The Next Box Wave: Can Containerization Reinvent ...

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The Next Box Wave: Can Containerization Reinvent Itself? Theo Notteboom ITMMA - University of Antwerp and Antwerp Maritime Academy, Belgium

Jean-Paul Rodrigue Dept. of Global Studies & Geography, Hofstra University, New York, USA

Terminal Operators Conference Europe EXECUTIVE SESSION 4: ACADEMIC PERSPECTIVE, Antwerp, June 7-9 2011

The Charthouse Group

Do you really know me?

Innovation

Diffusion The Charthouse Group

Just a partial (topless)  recovery. Not a “full frontal” recovery…

SITUATION REPORT EUROPE:  REASONS TO SMILE?

The Charthouse Group

Total European port throughput

European port traffic 2008‐2010 = ‐5.2%

2008: 4.26 billion tons 2009: 3.76 billion tons (-11.7%) 2010: 4.04 billion tons (+7.4%)

Million tons of maritime traffic

1600 1400

2008 2009 2010

316 ports

1200 ‐3.9%

+1.4%

1000 800 600

352 ports 266 ports ‐19.8%

400 200

135 ports

+13.6%

‐14.0%

+10.3%

340 ports ‐12.0%

+9.5% ‐19.6%

+9.5%

0 Roro

Conventional  general cargo

Liquid Bulk

Dry Bulk

Containers

Cargo segment The Charthouse Group

Non-anticipated traffic gap of 15 million TEU 2009: - 14.4% compared to 2008

2010

2009

2008

2007

2006

2005

2004

2002

2001

2000

1999

1998

2010: + 10.4% compared to 2009

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

European port system Hamburg-Le Havre range Mediterranean range UK range Atlantic range Baltic Black Sea Exponential trendline total traffic

2003

95 90 85 80 75 70 65 60 55 50 45 40 35 30 25 20 15 10 5 -

1985

Container throughput in million TEUs (78 ports)

Container volumes are bouncing back

The Charthouse Group

Market shares in the European  container port system 60%

Rising market share  Hamburg‐Le Havre range  mainly due to Benelux ports.

50% Hamburg-Le Havre range

45%

Mediterranean range

40%

UK range

35%

Atlantic range Baltic

30%

Black Sea

Med ports are losing market  share, mainly due to weaker  position transshipment hubs

25% 20% 15% 10% 5%

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

0% 1985

Share in total container throughput

55%

Black Sea port system loses  ground due to declining  The Charthouse Group volumes at Constantza

Market shares in total European container traffic

Gateway port Transhipment/interlining port (transhipment incidence >75%) Gateway port also handling substantial transhipment flows

‘09: 1.2% ‘10: 1.3%

Finland

Norway

Sweden

Multi-port gateway region Main shipping route

Estonia

UK

‘09: 1.9% ‘10: 1.9%

Ireland

‘09: 7.2% ‘10: 7.1%

Americas

Americas

Portugal

‘09: 1.5% ‘10: 1.6%

‘09: 7.3% Spain ‘10: 7.4%

Latvia

Den.

‘09: 0.8% ‘10: 1.2%

‘09: 14.9% Germany‘10: ‘09: 25.5% 14.9% Belg. ‘10: 26.1% NL

‘09: 3.0% France ‘10: 2.9% ‘09: 4.3% ‘10: 4.5%

Russia

Lithuania

Belarus

Other ports ‘09: 29.8% ‘10: 28.6%

Poland Ukraine

Czech Republic Slovakia

Austria ‘09: Switz.

Hungary

1.5% ‘10: Croatia 1.6%

Bosnia& Herz.

Romania

Serbia Bulgaria

‘09: 0.9% ‘10: 0.8%

Mace.

Italy

Alb.

