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This paper presents recent and ongoing work seeking to measure the level of liner shipping connectivity. Access to liner shipping services is a determinant of competitiveness and of the geography of trade. The indicators are generated from data obtained through Containerization international Online.
This paper presents recent and ongoing work seeking to measure the level of liner shipping connectivity. Access to liner shipping services is a determinant of competitiveness and of the geography of trade. The indicators are generated from data obtained through Containerization international Online.
This paper presents recent and ongoing work seeking to measure the level of liner shipping connectivity. Access to liner shipping services is a determinant of competitiveness and of the geography of trade. The indicators are generated from data obtained through Containerization international Online.
CONTAINER SHIP DEPLOYMENT J an HOFFMANN, Trade Logistics Branch, UNCTAD, Palais des Nations, Geneva, Switzerland J an.Hoffmann@UNCTAD.org Presented to International Port Forum, Pyeongtek, Republic of Korea, December 2006
This paper presents recent and ongoing work seeking to measure the level of liner shipping connectivity on the basis of the number of container vessels deployed, their size, as well as liner shipping companies and their services made available in different countries and routes. It consists of five parts: I. The concept of liner shipping connectivity II. Liner shipping connectivity per country, J uly 2006 III. Connectivity for shipping routes, J uly 2006 IV. The position of Korea V. Trade, liner shipping connectivity, and maritime freight rates Key words: liner shipping, freight rates, connectivity, geography of trade, container ships Disclaimer: the opinions expressed in the conference paper are those of the author; they do not necessarily coincide with those of UNCTAD.
I. THE CONCEPT OF LINER SHIPPING CONNECTIVITY The geography of trade, i.e. the question of who trades what with whom, depends not only on the demand and supply of goods, but also on the ability to deliver the goods to the market. Relevant aspects in this regard include geographical factors such as distance, landlockedness, as well as transport costs. Another important, yet often neglected, determinant of trade competitiveness is transport connectivity, defined as access to regular and frequent transport services. Except for bulk commodities, most intercontinental trade is transported by liner shipping services. Therefore, access to such services is a determinant of competitiveness and of the geography of trade. This paper presents measures that could possibly be used as indicators of liner shipping services available in different countries. The indicators are generated from data obtained through Containerization International Online. They reflect the services, vessels and their TEU capacity deployed by international liner shipping companies. Recent research has examined various aspects of maritime connectivity. Kumar and Hoffmann (2002), Marquez Ramos et al (2006) and Wilmsmeier et al (2006) incorporate measures of connectivity into research on maritime transport costs. Angeloudis et al (2006), and Bichou (2004) look at connectivity in the context of maritime security. McCalla et al (2005) measures connectivity for Caribbean shipping networks and Notteboom, (2006b) for seaport systems. Notteboom (2006b) also looked into the time factor in liner shipping services. 1 In various issues of UNCTADs quarterly Transport Newsletter, liner shipping connectivity was discussed in the context of trade competitiveness and the geography of trade. As a follow-up, this contribution provides a general overview on how well different countries are connected to the global liner shipping network. It reports on work in process; future research should attempt to incorporate transshipment services, land-side connections, and qualitative aspects of liner shipping services such as frequencies and speed. Readers are encouraged to contact the author for comments and suggestions. II. LINER SHIPPING CONNECTIVITY BY COUNTRY, JULY 2006 In the UNCTAD Transport Newsletters #27 (1 st Quarter 2005) and #29 (3 rd Quarter 2005), we presented an index that provided an indicator of liner shipping connectivity for 162 countries for J uly 2004 and J uly 2005, respectively. In this paper, a J uly 2006 update of the different components of the index is provided. 1) Deployment of container ships The fleet deployment is the number of ships that national and international liner shipping companies assign to the liner services from and to the countrys ports. 1 A larger number of ships is an indicator of the opportunities a countrys shippers have to load their containerized exports, i.e. their connectivity to foreign markets. Table 1 shows the ten economies with the highest number of container ships deployed on liner services from and to their ports in 2006, together with the respective data for J uly 2005 and J uly 2004. Between J uly 2004 and J uly 2006, the number of container ships servicing ports in China has gone up by almost 18%, from 1228 to 1448 vessels. Table 1: Fleet assignment (number of ships) Rank 2006 Country or territory 2006 2005 2004 change 2006/2005 1 China 1,448 1,354 1,228 6.9% 2 Hong Kong, China 1,242 1,175 1,166 5.7% 3 United States 1,037 1,094 1,074 -5.2% 4 Singapore 947 930 916 1.8% 5 United Kingdom 842 825 861 2.1% 6 Germany 821 820 810 0.1% 7 Netherlands 797 797 785 0.0% 8 Belgium 777 793 774 -2.0% 9 Korea, Rep. 706 767 734 -8.0% 10 Malaysia 700 607 588 15.3% Source: www.ci-online.co.uk, July2006. 2) Deployment of container carrying capacity (TEU) A similar picture is obtained if we look at the deployment of container carrying capacity, measured by the number of TEU slots (Table 2). During the last two years, 100 countries experienced an increase in the TEU deployment to their ports, while 60 countries have recorded a decrease. Two countries experienced no change in TEU capacity deployed.
