Business
7. Summary and Prospects
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.
network efficiencies by any sort of comprehensive governmental “edict”. There is every reason to hope, however, that individual steamship operators in both bulk and liner trades will use their own ingenuity to fashion networks and patterns of operation that will enhance their capacity utilisation, annual fleet work capacity, and, on the revenue side, annual fleet yields. There is no general prescription for success; however, each carrier, serving a geographical domain that is somewhat unique in its specifics, with a fleet that is somewhat unique in vessel sizes and specifications, should be able to differentiate itself from its competitors in some “attractive” way. Yet there have been many recent indications of “copy-cat behavior” in the liner trades – not a good sign, perhaps, if it leads to indiscriminately competitive efforts, overbuilding, overcapacity, bankruptcies, emergency mergers, and the like.
The trend towards using megaships in both bulk and liner trades complicates network strategies and, unless market demand is really robust, compounds the empty space problem. There is, as mentioned, an inherent inflexibility from large size although, of course, the ship operators count on this being outweighed by scale economies, measured in unit costs of transport.
Unfortunately the combined carrier for bulk trades, while conceptually appealing, has not lived up to its former promise or, in Erling Naess’ case, its former success. (Naess, 1977, chap. 21). Many operators have complained that dry and liquid bulk commodity trades just do not mix, not only because of expensive vessel design, cleaning costs when shifting trades, etc., but also because of difficulties coordinating trades between two or more “masters,” each absorbed with own-company needs. Many of the remaining combined carriers still in operation have reverted to the carriage of one commodity type, liquid or dry. So much for flexibility!
There is little doubt that the twenty-first century will bring more development of southern hemispheric trade routes, especially for container lines. It has been estimated that only 50% of the containerisable commodities in the developing economies are, in fact, containerised for ocean transport whereas the percentage in the developed economies approaches 90. It is predictable that as (or if) trade itself grows, and as the infrastructure for container handling and intermodalism continues to develop, the volumes of containerized cargo in all parts of the world will increase. Clearly they have increased for China, India, Brazil, Mexico,
Malaysia and others.
China and India are special cases, both with enormous growth potential in the container trades. Well over half the containerised cargo imported by North America and an estimated third of global seaborne container exports involve China and these fractions may well increase in size, despite the recent recessionary slump in trade, as more and larger vessels offer direct calls in China. Both China and India are on the main pathway from Japan and Korea to Europe, so their burgeoning ocean transport needs will accentuate the east–west northern hemispheric ring of inter-core trade routes. The data that appears in Table 1 for year 2007 traffic on the East Asia–Europe route, as mentioned, do not include the sizeable “intermediate” movements, for instance South Asia and Middle Eastern containers westbound to Europe (2.5m TEUs) and European containers eastbound to the Middle East and South Asia (5m TEUs ). South Asia and the Middle East exported 1.2m. TEUs to East Asia and imported an astounding 6.5m. TEUs from East Asia in 2007. Add to this a heavy volume of short-haul intra-Asia cargo (e.g. China–Japan, Japan–South Korea, China–South Korea). And, part of the heavy use of Route 2 of Figure 7 is by ships serving the North America–South Asia and Middle East connection and North America–
Southeast Asia connection. This en route traffic potential provides rationale for the use of megaships on the East Asia–Europe inter-core route and for the development of en route transhipment terminals.15
There is much reason to expect the filling out of networks to and in the southern hemisphere, especially if the South American and African economies rise to their true potential. However, it is unlikely that the dominant inter-core pattern in northern latitudes will disappear. It is too firmly etched on the mercantile maps of the globe.
A final prediction relates specifically to the container trades of the future.
There has been much talk of intermodality, total logistics chains, seamless movement of containers, electronic data interchange, and so forth. These are good ideas but not ideas that have yet been fully and perfectly implemented.
There always seem to be weak, often time-consuming, links in the chain. One trend, however, that has been notably strong and growing stronger in recent years has been the service contracting between carriers and shippers based on time-volume freight rates. On American container trade routes, the North
America–East Asia route, for instance, a large proportion of the total trade falls under these service contracts. The latter seem to reflect a true partnership between shipper and carrier, unlike the more confrontational shipping arrangements of the past. It is hoped that the partnership philosophy based on perceived mutual benefit will prevail in the twenty first century.
Container line operations have grown spectacularly in the last half century as Levinson describes vividly in his recent account of “how the shipping container made the world smaller and the world economy bigger” (Levinson, 2006, front cover). There is still, however, a large volume of baled, crated, bagged, palletised, wheeled, lashed down, loose and “other” general cargo on ships of various size in both tramp and liner service on all our seas and oceans. They have many of the same empty space, ballast requirements, directional imbalances in cargo movements that have been mentioned above and it seems certain that there are commodities that will never fit into a container. In a real sense this makes the maritime scene more interesting.