Container Shipping | Container | Container Logistics Consultants | Traffic Study

The growth of container volumes has gone up more in the region where the GDP growth rate is higher than in the region where the rate of GDP growth has been relatively lower. These high-growth regions are mostly the Asian countries and other developing economies, where the GDP growth rate has always been in the ballpark of double-digits or even more. Developed countries, however, face saturation and their GDP growth has been, mostly, subdued.

The aforesaid claim is reflected in the volume handled by these regions. The market share for Asian countries in the last decade or so has increased from less than 50% to the present 60%. Australia has been maintaining its share of 2% since the last decade. North America had a share of close to 20% in the year 1994, but now handles less than 12% of the global container volume at its ports. Europe has lost roughly 5% - 6% share. Their share in the global container handling of 26% in 1994 has dwindled to the current 20%. South American countries have gained a marginal market share, and the region, in over more than a decade, has seen its share in the global trade rise by roughly 2%. On the other hand, Africa and Australia have retained their previous market share.

Asian countries have gained from whatever losses Western developed countries had incurred. So, Asia, which had roughly less than 48% - 49% share in the container volume handled at its ports in the year 1994, now handles more than 60% of the global container trade.

A huge credit for the Asia’s container growth goes to China, which has been the factory of the world since the last decade. The country manufactures every small to large item, every toy to engineering goods, and supplies the same to the rest of the world through container trade. In Asia, in the near future, there is a probability of a change in dynamics because of the rising manufacturing cost in China. Some of the manufacturing units in China could move to destinations with lower value and lower costs. The low-value manufacturing segment, where the cost of labor is prominent, determines their location.

Container Shipping, Trade & Port Volumes

Container trade and the growth of containerized cargo is a good indication of the economic growth of a region. The overall global container trade has increased from roughly 55 million TEUs in the year 2000 to more than 120 million TEU in 2012. The volume of container trade has more than doubled.

However, the container traffic handled at ports and container terminals globally, has grown from roughly 225 million TEU in the year 1999 to more than 460 million TEU in the year 2009. The port volume for containers has increased more than the trade itself. The reasons for that is the more logical movement of containerized cargo as shown in the following pictorial model (hubs to spoke). Here, larger container ships are making longer haul while smaller container ships, mostly called feeder ships, call locally to feeder ports or terminals, instead of making multiple hauls by the same containership. Due to this practice, the actual tonne-miles movement of the containers during the trade reduces.

Container Transshipment

The chart above shows typical working of container trade in the present years. With rising size of container ships, this trend is likely to increase further.

What helps in Container transhipment scenario is that the cost of transporting container reduces on one hand, and on the other, due to multiple handling at various ports, the port dues and tariff component of the total container logistics cost increases. So in any scenario, the logistic cost becomes most effective and most favorable only when the container movement, using transshipment route, is much less compared to the rise in port tariff component due to multiple handling at various container ports.

In the last few years, this situation and the economics has worked more in favor of larger ships and higher transshipment volume. This is why we are seeing more economy of scale where larger and larger container ships are being built, and the number of feeder vessels that are meant for shorter hauling for internal or local distribution, are also increasing.

Container Trade & Port Volumes

The definition of mother vessel and the feeder vessel has expanded. Now, with the ordering of an 18,000 TEU container vessel by Mærsk, this segment is going to be skewed more towards larger ships. One of the two reasons for the unprecedented rise in container trade and container volumes is the shift of manufacturing base from the developed countries to the developing countries in Asia. This has led to the shipment of finished products, which are suitable for consumption in both intra-Asia regions and in the Western regions like United States and Europe.

The second reason for such a high growth has been the inclusion of break bulk cargo in the container trade. So, gradually, the percentage share of break bulk cargo in the total trade is falling, and most of these break bulk cargoes are being converted into containerized cargoes for convenience, faster movement and door-to-door delivery. This trend is likely to continue in the future and will lead to an increase in the number of container ships, containerized cargoes, resulting into containers with larger volume.

Drawing on the statistics related to container traffic at various port or cumulative container volume of a country, the growth has been more in Asia than in the more developed countries like USA and Europe. Asia, especially China, has emerged as a manufacturing hub or the “factory of the globe”. This has led to shipments of large volume of finished products to the West.

China is importing raw material in the form of bulk cargo such as iron ore and crude for their energy and gas needs. These are then processed and then the final, finished products, ranging from small toys to heavy engineering goods, are shipped in containers. So depending upon the type of economy, one can estimate if it’s a manufacturing-driven economy or a consumption-driven economy, and if it’s the use of container ships or the container trade that has increased.

Even in Asia, there are different container-generating regions and container-consumption regions. For instance, Middle East and India are economies based more on consumption. Middle East is an oil-driven economy that exports oil and natural gas. In return, these regions buy containerized, finished products, whereas India is a service-driven economy. Barring the automobile sector and some of the light-engineering goods sector, manufacturing has a very low and limited share in India.

Most of the containers and finished products are imported. So currently, India, which handles close to 8 million TEUs, has a higher share in imports than in exports. However, with the government and the industries focused on the manufacturing sector, and with the upcoming SEZs and other economic benefits to the manufacturers, several new manufacturing units are likely to be commissioned in India. This could lead to a rise in the export-driven container volume generated in India.

The future outlook for container industry has begun to look brighter. It looked sluggish in the last two years of recession, where there was a substantial fall in the container trade and container volumes at ports. More than that, there was a lot of oversupply in the container shipping industry, resulting in the fall in charter rates. Container shipping industry, in order to absorb the excess capacity, followed a principle called slow-steaming, where they allowed container ships to sail by reducing their speed by 20% - 22%.

This helped absorb a lot of container ships that was created due to oversupply. However, following the recent upturn in the economic growth and optimism on the consumers’ part, consumer spending has increased leading to large consumption. The volume growth in trade has begun to pick up to the previous level. This has given the industry a new outlook, a renewed optimism, and has led to further ordering of newer and larger ships, which would bring down the end-to-end logistics cost of moving containers.