1 For the purposes of this article, deployment and assignment are used synonymously. Although a ship can only be deployed at one place at one point in time, if it is assigned to a given route covering several countries it will effectively be deployed to these same countries over a period of time. 2 Table 2: Fleet assignment (TEU) Rank 2006 Country or territory 2006 2005 2004 change 2006/2005 1 China 5,068,909 4,442,070 3,928,913 14.1% 2 Hong Kong, China 4,345,864 3,936,129 3,749,697 10.4% 3 United States 3,162,767 3,014,748 2,978,193 4.9% 4 Germany 2,689,753 2,341,410 2,249,857 14.9% 5 Singapore 2,672,541 2,477,400 2,471,635 7.9% 6 United Kingdom 2,599,120 2,204,620 2,169,336 17.9% 7 Netherlands 2,411,338 2,120,237 2,083,832 13.7% 8 Taiwan, prov of China 2,264,185 2,001,254 1,959,434 13.1% 9 Korea, Rep. 2,092,781 2,215,415 2,110,367 -5.5% 10 Malaysia 2,046,129 1,737,298 1,716,361 17.8% 3) Deployment of container ships per capita Everything else being equal, a larger country will usually have more ships and TEU assigned to its ports than a smaller country. However, if these ships or TEU have to be shared by a larger population, an individual shipper may not necessarily be better connected than his colleague in a smaller country (Table 3). 4) Deployment of container carrying capacity per capita The TEU capacity can also be calculated on a per capita basis (Table 4). Most countries with the highest TEU assignment per capita are also important transshipment or transit traffic centres, since their own population would not economically justify such a high connectivity.
Table 3: Fleet assignment (ships) per capita Rank 2006 Country or territory Ships per million capita 1 St. Kitts and Nevis 281 2 Palau 251 3 American Samoa 231 4 Aruba 231 5 Malta 219 6 Singapore 219 7 Hong Kong, China 176 8 Bahamas, The 152 9 Tonga 137 10 New Caledonia 135
Table 4: Fleet assignment (TEU) per capita Rank 2006 Country or territory TEU per thousand capita 1 Malta 635 2 Singapore 618 3 Hong Kong, China 617 4 Bahamas, The 355 5 Aruba 239 6 Panama 234 7 United Arab Emirates 187 8 Belgium 184 9 French Polynesia 159 10 Guam 149 5) Number of liner shipping companies This indicator is of particular interest in view of the recent mergers in the shipping industry. Globally, the market share of the largest liner shipping companies has been increasing over the last years, and there have been concerns about the resulting process of concentration of market power. According to latest data from Clarksons Container Intelligence Monthly (CIM), the process of concentration in liner shipping has been continuing apace during 2006. In J anuary 2003, the 10 largest container ship operators accounted for 44.4 per cent of global 3 container carrying capacity; at the beginning of September 2006, the percentage had risen to 54.8 per cent. The growth is partly due to two major acquisitions in 2005, namely Maersks takeover of P&O Nedlloyd and Hapag Lloyds takeover of CP Ships. But organic growth has also led to a continuous gradual increase in the market share of the largest carriers. Monitoring this trend is of particular interest to shippers and also to regulatory bodies who, for example, oversee the issue of anti-trust immunity. Table 5: Liner companies providing services to the countrys ports Rank 2006 Country or territory 2006 2005 2004 change 2006/2005 1 Netherlands 118 126 131 -6.3% 2 Belgium 113 119 123 -5.0% 3 United Kingdom 108 117 133 -7.7% 4 Germany 103 110 114 -6.4% 5 France 97 100 105 -3.0% 6 United States 91 101 77 -9.9% 7 Singapore 89 95 98 -6.3% 8 China 84 87 96 -3.4% 9 Spain 83 88 91 -5.7% 10 Italy 79 82 87 -3.7%
