Tuesday, February 25, 2020

Port-Hinterland Transport and Logistics

[…]In spite of the sustained growth of port throughput worldwide, as well as of the substantial infrastructure investments of ports and their efforts to reform and modernize, hinterland transport—representing 60% of the costs of the global maritime supply chain—has not kept pace; productivity in the maritime leg of the supply chain has not been followed by productivity in its hinterland part, apart from the introduction of double-stack trains in the US in the 1980s, or the adoption of the dry port concept in the 2000s.

Moreover, the gigantism in container shipping is straining port infrastructure and cargohandling capacity, causing significant diseconomies of scale, which propagate throughout the supply chain. For many seaports, the weakest link in their transportation chains is hinterland access, due to congested roads and inadequate or non-existent rail connections, causing delays and increases in transport costs.

[…]A reversal of trends can recently be seen however. From the earlier days when ports were obliged to move downstream to find space, ports now look back to their hinterlands to find the additional space they require. Inland intermodal terminals (or dry ports) are thus mushrooming, connected to seaports by rail, road or inland waterways. As such, inland intermodal terminals are usually developed close to railway and motorway junctions to facilitate the transfer of containers between modes of transport, favouring, to the extent possible, the more environmentally friendly transport modes, such as rail and inland waterways[…]

HE Haralambides

Friday, February 7, 2020

Georgia's Anaklia mega-container facility on the “Belt and Road” backpack?

The 2.5 billion deep-water mega container facility at Anaklia has been shelved. The ‘official’ explanation is that the Anaklia Development Consortium (ADC) has been unsuccessful in securing finance. The true reasons, however, may be quite different, having more to do with regional geopolitics rather than anything else.

In a surprise move, the Georgian government has issued an authorization for the development of Anaklia’s southern rival, the port of Poti. The bid has been won by APMT (Maersk group). Looking at the latter’s plans, I cannot say I am very impressed however. These are about an initially general cargo facility, eventually developing a 300m container berth of limited drafts (11m).

The Poti authorization is a strategic move of high complexity, given that, at the same time, the Georgian government is talking to various international institutional investors (including China), in an effort to secure the financing of Anaklia. I am certain the government will succeed, and a new bid will be launched soon. Anaklia is a very strategic node on what I have earlier called  “a missing link of BRI”, i.e. that of connecting the Caspian and the Black seas, continuing to central Europe through the Romanian port of Constanza on its western part, and connecting to the Bandar Abbas (Persian Gulf)-Tehran-Baku (Azerbaijan)-Moscow North-South Corridor  on its eastern part (also strongly eyed by India). I launched this idea 4 years ago in Kuwait, and we were happy to see, last year, an implementation agreement signed between the governments of Turkmenistan, Azerbaijan, Georgia and Romania.

I expect that the Anaklia project will be re-launched very soon. One of the requirements would be the upgrading of the Baku-Tbilisi-Anaklia railway. If this happens, the Poti project will have to be scaled down, limiting itself to general cargo throughput only. The distance between the two ports is too short and, to my view, there is not enough room for container facilities in both ports.
This would be a waste of good money.


Tuesday, January 14, 2020

Decision-making in container shipping: reactive or proactive?

The best monopoly profit is a quite life” used to tell me Sir John Hicks many years ago when, as a student, I was writing my thesis -The Dynamic Stability of Competitive Equilibrium- based on his book Value and Capital.[1]

In our present research, Mike and I have tried to say something similar, albeit with different words: In imperfect markets (collusion, concentration, etc.), mistakes do not cost that much, and they can be easily corrected. Here, carrier short-run capacity deployment decisions could be described as ‘reactive’, or as ‘steady as she goes’. In other words, carriers’ approach is fairly mechanistic:  ‘let’s see what we did in the previous years, or what our competitors our doing, and do the same’. Expectations regarding future developments in their markets do not matter so much and, in a way, decisions are made reactively, like someone who tries to drive a car forward by looking in their rear view mirror. This is the essence of adaptive expectations.[2]

