As fuel costs and roadway congestion continue to increase, the appeal of transferring freight via water should be increasing as well. Although this type of freight movement is very common in certain corridors, especially in Northern Europe and along the Mississippi river, intra-coastal movement of freight has yet to take hold on the US West Coast.
In order to better understand how appealing a truck ferry might be, this paper examines the potential costs of a truck ferry running between the extreme ends of the US West Coast: Southern California and the Puget Sound.
In this hypothetical operation, a truck driver would drop off a trailer at a marine terminal at either end of the route, and a separate truck driver would pick up the trailer at the other end. Ships used would need to be constructed in the US and staffed with US crews in order to comply with the Jones Act.
Totem Ocean Trailer Express (TOTE) operates just such a service between Tacoma and Alaska. TOTE has the powerful advantage that the roadway connections between the Seattle Area and Alaska are relatively poor, whereas the hypothetical service described in this paper would compete with an end-to-end truck trip via Interstate 5, which runs directly between Southern California and the Seattle Metro area.
Table 1 lists the primary cost assumptions for freight transportation either as a direct truck move or as a truck-ferry-truck move where the truck trips are made by different local tractors on each end and the trailers are moved on a custom built ferry.
Table 2 lists the operating assumptions of each mode.
The end-to-end truck move is fairly straightforward to understand. The ferry + truck alternative depends on many factors, perhaps the most important is the proximity of the origin and destination (O/D) to the ferry terminal. Unless a warehouse is located directly at the ferry terminal, a truck trip will still be required at each end of the journey. Another very important input is the utilization of the ferry. A tractor is not going to make a line haul move at less than 100 percent utilized but a ferry must sail on a periodic schedule and incur the related costs regardless of the number of trailers it is carrying.
Figure 1 shows the overall results for O/D distances between 50 and 150 miles away from the ferry terminal, and for ferries at 80% utilization and 50% utilization.
As Figure 1 shows, if ferries can run reasonably full, they can move freight between the extreme locations on the US West Coast cheaper than an end-to-end truck move. The two variables are related because if the ferry can be profitable at O/D locations up to 150 miles from the terminal, it has a much larger pool of potential business and therefore is more likely to operate at a high level of utilization.
In order to better understand why ferries have a cost advantage over trucks, Figure 2 looks at the unit costs for ferries vs. trucks with ferries operating at 80% utilization. The cost for the ferry example in Figure 2 does not include any of the local trucking cost on each end of the journey.
Figure 2 highlights the relative strengths of each mode. Ferries are much more fuel-efficient than trucks, and require much less labor. Ferries cost substantially more to build than trucks, and also require additional costs at the terminals on each end. The largest cost item in Figure 2 is fuel cost for trucks. This analysis is based on $4/gal diesel. If this cost rises significantly, the advantage of truck ferries will only increase.
While many of the assumptions in this basic analysis could be refined, the overall conclusions are unlikely to change. Over a long distance such as the Southern California to Puget Sound, truck ferries can save cost if they can be run at high utilization.
So if truck ferries are such a good idea, why haven’t they been implemented? The major hurdle is a combination of cost and complexity. Starting up a ferry route with two vessels is a $100M investment and most trucking companies are small businesses without the access to this type of capital. The best opportunity seems to be for an existing Jones Act carrier with trailer expertise such as TOTE or Pasha to attempt to capture domestic coastal business. Another opportunity is for one or more large trucking companies to partner on a joint venture since they could guarantee a high level of utilization by diverting some of their existing business.
It is also important to consider the significant social benefit of a reduction of truck travel along the I-5 corridor. There will be savings in freeway maintenance, and in congestion, especially in urban areas along the route such as Sacramento, California and Portland, Oregon. There will also be substantial reductions in air emissions. If the combination of these factors is great enough, it may motivate various state and federal agencies to offer incentives for one or more ferry operators to develop routes along the coast.
