Container Shipping Industry

Container transfer IndustryOutline the growth of the structure in the container merchant marine labor and discuss the extent to which the geomorphologic switchs ar explained by increasing surface of send offs entering IntroductionIn the past especiall(a)y in the last twenty years multinational container transfer industry and the related carry on has been increasing at a tremendous rate. The period between 1980 and 2004 shows that international maritime trade grew at 2.4% comp bed to this the containerised cargo has enlarged at 8.6% with an increase of 600% over that period compared to 70% of the maritime trade. This phenomenal growth can be attributed to the many an(prenominal) things including the ripening importance of transhipment activities. As more(prenominal) shippers understood the advantages of container merchant marine system ports increasingly do mixed bags to the infrastructure and adapted to handling of cargo using containers. This growth of man conta iner traffic has in ilk manner conduct to an increase in the coat of ships resulting in challenges and opportunities for the container shipping industry. And there is no instance of such a large growth in the transportation industry. This paper outlines the evolution of the container shipping industry highlighting the main reasons behind the growth and development of the industry, moreover it also discusses the increasing size of the ships and its relationship with the container shipping industry. (Ircha, 2006. Volk)The Factors Behind the process of Container Shipping Industry Volk has studied the container shipping industry and point out four factors which hold helped the container shipping industry in achieving its tremendous growth. Following are the four factors (Volk)Significant growth in ProductivityThe origins of containerisation can be found in the fall out from the 1956 Suez Crisis when the when the blocking of the Suez canal leading to an increase in demand for transportation this take to an coronation of the shipping industry into ships, but the end of the crisis specifyt that there was an over supply of ships and at long last light-emitting diode to a prolonged recession in the shipping industry. In addition to this shippers are always seeking to minimise cost as the fr octette level universally doesnt cover the cost, this cost cutting authorisation take to the portal of container ships and the LASH ships, but the container ships were much more successful.The introduction of the 20 feet and the 40 ft container led to far-reaching changes to the transportation industry, the productivity of the container shipping is 4 to 8 times to that of the traditional shipping. This enormous productivity led to the shippers being profitable even when the freight rates were low and and then remained hawkish. How of all time to really gain from the containerisation conceit a lot of giftment was needed in the transportation convey. Countries have gradually adapted to this change and have done it at their own pace. This is the reason that the structural changes have been taking place even today in many of the Asian, African, Baltic and Latin American Countries. The Containerisation of shipping is still in the process of crisp many national markets this is the reason for its greater development compared too the public transportation market.Structural Changes in Shipping Due of ContainerisationThe structural chages in Cargo shipping industry led to the success of the container shipping industry. stolon many of the ports which were important were unable to make appropriate changes like innovation of quays, installation of careanes etc. Due to this many important ports like Liverpool, and San Francisco were leftover behind. Because of concentration od cargo on a fewer ports led to the development of hinterland connections, for example Rotterdam and Antwerp have effective inland shipping and. Not all of the shipping in dustry was able to adapt to the change brought about by containerisation, because in addition to shipping the shippers had to invest in containers too. This limited the number of shippers whoi were able to containerise their business.Major difference is that has occurred because of containerisation is the increase in the efficiency of shipping. In the past ships used to spend weeks standing(a) at ports, the trips between Northern Europe used to take eight weeks, however with the introduction of containers the trips time has halved to four weeks. With significant increase in the capital investment and fewer number of ports, and increase in the hasten of ships and efficiency. Shippers now realise that the ships cannot be profitable sitting at ports as a result the idea of offering of multiple loops has emerged.Because the big ships with containers could not reach all ports and since many poiorts did not have the capacity or the finances to support containerisation, ship rotation and feeder shipping, a interlock of shipping feeders has evolved. These ships function both inter-regionally and intra-regionally.There has been an evolution of the concern routes along with the evolution of containerisation. In the past the routes between different regions of the world were quite a clearly defined, however with the intention of creating more efficiency, for this wise concepts like the pendulum concept and the round-the-world concept evolved.The decrease in the transportation was and is passed on to the customer with increase cost reduction, the volume of cargo being transported from far-flung areas has arrive highly cheap as the large ships with containers are able to achieve economies of cuticle.Increase in Trade Volume and its Relationship with Economies of ScaleThe increase in containerised trade has induced the shippers to use bigger and larger ships and the large size of ships has led to economies of scale. The strategies adopted by the shippers to deal wit h this interdependency is to understand the limitations of investment in ships, generally ships last for about 25 year on average, therefore to cope with the steady increase in demand many shippers order ships which have extra capacity to deal with the future increase. or so shippers try to increase their market share so they can invest in more ships. The increase in capacity is not undistinguished as it determines the volumes whish can be transported.Bigger ships also mean more containers, this is the reason that there is extremely stiff competition because the container ship markets have newer ships all the time increasing the competition as the customers usefulness because of increased size of ships. Low transportation costs have fictive global trade as products and goods become more and more competitive on a global platform. This is the reason that containers are used for general cargo but also for break bulk cargo like transportation of salt from Australia to Europe. In add ition to price