Turkey

Greece

Cyprus

Main shipping route Algeria Morocco © 2011 T. Notteboom – ITMMA, University of Antwerp

Middle East – Far East

Tunisia Malta

The Charthouse Group

Trade volumes per route to/from Europe:  Mixed results Year on year change in trade volumes (basis = TEU)

Europe-SSA Northbound Europe-SSA Southbound

Q1-2009 -4.2% -1.3%

Q2-2009 -4.3% -3.1%

Q3-2009 -7.1% -1.8%

Q4-2009 3.5% 2.6%

Q1-2010 7.8% 5.7%

Q2-2010 2.5% 7.3%

Q1-2011 10.9% 27.5%

Q1-2011 vs. Q1-2008 30.7% 43.3%

Europe-Asia Westbound Europe-Asia Eastbound

-22.1% -15.6%

-22.2% -1.6%

-13.2% 9.2%

-0.2% 29.1%

21.2% 23.0%

24.1% 0.6%

6.3% 4.3%

0.2% 8.6%

Europe-North America WB Europe-North America EB

-16.9% -29.0%

-21.6% -35.0%

-15.0% -25.6%

-6.5% -6.6%

13.4% 12.3%

22.2% 16.0%

5.3% 8.1%

-1.1% -13.3%

Europe-India/Middle East WB Europe-India/Middle East EB

-12.1% -4.1%

-7.4% -0.6%

-0.5% 1.7%

4.7% 6.4%

18.1% 14.4%

20.1% 6.8%

15.4% 6.0%

24.9% 18.2%

Europe-South/Latin America NB Europe-South/Latin America SB

-12.9% -27.4%

-12.3% -26.4%

-18.6% -22.5%

2.7% -0.8%

4.7% 47.5%

-5.1% 57.7%

13.7% 20.1%

0.9% 28.7%

Europe-Oceania NB Europe-Oceania SB

-6.8% -14.7%

-9.1% -26.4%

-14.0% -8.5%

-12.9% -6.0%

-11.1% 19.6%

-2.3% 32.8%

2.4% 2.6%

-15.3% 4.1%

Source: based on data EELA and Container Trade Statistics

The Charthouse Group

Trade volumes per route to/from Europe:  geographical shifts   

2010

2008 Geographical distribution of extra‐European container  trade (dry and reefer) ‐ year 2008 (based on data ELAA) South and  Latin America 8,2%

Sub Saharan  Africa 5,0%

India/Middle  East 11,7%

North  America 19,2%

Oceania 1,8%

Asia 54,1%

Geographical distribution of extra‐European container  trade (dry and reefer) ‐ year 2010 (based on data ELAA) South and  Latin America 8,1%

Sub Saharan  Africa 5,7%

India/Middle  East 13,1%

North  America 16,9%

Oceania 1,8%

Asia 54,4%

The Charthouse Group

Far from being a no‐ brainer…

LOOKING AT THE FUNDAMENTALS

The Charthouse Group

Intermodal Integration

Major Steps in Intermodal Integration Advanced Containers An enduring innovative process. Advanced Terminals Multiplying effect on an existing  Regionalization technique. Intermodal rail crane (1985) An exercise in unintended  consequences? Doublestacking; IBCs (1985) From revolution to evolution? Deregulation (1980s) COFC (1967) Transatlantic (1966); Containerships (1968) Standardization (size and latching) (1965) Containerization (1956) TOFC (1950s) Pallets (1930s)

Time The Charthouse Group

Some Key Issues in Liner Shipping: Towards a  Revolution? Herd behavior or  segmentation?

The Charthouse Group

Filling the “gap”?

Air

Impact slow steaming   & transshipment

Freight rate to shipper (gate‐to‐gate)

Polar routes Direct services Fast ships Trans‐Siberian rail

LTL

Truckload

Intermodal Liner shipping

Performance (Speed, Reliability, Flexibility)

The Charthouse Group

Containerization as a Diffusion Cycles: World Container Traffic (1980‐2010) and Possible  Scenarios to 2015 Adoption

Acceleration

Peak Growth

Maturity

1966-1992

1992-2002

2002-2008

2008 -

New (niche) services Productivity gains

Network development Productivity multipliers

Reference

Divergence

To what extent the  growth in 2010 is  attributed to  transshipment and  emerging markets?