On the contrary, competition obliges you to stand on your toes; to sit on the edge of your chair; to bite your nails; to look around and ahead and try to fathom every scrap of information coming your way which could impact your bottom line. Here, mistakes cost; sometimes they cost a lot, as the bankruptcy of Hanjin Shipping has taught us. Such a decision-making approach reflects  the fundamentals of rational expectations.[3]

Mike and I therefore thought that if, through the use of shipping capacity deployment data, we could discover how shipowners form their expectations on future developments in their markets, i.e. adaptively or rationally, we should also be able to say something about the structure of their industry (imperfect or competitive). Such information, particularly today when the European Commission is considering extending for another five years its antitrust concessions to international shipping, might be of a certain value.

Admittedly, our results are not as strong as we would like them to be, but this is a good thing and a good starting point for other researchers who would like to follow us. We  however have been able to show that, in the more competitive Pacific market, carriers may tend to decide rationally; in the Atlantic market, instead, this could not be established and carriers there seem to be reactive rather than proactive, forming their expectations adaptively.

If true, the latter finding (Atlantic) comes only to validate, for one more time, what we said 15 years ago in our Erasmus Report:[4] “the disbanding of liner conferences from European trades has done little to increase competition in liner shipping”.

Hercules Haralambides
January 2020

PS. The complete paper is freely downloadable here: doi.org/10.1186/s41072-019-0057-2

[1] J.R. Hicks (1939) Value and Capital: An inquiry into some fundamental principles of economic theory. Oxford: Clarendon Press, 1939.
[2] See Milton Friedman (1968). The Role of Monetary Policy. American Economic Review, 58 (1): 1–17.
[3] See John A. Muth (1961). Rational Expectations and the Theory of Price Movements. Econometrica 29 (6): 315–335, and Thomas Sargent (1986) Rational Expectations and Inflation. New York: Harper and Row, 1986.
[4] The Erasmus Report: Global Logistics and the Future of Liner Shipping Conferences. DOI: 10.13140/RG.2.1.3225.3200 (Report prepared for the European Commission’s Competition Directorate General “for assistance in processing public submissions to be received in response to the “consultation paper” on the review of Council regulation 4056/86)”.

Sunday, December 15, 2019

Hub Ports and Container Shipping Networks

In our newest research here, we develop a bi-level super network, which jointly optimizes the selection (or new development) of hub ports along West Africa’s coastline, and a liner shipping network design, serving the trade of West Africa with China. 

In contrast to conventional discrete location models, our method relaxes the usual constraint requiring hub port alternatives be listed a priori. This allows us to consider the development of new port infrastructure, in greenfield areas, along the West African coast. We believe such an approach—i.e., the identification of ‘greenfield’ sites—could be of particular interest to infrastructure financiers, such as the World Bank and the Asian Infrastructure Investment Bank, as a port policy blueprint

Moreover, as many West African states possess no container facilities but instead own attractive greenfield sites with impressive water depths, an approach such as ours, which does not exclude a priori any possibility, would naturally bode well with the legitimate aspirations of these countries. 

Our results show that Abidjan, Cotonou, Lagos and Lomé, located in the central part of the West African coastline, could  develop into important hubs. Instead, ports in the western and southern parts of the west African coastline could develop into important feeder ports, in a pendulum type of network design, as we demonstrate. Interestingly, we also find that, as the number of routes increases, the structure of the liner network changes from circular to hub-and-spoke. Finally, the networks we design and present in our paper show how shippers’ path choice behaviour interacts with liner network design and the location of hub ports.


Sunday, August 11, 2019

What is a port?

