upgrade the size of their ship bays, but other preparations must be made. One issue plaguing many ports is draught. At Hamburg, for example, one of Europe’s most active and infl uential cargo hubs, restricted draught has always been a limiting factor – 12.8 meters (about 42 feet) during low tide and 15.1 meters (about 50 feet) during high tide’(Illing, 2015). Air draught, the height of the ship and its antennae above the water is also a limitation. Bridges that cross the mouth of a bay are someti- mes too low for the big ships. This is somewhat of a problem in Halifax and Baltimo- re, for example (Allen, 2012). Halifax, one of the deepest ports on the North American east coast can handle 18,000 TEU ships, but must increase the height of the bridge crossing the mouth of the bay to allow full access (Illing, 2015). The breadth of ultra large container ships creates another limitation. The com- bined beam of two ships plus a safe separation zone between them represents the required channel width to allow two ships to pass in a channel. Ships carrying 18,000 TEU’s are too wide for two-way traffi c on the Elbe Channel that serves Hamburg, for example. Requiring one-way traffi c while a large ship passes down the channel would create long waiting times and congestion for other port users (Illing, 2015). Variability of delivery volume is another problem faced by ports. This means that when mega ships arrive, servicing them can overtax local facilities. Unloading a mega ship creates demand for suffi cient intermediate storage space, for example. This re- fers not only to space for containers but also plug-ins for cooling and refrigerated containers, and tank storage for liquid bulk or dry bulk storage (Illing, 2015). Investment in more freight handling equipment will be necessary. Onward for- warding and distribution of cargo becomes a logistical challenge. The capacity to load so many containers on to trains and trucks is a concern, and moving freight into the hinterland mayrequire additional rail and road capacity in and out of a port. One train can only carry about 240 40-foot containers. About 20 double-stacked trains of maxi- mum size would be required to move the containers from one 18,000 TEU ship. The 66 larger the container ship, the more time is required to load or unload, but the time schedule for a container ship is tight (Global Security.org, undated, Container Types). An additional issue is ‘handoff ’ capacity to feeder ships, smaller ships that trans- port containers from the big ports to smaller costal or up-river ports. The speed of the inter-ship transfer is critical. Ships must line up side-by-side and have cranes sort and transfer containers. If only a few ports on a continent are able to handle the biggest ships, they may become hubs and will need to transfer containers to feeder ships in much greater volumes. Some ports that have a long history of being major ports may not be able to upgrade facilities to accept the largest ships. Such ports might fi nd increasingly that they are sending and receiving containers to/from other ports on feeder ships. The new mega-hubs must have more and bett er handoff facilities. These transfers require not only physical facilities but also other technologies to maintain internal security, track inventory and deal with border-crossing bureaucra- cies related to customs, immigration and terrorism threats. These soft infrastructures are both a signifi cant part of port costs and a more ongoing issue requiring constant update. They also contribute to a demand for advanced technologies in the port city and the establishment of trade, transportation and communication technology hubs (Lick and Hamlin, 2012). Mega-ships have an impact on the status of ports that can’t handle them. Shippers might relocate their business to ports that can be served by mega-ships. With ultra large container ships arriving in Rott erdam, for example the most economic choice might be to send Hamburg-bound containers on a feeder ship or some of the traffi c may be transferred by road or rail depending on the distance. This would challenge ports’ top-tier status, their inclusion on a main haul itinerary, and their place in a hub and feeder networks, says Diana Illing. Ports that have invested to prepare for the new vessels stand to benefi t. The APM Terminals facility at Pier 400, Los Angeles, handled three mega-ships simultaneously between Feb. 22 and March 7, 2015, representing a combined total of 34,465 moves in that period, and fi lling 28 double-stacked railroad trains. This author witnessed many of those containers crossing the Mojavi Desert by rail in early March. Intermodal con- tainer rail traffi c for inland destinations is a major component of West Coast contain- erized cargo volumes (Illing, 2015). ‘Trade volumes are forecast to continue growing, and the global new building order book includes a substantial number of mega-ships. This has implications for port infrastructure in approach channels, quayside handling, and hinterland infra- structure and logistics. Ports need a clear vision of trade developments, equipment and staffi ng issues, and hinterland infrastructure in their communities. It is likely that port authorities will be pushed towards mergers to achieve the scale needed to meet the demands of mega-ships’ predicts Diana Illing2 (Illing, 2015). 