Naval gigantism and new alliances - SRM · 2018. 8. 9. · 6 According to UNCTAD statistics, the market share of containerized goods on the total of goods traded by sea (in million

Naval gigantism and new alliances in the container sector. Current status and future outlook

2014

This text is extracted from the Annual Report “Italian Maritime Economy. New routes for growth” published by SRM in 2014

For more information please visit the website www.srm-maritimeconomy.com

This report was carried out by Oliviero BACCELLI and Lanfranco SENN, CERTeT – Research Centre in Regional, Transport and Tourism Economics, Bocconi University, Milan.

The analyses contained in the paper do not commit or represent in any way the views and opinions of the founding and ordinary partners of SRM. The paper is solely for illustrative and informative ends, and cannot be intended in any way as an opinion, an investment suggestion, or as expressing judgment on the companies or persons mentioned.The information provided is drawn from sources considered reliable by SRM, but is not necessarily exhaustive, and no guarantee is offered of its accuracy.Also, SRM cannot be held responsible for the facts, opinions, and data contained in the chapters not directly written and edited.This paper may not be copied, reproduced, transferred, distributed, hired or used in any way other than specifically authorised by SRM, on the terms and conditions at which it was purchased. Any form of unauthorised distribution or fruition of this text, and any alteration of the electronic information contained in it, will be in breach of copyright.This paper may not be in any way exchanged, traded, lent, resold, sold in instalments, or diffused in any other manner, without SRM’s prior consent. In case of consent, this paper may not be presented in any other form than the one in which it was published, and the conditions stated here will also apply to the authorised user.

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TABLE OF CONTENTS

Introduction 4

The drivers of growth of containerized traffic 5

The evolution of supply and the role of economies of scale 9

Forms of cooperation and the big alliances in the industry 15

The expected effects on port systems 20

The new relations between ports and hinterland, and the development of dry ports 24

Conclusions 28

Bibliography 30


IntroductionContainer traffic grew in the Mediterranean only in the last 40 years, but this phe-nomenon has generated remarkable changes in the system of trade flows and the in the relations between ports and hinterland, first in the Northern Range of Western Mediterranean, and then gradually in all its parts. In fact, the unitization of loads by means of containers allowed relevant productivity increases in international logisti-cs. This happened, in particular, by means of a relevant reduction of both the costs of the maritime trip (via economies of scale in hold management) and the port costs (via a simplification and standardization of handling).These technical factors, added to the remarkable development of trades on a global scale, have determined an evolution of the capacity of the container vessel fleet. While in 1988 the overall capacity reached 1.5 million TEU, in 2013 it reached 18.6 million TEU (+1240%), averaging a +10.6% annual growth. The research company Alphaliner forecasts that in 2014 new vessels will enter the market, with a total ca-pacity of 1.6 million TEU, and the demolition of ships for 500,000 TEU of capacity, with a variation of +1.1 million TEU, which equals a market growth of some 6%: this figure is definitely lower than recent averages, and derives from the overcapacity which emerged in the latest years.Recent scientific literature has shown an actual causality between the growth of trade between countries and the diffusion of containerization of freight transport. In fact, the increase of vessel size, the optimization of the number of ports and of investments and the growth of port labour productivity have enabled the exploi-tation of new economies of scale, thus giving maritime trade the role of engine of post-cold war globalization. Moreover, the reduction of the uncertainty of maritime transport times fostered the development of multinational production chains based on “just-in-time” prin-ciples, aimed at minimizing inventories and at exploiting the advantages of labour costs differences and international productive specializations. The objective of this article is to highlight the latest trends in the strategies of ship-ping lines, and in the implications of port logistics sector deriving from the evolution of the technical features of fleets and from the improvement of alliances between operators.


The drivers of growth of containerized traffic


According to UNCTAD statistics, the market share of containerized goods on the total of goods traded by sea (in million tonnes) went from 2.8% in 1980, to 5.8% in 1990, to 16.5% in 2013. Besides, the value of containerized goods is very high, as the estimates assess their market share in terms of value in 52%.In the last years, these trends are still driven by general variables, such as the rele-vant development of global trade (due to the higher interdependence of production chains), the demographic increase, but also by two elements directly linked to the organizational model of the container sector:• A remarkable increase of its overall reliability, derived from the standardization

and simplification of liner traffic, based on typically weekly frequencies;• An increased rate of containerization of dry goods, thanks also to technological

innovations.