A port is generally understood as the interface between sea and land, where goods change mode of transport, e.g. from ship to truck or rail and vice versa. To operate safely, a port needs to be protected, or harbored, from the elements of nature (waves, winds, currents) by such things as breakwaters and windbreakers, but also by essential port services like towage, pilotage and line-handling which assist the ship to berth and start in safety its cargo-handling operations. The latter operations require a wide spectrum of port equipment such as ship-to-shore cranes, straddle carriers, reach-stackers, forklifts and more. 

The figure shows a part of the historic Port of Brindisi, South Italy, at the turn of the previous century (c. 1920). The train would arrive right at the waterfront --something very uncommon at that time-- in the true sense of intermodality (see below), 100 years before the term was invented.[1]

Although the general public may understand the importance of ports (and shipping) for trade, growth and prosperity, most people have never visited or seen a port at close distance. Rather, the impression people have of a port is usually one of an exotic spot, of romanticism, adventure or organized crime. Cinematography has helped a lot in creating this impression: A beautiful account of the “waterfront” can be enjoyed in Elia Kazan’s 1956 masterpiece ‘on the waterfront’, with Marlon Brando, or Mike Newell’s 1997 drama ‘Donnie Brasco’, with Al Pacino and Johnnie Depp.

To put things in perspective, a port can be anything from a sheltered stretch of sea, protecting a handful of fishing boats somewhere in the South Pacific; a block of cement in a small Greek island, on which a passenger ferry would lower its ramp to disembark passengers; a buoy onto which a tanker would moor to offload its oil through a pipeline; a finger-pier alongside which a bulk carrier would unload its coal on a conveyor belt; a cool port (i.e. a refrigerated facility) in Latin America exporting fruit to Europe; a mega-yacht marina in Monaco or Nice, or just a water-taxi that would disembark passengers from a cruise ship anchored in the middle of the sea, outside Amalfi, in the absence of any berthing infrastructure at the picturesque village of South Italy. At the other end, there is the mind-boggling Yangshan Deep Water Port (of Shanghai), handling 40 million containers a year, or the equally impressive industrial complex of the Port of Rotterdam, running for 40 kilometers along the river Meuse to the North Sea, comprising in its domain a cluster of thousands of companies, from the large refineries of the oil majors,  to the small paint shop, inconspicuously hidden under an abandoned bridge, next to a pub.  HH

(Introduction of my chapter on ports, in Elsevier's 'Transport Encyclopedia', edited by Roger Vickerman, which will appear at the end of this year / beginning next).

[1] The train, coming from London and Paris, would bring to Brindisi ‘la valigia delle Indie’, i.e. the diplomatic bag (actually a trunk) and other mail and documents heading for India. Crossing Suez was great fun and an adventure, but the ladies had to be careful with the scorching sun. Thus, cabins had different prices with the most expensive ones being the posh (i.e. Port-Out-Starboard-Home). At the very same spot, Phileas Fogg and Passepartout (Jules Verne: Around the World in 80 Days) were waiting to board P&O’s m/s Mongolia. Fogg was worried of a delay but Passepartout was reassuring him that, opposite to sailing ships, steamships were never late!

Monday, June 24, 2019

Riding along China’s Maritime Silk Road (MSR): State-of-the-Art in port research (and beyond)

China’s Belt & Road Initiative (BRI) has been so far a rather fuzzy concept: Particularly in regard to ports, China has been talking to virtually every country or, rather, every port manager in Europe and around the world has been visiting Beijing more than frequently. Lately, however, BRI has started to shape up, in no small measure thanks to the research of the MEL journal; Haralambides & Associates; University of Venice; Dalian Maritime University (China); and Ningbo University (China). Specifically: 

In March 2015, with the authorization of the State Council of China, China's National Development and Reform Commission, the Ministry of Foreign Affairs and the Ministry of Commerce jointly released Visions and Actions on Jointly Building Silk Road Economic Belt and the 21st-Century Maritime Silk Road. The document clearly emphasized the construction, and/or the further development, of 15 seaports, namely, Shanghai, Tianjin, Ningbo, Guangzhou, Shenzhen, Zhanjiang, Shantou, Qingdao, Yantai, Dalian, Fuzhou, Xiamen, Quanzhou, Haikou, and Sanya.

