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Containerized Commodity Chains: A New Perspective on Global Supply Networks

Explore the shift from logistics to commodity chains in containerization and its impact on global trade dynamics and market potential. Investigate growth factors, market dynamics, and challenges in handling commodities in containers.

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Containerized Commodity Chains: A New Perspective on Global Supply Networks

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  1. Moving Inside the Box:The Containerization of Commodities Jean-Paul RodrigueAssociate Professor, Dept. of Global Studies & Geography, Hofstra University, New York, USA Theo Notteboom President, Institute of Transport and Maritime Management, University of Antwerp, Belgium

  2. Moving from Logistics to Commodity Chains A New Growth Dynamics for Containerization Market Potential: Hype and Reality Commodities in Containers Containerized Commodity Chains

  3. Containerization Growth Factors A B C D

  4. Containers are More than Boxes… • Looking inside the box • Containerization mainly viewed from the principle of flow. • Development of maritime and inland logistics: • Network and service configuration. • Maritime terminals and inland ports. • Globalization and global production networks: • Most considered perspective about the driver of container transport demand. • Global supply chains. • Global commodity chains: • An underrepresented dimension of containerization.

  5. From Logistics to Commodity Chains Suppliers DC Inland Logistics Gateway MaritimeLogistics Global Supply Chain Intermediatehub CommodityChain Inland Logistics Inland Terminal Customers

  6. Bulk and Containerized Shipping: An Emerging Complementarity

  7. Bulk and Containerized Commodity Chains Bulk Commodity Chain Supplier Customer Port Point-to-Point Consolidationcenter Complementarity Container port Pendulum Services Intermodal terminal Containerized Commodity Chain

  8. Bulk and Containerized Shipping: A Convergence of Factors

  9. Continuous Commodity Index (CRB), Monthly Close, 1970-2009 (April) C B II III a c b I d 1 A 2 3 5 4

  10. Continuous Commodity Index and Baltic Dry Index, 2000-2009 (2000=100)

  11. Continuous Commodity Index and Average Container Shipping Rates, 1994-2009 (1994=100)

  12. Container Shipping Costs and Cargo Value

  13. Maritime Freight Rates (Nominal USD per TEU), 1993-2008

  14. Containerized Cargo Flows along Major Trade Routes, 2007 Million TEUs Growth (2000-2007) 15.4 (+175%) 14.9 4.9 (+48%) Asia 19.9 33.1 USA 10.0 (+178%) 7.6 17.7 (+293%) Imports (M TEUs) 4.5 (+55%) 20.4 Europe 14.5 2.7 (+23%) Exports (M TEUs)

  15. Shipper Growth Factors for Containerized Grain Shipments: A Matter of Price and Availability

  16. Shipping Time between Bulk Handling and Containerization (Canadian Wheat)

  17. The Containerized Commodities Market • A different market dynamic • Scale economies are achieved by the shipper: • Modes, terminals and corridors. • Few differences in scale economies for a producer. • Limited barriers to entry: • The entry unit is a container load. • As long as there is a containerized volume. • Double benefit: • Development of global niche markets where numerous small exporters may compete. • New economic development venues in commodity sectors which could not previously access foreign markets.

  18. Composition of the Leased Container Fleet, 2008-09 40.6% 40.7% 31.2% 31.4% 20.4% 15.7% 21.6% 16.7% 28.9% 44.3% 27.6% 42.6%

  19. American Containerized Trade, 2003

  20. Share of Main American International Trade Commodities Transported by Containership, 2000

  21. Commodity Group and Containerization Potential

  22. Commodity Markets: Embedding Containerization

  23. Challenges for the Containerization of Commodities

  24. Commodities in Containers • Container preparation • Containers are well adapted to handle packaged freight either directly ("floor loaded") or on pallets. • Not well adapted to handle commodities in bulk. • Shipment contamination: • Some commodities, like grains, would require a container to be thoroughly cleaned. • Require the cleaning of a container once unloaded. • The usage of dedicated containers? • Specialized containers exist for liquids and for refrigerated cargo.

  25. Commodities in Containers • Container loading, unloading and transloading • Horizontal loading / unloading: • Complex task often requiring a panel to block the back door and hold the loose cargo. • Vertical loading / unloading: • Require specialized handling equipment. • Attractive option in situations of constant volume. • Transloading: • Usage of different modes to reach the load center (such as rail hopper cars). • Source loading: • Maintaining the integrity of some commodity chains (e.g. grains). • Shipment quality and product differentiation.

  26. Horizontal Bulk Loading System Source: DirectIndustry

  27. Commodities in Containers • Weight • Container loads are much lighter for conventional (mainly retail) freight than for commodities: • 10 to 14 tons per TEU. • The shipping industry prefers using larger containers (40 footers); more volume for the same handling costs. • Shipping commodities tends to rely on 20 footers: • Each load around 26 to 28 tons. • A 40 footer has a loading capacity of about 30 tons. • Load unit mismatch.

  28. Commodities in Containers • Weight distribution • Containerships designed to accommodate a specific weight load and distribution: • 10 to 14 tons per loaded TEU are common operational considerations. • Large commodity shipments are problematic: • More than 20 tons per TEU; adjustments in the distribution of this load must be made. • A containership presented with a full load of heavy containers could only by filled to 75% of its capacity. • Trade imbalances: • Inbound full loads of relatively light containers. • Outbound heavies and empties.

  29. Weight Distribution…

  30. Containerized Commodity Chains • Inertia • Substantial investment in bulk handling equipment. • Stakeholders reluctant to change practices. • Suitability: • New or expanding markets. • Low volume situations. • Surge in demand. • Demand mismatches • Import regions are not the same than exports regions: • Imports regions: consumption related (large metropolitan areas). • Exports regions: rural areas or resource extraction areas (low population densities). • Cargo rotation: • Permit repositioning opportunities. • Mitigate the availability of containers for exports.

  31. Containerized Commodity Chains • Seasonality • Attribute of many commodities. • Surge in demand at specific times of the year. • Seasonality has a geography: • Harvesting time varies between different regions of the world. • Temporal and geographical fluctuations in the repositioning of empty containers. • A double-edged sword: • Surge in supply (demand for containers). • Drop in commodity price.

  32. Conclusion: A Look Inside the Box Commodities and the Functional and Geographical Diffusion of Containerization A Complex Complementarity

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