The latter factor, in particular, has accompanied the latest trends, and the current de-velopment of trade via container does not involve only its traditional goods any more (components for the automotive industry, furniture and related products, household appliances, packing cardboard, pottery, tiles – which still represent the most relevant part of such traffic). In fact, the recent increase of reliability of reefer and controlled temperature containers, and the possibility to fill the whole container with large bags which can also reach 20 tons, have allowed to increase the rate of dry goods contai-nerization, including fruit and vegetables (such as banana and pineapples – a variety of flows now ensures the availability of typically seasonal fruit and vegetables all year long in various markets), dry bulk (such as balls and powders, chemicals and food). The large 20-ton bags have especially become widespread for the transport of coffee, cocoa, seeds, fertilizers and fish feed, which until recently was carried as general car-go in bulk carriers, by means of palletized 20-50 kg bags or ad hoc containers.Moreover, the use of special bags within containers has enabled to overcome the approach of bulk containers, i.e. the ones with a top hatch for loading, and sliding bot-tom for unloading, which were common in the container scenario until recently. Such special containers often represented a problem for long range maritime transport; in fact, they are in theory appropriate for carrying a product e.g. from Europe to Asia, but it is often difficult to locate, in the destination area, a return load which can be carried in such containers. Therefore, it is not economically convenient to employ such costly equipment for 50% of the time only.The possibility to split loads which normally were carried in the holds of 2-3000 ton vessels (typically used e.g. for grains) into 20-ton lots benefited from the develop-ment of just-in-time logistics (which in Europe have been further strengthened by the uncertainty of market demands), from the fluctuations of raw materials prices, and from the increase of financial duties.


In fact, the model based on weekly maritime connections, the partition in lots and the increased frequencies of procurements in order to avoid inventory costs, have pushed firms in the e.g. paper, steel and construction industries to make more use of containerized flows rather than bulk loads.Such new flows, together with others involving poor products such as recycled paper or straw, have contributed to make up (albeit partially) for the unbalance of flows, which derive from relevant asymmetries on main routes, as shown in the following table.

The unbalance of flows on East-West trunk routes (million TEU per year)Year Transpacific Europe and Asia Transatlantic

Asia - North America

North America - Asia

Asia -Europe Europe -Asia Europe -North America

North America - Europe

2009 10.6 6.1 11.5 5.5 2.8 2.5

2010 12.3 6.5 13.3 5.7 3.2 2.7

2011 12.4 6.6 14.1 6.2 3.4 2.8

2012 13.3 6.9 13.7 6.3 3.6 2.7

% variation 7.4 5.2 -2.6 0.4 5.9 -6.9

Table 1 -MDS Transmodal data as published in Data Hub Trade Statistics, Containerisation International, www.contai-nershippping.com, April, May and June 2013

The above table shows that international container flows are linked to exports from South-Eastern Asia and especially from China, which is clearly the main area of origin of international trade, both towards Europe and towards North America.The unbalances not only imply a relevant number of empty container returns, but have also consequences on maritime rates, with e.g. big differences in average 2013 rates to big Italian forwarders for the transport of 20-feet containers to Hong Kong, which equal 1360 USD for import and only 500 USD for export. The low cost of con-tainer transport in export allow to find an economic justification for the movement of low value goods, such as recycled paper or even various types of scraps and wastes whose treatment is more convenient in Asia, thus further increasing international trade.The role and the importance of containerized flows are more closely linked to the organization of the inland section of the trip, which is remarkably different compared to the case of raw materials. In fact, the trunk flows of bulk (typically energy products or goods linked to industrial sectors), involve a few big operator on a few routes and in one direction only – either import or export only. On the contrary, container flows to/from ports come from multiple destinations, spread over a wide hinterland, with a large number of operators in both directions.


The degree of competition between ports is therefore stronger, since the points for loading/unloading are more easily replaceable.Such higher competition between ports fostered the development of systems of in-land forwarding, often based on rail intermodality. Such strategies, which have the operational implication of rolling stock procurement and the realization of inland ter-minals, benefited not only the operators of the involved shipments (via a reduction of shipment costs – which the maritime section is a lesser part of), but also other logistics chains, thanks to the development of economies of scale and of scope in the investments in infrastructure and services.


The evolution of supply and

the role of economies of scale


The maritime transport sector is based on business models which involve a very high share of fixed costs. In fact, crew costs, administrative costs, and procurement costs (especially bunker costs) increase less than proportionally compared to the increase in size of vessels, fostering the research of economies of scale on routes where de-mand is higher. Unit costs per carried TEU decrease with the increase of vessel size, thanks also to relevant economies of scale in the building and investment stages.In parallel with the growth of containerized traffic flows, the importance of these cost reductions fostered the increase of vessel size, especially of ships with higher capaci-ty (so called naval gigantism). While in 2004 the largest ships had a capacity of up to 8,238 TEU. In 2010 this figure rose to 14,770 TEUs (+79%), and in 2013 reached 18,000 TEU with the launch of McKinney-Moeller by Maersk (+21% compared to three years before). The latest accelerated trend is also due to two specific factors:

1. Relevant increase of bunker prices between 2005 and 2013;2. Reduction of ship building costs since 2009.The cost of bunker, according to the price per ton on the Rotterdam market, went from 138 USD in 2000, to 234 in 2005, to 345 in 2007; after a fast decline in 2008 and 2009, it got back to grow, reaching 639 in 2012 and 631 in 2013, thus growing by three times along the last decade. Bunker now accounts for 50-60% of operating costs, so that shipping lines have pursued multiple strategies in order to decrease this share, employing naval industry technologies such as new thrust systems, new propulsions, hydrodynamic paints, but above all reducing the number of vessels on a route, thus increasing their average size in order to maintain or increase the total capacity.The crisis of 2008 has lasted until the end of 2013, with a meaningful reduction of rates in the maritime sector, and has closed a strong expansion cycle started in 2002, and characterized by relevant orders to Asian shipyards and a limited number of de-molished ships. The outcome of this so-called “super cycle” brought to a relevant reduction of building costs of new vessels, due to the overcapacity of Asian shipyards, and the main ship-owners took the chance to commission large ships with efficient engines (eco-ships) at low market prices, thus contributing to the fast evolution of the vessels’ characteristics and to the reduction of the environmental impact in the maritime sector. It is worth underlining in this respect that in 2010 and 2011 Maersk (the biggest shipowner in the world by fleet size) commissioned to the South Korean group Daewoo Shipbuilding & Marine Engineering Co the building of ten vessels ca-pable of carrying up to 18,000 TEU, with a later integration for the building of 20 more units of the same type, to be delivered by 2015.The phenomenon of naval gigantism also determined relevant impact onto ports at a global level, since, with the growth of vessels’ size, container terminals need to be


endowed with the necessary requirements to ensure mooring and the efficient ope-ration of loading and unloading. As shown in the following table, in order to serve last generation ships a port needs to be endowed with quays of appropriate length and draught.

Growth in size of high capacity vessels

Year Class (TEU) Length (m) Beam (m) Draught (m)

1968 750 180 25 -9.0

1972 1,500 225 29 -11.5

1980 3,000 275 32 -12.5

1987 4,500 275 39 -13.5

1997 5,500 325 41 -14.1

1999 8,000 345 43 -14.5

2007 15,500 396 56 -15.5 /-16.0

2013 18,000 400 59 -14.5 /-16.5

Table 2 - Source: CERTeT elaborations on Alphaliner data, 2012

Technically, classification societies consider likely that Asian shipyards may receive rodersi for ships up to 22-24,000 TEU, with lengths up to 450 m; however, the maxi-mum size of an actual order, commissioned by CSCL with the delivery due in 2013, is still equal to 19,000 TEU. Of course, the management issues with this type of vessels are remarkable, and the commercial constraints, given that the lack of flexibility due to the limited number of ports where loading and unloading can be efficiently operated, represent the real limit to the trend towards an outstanding gigantism. As illustrated in the next section, the trend towards gigantism is accompanied by an increase of the use, by shipping lines, of terminals for transhipment and interlining–implementing synergies betwe-en transoceanic vessels and feeder ships (transhipment) in order to achieve a wider network, and between two transoceanic lines (interlining) that match their routes in a certain port in a commercially coordinated manner, so as to achieve economies of scale for both lines. The shipping lines are able to exploit economies of scale differentiating among va-rious routes, taking full advantage of naval gigantism on the routes between Eastern Asia and Northern Europe, thanks to the high volumes traded and to the length of the route (more than 40 days of sailing). The following table clarifies this aspect.


Vessel capacities on main routes (TEU)