Our research has assessed the “capability for sustainable development” of the above ports, and on the basis of this, we have divided them in 4 categories: (a) international hub ports (Shanghai); (b) regional hub ports (Tianjin, Guanzhou, Shenzhen, Dalian, Ningbo, Qingdao); (c) node ports (Yantai, Quanzhou, Fuzhou, Shantou); and (d) ports of local interest (Xiamen, Haikou, Sanya).[1]

At the same time, the Chinese government has identified –so far ‘informally’- 65 countries of interest along the BRI. We have tabulated Origin-Destination (O/D) matrices between the above 15 Chinese (BRI) ports and the 65 countries/ports of “BRI interest”. Our data comprises all types of traffic: Bulk; General Cargo; Containerized Cargo. This data will become publicly available soon so as to enable “meaningful port partnerships” between China and the rest of the world, as well as meaningful ‘visits’ of port managers to China.

Together with researchers from Dalian Maritime University, China, we have identified the ports which would make meaningful economic sense for inclusion in the BRI network in West Africa;[2] along the Yangtze river;[3] and along the ‘Maritime Silk Road’, from Valencia-Genova-Trieste-Piraeus to East China. In the same research, we are also looking at Chinese industry relocation due to port development along the BRI.

In (Mediterranean) Europe in particular, our recent research is proposing ways to link BRI plans with the to-be-revised TEN-T Networks, particularly as EU economic activity is moving eastwards (central and eastern Europe) and our new, revised, TEN-T will have to be “very different” from the existing one.[4]

Finally, in view of China’s strong prioritization of issues of ‘sustainable development’, and its recent conviction to talk only to sustainable ports, we are advancing new methodologies for assessing the sustainability of port development, based on scientifically weighing 4 independent factors: (a) Operational capabilities of the port; (b) Economic well-being of the port-city and its territory; (c) Environmental performance of the port-city; and (d) Human capital and technology development.

HE Haralambides

[1] Chuanxu Wang, Hercules Haralambides  and Le Zhang (2019 forthcoming) “The Role of Major Chinese Seaports in the Belt-and-Road Initiative (BRI)”.
[2] Kang Chen, Jiajun Li, Hercules Haralambides and Zhongzhen Yang (2019 forthcoming) “Determining Hub Port Locations and Feeder Network Designs: The Case of China-West Africa Trade”.
[3] Yiran Zhao, Zhongzhen Yang and Hercules Haralambides (2019) “Optimizing the transport of export containers along China's coronary artery: The Yangtze River”. Journal of Transport Geography, Volume 77, May 2019, pp. 11-25.
[4] Paolo Costa, Hercules Haralambides and Roberto Roson (2019 forthcoming) “From Trans European (Ten-T) to Trans Global (Twn-T) Transport Infrastructure Networks: A conceptual Framework”.

Friday, April 12, 2019

Chinese port investments and ‘debt-trap diplomacy’: Real or fake news?

Since 2013, when President Xi Jinping announced his grandiose vision of a shared future through better connectivity, the amount of Chinese foreign investment has been mind-boggling. Various consultants have estimated this to be in the neighborhood of  €250 billion whereas, according to Bloomberg (see map), more than €300 billion has been invested in Europe, during the last 10 years.

Particularly in Europe, investments are not limited to infrastructure but comprise such heterogeneous things as nuclear power stations, theaters, historic buildings, football teams, restaurants and more. Many, if not all, of these investments are ‘baptized’ “BRI investments” to the extent that, for some observers, BRI has become synonymous to “money”.

