Presentation on theme: "What’s in a box? Do you really know me? Growth Factors"— Presentation transcript:
0LOOKING 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, JuneTIMEFRAME: 25 minutes
1What’s in a box? Do you really know me? Growth Factors Market PotentialWhat’s in a box?Commodities in ContainersCommodity and Cold ChainsThe container is more than a transport unit; a supply and commodity chain unit.
3Containerization as a Diffusion Cycles: World Container Traffic ( ) and Possible Scenarios to 2015AdoptionAccelerationPeak GrowthMaturity2008 -New (niche) servicesProductivity gainsReferenceNetwork developmentProductivity multipliersDivergenceDepressionSource: Drewry Shipping Consultants.Niche marketsMassive diffusionNetwork complexities
4The Main Driving Forces of Containerization: The Importance of Niches Derived Economic and income growthGlobalization (outsourcing)Fragmentation of production and consumptionSubstitution Functional and geographical diffusionNew niches (commodities and cold chain)Capture of bulk and break-bulk marketsIncidentalTrade imbalancesRepositioning of empty containersInducedTransshipment (hub, relay and interlining)
6Commodity Group and Containerization Potential Category (SITC)ExamplesContainerization (Existing or Potential)Food & Live AnimalsMeat, Fish, Wheat, Rice, Corn, Sugar, Coffee, Cocoa, TeaLow (grains) to high (coffee, cold chain products)Beverages & TobaccoWine, Beer, TobaccoHighRaw MaterialsRubber, Cotton, Iron oreCommodity specificFuels & LubricantsCoal, Crude oil, Kerosene, Natural gasVery limitedAnimal & Vegetable OilsOlive oil , Corn oilChemicalsSalt, Fertilizers, PlasticsLow to averageManufactured GoodsPaper, Textiles, Cement, Iron & Steel, CopperMachinery & Transport EquipmentComputer equipment, Televisions, CarsVery high (already containerized)Miscellaneous ManufacturesFurniture, Clothes, Footwear, Cameras, Books, Toys
7Growth Factors behind the Containerization of Commodities OutcomeGrowing availability of containersMore containers available on freight markets.Ubiquitous transport product.But: container shortage peaks and slow steamingRising demand and commodity pricesMore commodities in circulation (usage of containerization to accommodate growth).New producers and consumers (marginal markets penetration).But: equipment mismatchFluctuations and rises in bulk shipping ratesDecrease 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 pressureImbalances in container shipping ratesExport subsidy for return cargo.Empty containers repositioningPools of containers available for backhauls.But: equipment and locational mismatch
8CRB Index (CCI), Monthly Close, 1970-2011 Paradigm shift in input costs…Reaping the consequences of monetary policy.Could be positive for containerization…Source: Commodity Research Bureau.
9Income per Capita and Perishable Share of Food Imports “Permanent global summertime”Source: adapted from Lufthansa Consulting,
10The Usual Suspect: China’s Share of the World Commodity Consumption, c2009 Source: United States Geological Survey (2009), BP Statistical Review of World Energy (2009), Food and Agriculture Organization of the United Nations (2008), International Monetary Fund (2010).
11Continuous Commodity Index and Baltic Dry Index, 2000-2011 (2000=100)
12Continuous Commodity Index and Average Container Shipping Rates, 1994-2011 (1994=100)
13From Bulk to Containers: Breaking Economies of Scale Container as an independent load unit.Minimal load unit; one TEU container.Entry BarriersLimited differences in scale economies for a producer.Incremental / linear cost-volume function.Required VolumesNew producers (smaller).Product differentiation (larger variety).Market PotentialThe variety factor in penetrating the commodity sector.
14Containerized Cargo Flows along Major Trade Routes, 1995-2009 (in millions of TEUs) Source: UNCTAD, Review of Maritime Transport, various years.Empties; an export subsidy
16Challenges for the Containerization of Commodities IssuesContainer 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
17Challenges for the Containerization of Commodities IssuesContainer preparationPre-use and post-use cleaning (avoid contamination).Dedicated containers?Container loading, unloading and transloadingBulks difficult to load horizontally. Vertical loading / unloading (equipment). Transloading issues. Source loading.
18Challenges for the Containerization of Commodities IssuesWeight distributionContainership load (10-14 tons per TEU).Trade imbalances create mitigation strategies.
19Challenges for the Containerization of Commodities IssuesLand consumption at port terminalsSpace consumption (4 times more than bulk) mitigated by velocity.
20Asymmetries between Import and Export-Based Containerized Logistics DistributionCenterCustomerInland TerminalImport-BasedGatewayMany CustomersFunction of population density.Geographical spread.Product customization.Incites transloading.High priority (value, timeliness).RepositioningSupplierExport-BasedFew SuppliersFunction of resource density.Geographical concentration.Lower priority.Depends on repositioning opportunities.
22Bulk and Containerized Commodity Chains: An Emerging Complementarity Cost / volume driverLow frequencyDedicated terminalsOne way flowsBulk Commodity ChainSupplierCustomerPortPoint-to-PointConsolidation centerTime / flexibility driverHigh frequencyGeneral terminalsMore balanced flowsComplementarityContainerportPendulumServicesIntermodalterminalContainerized Commodity Chain
23The Cold Chain: A Highly Constrained Niche Conditional demandEach product has a specific perishability.Shelf life and revenue.Demand conditional to qualitative attributes.Load integrityReefers as the common load unit.Packing, packaging and preparation.Empty backhauls.Transport integrityUninterrupted integrity of the transport chain (modes, terminals and DC).Specialized modes (speed) and terminals?Shipping lines adapting their speed based on the reefer level of the trade lane. Point to point services.
24Conditional Demand: Shelf Life of Selected Produce Optimum Temperature (Celsius)Apples90-240Bananas7-2814Bell Peppers12-1810Cabbage14-20Carrots14-28Onions30-180Grapes10-25Oranges10-157Potatoes30-50Strawberries5-10Tomatoes7-1412Various other factors are also at play in addition to temperature, including moisture and ethylene sensitivity.
25Conditional Demand: Lettuce Shelf Life by Storage Temperature
26Temperature Integrity along a Cold Chain Potential integrity breachTemperature RangeTemperaturePotential integrity breachTimeTransportUnloading – Warehousing – LoadingTransport
27Reefers and Source Loading: Securing Cold Chain Integrity Cold Transport ChainTransit Time (days)Typical Shelf Life (days)Refrigerated truck / Cold-storage facility transloading / Air4-530-35Refrigerated truck / Cold-storage facility transloading / Maritime shipping15-16Source loading with Reefer / Maritime shipping55-60Gain 25 days of shelf life (10 days net gain)
28Slow 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.
29Conclusion: Commodities and the Cold Chain as Value Propositions Retail and intermediate goodsCommodities (balancing)Cold chain (revenue)On some trade routes, the cold chain is the main driver for growth and revenue (South America / Europe).