An individual shipper or port will be particularly concerned about the effect of global consolidation on competition in his port or on a specific trade route. According to our research, up to the beginning of 2005, it appeared that the number of carriers offering services at individual ports had continued to increase despite the global process of concentration. Mergers and acquisitions mean while there are fewer carriers today than ten years ago, same global carriers continued to expand into new markets. As a result the number of carriers providing services to a specific port had actually increased for the majority of countries. Since mid-2005, however, the average number of carriers per country has started to decline. In order to complement Table 5 above, Table 6 compares the averages per country for the months of J uly 2004, J uly 2005 and J uly 2006. Table 6: Fleet deployment and companies providing services per country, 2004-2006 2004 2005 Percentage change 2005/2004 2006 Percentage change 2006/2004 Percentage change 2006/2005 Average TEU capacity deployed per country 296025 309658 +4.6% 337940 +14.2% +9.1% Average vessel size, TEU 1212 1254 +3.4% 1399 +15.4% +11.6% Average # of companies per country 21.7 21.5 -0.7% 20.3 -6.2% -5.5%
While the deployed TEU capacity per country and the average vessel sizes continue to increase, the average number of companies that provide services to an average countrys ports has decreased from 21.5 (J uly 2005) to 20.3 (J uly 2006). Although the reduction of an average of around one company per country may not, at first sight, appear to be significant, for smaller markets it can make a considerable difference. Among the 161 countries in the database, in J uly 2004 there were 79 countries which were served by only 10 or even fewer companies; this number increased to 80 in J uly 2005 and to 85 in J uly 2006. 4 6) Liner services Usually, shipping companies provide more than one regular service. The recorded reduction in the number of services per country (Table 7) does not necessarily mean a lower connectivity. In fact, the quality and frequency of these services and their connection to other services may improve via transshipment ports. These elements have (so far) not been covered in our connectivity measures for (direct) services. Table 7: Liner services from the countrys ports Rank 2006 Country or territory 2006 2005 2004 change 2006/2005 1 China 943 957 863 -1.5% 2 Hong Kong, China 743 738 738 0.7% 3 Singapore 689 687 669 0.3% 4 United States 594 621 623 -4.3% 5 Korea, Rep. 531 567 569 -6.3% 6 Japan 496 540 539 -8.1% 7 United Kingdom 469 503 538 -6.8% 8 Germany 461 474 472 -2.7% 9 Netherlands 454 498 506 -8.8% 10 Malaysia 445 436 431 2.1% Note: Includes some double counting if services are being sold under different names. 