Average vessel capacity Vessel capacity on major routes

Min Max Min Max

Eastern Asia – Northern Europe 8,000 11,000 12,000 15,500

Eastern Asia – Mediterranean 5,000 8,000 11,500 14,000

Eastern Asia – Middle East 4,500 6,500 8,000 14,000

Eastern Asia – US East coast 4,000 8,000 9,000 12,500

Eastern Asia – South America East coast 4,000 6,500 8,000 9,500

Eastern Asia – South America West coast 4,000 6,000 6,500 9,000

Europe – South America West coast 3,500 5,500 6,000 8,500


In any case, “ripple” effects are relevant, in that the ships previously employed on main routes are moved to minor routes, with the overall effect of increasing the ave-rage size on all routes. According to Alphaliner research, on the route between Ea-stern Asia and Northern Europe the average size of vessels in 2008 equaled 6,390 TEU; in 2012, it equaled 9,350 TEU. In the same period, the average size in the Eastern Asia – US west coast route rose from 4,920 to 5,710 TEU, while between Europe and North America it rose from 3,490 to 4,010 TEU; the immediate implications are a significant stiffening of supply, and a reduction of possible differentiation in the se-lection of routes.In order to achieve the necessary transport volumes to exploit economies of scale in maritime routes with unbalanced flows, not only aggressive commercial strate-gies are needed towards shippers and forwarders, based on pricing tools which vary per geographical distance, but also, according to carried volumes, specific surcharges (bunker surcharges, currency adjustment factor, IMO charges for dangerous goods, heavy weight charges for heavy or seasonal charges, like the “peak season charge” usually applied between June 1st and October 31st on the Asia-Europe route), and required additional logistic services.Operationally, lines implement a lot of other strategies in organizing routes, in order to optimize supply, in a context in which demand traditionally depends on different types of seasonality (which vary by geographical regions) and is more and more un-predictable, after the global crisis started in 2009 and the differentiated declines of growth rates in various continental markets.An organizational practice which is becoming more and more common in the last years (characterized by a relevant increase of bunker prices) is the so called low stea-ming or ultra-low steaming, that is the decrease of cruising speed on weaker routes. This practice implies a reduction of the number of calls at less reliable ports because


the risk of delays determines possible modifications to the speed and the reduction of calls in ports outside the main routes. In the case of routes between Asia and Eu-rope, characterized by an Eastbound transport demand which is about half of the Westbound demand, the differences can reach 6 miles per hour. The outcome is that, for instance, between Korea and Italy the days of sailing offered by Maersk are only 31, while in the opposite direction they are 40; this allows relevant fuel savings in a direction in which the shippers’ and forwarders’ willingness to pay is way lower com-pared to the same route in the opposite direction.According to Alphaliner, between 2006 and 2013 the average round trip between Asia and Europe has increased by 3 weeks (going from 6 to 9 weeks), because of both low steaming practices and longer times in port due to the relevant increase of the num-ber of movements per call. This implies the necessity to introduce a higher number of vessels in the same route, so as to continue to offer a weekly service, raising both the level of required investments and the degree of commercial risk of operations.An indirect effect is the possibility to introduce express-type services, with higher cru-ising speeds and shorter delivery times, thus triggering forms of differentiation in a market scenario which has recently only aimed at cost reductions. This opportunity has only partially been taken by shipping lines as yet.

Shipping lines’ practices to optimize their offer in reply to unbalances of flows and bunker cost increases: low steaming

Carrier/GroupAsia – North-Western Europe Asia – North-Eastern Europe

Avergae Fastest Slowest Average Fastest Slowest

Maersk Line 20.4 21.9 19.3 14.3 16.7 12.3

CSCL 19.1 19.2 19.0 16.4 17.3 15.6

Evergreeen 18.5 19.5 17.4 14.2 14.8 13.6

G6 Alliance 18.5 19.4 17.8 15.4 16.2 14.4

MSC 18.2 18.2 18.2 13.7 14.6 12.8

CMA CGM 17.8 19.0 16.2 15.5 16.7 14.3

CKYH Alliance 17.8 18.8 16.6 14.9 18.1 13.0

Average 18.7 21.9 16.2 14.9 18.1 12.3


During last years, a number of cancellations or route unifications occurred on a we-ekly basis, during some periods of weak demand (e.g. Christmas, Chinese New Year, Europe summer season), as a strategy of shipping lines to avoid services operating at a loss. For instance, in the 7th and 8th week of 2013, at the same time as Chinese New Year, the overall supply between Eastern Asia and Europe was reduced, albeit in diffe-


rent extents (between 27% and 47%). The meaningfulness of this phenomenon grew with proportionally with the extent of possible savings achievable via a cancellation of a weekly service, which increases with the vessels’ size and with the capability of the following service to take up the demand. In summary, the relevant increase of bunker costs and naval gigantism have remar-kably modified the provision of liner service for containerized flows; the outcome is the lengthening of times, the reduction of lines differentiation and a higher risk of service cancellation in periods of weaker demand.


Forms of cooperation and

the big alliances in the industry


The provision of maritime container transport, while searching for increasing econo-mies of scale, especially on the trunk routes between Asia and Europe, has undergo-ne a gradual industrial concentration and, thanks to mergers and alliances between ship-owners, the top 20 shipping lines represent 80.8% of the market (beginning of 2013), and four shipping lines alliances operate the flows between Asia and Europe, as shown in the chart below.

