Archives for posts with tag: Transportation

The film Transporter starring Jason Statham ought to appeal to shipping folk. There’s a big action scene on a containership and the “transporter”, with his computer-like karate skills, has a commercial philosophy which consists of three absolute rules. Rule 1 – “never change the deal”; Rule 2 – “no names”; Rule 3 – “never open the package”. Could these be helpful in our branch of the transport business?

Our Word Is Our Bond

Rule 1 certainly can. Shipping is famous for sticking to its word, and Baltic members will enjoy the opening scene of the movie. Statham is waiting outside a bank, in his impeccable BMW get-away car, when four bank robbers jump in. But the deal was to transport only three, so Statham refuses to move. As police sirens wail, his clients solve the problem by shooting number four and pushing him out of the car. A better solution than arbitration, given the circumstances, but not one the Baltic recommends!

Shipowner With No Name

The Transporter’s second rule is also close to the heart of many shipowners – “no names”. During the 20th century shipping became a rather anonymous business, with the majority of ships flagged out under brass plate companies to avoid unwelcome costs. This practice of giving the ship a different name and nationality from the owner has gained wide acceptance and the “flagged out” fleet grew to 40% of world shipping in the 1980s and over 70% today. But Mr Statham’s “no names” rule is under pressure as the EU and US seek transparency so that the “responsible party” for pollution and terrorism incidents can be traced and apprehended.

P3 Package Poker

Which brings us to the 3rd rule – “never open the package”. The problem this rule addresses is that opening the package can produce unexpected consequences. It happens in the movie when the transporter opens the package and finds a girl and it can happen in business too. Take the recent “P3” package. The world’s three biggest (European) container operators decided that cooperation would give them a cost advantage. They packaged themselves as “P3” and asked for approval from the authorities. The EU agreed, but unexpectedly China did not. Why? One explanation is the balance of fleet ownership. Europe is a massive exporter of shipping services, with a fleet twice its ship demand, whilst China and SE Asia are big importers and exporters with relatively smaller fleets (see graph). To date China and Asia have accepted this imbalance, but maybe the world is changing.

Who Rules The Waves?

So, can the shipping industry learn from Mr Statham’s pithy approach to the transport business? “Never change the deal” is a core market principle and although “no names” does not work so well today as it used to, shipping has something to gain from keeping its head down. But it’s the unexpected consequences of opening the package that drives the film and maybe smart shipping players can learn something from Mr Statham’s error. Stick to the deal, keep your head down and whatever you do, never open the package, however interesting the contents may seem. Have a nice day.

SIW1127

SIW1084It has been well documented that for the last few decades container trade has been one of the fastest growing parts of world seaborne trade. In tonnage terms it has grown from an estimated 237 million tonnes in 1990 to 1.5 billion tonnes in 2012, increasing its share of global seaborne trade from 6% to 15%. Like any emerging phenomenon the early years of containerization were marked by rapid growth, following the inaugural voyage of the Ideal-X in 1956.

Great Expectations

The next question was how long it would take the industry to mature and what growth rates could be ex-pected in each phase. We now have plenty of data to examine the progression. The graph shows the historical growth rate of container trade back to 1974, based on estimated ‘A to B’ trade from 1997 onwards and global container ports lifts (a useful available proxy) prior to that. It also shows the growth rate of the volume of world trade in goods (not just those in containers) back to 1980.

Early Growth Phase

The 70s and 80s were really still part of the early phase, and the conversion of the carriage of goods from general cargo to containers sustained rapid growth. In the 70s/80s the average annual growth rate in box volumes stood at 11.7%, and in the 80s the average rate was more than double that of world goods trade.

By the 90s, although many commodities had been container-ised, the trend continued and equally importantly the commodi-ties forming the bedrock of box cargo were representative of the fastest growing part of world trade (i.e. manufactures). In the 90s the average growth rate stood at 9.3%.
Phasing East

In the 2000s the pace of the growth was bolstered by a key trend – the outsourcing of production from developed to developing economies, notably from the US and Europe to China. As western companies rushed to set up shop in or source production from Asia, this boosted volume growth. In the 2000s average box trade growth stood at 7.8%, but prior to the downturn in 2008 it was 10.3%, 1.4 times the growth in world goods trade. The average rate in the 2010s so far has slowed (7.0%) on the back of the downturn, but not (yet) quite as heavily as some expected.

That’s A Lot of Boxes

What’s next? For a new transporta-tion technology, 57 years old is still young, and there’s still non-containerized general cargo out there. But the outsourcing boom and the peak of containerization have passed, and a betting man might expect growth to mature to 5-6% pa in the next decade. Though it’s hard to predict precisely, a lot of capacity will likely be required. Boom period deliveries have ranged between 1.0 and 1.5m teu, but with today’s fleet and orderbook totalling 20m teu, 6% pa growth would soon require 1.2m teu of extra capacity every year just to keep up, before the replacement of old and obsolete tonnage. That’s a lot of food for thought for the shipping industry’s builders and financiers.