It is not unreasonable, therefore, that the cash-strapped countries of the European South have been quite ‘eager’ to engage in a dialogue with China, starting with Greece and Spain and followed, recently, by Italy.  This development has evoked the dismay of the European North (Germany in particular[1]), as well as of a part of the Chinese citizenry, which is questioning the usefulness of investments in far away places, in the wake of rising unemployment and the cooling of economic activity at home.[2]

A part of western concerns on BRI investments consists of what has come to be known as debt-trap diplomacy. The Sri Lankan Port of Hambantota has often been quoted as a case in point. The practice is not unknown to certain western ‘financiers’, however, and in short it consists of extending excessive loans to borrowers, usually under onerous terms, when the lender knows (or should know) that the debtor will be unable to repay. The alleged aim is to extract economic or political concessions from the debtor country and/or to eventually swap debt with equity; i.e., in our case, the lender takes over control of the port. Some others argue that China might be buttressing repressive regimes, exploiting developing countries in a neocolonialist manner through high interest rate loans, and most of all seeking to coerce countries to align with China’s key strategic and military objectives.

President Xi’s vision, however, is quite the opposite: […]BRI aims to replace estrangement with exchanges between different civilizations; replace clashes with mutual learning; and replace a sense of superiority with coexistence; it aims to boost mutual understanding, mutual respect and mutual trust among different countries. In this light, the BRI is seen as a path towards global peace […].[3]

Whether accusations such as the above are true or not, in the case of BRI investments, remains to be seen. So far, the majority of such concerns and criticism originate, understandably, from China’s competitors, it is anecdotal, published in dubious outlets, or lacking scientific verification.[4]

For instance, loans to Sri Lanka (Hambantota) were rather concessionary (2%), while the country’s largest debt is to Japan and not to China. The case, to my view, was one of wide Sri Lankan public sector corruption rather than anything else. As regards China herself, in all honesty she should have known that, with the port of Colombo just around the corner, the prospective of Hambantota was meager at most.

The case of the Port of Piraeus is not much different either: At the time of writing, the Greek government rejected a €600 million port investment plan on grounds of archaeological finds. Also at the time of writing, a mounting Chinese disillusionment with the port of Piraeus has led China to start looking at the Italian ports of Trieste and Genoa. Since it was leased to COSCO, however, the port of Piraeus has become one of the fastest growing container ports in the world, soaring to the 36th place in global container traffic rankings, from the 93rd in 2010. The port has only 10 Chinese staff but employs 1,000 Greeks, and it has created more than 10,000 indirect local jobs.

One thing is for sure though and this was made crystal clear by President Xi Jinping at Davos in 2017: 

If America decides to retreat from its global responsibilities, China would gladly pick up the slack.

HE Haralambides

[1] Interestingly, in this period, Germany has received 10 times as much as all the others together (with the exception of the United Kingdom).
[2] The IMF growth forecasts for 2019, for China, are down to 6%.
[3] Quoted by Yang Jiechi, Member of the Political Bureau of the Central Committee of the Communist Party of China and Director of the Office of the Central Commission for Foreign Affairs. China Daily, 30 March 2019.
[4] To address this ‘lack of substantiation’, for a number of years now I am trying to engage Chinese academics and high-level researchers in investigations like: which ports should be included in the New Silk Road? With which ports should China partner in Europe and West Africa? How should Chinese industry ‘relocate’ in the wake of a continuously developing New Silk Road? What ship types (and sizes) should better serve the New Silk Road? Etc. Much of this research has already been published.