The evolution of the forms of alliances between container shipping lines between Europe and Asia

Figure 1 - Source: Alphaliner, 2014

Even though the forms of collaboration between shipping lines have remarkably evol-ved in the last few years because of specific incidental factors, actually mergers and acquisitions have been very frequent since the ‘90s already (when the industry rea-ched a high degree of specialization globally), with the aim to offer wider networks and more regular services, above all to support multinational companies, who are the main clients of the operators of the container sector. In this respect, the world’s biggest shipping line, Maersk, achieved its rank also because of a number of mergers and acquisitions: in 1999 with Safmarine (South-Africa) and Sealand (USA), and in 2005 with P&O Nedlloyd, which in turn was the outcome of a 1996 merger between P&O Containers (UK) and Nedlloyd Lines (Netherlands). Also the Taiwanese group Evergreen, fourth shipping line in the world by global capacity, had started in the second half of the ‘90s a strategy of first cooperation and then acquisition of smaller lines, including Lloyd Triestino, which were sold by the Italian Ministry of Economy to


Evergreen in 1998 after a gradually closer collaboration which had started in 1993. The top 4 shipping lines in the world account for 32.8% of the market in 2001; in 2013 their share reached 42.3%.The commercial agreements between shipping lines are the outcome of the evolution of conferences1, which for many decades characterized the market of liner traffics. In fact, the mechanism which was perfected by shipping lines in time in order to pro-tect themselves from the cyclic evolution of the sector and from dangerous types of competition was the establishment of Conferences, i.e. associations of carriers which agreed to set freight rates compatible with the economic solidity of member compa-nies, and which could ensure stability in the rate market. Such type of restriction of competition allowed shipping lines to transfer to consumers the average long-term costs in order to provide regular, efficient and sustainable services. This allowed ship-ping lines to take advantage for decades the possibility to discriminate prices. By esti-mating the demand elasticity in different markets the shipping lines were able to set the most efficient rate in order to take up the consumer’s surplus. The official end of Conferences among carriers, set by a European Commission regulation in 2006, en-forced since 2008, gradually transformed the liner shipping market.Besides liberalization, the economic crisis determined an additional, heavy impact from 2008 onwards on the freight rate market. The trouble deriving from the relevant decline of demand due to the slowdown of trade was strengthened by the situation of hold overcapacity, mainly due to remarkable orders of new vessels, commissioned to shipyards before the beginning of the crisis. The effects of these events are still clear nowadays, despite international trade has gone back to growth above pre-crisis levels.In summary, the evolution of the regulatory framework and the economic crisis have been two incidental factors which accelerated the process of concentration typical of globalized markets with standardized productions.The forms of collaboration between ship-owners have the aim both a reduction of costs (from exploiting economies of scale), an effective optimization of resources and a widening of the geographical network; they can be summed up as follows:

1 UNCTAD’s Code of Conduct for Liner Conferences defines maritime Conferences as “A group of two or more vessel-o-perating carriers which provides international liner services for the carriage of cargo on a particular route or routes within specified geographical limits and which has an agreement or arrangement, whatever its nature, within the fra-mework of which they operate under uniform or common freight rates and any other agreed conditions with respect to the provision of liner services”. Born in the second half of ‘800 with the main aim to resolve the issues of pricing, they pursued a number of objectives: dictate specific service frequencies, transport terms and common freight rates; ensure the loyalty of shippers via royalty rebates; implement a number of measures against so-called outsiders.


• Vessel Sharing Agreement, aimed to subdivide slots onboard the vessels according to the corresponding loading requirements;

• Slot Charter Agreement, aimed at renting particular slots on the vessels of another carrier for a trip or for a period of time at a fixed price;

• Joint Services, aimed at coordinating the ships’ departures from each port, so as to avoid overlapping of hold provision, minimizing the risk of not loading the loading units, and to provide clients with a more efficient service.

The world’s three main carriers, characterized by the presence as main sharehol-ders of family groups, Maersk (Denmark), MSC (Switzerland) and CMA-CGM (Fran-ce), during 2013 have reached an elaborate Vessel Sharing Agreement on the main East-West routes, which will be implemented in the second quarter of 2014, after its approval by the anti-trust Authorities in all continents. The agreement provides for the sharing of 8 service between Asia and Northern Europe, where a capacity of 1.2 million TEU will be supplied; 5 services between Asia and the Mediterranean, with a capacity of 700,000 TEU; 6 services between Asia and the US West coast for 500,000 TEU, 4 services between Asia and the US East coast for 400,000 TEU and 5 services on transatlantic routes for 200,000 TEU. To sum up, the agreement envisages the shared management of 28 services for a total capacity of 2.6 million TEU, with an average ca-pacity of 150,000 TEU in each of the 8 lines between Asia and Northern Europe, and of 40,000 TEU on the 5 transatlantic lines.The aim is to exploit economies of scale, by using larger ships than competitors, and to reduce the number of cancellations of services providing a higher regularity to clients, even if on a lower number of routes compared to the recent past, thus hinde-ring network coverage and disadvantaging some major ports in the Northern Range, including Rotterdam, Hamburg, Zeebrugge, while benefiting others such as Anwerp and Wilhelmshaven.The alliance has been called P3, and according to the US Federal Maritime Commis-sion its market share will reach 42% between Asia and Europe, 40% on transatlan-tic routes and 24% on transpacific ones. The agreement defines that routes will be shared together with operating choices (including average cruising speeds and the selection of transhipment ports), maintenance periods, decisions on service cancella-tions during periods of weak demand. The agreement also includes the possibility to carry out analyses, forecasts, data collection and cost and market research by means of a centralized office called Network Center, but it does not include the possibility to share sensitive commercial information or data regarding customers.The FMC evaluated the effects of P3 on the American market with a specific analysis which ended on March 20th, 2014, and its conclusion is that – similarly to other Ves-