Depression

Niche markets Massive diffusion Network complexities

The Charthouse Group

Container Usage during its Life‐Span

A lot of waste to improve  upon. Challenges for asset  management.

The Charthouse Group

Weighting Out versus Cubing Out: What is a  Proper Distribution of Containerized Assets? 

Regions follow  standards; they do not  set them. 

Balance between retail,  intermediate goods and  commodities The Charthouse Group

The Main Driving Forces of Containerization

The Charthouse Group

DERIVED: ORGANIC GROWTH IN THE  PIPELINE?

The Charthouse Group

Monthly Value of Exports or Imports, Selected  Traders, 2006‐2011 (Jan 2006=100) Trade has bounced back. America’s consumption  engine sputtering.

Yes, but at what cost?

The Charthouse Group

CRB Index (CCI), Monthly Close, 1970‐2011

Paradigm shift in input  costs… Reaping the consequences of  monetary policy. Could be positive for  containerization…

The Charthouse Group

Business Cycles and Misallocations

When “organic growth” is using a  lot of chemicals… Second phase of the credit‐ driven bust.

Credit-Driven Boom

Normal Cycle Peak Credit-Driven Bust Credit-Driven Cycle

Trough Expansion

Recession

Expansion

Depression

The Charthouse Group

SUBSTITUTION: STUFFING THE BOX WITH  SOMETHING DELICIOUS

The Charthouse Group

Looking Inside the Box: Accept all Substitutes…

The Charthouse Group

The Usual Suspect: China’s Share of the World  Commodity Consumption, c2009

The Charthouse Group

Bulk and Containerized Commodity Chains: An  Emerging Complementarity Cost / volume driver Low frequency Dedicated terminals One way flows

Bulk Commodity Chain Supplier

Port Point‐to‐Point

Customer

Consolidation center

Time / flexibility  driver High frequency General terminals More balanced flows

Complementarity Container port Pendulum Services

Intermodal terminal

Containerized Commodity Chain

The Charthouse Group

Continuous Commodity Index and Baltic Dry  Index, 2000‐2011 (2000=100)

The Charthouse Group

Continuous Commodity Index and Average  Container Shipping Rates, 1994‐2011 (1994=100)

The Charthouse Group

From Bulk to Containers: Breaking Economies of  Scale

The Charthouse Group

The Cold Chain: A Highly Constrained Niche

The Charthouse Group

Equal but Separate… The Reefer Ghetto (Away  from Containers of Color…)

The Charthouse Group

INDUCED: TRANSSHIPMENT (THE GREAT  SHUFFLE)

The Charthouse Group

The Global Transshipment Market

The Charthouse Group

How the Main Actors in Global Freight  Distribution Influence Routing? Top ten terminal operators: 65% of the  world’s total container handlings

Container Terminal Portfolio of the Four Main Global  Terminal Operators, 2010

The Charthouse Group

Sea‐sea transshipment plays a role, particularly  in Med and in relation to UK and Baltic…

Hamburg Rotterdam Bremerhaven

Antwerp

Le Havre

Influences on North Europe (1)Maasvlakte 2 effect + JadeWeserPort, capacity in UK (2)Direct deepsea calls in Baltic (cf. Gdansk)

Zeebrugge

Barcelona Sines

Valencia

Taranto

Cagliari Piraeus

Algeciras Gioia Tauro Malta

Influences on South Europe (1)Direct calls in gateway ports (cf. NAPA, Spain, etc..) (2)Competition Tanger Med

Transhipment incidence: North Europe = 24.2% Eastern Europe = 16.2% South Europe = 44.6%

The Charthouse Group

Pure transhipment hubs in  West Med lose market share  West-Mediterranean ports with one-way diversion distance > 250 nm West-Mediterranean ports with one-way diversion distance 100-250 nm West-Mediterranean ports with one-way diversion distance < 100 nm

90% 80% 70% 60% 50% 40% 30% 20% 10%

2010

2009

2008

2007

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

0% 1975

Share in TEU throughput West-Med

100%

The Charthouse Group

Major ports and future terminal developments in non‐EU  Med ports: impact of a changing political landscape? Container throughput in million TEU, capacity extensions in million TEU