2 Diana Illing, an IHS Maritime & Trade consultant, can be contacted at diana.illing@ihs.com. This commentary was originally published in IHS Maritime Fairplay, a sister publication of JOC.com within IHS Maritime & Trade. 67 In the early history of urban development break-of-bulk points at seaports lead to the location of many of the world’s great cities. More recently, the airport has become a catalyst for both industrial development and high-tech ‘aerotropolis’ services. Now, the elevated importance of sea freight in modern trade is providing an impetus for modern technological development and local economic growth near seaports again, including high-tech logistics centers, often with a closely associated aerotropolis (Lick and Hamlin, 2012). 3. Europe’s Southeastern gateway Southeastern Europe has the advantage of a long coastline with many natural har- bors (Nott eboom, 2012). Southeastern Europe also has many port cities that are com- peting for the distinction of gateway to Europe. In the port of Rijeka, Croatia, for ex- ample, the Adriatic Gate Container Terminal (AGCT) recently serviced a 10,000 TEU container ship. The vessel is part of the 2M Alliance of two of the world’s largest ship- ping companies, Maersk and Mediterranean Shipping. The alliance connects Rijeka and the Far East, deploying fi fteen vessels with capacities of 9,600 to 11,300 TEUs. Other gateway ports include Italian ports in the North Adriatic and the Thessaloniki region of Greece (Nott eboom, 2012). The North Adriatic Region has established the North Adriatic Port Association (NAPA), for example, to try to become a gateway region. In addition to Rijeka, this association includes Trieste, Italy, which has a port 18 meters deep and able to handle very large ships. But, at 1.8 million TEUs in 2012, NAPA members still only handle a fraction of the volume of the multi-port gateway region of Hamburg-Le Havre (Poledica, 2014). Some would argue that one single port would have diffi culty becoming a conti- nental gateway. They might argue that the economics favor a multi-port region, with each port playing a specialized role. One port might handle the largest ships and hand off cargo to smaller ships and rail lines that operate between member ports. Some ports in the system might specialize in dry bulk or tanker shipping and each would have a diff erent confi guration of access to the hinterland (Noteboom, 2010; Gilman and Williams, 1976). 3.1. Constanţa: favorable location Constanţa Seaport in Romania is an example of a port city that has the potential to increase its importance because of the shifting patt erns of trade and transportation (Hamlin and Lazar, 2012). Constanţa is located at the western end of the Black Sea. With a natural harbor, Constanţa has welcomed ships since at least the sixth century B.C. (Bloomberg.com, 2014). Constanţa’s att ributes facilitate the connection of other Black Sea ports to Cen- tral European markets using Pan European corridors. As such, the Port at Constanţa hopes to be Europe’s link to the Black Sea basin that also serves the Ukraine, Geor- gia, Bulgaria, Russia, and Turkey. And, with growing Asian-European trade and im- 68 provements to the Suez, Constanţa might be well located to connect European and Asian markets. It could be a key link between Europe and the rapidly growing econ- omies of south and East Asia through the Suez Canal, saving shippers the multi-day trip around Europe to North Sea ports like Rott erdam and Bremenhaven. Further- more, with the expanding Panama Canal, Constanţa could be a Black Sea hub, pro- viding access between East Asia and the Black Sea basin through the Panama Canal (Hamlin and Lazar, 2012). The port city is at the junction of major trade routes, including routes connecting the Transcaucasus, Central and Eastern Europe and Asia and the Far East. Constanţa might also be a gateway to Western Europe saving time and fuel compared to routes going from the Suez to Northern European ports. According to the ‘CO2 Reduction’ report issued by the European Gateways Platform, signifi cant savings in CO2 emis- sions would be achieved if goods destined for Central and Eastern Europe entered through Constanţa, rather than northwestern Europe. Constanţa port’s favorable geo- graphic position is emphasized by its connection with two Paneuropean transport corridors, as defi ned by the European Commission. ‘Its position as a “core port” in the revised EU Ten-T network, its pro-active im- plication in the Strategy for the Danube Region, and its favorable location make Constanţa port more and more att ractive to investors’, says Valeriu Nicolae Iones- cu, CEO of N.C. Maritime Ports Administration S.A. Constanţa, (in Forward of 2013 Annual Report: Port of Constanţa). TEN-T network is the Trans-European Trans- port Network policy and program (European Commission, Mobility and Transport, 2015). According to European Commission policy, Constanţa is a part of two TEN-T corridors, the Orient/East-Mediterranean Corridor