7) Average vessel sizes Combining a data on vessels (Table 1) and TEU (Table 2), the average vessel size is calculated. Saudi Arabia, Egypt, and Oman are among the top 10 countries in this regard, which is due to their location on the main Asia-Europe route. Table 8: Average vessel sizes Rank 2006 Country or territory 2006 2005 2004 change 2006/2005 1 Saudi Arabia 3,616 3,097 2,882 16.7% 2 China 3,501 3,281 3,199 6.7% 3 Hong Kong, China 3,499 3,350 3,216 4.5% 4 Taiwan, prov of China 3,354 3,147 3,115 6.6% 5 Egypt, Arab Rep. 3,347 2,846 2,542 17.6% 6 Germany 3,276 2,855 2,778 14.7% 7 Canada 3,211 3,074 3,022 4.5% 8 Oman 3,199 3,595 3,215 -11.0% 9 Panama 3,111 2,855 2,895 9.0% 10 United Kingdom 3,087 2,672 2,520 15.5% 8) Maximum vessel sizes In J uly 2006, there were 11 countries that were served by ships of 9200 TEU and above. 5 Table 9: Maximum vessel sizes Rank 2006 Country or territory 2006 2005 2004 change 2006/2005 1 Belgium 9,449 8,468 8,076 11.6% 1 China 9,449 9,200 8,238 2.7% 1 Egypt, Arab Rep. 9,449 8,073 6,978 17.0% 1 Germany 9,449 8,750 8,076 8.0% 1 Hong Kong, China 9,449 9,200 8,238 2.7% 1 Netherlands 9,449 8,750 8,076 8.0% 1 Singapore 9,449 8,750 8,063 8.0% 1 United Kingdom 9,449 8,750 8,076 8.0% 9 France 9,200 9,200 6,978 0.0% 9 Korea, Rep. 9,200 8,189 6,978 12.3% 9 Spain 9,200 8,189 6,742 12.3% 9) Vessels per liner shipping company This indicator attempts to measure Economies of scale as regards the number of operated vessels per liner shipping company (Table 10). Table 10: Vessels operated per liner shipping company Rank 2006 Country or territory 2006 2005 2004 change 2006/2005 1 China 17.2 15.6 12.8 10.8% 2 Hong Kong, China 16.6 13.8 12.5 19.8% 3 Oman 12.4 14.3 10.4 -12.8% 4 Taiwan, prov of China 11.4 9.6 13.4 18.7% 5 United States 11.4 10.8 13.9 5.2% 6 Singapore 10.6 9.8 9.3 8.7% 7 Panama 9.7 9.5 9.0 2.3% 8 Japan 9.7 9.0 9.1 7.9% 9 Malaysia 9.6 8.1 7.7 18.5% 10 Korea, Rep. 9.5 9.5 9.2 0.8% The new LSCI 2006 If we combine the available information about fleet assignment, liner services, and vessel and fleet sizes, it is possible to generate an overall Liner Shipping Connectivity Index (LSCI) (Table 11). In order to allow a comparison over time, the maximum value of the LSCI is set to be equal to 1.0 in 2004. Note: The indexes for 2004, 2005 and 2006 presented above are a simplified version of the LSCI initially presented in UNCTADs Transport Newsletters for the years 2004 and 2005. For clarity purposes and long term consistency we recalculated the index to include only the five original components, i.e. number of ships, TEU, number of companies, number of services and the maximum vessel size. 2
