Presentation on theme: "The Charthouse Group LOOKING INSIDE THE BOX: EVIDENCE FROM THE CONTAINERIZATION OF COMMODITIES AND THE COLD CHAIN LOOKING INSIDE THE BOX: EVIDENCE FROM."— Presentation transcript:
The Charthouse Group LOOKING INSIDE THE BOX: EVIDENCE FROM THE CONTAINERIZATION OF COMMODITIES AND THE COLD CHAIN LOOKING INSIDE THE BOX: EVIDENCE FROM THE CONTAINERIZATION OF COMMODITIES AND THE COLD CHAIN Jean-Paul Rodrigue Dept. of Global Studies & Geography, Hofstra University, New York, USA Theo Notteboom ITMMA - University of Antwerp and Antwerp Maritime Academy, Belgium European Conference on Shipping & Ports – ECONSHIP 2011 Chios, Greece, June 22-24 2011
The Charthouse Group Do you really know me? The container is more than a transport unit; a supply and commodity chain unit. Growth Factors Market Potential Commodities in Containers Commodity and Cold Chains
The Charthouse Group GROWTH FACTORS FOR CONTAINERIZATION
The Charthouse Group Containerization as a Diffusion Cycles: World Container Traffic (1980-2010) and Possible Scenarios to 2015 Divergence AdoptionAcceleration Peak Growth Maturity 1966-19921992-20022002-20082008 - Reference Depression New (niche) services Productivity gains Network development Productivity multipliers Massive diffusion Network complexities Niche markets
The Charthouse Group The Main Driving Forces of Containerization: The Importance of Niches Derived Economic and income growth Globalization (outsourcing) Fragmentation of production and consumption Substitution Functional and geographical diffusion New niches (commodities and cold chain) Capture of bulk and break-bulk markets Incidental Trade imbalances Repositioning of empty containers Induced Transshipment (hub, relay and interlining)
The Charthouse Group MARKET POTENTIAL
The Charthouse Group Commodity Group and Containerization Potential Category (SITC)ExamplesContainerization (Existing or Potential) Food & Live Animals Meat, Fish, Wheat, Rice, Corn, Sugar, Coffee, Cocoa, Tea Low (grains) to high (coffee, cold chain products) Beverages & TobaccoWine, Beer, TobaccoHigh Raw MaterialsRubber, Cotton, Iron oreCommodity specific Fuels & LubricantsCoal, Crude oil, Kerosene, Natural gasVery limited Animal & Vegetable Oils Olive oil, Corn oilHigh ChemicalsSalt, Fertilizers, PlasticsLow to average Manufactured GoodsPaper, Textiles, Cement, Iron & Steel, CopperCommodity specific Machinery & Transport Equipment Computer equipment, Televisions, CarsVery high (already containerized) Miscellaneous Manufactures Furniture, Clothes, Footwear, Cameras, Books, Toys Very high (already containerized)
The Charthouse Group Growth Factors behind the Containerization of Commodities FactorOutcome Growing availability of containers More containers available on freight markets. Ubiquitous transport product. But: container shortage peaks and slow steaming Rising demand and commodity prices More commodities in circulation (usage of containerization to accommodate growth). New producers and consumers (marginal markets penetration). But: equipment mismatch Fluctuations and rises in bulk shipping rates Decrease in the ratio cargo value per ton shipping rate for commodities. Volatility (rates) and risk (hedging). Search for options to bulk shipping. Low container shipping ratesIncrease in the ratio cargo value per TEU shipping rate for commodities. Relative rate stability. Containerization more attractive as an option. But: rate stability under pressure Imbalances in container shipping rates Export subsidy for return cargo. But: equipment mismatch Empty containers repositioningPools of containers available for backhauls. But: equipment and locational mismatch
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 Income per Capita and Perishable Share of Food Imports “Permanent global summertime”
The Charthouse Group The Usual Suspect: China’s Share of the World Commodity Consumption, c2009
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 Container as an independent load unit. Minimal load unit; one TEU container. Entry Barriers Limited differences in scale economies for a producer. Incremental / linear cost-volume function. Required Volumes New producers (smaller). Product differentiation (larger variety). Market Potential
The Charthouse Group Containerized Cargo Flows along Major Trade Routes, 1995-2009 (in millions of TEUs) Empties; an export subsidy
The Charthouse Group COMMODITIES IN CONTAINERS
The Charthouse Group Challenges for the Containerization of Commodities ChallengeIssues Container availabilityLocational and load unit availability. WeightLimitations to about 30 tons (40 footer). 20 footer the preferable load unit (26-28 tons). Balance between retail, intermediate goods and commodities
The Charthouse Group Challenges for the Containerization of Commodities ChallengeIssues Container preparationPre-use and post-use cleaning (avoid contamination). Dedicated containers? Container loading, unloading and transloading Bulks difficult to load horizontally. Vertical loading / unloading (equipment). Transloading issues. Source loading.