that connects the German ports Bremen, Hamburg and Rostock via the Czech Republic and Slovakia, with a branch through Austria, further via Hungary to the Romanian port of Constanţa’s, and the Rhine-Danube Corridor, that connects Strasbourg and Mannheim via two parallel axes in southern Germany, one along Main and Danube, the other one via Stutt gart and Munich, and with a branch to Prague and Zilina to the Slovak-Ukrainian border, through Austria, Slovakia and Hungary to the Romanian ports of Constanţa’s and Galati (European Commission, 2014). TRACECA (Transportation Corridor of Europe Caucases and Asia) – is a policy linking Europe to the Caucasus and to Central Asia (2013 Annual Report, Constanţa Port). The 21st century ‘Silk Route’ policy has been a name for a loose set of ideas and projects to connect Asia and Europe. One part of it sees Constanţa as an end point of a transportation link between East Asia and Central and Eastern Europe. TRACECA is a key link both conceptually and physically in a Silk Road policy. More recently, China has added more specifi city and perhaps money to a 21st century Silk Road with two connected initiatives, (1) the Asian Infrastructure Investment Bank and (2) Chi- na’s Belt and Road Initiative. The China Belt and Road initiative has two parts, (a) the Maritime Silk Road and (b) the overland transportation link. 69 The 21st century Maritime Silk Road, offi cially announced March 28, 2015, is de- signed to go from China’s coast to Europe through the South China Sea and the Indi- an Ocean in one route (Shaohui, 2015). The overland link includes the world’s longest rail route, 13,000 kilometer from Yiwu, China to Madrid, Span (Ridgewell, 2015; Yale, 2015). Certain other att ributes of Constanţa recommend it as a hub port for the Black Sea and beyond. First, the port has three elements of eff ective intermodal transportation (inland waterways, (Black Sea Danube Canal), railways and roads/motorway infra- structure). Also, the facilities for servicing all type of vessels, containers, tankers and others are in place3. 3.2. Can Constanţa take advantage of its locational and other advantages? The European Gateway Project has plans, looking at the port at Constanţa as a Black Sea-Danube River handoff point to feeder containerships and to other modes that could carry goods to inter-modal terminals in countries such as Romania, Serbia, Hungary, Austria and Germany. According to some, Constanţa already has the larg- est throughput volume of dry bulk, primarily grain, from Easter Europe to the Middle East (Bloomberg.com, 2014). In 2020, the shipping volume is forecasted to be 1.47 mil- lion TEUs. However, dry bulk shipping volume represents only about 10 percent of the total volume destined to or from Central and Eastern Europe. And while the dry bulk capacity is important, some claim that Constanţa is lagging in containerization. Important container shipping lines are utilizing Constanţa Seaport as a distribu- tion port for the Black Sea region. In the past decade, Constanţa Seaport has been serving freight fl ows from Austria, Bulgaria, Hungary, the Republic of Moldova, Slo- venia, Slovakia, Ukraine and Serbia. According to Romanian authorities, the Port of Constanţa off ers the largest terminal handling capacity in the Black Sea Basin. Based on 2010 statistics, the container throughput approximated 600,000 TEUs. Constanţa ranked 25th among the European ports in this regard and, in the top 10, in Eastern Eu- rope. This volume increased between 15 and 20 percent during 2011 to approximate- ly 700,000 TEUs4. Total traffi c increased 9% in 2013 compared with 2012 or 55.138 million tones (Annual Report, Port of Constanţa, 2013). Yet, the percentage increases described above come off of a very slow year in 2009-2010. In fact Constanţa has been slower than other ports such as the North Adriatic cluster to come back from the slow years of the Great Recession. The largest container vessel calling on the Constanţa port has a capacity of ap- proximately 9,000 TEUs. This is smaller than the ships using the North Adriatic and only half of the size of the largest ships now in use world-wide. The largest container terminal, located in the southern part of the Port of Constanţa, operated by DP World, 3 Information provided by the Romanian Ministry of Transportation and Infrastructure, 2011. 4 Ibidem. 70 has an area of approximately 60 hectares with an estimated annual capacity of 1.5 to 2 million TEUs5. Constanţa’s location is a disadvantage in two ways. First, the overland distance to the center of Europe is much greater than it is for the North Adriatic ports. And, the rail and highway systems in Romania need substantial up-grading to act as an eff ec- tive link to the center of Europe. Second, its geopolitical location makes Constanţa a more isolated port. It is not a part of a major gateway cluster such as the North Adriatic or those of Northwest Europe. According to the multiport theory mentioned above, this could be a long-term disadvantage. 