Friday, March 22, 2019

COSCO’s 25,000 TEU ‘Goliathan’ and the ‘Sweating’ Port

Yesterday, COSCO let on its plans of constructing a 25,000 TEU megaship amidst a lot of industry criticism (including Maersk), mostly from people who fail to understand (or do they?) that, in container shipping, not everything is dollars and sense; most definitely not in China. Although the Chinese economy is letting off steam since 2016, it is no secret that China intends to become the world’s leading maritime nation par excellence, in shipping, ports and shipbuilding. In this sense, it was not by accident that China announced, also yesterday, that «such ships ‘befit’ the country’s Belt & Road Initiative (BRI)». My personal forecast is that, in three years’ time at most, COSCO will have overtaken Maersk as the world’s largest container carrier.
However, megaships and high frequency of service mix a very explosive cocktail and filling the big ship is easier said than done. Fortunately, carrier cooperation through global shipping alliances has come to the rescue, but will COSCO (and others of course) be able to fill such ships by itself if its alliance with CMA CGM comes under attack next year?[1] We shouldn’t forget that, for EoS to be had, the ship must sail full; otherwise, economies of scale become diseconomies of scale.
Years back I had shown that there are significant EoS to be had in shipbuilding, up to Panamax-size vessels (about 4,700 TEU). After this point, the unit cost curve flattens, with only marginal gains to be had (see Fig. 1). Following the thinking of Kendall (1972)[2] of almost half a century ago, I have also shown (see Haralambides 2017[3]; Fig. 4 on p. 12) that in situations where the ship has to be turned around within a fixed time frame, say within 48 hours irrespective of her size, it costs more to handle a container arriving on a large ship than one arriving on a smaller one. In other words, cargohandling time per TEU is higher after a certain ship size, and this is a distinct “port diseconomy of scale”.

          Fig. 1: EoS in Shipbuilding (Source: Haralambides & Associates)
It is not so difficult to understand why: As crane productivity cannot be stretched much beyond 30 moves/h (it actually declines after a certain crane density[4]), the only way to serve a larger ship in the same time (48 h) is by adding more and bigger (in terms of air draft and outreach) cranes. However, increasing crane density reduces crane productivity, among others nullifying the advantages of having bigger hatches.
Stopford (2008)[5] arrived at a similar result, this time however for total costs per slot in the Atlantic trades. Stopford’s unit cost curve starts to flatten at a higher tonnage (about 8,000 TEU), given the significant EoS to be had in ship operations and propulsion. After this point, however, there are only 4% savings, all the way to 18,000 TEU ships (Malacca-max).

Big ships impose substantial demands on port capacity, without, however, paying commensurately for this demand. For instance, where before we could accommodate simultaneously three Panamax vessels (i.e. three berths) along one kilometer of quay-wall, today we can host there only two mega-vessels of the latest generation (about 400 m long). Berth utilization obviously goes down and so does the utilization of ship-to-shore (StS) cranes, for bigger ships mean lower call frequency.

All this would be fine, as long as carriers were bringing more traffic to the port with their larger vessels. But this doesn’t happen either. As Fig. 2 shows, call size is only moderately correlated with vessel size.

Fig. 2: Ship size vs. call size
More importantly, one needs fewer bigger ships, and fewer port calls, to serve a given amount of yearly demand. Thus, the infamous UNCTAD connectivity Index[6] goes down and, with it, the contribution of shipping to trade and development. Here too, berth and crane utilization decline and this impacts on the capital costs of the port and of the terminal operator. In addition, a reduction in the frequency of carrier itineraries (i.e. number of services), caused also by slow-steaming, impacts the inventory costs of traders, thus defying the very principles of supply-chain optimization, and this is a clear diseconomy along the supply chain. Finally, filling up the bigger ship in Asia is easier said than done. To do so, the ship must call at more Asian ports than what her size would warrant, often picking up containers at random and at short notice, without due consideration to the importance of proper stowage planning. As a result, ship and terminal stowage planning at the other end (Europe/North America) often becomes a nightmare.
HE Haralambides