Enfidha (Tunisia) Capacity: +1 (2011) +2.5 (period 2011-2015) +2 (period 2015-2030)

Djendjen (Algeria)

Rades (Tunisia)

Capacity: +2 (DP World)

Bejaia (Algeria)

Ambarli (Turkey) Traffic: 2.26 (2008)

Traffic: 0.3 (2007)

Traffic: 0.15 (2008) Capacity: +2.5 (>2010)

Mersin (Turkey)

Algiers (Algeria) Traffic: 0.5 (2007) Capacity: +0.8 (2010)

Beirut (Lebanon) Traffic: 0.95 (2008)

Haifa (Israel) Traffic: 1.39 (2008)

Tanger Med II

APMT/Akwa: + 3 mln TEU (2012) PSA: +2 mln TEU (2012)

Tanger Med

APMT: + 1.5 mln TEU Eurogate: +1.5 mln TEU

Damietta (Egypt) Capacity: +4 (2012)

Misurata (Libya) Initial plans cancelled?

Port Said (Egypt) Traffic: 3.2 (2008) Capacity: +2.5 (2011)

The Charthouse Group

Pushing Atomization in the Hinterland and  Massification in the Foreland Capacity

Frequency

Hinterland‐Based  Regionalization PORT HINTERLAND Capacity Gap

Frequency Mitigation

PORT FORELAND Economies of scale

Different  momentums Economies of scale Functional  Integration

Foreland‐Based  Regionalization The Charthouse Group

INCIDENTAL: LIVING IN AN ASYMMETRIC  WORLD…

The Charthouse Group

Containerized Cargo Flows along Major Trade  Routes, 1995‐2009 (in millions of TEUs)

Empties; a breath  of fresh air…

The Charthouse Group

Geographical Levels of Empty Container  Repositioning

Hinterland

Port

Global Reposit io

Depot / Inland terminal Freight Distribution Center Cargo Rotation

t io osi

p l Re ) a n o d egi (inlan R r Inte

ning

g nin

Regional Repositioning

Inter-Regional Repositioning (coastal / fluvial)

Foreland

The Charthouse Group

Asymmetries between Import and Export‐Based  Containerized Logistics

Gateway

Inland Terminal

Distribution Customer Center

Import-Based Many Customers •Function of population density. •Geographical spread. •Product customization. •Incites transloading. •High priority (value, timeliness).

Repositioning Supplier

Export-Based Few Suppliers •Function of resource density. •Geographical concentration. •Lower priority. •Depends on repositioning opportunities. The Charthouse Group

Slow Steaming: What Hath You Brought Us?

The Charthouse Group

TERMINAL OPERATOR STRATEGY: IN SEARCH OF UNIQUE FEATURES? The Charthouse Group

Going Green: Hypocrisy?

Carbon neutral

Low emission vessel

Green supply chain

The Charthouse Group

Going global Regional Share in the Terminal Portfolio of the Twelve Largest Global  Terminal Operators (Hectares, 2010)

Changes in regional  orientation?

The Charthouse Group

Building partnerships Complexity in terminal ownership structures  Example for the Rhine‐Scheldt Delta ‐ 2010 HUTCHISON PORT HOLDINGS

PSA

20%

Majority shareholding

100% Minority Shareholding

ECT

MSC

50%

NYK 100% 100%

50%

Delta Terminal Waal- and Eemhaven Euromax phase 1

Rotterdam World Gateway (Maasvlakte 2) Operational by 2013

PSA (Antwerp/ Zeebrugge)

CYKH Alliance

50% 50%

New World Alliance

60%

DP World

30% 10%

APM Terminal Maasvlakte

Terminal 1 (Maasvlakte 2) Operational by 2014

ANTWERP

100% 100%

ROTTERDAM

Source: Notteboom & Rodrigue (2010)