3.3. The Constanţa gateway plan While Constanţa has many natural advantages, it faces many challenges. This at- tempt at an Eastern gate to European trade and transportation hopes to create a new competitive advantage for the region and promote manufacturing and trade in gener- al. Yet, success requires careful planning and the capacity to move forward with local and Romanian funds and private money, not just waiting for EU funds. Also a part of the project would be a high-tech logistics hub for the east side of Europe. Creating an advanced multi-modal freight facility and logistics hub requires a multi-faceted plan. Basic questions to be answered are: What do Constanţa and Europe need to do to accomplish this lofty goal? What is the status of the Constanţa Port as it relates to the new larger ships and changing patt ern of global trade? What is the status of the hand- off facilities at Constanţa? What work needs to be done to the canal shortcut through the Danube delta? What expansion of the Danube’s capacity is required? What is the quality of the rail and highway connections between Constanţa and the center of Eu- rope? Can Constanţa become a high-tech logistics hub? A Joint Taskforce presented a White Paper in April of 2010 to the Romanian Gov- ernment that was to act as a roadmap and work plan to guide implementation. The Joint Taskforces consisted of experts from representative Romanian ministries and other public entities (e.g., Constanţa Port Authority) and experts from the European Gateway Platform foundation6. In order to accomplish the targets and goals, Port of Constanţa, with consistent support from Romanian Ministry of Transportation and Infrastructure, must elab- orate a strategy for future developments which should integrate with the national transportation strategy. So far only some of the proposals of the white paper have been implemented. 5 Information provided by the Romanian Ministry of Transportation and Infrastructure, 2011. 6 The Dutch-Romanian Chamber of Commerce established the Romanian Gateway Association which developed a white paper with recommendations. The degree to which the Romanian Gateway Association continues to be active is not clear. 71 3.4. Current projects Several projects are either in progress or to be started in the near future. The port can accommodate the current Panamaxships, but, as mentioned previously, ship sizes continue to increase rapidly, and the Panama Canal is increasing its ship size capaci- ty. The port of Constanţa strives to secure bett er alongside-access conditions for most of its inner port basins to promote effi cient intermodal transfer (truck and rail). One of the important projects in railway traffi c is the enhancement of railway capacity in the river-maritime area of Constanţa Seaport and the connections to the rest of Eu- rope. The local project consists of the construction of a systematized railway complex. In the fi rst phase, the railway lines serving current operators will be executed based on traffi c estimates for the year 2020. The project costs an estimated 17.6 million Eu- ros. As a part of TEN-T several projects eff ecting Constanţa port or its hinterland are being funded. The Budapest – Arad – Timiş oara – Calafat rail upgrade and the Arad –Brașov–Bucuresști–Constanţa rail upgrade are key projects connecting the port to the hinterland (European Commission, Mobility and Transport, 2014). Also, the rail bott leneck between Timiş oara and Sofi a is being addressed (European Commission, Mobility and Transport, 2014). Projects to improve port transportation infrastructure are also in progress includ- ing work to improve inter-modal connections at Constanţa port (European Commis- sion, Mobility and Transport, 2014) as well as the development of roads and bridges connecting port operation areas with national transportation systems. The limited access highway from Bucharest to Constanţa has been completed. The Danube Riv- er – Black Sea canal is operational and being maintained at its current level. Projects designed to provide bett er sailing conditions on the Danube all through the year are also in the works. The 2012 blockage of the Danube’s freight transport illustrated a severe problem. Equally important are several projects expanding Constanţa’s role as a logistic hub. Creation of a state-of-the-art information and logistics hub is a complicated enti- ty that showcases the interaction of science-based technologies with human systems. Governments are involved because of concerns at such locations for both security and taxation. Private systems must track inventories, time and related costs, and billing and shipping instructions, to name a few. The interaction of real time data bases, gov- ernment policy, law and profi t orientation are all areas that cross sectoral and techni- cal lines. A major maritime port can fall behind quickly if it does not employ the latest information-age technologies as a part of a high-tech port and logistics hub. 4. Summary, conclusions and policy implications The shipping industry is recovering slowly from the global Great Recession of 2009-2010, in part, because the world economy is recovering slowly. Container ship- ping has been one of the slowest segments of maritime shipping to recover. Tanker shipping has done bett er. 72 Despite the respite, global trends