Business
6. General Cargo Trades: 2007
6.3 Directional imbalances
Another area of concern is the directional imbalance of cargo flow on virtually all container routes. The large container lines, with large ships in their fleets,
need to be especially sensitive to “weak directions” and “weak segments” in their extensive networks. Sometimes these are created by extraneous factors of global geopolitics or global economic trends like economic recession, or major currency exchange fluctuations. Periodic adjustments need to be made to respond to changes in market demand – e.g. adjustments of network configuration, itineraries, schedules, alliances, fleet capacity, vessel sizes, not to mention freight rate adjustments. This is part of a global strategy that each line constructs and modifies.
From Table 1 one can construct three general scenarios for container line service:
Scenario 1: Shuttle services
Container lines offer back-and-forth shuttle services on Routes 1.2 and 3.
There are no special physical geographic constraints except on Route 1 where only Pacific Coast North American ports can be used for megaships until the Panama Canal project is completed (est. 2014 or later).
The least empty space and the best directional balance in year 2007 occurred on Route 3 (transatlantic) where the westbound to eastbound cargo volume ratio was 4.5m TEUs to 2.7m. The west/east ratio on route 1 (transpacific) was 4.2m. to 14.5m. The west-east ratio on Route 2 (Far East-Europe) was 14.7m. to 5.1m.
The highest total TEU traffic occurred on Route 2 which also has the best en route cargo prospects to/from South Asia and Middle East plus cargo transshipped from the southern hemisphere and ongoing traffic transatlantic along Route 3 to/from eastern North America.
Scenario 2: Round-the-world (RTW) services RTW services offered in both directions.
Complete all-water service limits vessel size to about 4,800 TEU capacity enabling Panama Canal transit.
Using the data from Table 1, an eastbound globe encirclement starting in Europe progressing from Route 2 to 1 to 3 would have accumulated 22.3m TEUs (intra-Asian, South Asia and Middle Eastern traffic omitted) whereas a circumnavigation starting in Europe, progressing westbound from Route 3 to 1 to 2 would have accumulated 23.4m TEUs. The balance between eastbound and westbound cargo volumes in 2007 was quite close. However, there would have been a great deal of empty space circling the globe on containerships unless the operators were astute in their choice of transhipment ports, feeder service arrangements, etc. and unless they made the most of Route 2 by tapping into the rapid growth of intra-Asian and South Asian cargoes which have not been included in the above statistical calculations.
Scenario 3: Pendulum services
Container lines can construct three types of pendulum service, one centered on Europe, one centered on East Asia and one on North America.
The diagrams below indicate 2007 TEU volumes in millions; e = eastbound, w = westbound.
no special constraint on vessel size; megaships use east coast North America ports;
the least empty space of the pendulum services;
lowest total traffic potential.
no special constraint on vessel size;
the most acute directional imbalances of the three scenarios;
heaviest total traffic potential, especially if Indian and Middle Eastern traffic feeding in to or out of Route 2 is counted;
presence on the two heaviest volume routes: transpacific eastbound and East Asia-Europe westbound.
all water service via Panama Canal limits size of vessels to about 4800 TEU capacity;
presence on heavy cargo volume transpacific eastbound route;
most comprehensive access to North American intermodal system.
These scenarios suggest some of the general geographical factors of network
structure, traffic densities and favoured directions of movement that enter into the container line’s thinking as global strategies are constructed. It should be emphasised that there are many other factors in the decision equation, for instance the revenue yields per filled slot which vary from one route to another, the break-even load factors for ships of different sizes on different routes, the degree of competition on the various routes, the amount of traffic feed that might be expected at well-chosen transhipment hubs. And, for each container line, there are always the possibilities of finding “special niches” to enhance market share.
There is no fail-safe scenario. Each requires reevaluation as market conditions change, for better or for worse. The empty space problem engendered by “weak directions” and weak route segments can sometimes be softened by moving from one scenario, or form of service, to another. Every one of the big container lines has used shuttle services and pendulum services in the past. A few of the largest lines have tried RTW services, some like US Lines in the 1980s very unsuccessfully (Lim, 1996). Evergreen, the huge Taiwanese carrier, whose competition really precipitated US Lines demise, announced, not much later, the cessation of their RTW services, replacing them with pendulum services, one centred on North America using 4,200 TEU vessels and Panama Canal transit, and the other centred on East Asia using new 5,600 TEU vessels.14 The need to accommodate megaships, recently of 8,000 TEU capacity or more has become a vital consideration in network decisions. Apparently the promise of low slot costs outweighs the fears of overcapacity, leading to cut throat competition, low yields per slot, and the inherent inflexibility in the operation of these huge vessels.