sel Sharing Agreements – the reduction of the overall supply and the increase of frei-ght rates are not likely, so the agreement was approved. The involved shipping lines will have to submit, in the future, reports that enable to monitor market evolution. The EC will not express any ex ante judgment, but it will monitor the implementa-tion of the agreement in order to verify that art. 101 of the EU Treaty on the market non-distortion via alliances or agreements. If a violation is found, the EC will be entit-led to a direct intervention by putting an end to the alliance. Chinese Authorities will pronounce themselves during 2014 and it is not easy to foresee their assessment con-sidering the lack of precedent. Actually, since the two main container lines in China, COSCO Container Lines (COSCON) and China Shipping Container Lines (CSCL), which have reached an agreement on February 14th, 2014, are both publicly controlled and in the red, it is likely that Chinese Authorities too will not rule out agreements that can support big alliances.


The expected effects

on port systems


Port systems are the main entities that bear the diseconomies of scale deriving from the relevant accelerations of the evolution of fleet characteristics towards naval gigan-tism and of horizontal integrations between shipping lines. The first effect is observed by the Liner Shipping Index (LSCI) calculated by UNCTAD, which registered that betwe-en 2004 and 2013 the average number of shipping lines providing liner services for containers in a country decreased by 27% (going from 22 to 16), implying a reduction of possible choices for shippers and evident oligopolistic behaviors in minor markets.Moreover, the increase of the costs of capital invested in ships and of the value of car-go implies that port operations be faster and more reliable, so as to allow the longer cruising times in optimal speeds which can avoid high fuel consumption. The ripple effects on the overall port logistics system involve aspects relating investments in in-frastructure and superstructures, and internal and hinterland organizational models, that can be summed up as follows:• Investments on quays, aiming to increase their length and draught, in order to be

capable of receiving vessels with lengths of 400 m, beam of 60 m and draught of 16 m2;

• Investments in new quay cranes, with longer jibs so as to handle until row no.23; and higher, so as to handle 9 lines of containers on deck, and above all with higher productivity so as to embark/disembark 2 or 4 containers at one time;

• Expansion of storage areas, via the exploitation of the superimposition of contai-ners, with the consequent modification of vehicles in aprons, and a higher pro-ductivity of positioning operations, which in many cases push towards the auto-mation of a bigger number of processes;

• The management of a higher number of movements from quay to apron gene-rates the necessity to speed up the operations of entry and exit from port gates, exploiting the role of all modalities of inland forwarding;

• The higher volumes, but also the higher speed and complexity of loading/unloa-ding and of the inland trips to/from ports, imply a bigger use of IT systems and of advanced software for ship and terminal planning.

Transhipment terminals, which have become the main nodes for planning routes on the axes where gigantism is more advanced, are the step of the chain where there is a deeper search for productivity. It was not by chance that in 2013, for instance, the main four hubs in the Mediterranean have grown, on average, in double digits and twice as fast as the rest of Mediterranean ports. The table below clearly highlights technical features required to ensure a particular amount of operations, underlining the synergic role of both port-related and inland-related aspects.

2 These figures regard the CSCL Globe, with a capacity of 19,000 TEU, which will start operating in November 2014.


Technical features of container terminals required for specific levels of operations

Yearly capacity (TEU)

Quay length (m)

Quay cranes (no.)

Storage area (sqm) RTG (no.) Reachstackers

(no.)