both inside and outside the shipping industry are in place. Long-term energy price trends, improved handoff infrastructure and technologies, and security concerns are elevating ocean shipping as a more important transportation mode. Notwithstanding the deep drop-off of container volumes and the slow recovery, ships are still increasing in size rapidly. As has been said, in poor economic times ships become bigger to gain effi ciency and in good economic times they grow to in- crease capacity. Maersk,the world’s largest maritime shipper, is continuing to buy Triple-E’s, the world’s largest ship, and is often modifying them to hold up to 20,000 TEU’s. This trend is having far reaching eff ects on all aspects of global transportation. The trend has implications for the major cities of the world and can dramatically im- pact the economies of whole countries and continents with implications for the world economic order. Few countries are in tune with what is happening. Not keeping up with this ship size escalation could cause a country or a whole continent to fall behind economically. The two major canal systems of the world, Panama and Suez, are in need of the major upgrades, some of which are underway. Major canals are expanding to accom- modate larger ships at enormous cost in time, money and environmental impact. Yet, even after a multi-billion dollar investment, the Panama Canal will be far too small for the largest ships when it is complete in 2016. Nicaragua has given permission to a Chinese investor to build a competing canal designed to accept larger ships. The sta- tus of the Panama and Suez Canals has great eff ect on the shipping routes and there- fore selection of ports. The status of the Central American canal connection has strong infl uence on East Asia to Europe shipping as well as ports on the East Coast of the US. At present, mainly Asian seaports are able to accept the largest ships being built. Halifax, Nova Scotia can now accept a ship of 18,000 TEU’s. Only a few other ports in North America and Europe such as New York, Los Angeles/Long Beach and Rot- terdam are able to handle the next sized ships, and those ports are congested. Many ports are att empting to deepen their approaches and expand quays, cranes and stor- age capacity to accommodate mega ship arrivals. Electronics and communication in- frastructure are also in need of modernization. Advanced communication is critical to tracking cargo, dealing with customs, improving safety and maintaining security. Some of the great inland waterways, such as the St. Lawrence Seaway and Eu- rope’s two major rivers require expansion just to handle ‘handoff ’ traffi c, and rail lines, highways and other hinterland transport are often inadequate to handle the load of a mega-ship. The concept of continental gateway also becomes salient with the renewed impor- tance of ocean freight. Secondary cities can emerge as major players in global trade if, (1) they are located on the edge of a continent, (2) they have a good deep-water port, (3) they build good inter-modal transfer facility, and (4) they obtain the technological expertise to develop a logistics hub. One place in Eastern Europe that has that poten- 73 tial is Constanţa, Romania. Currently the largest port on the Black Sea, Constanţa is eff ectively near the mouth of the Danube River, and has rail and highway connections to the rest of Europe. By using the port at Constanţa ships coming from Asia, through the Suez can save more than ten days travel time and cost and CO2 emissions by un- loading in Constanţa rather than Rott erdam. Has Constanţa risen to the challenge of becoming the southeastern gateway and hub for Europe? Constanţa is doing very well as a port link for grain shipment to the Middle East and as a hub for Black Sea traffi c. But, it can only handle container ships ½ the size of the largest vessels, and the rail and highway links from Constanţa to the rest of Europe are underdeveloped. To take advantage of the signifi cant locational advantage, Constanţa and other similar gateways must rapidly upgrade quays to handle lager boats, improve cranes for transfer to Black Sea ships, river vessels, rail and truck. They must develop state- of-the-art information and logistics hubs that eff ectively interface the real time infor- mation concerns of government, regional security, inventory, safety, large-scale phys- ical infrastructure. They must also improve storage capacity at the port. All of this is extremely costly. Who will pay for it? (Drew Maritime Research, 2015). Private sector sources must be part of the picture. Shipping lines that are buy- ing or leasing the mega ships will want and need the port facilities and associated infrastructure required to handle them. Rail lines also have a major stake, and private investment capital can be att racted if they see a growth opportunity. But with their money they will make the decision as to which ports receive the att ention. An enlight- ened public sector should also be involved to promote the interests of its citizens and to insure that facilities are developed that enhance the community. 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