Global Containerized Maritime Shipping: Emergence and Divergence

University of Gothenburg, School of Business, Economics and Law, March 1, 2013

Global Containerized Maritime Shipping: Emergence and Divergence

Jean-Paul Rodrigue

Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA

THE EMERGENCE OF CONTAINERIZATION

Density of Ship Log Entries, 1750-1810

Maritime Shipping Routes and Strategic Locations

The Container as a Transport, Production and Distribution Unit

TransportModes, terminals, intermodal and transmodal operations

ProductionSynchronization of inputs and

outputs (batches)

DistributionFlow management (time-based), warehousing unit

Diffusion Cycle of Containerization

New (niche) servicesProductivity gains Network development

Productivity multipliers

Massive diffusionNetwork complexities

Niche markets

Diffusion Level

TimeAdopt

ion

Accele

r

ation

Peak

Gr

owth

Maturity

Containerization as a Diffusion Cycle: World Container Traffic (1980-2011) and Scenarios to 2015

1980 1985 1990 1995 2000 2005 2010 20150

100

200

300

400

500

600

700

800

900

1000

Milli

on T

EU Divergence

1966-1992 1992-2002 2002-2008 2008 -Reference

Depression

Adoption

Acceleration

Peak Growth

Maturity

The K-Wave of Containerization

Adoption

Acceleration

Peak Growth

Maturity

K-Wave

Phase (Wave)

Transition (A)

AB

Seasonal Cycle (B)

Time(Decades)

Traffic

Years Months

Source: Guerrero and Rodrigue (2013)

Hierarchical Cluster Analysis Parameters of Global Container Ports, 1970-2010

2

3

4

5

6

7

8

9

10

0 20 40 60 80

58.06

31.50

30.69

18.92

16.10

10.20

9.36

7.52

6.74

Dissimilarity per number of classes Dissimilarity dendrogram for 7 classes

A

B.1

C

D.1

D.2

E

B.2

Dissimilarity LevelHigh Low

First Wave

Second Wave

Third Wave

Fourth Wave

Fifth Wave


The First Wave of Containerization, 1970 – The Pioneers of the Triad

Pioneer ports setting containerized operations in the economic triad (North America, Western Europe, Australia and Japan).

Driver: Trade substitution


The Second Wave of Containerization, 1980 – Adoption in the Triad and its Periphery

Expansion of the triad and its trade partners (Caribbean, Mediterranean, Asian Tigers).

Driver: Adoption of containerization


The Third Wave of Containerization, 1990 – Global Diffusion

Large diffusion in new markets (Latin America, Middle East / South Asia, Southeast Asia).

Driver: Setting of global supply chains. Setting of transshipment hubs.


The Fourth Wave of Containerization, 2000 – Global Standard

The container as the standard transport support of the global economy.

Driver: Expansion of global supply chains. China and transshipment hubs.


The Fifth Wave of Containerization, 2010 – Peak Growth

Peak growth and the setting of niches.

Driver: Spillover effect and new transshipment hubs.


Waves of Containerization, 1970-2010

Each wave lasts 8 to 10 years.Hierarchical diffusion pattern.


DIVERGENCE: GLOBAL TERMINAL OPERATORS AND TRANSSHIPMENT HUBS

Typology of Global Port Operators

StevedoresHorizontal integration (Port operations is the core business; Investment in container terminals for expansion and diversification).Expansion through direct investment.PSA (Public), HPH (Private), HHLA (Public), Eurogate (Private), ICTSI (Private), SSA (Private).Maritime Shipping CompaniesVertical integration (Maritime shipping is the main business; Investment in container terminals as a support function).Expansion through direct investment or through parent companies.APM (Private), COSCO (Public), MSC (Private), APL (Private), Hanjin (Private), Evergreen (Private).Financial HoldingsPortfolio diversification (Financial assets management is the main business; Investment in container terminals for valuation and revenue generation).Expansion through acquisitions, mergers and reorganization of assets.DPW (Sovereign Wealth Fund), Ports America (AIG; Fund), RREEF (Deutsche Bank; Fund), Macquarie Infrastructure (Fund), Morgan Stanley Infrastructure (Fund).

Factors behind the Interest of Equity Firms in Transport Terminals

Asset (Intrinsic value) Globalization made terminal assets more valuable.Terminals occupy premium locations (waterfront) that cannot be substituted.Traffic growth linked with valuation; same amount of land generates a higher income.Terminals as fairly liquid assets (perception).Source of income (Operational value)Income (rent) linked with traffic volume.Constant revenue stream with limited, or predictable, seasonality.Traffic growth expectations result in income growth expectations.

Diversification (Risk mitigation value)Sectorial and geographical asset diversification.Terminals at different locations help mitigate risks linked with a specific regional or national market.