100%

ZIM Line

42.5% 10%

MSC Home terminal

50%

North Sea Terminal

100%

Europe Terminal

50%

Deurganck Terminal Antwerp International Terminal (AIT) DP World Delwaidedock

Shipping Line (Global) Terminal Operator

Antwerp Gateway

Terminal

Cosco Pacific

20%

CMA-CGM

10%

35%

65%

CHZ

APM Terminals (AP Moller Group)

100%

Albert II-dock north (under construction)

Shanghai International Port Group (SIPG)

25%

PORT Financial Holding

75% APM Terminal

ZEEBRUGGE

The Charthouse Group

Filling the “gap”? Fast end‐to‐end services? Multi‐container platform for fast roro handling

Bron: Kvaerner Masa-Yards Technology

The Charthouse Group

Going inland Active involvement of terminal operators

• ‘Extended Gate’ concept of ECT (Hutchison Port Holdings) • ‘Terminal Operator Haulage’ concept of DP World Inland terminal

vessel

vessel Seaport terminal

Seaport terminal

Inland terminal

Inland terminal

• Impact

= direct truck = endhaul truck

= barge/rail shuttle

‐ Optimize capacity use at deepsea terminals ‐ Lower environmental footprint and road congestion in/around port ‐ Create a streamlined logistics solution for customers The Charthouse Group

Going inland Active involvement of shipping lines: ‘Push strategy’

B/L seaport X

x x

B/L seaport X Second move by rail, barge or truck

y Multi-port gateway region

x

CONTAINER PUSH STRATEGY

B/L inland port

y z Source: Notteboom (2011)

Rail, barge (or truck) The Charthouse Group

Gateway traffic (inland traffic excl. sea-sea transhipment) in major multi-port gateway regions in Europe (TEU – figures 2008) Core of “Blue Banana” + EDC effect

Gateway port Transhipment/interlining port (transhipment incidence >75%) Gateway port also handling substantial transhipment flows Multi-port gateway region

Finland

Norway

Sweden

Main shipping route

Estonia

Immediate hinterlands remain  the backbone of ports’ gateway  traffic..

Latvia

Russia

Lithuania UK

Den.

Ireland

Belarus

Gdansk Bay 0.77 mln TEU Americas

SE East Coast UK 6.3 million TEU

North Germany 9.2 mln TEU Poland

NL

Germany

Belg.

Slovakia

Seine Estuary 1.9 mln TEU

Flexibility is key 

France

Americas

Austria

Switz.

Liguria Marseille 4 mln TEU 0.85 mln TEU

Hungar North Adriatic: 1.3 mln TEU

Romania

Black Sea 0.54 mln TEU

Croatia Bosnia& Herz.

Serbia Bulgaria

Spanish Med 3.9 mln TEU Portugal

Ukraine

Rhine-Scheldt Delta 16.8 mln TEU Czech Republic

.. but gateway regions  increasingly vie  for distant contestable  hinterlands

Mace.

Italy

Spain

Alb.

Portugal 1.1 mln TEU

Turkey

Greece

Cyprus

Main shipping route Algeria Morocco © 2011 T. Notteboom – ITMMA, University of Antwerp

Middle East – Far East

Tunisia Malta

The Charthouse Group

Going intermodal Modal split targets of terminals

Source: Notteboom (2011)

The Charthouse Group

Going intermodal Linking pricing and non‐pricing levers  across transport nodes and modes  Pricing levers

Port  pricing

Non-pricing levers

Port  service  level

Pricing linkages Service level linkages Rail or  barge  service  level

Rail or  barge  pricing

Inland  port  pricing

Source: Notteboom (2011)

Pricing/service level linkages at same mode/node Pricing/service level linkages between modes/nodes

Inland  port  service  level

The Charthouse Group

Ay caramba! Can I handle  the load?

THE NEXT BOX WAVE OR THE NEXT BOX  CRASH? The Charthouse Group

Conclusion: Which Growth for Which Box? Derived

Substitution

Incidental

Induced

The Charthouse Group

Thank you for your attention ! [email protected] jean‐[email protected]

The Charthouse Group