Vehicles for internal move-

ments (no.)Trailers

250.000 250 2 33,000 4 1 7 9

500.000 375 3 66,000 8 2 14 17

750.000 500 4 99,000 13 3 22 26

1.000.000 625 5 132,000 17 5 29 34

1.500.000 875 8 198,000 25 7 43 51

2.000.000 1,125 10 264,000 33 9 58 67

2.500.000 1,375 13 330,000 42 12 72 84

3.000.000 1,625 15 396,000 50 14 87 101

3.500.000 1,875 17 462,000 59 16 101 117

4.000.000 2,125 20 528,000 67 19 116 134

4.500.000 2,375 22 594,000 75 21 130 151

5.000.000 2,625 25 660,000 84 23 145 167

Table 5 - Source: CERTeT elaborations on Drewry data, 2012

Productivity in terminals is based on both technological aspects (which involve the lifting equipment available in the terminal) and organizational aspects, such as shift management and labour management, with personnel being asked more and more flexibility in order to deal with the remarkable peaks of operations. For instance, du-ring 2013 in Italy the highest number of movements was reached in transhipment terminals, with 4,500 TEU handled in one only ship in some 24 hours, but also in import-export terminal, in La Spezia, with 2,393 handled containers, 1,111 of which loaded and 1,277 unloaded, in some 33 hours.The growing necessity to count on reliable terminal systems, capable to realize the remarkable technological investments required to keep high levels of productivity, has pushed the main shipping lines to implement forms of vertical integration of the service, by means of both acquisitions of terminal operators and the development of new container terminals. The latter is the case of APM Terminal of the Maersk Group, and in particular of MSC and COSCO, which hold the majority stakes in tenths of terminals positioned in major markets; their market share on the world’s container terminal operations is 5.8%, 2.5% and 1.8%, ranking in the first six terminal groups in the world.


A non secondary impact of these changes is the increased hierarchization of ports. In fact, big alliances become more and more demanding in selecting terminals to call, and this, for instance, determined the decision from P3 lines to call at five Italian ports only in the direct routes between the Mediterranean and Asia (Gioia Tauro, Naples, La Spezia, Genoa and Trieste), thus cancelling in the second half of 2014 the services to Venice and Leghorn, considered not capable to efficiently cope with the effects of naval gigantism. Moreover, it is expectable that, in the attempt to exploit the eco-nomies of scale in longer routes, transhipment ports in Western Mediterranean will be more and more used as interlining ports for routes coming from Asia to Europe, where vessels of 15,000+ TEU are used, and routes from the Mediterranean to North American and Western Africa where vessels of 5-18,000 TEU are used. This trend will remarkably increase the activities of some ports, such as Gioia Tauro, Valencia, Alge-ciras and Tangeri.


The new relations between ports and hinterland,

and the development of dry ports


In order to exploit the role of ports in a scenario of gigantism and growing oligopoly forms, a modification of logistics approach is required, both at the port level and at the hinterland level, via a high level of integration between the two.The competitiveness of a port in the new network of liner container services is not only linked to the geographical position, but also to the overall quality of provided services. An essential importance is therefore assigned to the presence of facilities and equipment which allow fast loading/unloading of containers, a fast flow of corre-sponding information, and fast operations in aprons and transhipment movements; of areas dedicated to storage; of connections with the main origin/destination mar-kets of cargo. All these activities can be defined as port-centric logistics.In order to ensure that transport and connections to/from the hinterlans be seamless, appropriate railway and road links are necessary. The ability of ports to take up incre-ased traffic determines the ability of the maritime industry to conquer and keep new customers, both via forms of door-to-door services and implementing new solutions of intermodalism to/from ports, such as the ones developed in the ports of Rotter-dam and Antwerp, thanks to the recent completion of freight-dedicated railway lines, e.g. the Betouwe Route in the Netherlands and the Iron Rhine in Belgium.Ports are therefore seen more and more as an integrated part of supply chain, where port choice criteria are based on the whole service provided, in which port is only one node of the network, so as to minimize overall transport costs (both maritime and inland).As concerns a system integration between the port area and the wider hinterland, a port can be considered as:• A maritime logistics centre, able to provide logistics services both in the port and

in the inland part. The logistics functions include cargo handling, transhipment, storage, consolidation/deconsolidation, added value activities, information mana-gement, and other connected activities. In such a context, shipping lines, growing in carried volumes, have widened their services, providing not only with freight transport but also integrated logistics solutions. Via various forms of integration along the supply chain, they are trying to generate revenues and to fulfill the clien-ts’ requirements. At the same time, container terminals are turning into logistics organizations that provide warehousing and distribution services, and value added services, like the customization of products for local markets.

• An inland logistics centre, by acting as intersection nodes of different transport systems (railway, road, air), with the deriving opportunity to develop port fun-ctions that can provide logistics services not located in the port. Recently, the rela-tions with regional distribution centres, inland terminals and distriparks have been more and more exploited.


From a geographical point of view, the relations between freight traffic flows and the development of terminals are implemented via:• The concentration of nodes which connect different spatial systems and different

services, acting as gateways between the production sector and the consumption system. They are not a mere interconnection point, but they include terminals, distribution, warehousing and trade centres;

• The realization of distribution centres: localization for moving cargo, for the distri-bution to regional markets. In the past, they were located near terminals, or near the main markets; nowadays, they are relocated in areas defined as “dry ports”, outside the port system, but well connected to it via rail shuttle, because of spatial requirements, of market integration and of economic specialization.