Top Twelve Global Container Terminal Operators by Equity-Based Throughput, 2010

PSA

Hutchison Port Holdings

DPWAPM Terminals

SPIGCOSCO

MSC

China Merchants

Ports America

Modern Ter-minals

SSA MarineEvergreen

0 10 20 30 40 50 6051.3

36.032.6

31.619.5

13.69.9

8.98.18.07.57.0

Million TEUs (2010)

Container Terminal Surface of the World's Major Port Holdings, 2010

Container Terminals of the Four Major Port Holdings, 2010

The Insertion of Intermediate Hub Terminals

85% of Transshipment Traffic 15% of Transshipment Traffic

Transshipment Volume and Incidence by Major Ports, 2007-09

Asia – Mediterranean Corridor Caribbean Transshipment Triangle

East Asia Cluster

Northern Range

Gateways and Transshipment Hubs: Different Dynamics Monthly Container Traffic (Jan 2005 =100)

CHALLENGES TO CONTAINERIZATION

An Expected Shift in Containerization Growth Factors

Derived

Economic and income growthGlobalization (outsourcing)

Fragmentation of production and consumption

Substitution

Functional and geographical

diffusionNew niches

(commodities and cold chain)Capture of bulk and break-bulk

markets

Incidental

Trade imbalances

Repositioning of empty containers

Induced

Transshipment (hub, relay and

interlining)

Evolution of Containerships

A

B

C

D

E

Early Containerships (1956-)

Panamax (1980-)

Post Panamax (1988-)

New Panamax (2014-)

Fully Cellular (1970-)

Panamax Max (1985-)

Post Panamax Plus (2000-)

Post New Panamax (2006-)

Triple E (2013-)

500 – 800 TEU

1,000 – 2,500 TEU

3,000 – 3,400 TEU

3,400 – 4,500 TEU

4,000 – 5,000 TEU

6,000 – 8,000 TEU

12,500 TEU

15,000 TEU

18,000 TEU

200x20x9

137x17x9

215x20x10

250x32x12.5

290x32x12.5

285x40x13

300x43x14.5

366x49x15.2

400x59x15.5

397x56x15.5 ; 22–10–8 (not shown)

(LOA – Beam – Draft)

10

8

23

20106

69

1759

1568

1356

13

1045

84

64

A

B

C

D

E

6 containers across4 containers high on deck

4 containers high below deck

The Largest Available Containership, 1970-2013 (in TEUs)

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

20,000

Ship

Siz

e in

TEU

L “Lica” Class(3,400 TEU)

R “Regina” Class(6,000 TEU)

S “Sovereign” Class(8,000 TEU)

E “Emma” Class(12,500 TEU)

“Triple E” Class(18,000 TEU)

Potential Impacts of Larger Containerships on Maritime Transport Systems

Shipping Network•Cascading of ship assets; Less port of call options; Changes in the frequency of services; Increase in transshipment.

Port Operations•Dredging; Improved equipment; More yard storage.

Hinterland•Increased congestion; Pressure to invest in infrastructures; Modal shift; Setting of inland ports.

Fuel Consumption by Containership Size and Speed

17 18 19 20 21 22 23 24 250

50

100

150

200

250

300

350

400

4,000-5,0005,000-6,0007,000-8,0008,000-9,0009,000-10,00010,000+

Speed (Knots)

Fuel

Con

sum

ptio

n (T

ons

per d

ay)

Ship Size (TEU)

Normal

Speed

Slow Steam

ing

Extra Slow

Steaming

Source: adapted from Notteboom and Carriou (2009)

Containerized Cargo Flows along Major Trade Routes, 1995-2011 (in millions of TEUs)

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

0 5 10 15 20 25 30 35 40 45 504.0

4.0

4.6

5.4

6.1

7.3

7.4

8.4

9.0

10.6

11.9

13.2

13.5

13.4

10.6

12.8

12.7

3.5

3.6

3.5

2.9

2.9

3.5

3.4

3.4

3.6

4.1

4.5

4.7

5.3

6.9

6.1

6.0

6.0

2.4

2.6

3.0

3.6

3.9

4.7

4.7

5.1

6.9

8.2

9.3

11.2

13.0

13.5

11.5

13.5

14.1

2.0

2.2

2.3

2.1

2.3

2.5

2.5

2.6

3.8

4.3

4.4

4.5

5.0

5.2

5.5

5.6

6.2

1.7

1.6

1.7

1.7

1.5

1.7

1.6

1.4

1.6

1.9

2.0

2.1

2.4

3.3

2.8

3.1

3.4

1.7

1.7

2.1

2.3

2.4

2.7

2.6

2.6

3.0

3.3

3.7

3.7

3.5

3.3

2.5

2.8

2.8

Asia-North AmericaNorth America-AsiaAsia-EuropeEurope-AsiaNorth America-EuropeEurope-North America

Average Container Usage during its Life-Span

16%

16%

6%

6%

56%

Ocean TransitTerminalInland UseRepairIdle or Empty Repositioning

Why Hinterland Transportation Matters? The Space / Cost Dichotomy of Forelands and Hinterlands

FORELAND

90%

10%

Distance

20%

80%

HINTERLAND

Costs

Port

The Inland Logistics Challenge: The “Last Mile” in Freight Distribution

CapacityFunnel

FrequencyFunnel

CapacityGap

Economies of scale

FrequencyGap

FORELAND

HINTERLAND

Main Shipping Lane

Inland Terminal

INTERMEDIATE HUB

GATEWAY

Atomization

Massification

Main Routing Alternatives between the Pacific and Atlantic

Main Routing Alternatives between East Asia and Northern Europe

Conclusion: Potential Structure of the Global Container Transport System

Documents

Global Containerized Maritime Shipping: Emergence and Divergence