container shipping is not only reliable, timely and has more geographical outreach, that industries and producers produce goods which can be containerised.In addition since the size of ships is increasing even today the transportation costs provide continue to decrease as the growth of containers is more than proportionate.Deregulation and LiberalisationDeregulation and trade liberalisation occurred in the 90s specially the Asian and the Latin American countries. Chinas entrance in world trade has also been a major part of this liberalisation. Because of this container industry has experienced an added pulsation to growth.Structural Change due to Increase in Ship size Gradually over the years, specialised container ships have steadily increased in capacity and dimension shippers try to bump the economies of scale in an ever competive market. In 2004 half of the ships ordered were big enough to have a capacity of 5500 TEUs at the minimum, in addition the 36 percen t of the all container ships planned for building have a capacity of 7400 TEUs. These huge ships are now becoming more common in the key trading paths which serve Asia. New orders for China Shipping Container Lines celestial orbit between 8500 and 9600 TEUS. It is estimated that the new ships will be 334 metres long and 42.8 metres wide and have anticipated drafts of 15 metres or more. Even bigger ships depend on better locomotive technology for the vessels propulsion system. (Notteboom2004)It is believed that the next increase in ship size will be 12,000 TEUs or even more, as the limitation in the engines mean that it will take two engines for the ships larger then 10,00 TEUs. It is estimated that the utmost size of ships would be approximately 18,000 TEUs. This is based on the fact that Malaccan refined between Indonesia and Malaysia has the relevant depth limits (Gilman 1999).Bigger container ships needApproach channels and berths which are deeperChannels and turning basins w hich are wider larger container terminals which have more storage capacity and warehouses on land so that they can satisfactorily handle higher volumes of export and import containers. Outreach which is both higher and lastingmechanized ship-to-shore support cranes, An extremely proficient and well-organised work force running(a) round the clock to guarantee swift ship turnaroundCullinane et al (1999) have found that economies of scale exist in the case of Europe-Far due east and trans-Pacific routes in ships with 8,000 TEU even if the limitations of ports are taken into consideration. As for trans-Atlantic route the range of 5,00 to 6,00 TEUs is ideal. However today there is less knowledge about the economies of scale related to super-big container ships. Some believe in the case of 18,000 TEUs the cost rescue are negligible as they would lack flexibility. Adding post-panamax capacity can obligate a short-term competitive edge to the early mover, putting nip on the followers in the market to upgrade their container fleet and to rid of a serious unit cost disadvantage, i.e. the me too syndrome as indicated by. A boomerang effect eventually also hurts the carrier who started the price war. sequence others like Waals and Wijnolst,( 2001)insist that there would be cost saving based on hub-feeder arrangement.It is clear that the increase in scale of vessels has decreased the slot costs in container industry, however it is also significant that larger carriers have not been able to achieve cost saving from economies of scale (Lim, 1998). Moreover inefficient slot utilisation and the tendency to buy more cargo at lower rates can lead to lowered revenues.Graham states that the techniques like cost cutting by post-panamax building will not be helpful and instead will prevent the shipping industry from achieving stability. To him the insecurity of a brutal cycle of increase in ship scale, incessant building and decreasing margin is detrimental to the industr y. he goes on to ordinate that this increase leads to short term reduction in cost which pushes competitors into investing in still larger vessels this is confirmed by Helmick et al (1996) who thinks that it is a boomerang effect hurting the shipper who started it in the first place.ConclusionContainerisation has been extremist in terms of changes brought about in the transportation industry, and especially in the case of container shipping industry the change has not only led to its tremendous growth but also lowered prices.From the above preaching it becomes obvious that containerisation and subsequent steady increase in ship sizes has led to many changes however some people argue that the exercise to find achieve economies of scale is unending and this will lead to an increase in vessel size, which may go beyond 12,000 TEUs in the next few years. This is because shippers have tried to achieve savings in terms of give notice economy and economies of scale in larger ships, thi s is to have a larger market share and be successful in the sector. Larger ships do have lower costs per TEU than smaller ships.From the perspective of the ports, the larger vessels will be favoured in the longer rroutes, like Trans-Pacific, trans-Atlantic and Far East- Europe routes, with vessels larger than 8,000 TEUs. Ports have been gearing themselves up for bigger vessels trying to provide facilities to concord the huge sizes, this entails huge costs and structural adjustments, and however the incentive is to become hub ports, other ports have to make appropriate changes to remain competitive.ReferencesCullinane, K., Khanna, M. and Song, D.-W. (1999) How Big is well-favoured Economies of Scale and the Optimal Size of Containership, Liner Shipping Whats Next? proceeding of the 1999 IAME conference, Halifax, 108-140.Gilman, S., 1999, The size economies and network efficiency of large containerships, International daybook of nautical Economics, 1(1)Graham, M.G. (1998). Stabilit y and competition in intermodal container shipping finding a balance, oceanic Policy and Management, 25(2), 129-147Helmick, J.S., Wakeman, T.H., Stewart, R.D. (1996). Technology, intermodal transportation and port productivity throughput maximization and environmental sustainability, The Journal of Urban Technology, 3, 11-38.Ircha, M C. (2006). Characteristics Of Tomorrows Successful Port in Crowley, Brian Lee (Ed.) The AIMS Atlantica paper 4http//www.aims.ca/library/Ircha.pdf.Lim, S.-M. (1998) Economies of Scale in Container Shipping, Maritime Policy and Management, 25 361-373Notteboom T E. (2004). Container Shipping And Ports An Overview. Review of Network Economics Vol.3, Issue 2, 86-106http//www.rnejournal.com/articles/notteboom-RNE_june_04.pdfVolk B. Growth Factors in Container Shipping. Elsfleth, Department of Marine Studieshttp//www.amc.edu.au/mlm/papers/AMC3_GRO.pdfWaals, F., Wijnolst, N.(2001). Malacca-max container shipping network economy, legal proceeding of the IAME 2001 conference, Hong Kong, 191-207