[1] Review of the EU Consortia Regulation.
[2] Kendall, P.M.H. 1972. A Theory of Optimum Ship Size. Journal of Transport Economics and Policy IV (2): 128–146.
[3] Haralambides, H.E. 2017. Globalization, Public Sector Reform, and the Role of Ports in International Supply Chains. Maritime Economics & Logistics 19 (1): 1–51.
[4] Crane density is defined as the number of cranes per 300 m of quay length.
[5] Stopford, M. 2008. Maritime Economics, 3rd ed. London: Routledge.
[6] UNCTAD’s concept of connectivity is broadly described by the number of weekly services and liner companies active on a certain route. Bigger ships and shipping alliances reduce both the number of services (bigger ships) and the number of (independent) competitors on the route (alliances). For more information on UNCTAD’s Connectivity Index, see Fugazza and Hoffmann. 2017. Liner Shipping Connectivity as a Determinant of Trade. Journal of Shipping and Trade 2: 1.

Wednesday, March 13, 2019

A “missing link” in China’s Belt-and-Road Initiative: Connecting The Caspian- to The Black Sea and Beyond (Rotterdam)


The first time I threw around my ideas of connecting the two great seas, The Caspian- and the Black Sea, seeing this connection as a missing (multimodal) link in China’s Belt and Road Initiative (BRI), was in 2016 in Amsterdam (TOC Europe). A roadshow followed (aimed at ‘selling’ the idea to interested parties) to Shanghai, Baku, Kuwait, Tehran, Marseilles, Rotterdam, Venice, Hamburg and Brussels.

Through the Baku-Tbilisi-Kars railway system (BTK), running south of Caucasus, the link would connect the new port of Baku (President Aliyev’s top national priority) to the Georgian ports of Batumi, or Poti, or -why not- the 2.5 billion dollar port of Anaklia, once this project materializes.  

As Baku is at the crossroads of the North-South (Iran-Azerbaijan-Russia) corridor (a tripartite grand project already agreed, signed and sealed by the 3 countries), the interests of Iran and Russia in the project are obvious, as are those of India who wants to use the north-south corridor for her exports to Russia and Europe.

But my plan did not stop at Georgia. Navigating the Black Sea, my Missing Link would extend to Istanbul, Thessaloniki and Costanza and from there, through the Danube-Rhine fluvial system, it would end up to central and northern Europe (Rotterdam) (see map).

I am therefore pleased to report that, at a meeting in Bucharest last week, the Ministers of Foreign Affairs of Turkmenistan, Azerbaijan, Georgia and Romania signed a declaration on the development of the Caspian Sea - Black Sea international transport corridor (CSBS-ITC).

HE Haralambides

PS: A "discerning eye" would have already spotted our next project on my "Missing Links" map: Connecting the Upper Gulf port system of MAK (Kuwait)-Umm Qasr (Iraq)- Bandar Imam Khomeini (Iran) -three ports, in three different countries, at a spitting distance of each other- to the Mediterranean Basin (Lebanon or Syria or both), and from there to the Port of Piraeus and to the EU. The connection of the Upper Gulf Port System to the Caspian Sea (Tehran) would complete the 'big picture', connecting the two projects together, and to the North-South Iran-Azerbaijan-Russia corridor which, eventually, will extend, by sea, to India (Bombay). 

Friday, March 8, 2019

After containerization…

This situation I described in my previous post (cf. “Before Containerization…” below) started to change in the 1960s with the introduction of the “container” and the containerization of the trade between the United States and Europe at first and, subsequently, of the rest of the world (for the full story of containerization, see my 60-page saga "gigantism in container shipping, ports and maritime logistics").

The innovation entailed in the concept of containerization is credited to Malcolm Mclean: an American trucker who thought of separating the tractor from the trailer part of his trucks, standardizing (unitizing) the latter (trailer) so as to be able to be transported—with its contents intact—by various transport means, handled at ports by standardized cargohandling equipment (cranes, straddle carriers, reach stackers, etc.), and stacked uniformly one on top of the other, both in ships and at terminals. 