The Charthouse Group Challenges for the Containerization of Commodities ChallengeIssues Weight distributionContainership load (10-14 tons per TEU). Trade imbalances create mitigation strategies.
The Charthouse Group Challenges for the Containerization of Commodities ChallengeIssues Land consumption at port terminals Space consumption (4 times more than bulk) mitigated by velocity.
The Charthouse Group Asymmetries between Import and Export-Based Containerized Logistics Many Customers Function of population density. Geographical spread. Product customization. Incites transloading. High priority (value, timeliness). Few Suppliers Function of resource density. Geographical concentration. Lower priority. Depends on repositioning opportunities. Gateway Inland Terminal DistributionCenter Customer Supplier Repositioning Import-Based Export-Based
The Charthouse Group CONTAINERIZED COMMODITIES AND COLD CHAINS
The Charthouse Group Bulk and Containerized Commodity Chains: An Emerging Complementarity Bulk Commodity Chain Containerized Commodity Chain Consolidation center Port Supplier Customer Intermodal terminal Container port Pendulum Services Point-to-Point Complementarity Cost / volume driver Low frequency Dedicated terminals One way flows Time / flexibility driver High frequency General terminals More balanced flows
The Charthouse Group The Cold Chain: A Highly Constrained Niche Conditional demand Each product has a specific perishability. Shelf life and revenue. Demand conditional to qualitative attributes. Load integrity Reefers as the common load unit. Packing, packaging and preparation. Empty backhauls. Transport integrity Uninterrupted integrity of the transport chain (modes, terminals and DC). Specialized modes (speed) and terminals?
The Charthouse Group Conditional Demand: Shelf Life of Selected Produce ProduceShelf LifeOptimum Temperature (Celsius) Apples90-2400 Bananas7-2814 Bell Peppers12-1810 Cabbage14-200 Carrots14-280 Onions30-18010 Grapes10-250 Oranges10-157 Potatoes30-5010 Strawberries5-100 Tomatoes7-1412
The Charthouse Group Conditional Demand: Lettuce Shelf Life by Storage Temperature
The Charthouse Group Temperature Integrity along a Cold Chain Potential integrity breach Temperature Temperature Range Potential integrity breach Transport Time Unloading – Warehousing – Loading Transport
The Charthouse Group Reefers and Source Loading: Securing Cold Chain Integrity Cold Transport ChainTransit Time (days)Typical Shelf Life (days) Refrigerated truck / Cold-storage facility transloading / Air 4-530-35 Refrigerated truck / Cold-storage facility transloading / Maritime shipping 15-1630-35 Source loading with Reefer / Maritime shipping 15-1655-60 Gain 25 days of shelf life (10 days net gain)
The Charthouse Group Slow Steaming: Potential Impacts on Commodities and the Cold Chain Longer transit times may compromise some cold chains. More containerized inventory tied in transit (heavier use of modes and terminals). More containers for the same flow capacity (10-30%?). Lower availability of containers in the hinterland.
The Charthouse Group Conclusion: Commodities and the Cold Chain as Value Propositions Retail and intermediate goods Commodities (balancing) Cold chain (revenue)