Sunday, August 11, 2019
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.
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).
 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
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).
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; along the Yangtze river; 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.
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.
 Chuanxu Wang, Hercules Haralambides and Le Zhang (2019 forthcoming) “The Role of Major Chinese Seaports in the Belt-and-Road Initiative (BRI)”.
 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”.
 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.
 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
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), 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.
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 […].
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.
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.
 Interestingly, in this period, Germany has received 10 times as much as all the others together (with the exception of the United Kingdom).
 The IMF growth forecasts for 2019, for China, are down to 6%.
 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.
 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
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? 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) of almost half a century ago, I have also shown (see Haralambides 2017; 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), 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) 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 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.
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).
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
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).
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. 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.
 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.
 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.
Saturday, March 2, 2019
Cargo carried by liner shipping has come to be known as general cargo. Up to the beginning of the 1960s, i.e. before containerization, such cargo was transported in various forms of unitization (packaging), such as pallets, slings, boxes, barrels and crates, by relatively small ships, known as general cargo ships, cargo freighters, multipurpose ships, twin-deckers or multi-deckers. These were ships with holds (cargo compartments) in a shelf-like arrangement, where goods were stowed in small pre-packaged consignments (parcels) according to destination (see Figure).
This was a very labor-intensive process and ships were known to spend most of their time in port, waiting to berth, load or discharge. Seafaring was fun in those days, but congestion was a chronic problem in most ports, raising the cost of transport and hindering the growth of trade. Equally importantly, such delays in ports made trade movements erratic and unpredictable, obliging manufacturers, wholesalers and retailers to keep large stock. As a result, warehousing and carrying (capital) costs were adding up to the cost of transport, making final goods more expensive and, again, hindering international trade and economic development. Cases have also been known where inefficient ports were welcomed, if not deliberately pursued, by governments, as an effective tariff and barrier to foreign imports. (see: Gigantism in container shipping here).
 Labor productivity in those days was roughly 1 ton per man-hour; with containerization, this went up hundredfold. In the first case, a docker would climb up the gangway 10 times an hour, with a sack of rice on his shoulder. In the second, a crane-driver would load 20 containers of rice onboard the containership, comfortably seated and handling a “joystick” from the warm cubicle of a ship-to-shore gantry-crane, or from the terminal office, or even from his home! The first docker would be paid peanuts (if he was lucky) while the second has a salary every worker in the world would envy today.
Friday, February 22, 2019
My gigantism in container shipping ‘little book’ gave me the opportunity to do something I have always wanted to do since the days of my good friend and colleague, the late Basil Metaxas and his infamous monograph The Economics of Tramp Shipping (Athlone Press, 1971). This was my perceived need for a clarification in the concepts of tramp; tramping; or tramp shipping on the one hand, and bulk shipping or even bulk-carrier on the other.
Often in the literature, the two concepts, tramp and bulk, have been confused or used interchangeably. Even worse, a “tramp ship” has often been used synonymously to a “bulk ship”, or bulk-carrier, and vice versa. However, “tramping” simply means operating a ship in the spot (voyage) market -i.e. as a taxi of the seas, whereby the contractual relationship between ‘passenger’ and ‘taxi-driver’ (‘cargo owner’ and ‘shipowner’ in our case) ends upon the completion of the voyage and the driver (shipowner) is again on the lookout for new custom (cargo) that will take him to the four corners of the earth, without any scheduling or fixed itinerary (thus the name tramp). Other than the ship itself, the provision of a tramp service requires minimal carrier infrastructure; the market is highly competitive, with prices (freight rates) fluctuating wildly even in the course of one day.
Certainly, however, tramping does not assume any particular type of ship, such as a tanker or a bulk-carrier. To put it differently, a bulk-carrier or a tanker on a long-term time-charter is not tramping, nor is one engaged in a contract of affreightment. In short, the mere fact that a bulk ship is not offering regular or scheduled services, like a liner ship, does not make her a tramp. In the opposite, and this is the first time you hear this, a small container feeder-ship which out of, say, the hub of Piraeus distributes containers all over the Mediterranean, working as a common carrier, indiscriminately serving many principals (main-haul majors such as Maersk, MSc, CMA CGM, Cosco, etc.) would most definitely fall under my definition of tramping.
 Things nowadays may be somewhat different, but I remember a Greek shipowner friend, years back, telling me that, to do tramping, the only things you needed were a telephone, a shared office and a part-time secretary! He was also very good in forecasting… I remember him once, while sipping a glorious chilled Viognier on his terrace, overlooking the Thames, attentively and silently looking down on the street. “what are you doing”, I asked. “When the queue of the taxis below is long”, he replied, “business is not good, and people take the bus… shipping will not be doing well either”, he said philosophically with half a smile, refilling at the same time our glasses.
Friday, February 8, 2019
Shipping is a global service industry that, by general recognition, provides the lifeline of international trade. Suffice it to say that, due to the morphology of our planet, 90% of international trade takes place by sea. Technological developments in ship design and construction, and the ensuing economies of scale (EoS) of larger ships, have reduced trade- and transport costs, thus promoting trade (particularly that of developing countries) by making the transportation of goods over long distances affordable. As a matter of fact, geographical distance plays a much lesser role today, as a determinant of trade between countries, and it is being replaced in trade models by the concept of economic distance, as this is proxied by ocean freight rates (cf. transport costs).
These developments have expanded the international markets for exported goods, thus allowing mass production and lower unit costs at home. This has improved the international competitiveness of exporting countries, and it has facilitated the industrialization of many of them around the world. One of the best examples of export-led industrialization is Japan: The Japanese are thrifty people. It was not therefore growth of domestic demand that enabled the country to develop, but low transport costs which allowed Japan to conquer Asian and world markets with high quality products. As a result, a huge global market for its products led to mass production, even lower costs and export prices, and greater dominance still in international markets.
Often, international ocean transportation and Information and Communications Technologies (ICT) are referred to as the two basic ingredients of globalization [Joseph Stiglitz (2006) Making Globalization Work. W.W. Norton and Company, Inc. New York].
 In spite of distances, China buys more iron ore from Brazil, four times farther than Australia; it costs one dollar cent to transport one can of Heineken beer from Rotterdam to New York; and less than 10 dollars to bring an expensive TV set from Busan (Korea) to London. Actually, what matters most these days is not transport costs, but the time of the sea passage (as well as time in port) and the way these times impact the logistics and warehousing costs of traders.