The container, or the maritime container, as it is often called, is a fairly robust and sturdy structure, manufactured at very high standards, intended to withstand the harshest of conditions, such as those often prevailing on the high seas. Containers are waterproof, vandal-proof, and adequately ventilated, to avoid possible accumulation of condensation, and, if treated well, they could give their owner many years of problem-free service (the average economic life of a container is 15 years). There are many types of containers (high cube, flat rack, open side, open top, tank, reefer [refrigerated], etc.), depending on the intended use (cf. figure).[1]

Containerization is often described as a revolution in transport. General cargo goods are now increasingly carried in steel boxes (containers) of standardized dimensions; most common is the 8 × 8 × 20 foot container known as TEU—Twenty-foot Equivalent Unit—although containers of double this size (40 feet) are increasing in importance.[2] Perhaps one of the most important effects of containerization is that, now, containers can be packed (stuffed) and unpacked (stripped) away from the busy waterfront, either at the premises of the exporter (consignor) and/or the importer (consignee), or at Inland Container Depots (ICD), warehouses, and distribution centers (dry ports).

Expensive and often unreasonably strongly unionized port labor is thus bypassed; pressure on port space relieved; and ship time in port minimized. These developments have increased ship and port productivity and system reliability immensely, thus allowing ships to become even bigger, achieving significant economies of scale and, consequently, lower unit transport costs and thus international competitiveness. Actually, as I have discussed many times in the past, the economic incentive behind the construction of ever larger ships is modern day port efficiency and productivity, rather than technological advances in ship design, or economies of scale at sea (which are lost if the ship has to wait in port). Nowadays, containers are increasingly carried by specialized cellular containerships many of which able to carry more than 20,000 TEUs, while designs for 25,000 TEU ships—or bigger—are already on the drawing boards of naval architects.
In parallel, by-passing the waterfront in the stuffing and stripping of containers, and thus having them ready in port to be handled by automated equipment, has increased immensely the punctuality, predictability and reliability of cargo movements and transport systems, enabling manufacturers and traders to reduce high inventory costs through the adoption of flexible Just-in-Time and Make-to-Order production technologies. Inter alia, such technologies have helped manufacturers to cope with the vagaries and unpredictability of the business cycle and plan business development in a more cost effective way. Indisputably, containerization has been the kindle wood under global logistics and supply chain management. Furthermore. The concept of logistics does not regard only cargo systems, but it permeates every aspect of our everyday life. For instance, in a reliable transport system, I know precisely what time I need to leave home to make it to the airport. But if taxis are frequently on strike; rail under continuous maintenance; or security controls at airport a mess, I need to leave home an hour earlier. This hour is “my” inventory cost.

Around the world, the port industry has invested a lot, in order to cope with the technological demands of containerization. Modern container terminals and commensurate cargohandling equipment have been built and new, more efficient, organizational forms (including privatization) have been adopted in an effort to speed up port operations. Operational practices have been streamlined, the element of uncertainty in cargo flows largely eliminated, forward planning has been facilitated, port labor regularized, and customs procedures simplified. These developments took place in the firm understanding of governments and local authorities that ports, now, constitute the most important link (node) in the overall door-to-door supply chain and thus inefficiencies (bottlenecks) in the port sector can easily wither all benefits derived from economies of scale and scope in transportation and logistics. Since 2000, the measurement of port efficiency has thus become a key research area in maritime economics, pioneered by the Maritime Economics & Logistics (MEL) Journal. 

HE Haralambides

[1] For more on containers, their production, use, leasing market, etc., see my 2016 report for Davenport Laroche “Liner Shipping, Containerization and the Container Leasing Market”, freely downloadable from my ResearchGate and Academia profiles.

[2] Although, for reasons of simplicity or easy reference, the standard maritime containers (TEU or FEU) are often referred to as 20x8x8 or 40x8x8, their height is actually 8 ft 6 in. Moreover, the hi-cube 40-footer, with a height of 9 ft 6 in, is assuming increasing importance, representing, according to certain estimates, the majority of maritime containers in service in recent times.