In this frame work the interaction between the three interfaces (sea, surface and intermodal system) becomes important: the maritime logistics centre operates and provides value added services to freight carried by sea; the inland logistics centre tre-ats freight bound to the sea or to the intermodal system, despite not being physically connected to the sea; the intermodal system intersects the maritime and surface in-terface, acting as interchange node and not as logistics centre.In this context, it is necessary to improve the offer with integrated services which include processes of manipulation and transformation of freight (packaging, repacka-ging, labeling, assembly, sorting, invoicing and tax accounting), capable to generate added value, to be carried out in areas close to maritime terminals (distripark) and in the inland nodes located along the main infrastructural axes (dry ports). These phe-nomena are recognizable, in the Italian context, in the combined planning between Ligurian ports and some dry ports. For Genoa, the reference dry port is the Rivalta Scrivia freight village, whereas for La Spezia it is the inland terminal of Santo Stefano Magra. In both cases, the possibility to relate to the same custom area and an efficient rail shuttle services between port and inland terminals represent competitive advan-tages.The advantages of a coordinated planning between port systems, access infrastructu-re network and inland terminals are:• Higher productivity of space utilization, via an efficient connection with inland ter-

minal areas;• Increased availability of port areas supporting freight flows, and higher opportuni-

ties for modal shift;• Possibility to attract financing thanks to the integrated activities of terminals in the

hinterland;• Capability to attract clients from competitor ports and potential clients of the hin-

terland;


• Prevention of an excessive price competition;• Potential development of intermodal service also on the short range;• Possibility to attract cargo coming from the hinterland thanks to the higher flexibi-

lity, reliability and frequency of the service;• Realization and strengthening of a logistics centre which brings advantages both to

ports and for inland terminals;• Simplification of custom procedures, especially if the port is located in a free zone,

which allows the transit of cargo in import/export avoiding the long custom pro-cedures.

The identification of the above listed advantages underlines the necessity of solutions which enable an easing of flows and a reduction of transport costs between ports and the corresponding hinterland, acting via forms of modernization of transport services, but also via new models for a coordinated greater area/corridor planning.The entities which are capable to promote such initiatives are the Port Authorities, in agreement with the local administrations. In the current scenario characterized by a strong competitive pressure towards the reduction of the costs of the transport chain, and to foster the stabilization of big shipping lines, Italian Port Authorities have promoted several initiatives such as: • Shareholding in railway undertakings;• Memorandums of Understanding and agreements with Trenitalia, RFI, Local Ad-

ministrations, Ministry of Infrastructure and Transports, and private companies operating rail services or logistics centres;

• Establishment of or shareholding in agencies for the promotion of intermodalism and logistics;

• Acquisition of areas dedicated to logistics activities (dry ports);• Purchase of vehicles for handling and/or rail traction.


ConclusionsThe standardization and simplification of transport services provided via containers have determined a strong pressure towards the reduction of operating costs, consi-dering that for many shippers and forwarders the most relevant choice factor is price. The development of naval gigantism and the growing role of alliances on the main routes are the answer of shipping lines to these requirements. These strategies have been accelerated by the remarkable increase of bunker prices which started in 2005, and by the freight rate crisis which started in the second half of 2008.The full exploitation of the combined effects of new technological and organizational factors will occur in the second half of 2014, when the system of alliance which redu-ces the number of strategic decision-makers on routes between Asia and Europe (the route where all changes can be tested) to only four will be implemented.The reference scenarios show that the strategic choices of shipping lines impact the whole organizational model of the maritime logistics chain, besides the economic convenience and the reliability provided by the maritime service. In fact, three main levels of impact can be highlighted, which require investments and specific measures in order to react to these new drivers of change in a positive and effective manner, and to allow logistics to remain a factor of economic development rather than dise-conomies for shippers and territories. Such three levels are: port terminals, the inter-modal transport network, and dry ports.In the case of port terminals the necessary adjustments involve not only infrastructu-ral aspects but also organizational practices capable to increase the overall producti-vity, also by means of relevant technological improvements. The development of an efficient system for inland forwarding, based on intermodalism, is necessary both for fostering a better use of port areas (by reducing the waiting time of containers in terminal aprons) and for reducing the inland transport costs, an essential element to widen the port’s catchment area. In order to reach such objectives, it is necessary to involve Port Authorities in order to implement effective policies to support intermo-dalism; the aim of such policies is also to reduce negative externalities deriving from the concentration of road traffic in port areas. Dry ports can act as complementary to ports, in reducing congestion in state-owned areas, thus allowing to exploit all the logistics functions activated by the port, but in bigger areas, at lower costs and with almost always private ownership layouts.The optimization of coordination among all players of the intermodal chain, therefo-re, proves to be the main reaction to the described trends, with the aim both to avoid bottlenecks and to take advantage of the potential benefits deriving from exploiting


economies of scale and from the horizontal integration in the maritime part of the chain. Anyways, monitoring the actual impacts of these strategies, in order to both verify their economic, social and environmental sustainability, and to avoid forms of abuse of dominance, is essential as a central element in the accompanying policies for the development of new port logistics systems.


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