2 The two per-capita indicators (i.e. ships/capita and TEU/per capita) that had been included in the 2004 and 2005 index are no longer included because the adjustment for population sizes was considered somewhat arbitrary; furthermore it was found that available data for population sizes of several countries and territories could not be updated annually. The two coefficients of original indicators (i.e. TEU/ship and ships/company) were excluded because of methodological concerns regarding the calculation of an index if components of the index are included more than once and in different forms. The new, simplified, index is easier to calculate and it allows for a clearer interpretation: It is the un-weighted average of five components, i.e. ships, TEU, companies, services and maximum vessel size. 6 Table 11: UNCTAD Liner Shipping Connectivity Index for 2004, 2005 and 2006 (Maximum index 2004 = 100)
Rank 2006 Country or territory 2006 2005 2004 Change 2006/05 1 China 113.1 108.3 100.0 4.8 2 Hong Kong, China 99.3 96.8 94.4 2.5 3 Singapore 86.1 83.9 81.9 2.2 4 United States 85.8 87.6 83.3 -1.8 5 United Kingdom 81.5 79.6 81.7 1.9 6 Netherlands 81.0 80.0 78.8 1.0 7 Germany 80.7 78.4 76.6 2.3 8 Belgium 76.1 74.2 73.2 2.0 9 Korea, Rep. 71.9 73.0 68.7 -1.1 10 Malaysia 69.2 65.0 62.8 4.2 11 France 67.8 70.0 67.3 -2.2 12 Taiwan, prov of China 65.6 63.7 59.6 1.9 13 Japan 64.5 66.7 69.1 -2.2 14 Spain 62.3 58.2 54.4 4.1 15 Italy 58.1 62.2 58.1 -4.1 16 Egypt, Arab Rep. 50.0 49.2 42.9 0.8 17 United Arab Emirates 46.7 39.2 38.1 7.5 18 India 42.9 36.9 34.1 6.0 19 Saudi Arabia 40.7 36.2 35.8 4.4 20 Sri Lanka 37.3 33.4 34.7 4.0 21 Canada 36.3 39.8 39.7 -3.5 22 Thailand 33.9 31.9 31.0 2.0 23 Brazil 31.6 31.5 25.8 0.1 24 Greece 31.3 29.1 30.2 2.2 25 Malta 30.3 25.7 27.5 4.6 26 Mexico 29.8 25.5 25.3 4.3 27 Sweden 28.2 26.6 14.8 1.6 28 Panama 27.6 29.1 32.1 -1.5 29 Turkey 27.1 27.1 25.6 0.0 30 Australia 27.0 28.0 26.6 -1.1 31 South Africa 26.2 25.8 23.1 0.4 32 Indonesia 25.8 28.8 25.9 -3.0 33 Argentina 25.6 25.0 20.1 0.6 34 Lebanon 25.6 12.5 10.6 13.0 35 Denmark 25.4 24.2 11.6 1.1 36 Portugal 23.5 16.8 17.5 6.7 37 Jamaica 23.0 22.0 21.3 1.0 38 Pakistan 21.8 21.5 20.2 0.3 39 New Zealand 20.7 20.6 20.9 0.1 40 Colombia 20.5 19.2 18.6 1.3 41 Israel 20.4 20.1 20.4 0.4 42 Oman 20.3 23.6 23.3 -3.4 43 Venezuela, RB 18.6 19.9 18.2 -1.3 44 Guatemala 18.1 13.9 12.3 4.3 45 Romania 17.6 15.4 12.0 2.2 46 Cyprus 17.4 18.5 14.4 -1.1 47 Iran, Islamic Rep. 17.4 14.2 13.7 3.1 48 Uruguay 16.8 16.6 16.4 0.2 49 Philippines 16.5 15.9 15.4 0.6 50 Peru 16.3 15.0 14.8 1.4 51 Bahamas, The 16.2 15.7 17.5 0.5 52 Chile 16.1 15.5 15.5 0.6 53 Dominican Republic 15.2 14.0 12.4 1.2 Rank 2006 Country or territory 2006 2005 2004 Change 2006/05 54 Vietnam 15.1 14.3 12.9 0.8 55 Costa Rica 15.1 11.1 12.6 4.0 56 Ukraine 14.9 10.8 11.2 4.1 57 Puerto Rico 14.7 15.2 14.8 -0.6 58 Ecuador 14.2 12.9 11.8 1.3 59 Ghana 13.8 12.6 12.5 1.2 60 Nigeria 13.0 12.8 12.8 0.2 61 Cote d'Ivoire 13.0 14.5 14.4 -1.5 62 Jordan 13.0 13.4 11.0 -0.4 63 Russian Federation 12.8 12.7 11.9 0.1 64 Mauritius 11.5 12.3 13.1 -0.7 65 Cameroon 11.4 10.6 10.5 0.8 66 Syrian Arab Republic 11.3 11.8 8.5 -0.6 67 Senegal 11.2 10.1 10.1 1.2 68 Trinidad and Tobago 11.2 10.6 13.2 0.6 69 Togo 11.1 10.6 10.2 0.5 70 Slovenia 11.0 13.9 13.9 -2.9 71 Benin 11.0 10.2 10.1 0.8 72 Croatia 10.5 12.2 8.6 -1.7 73 Guam 9.6 10.5 10.5 -1.0 74 Angola 9.5 10.5 9.7 -1.0 75 Yemen, Rep. 9.4 10.2 19.2 -0.8 76 Kenya 9.3 9.0 8.6 0.3 77 Congo, Rep. 9.1 9.1 8.3 0.0 78 New Caledonia 9.0 10.3 9.8 -1.3 79 French Polynesia 8.9 11.1 10.5 -2.2 80 Gabon 8.7 8.8 8.8 0.0 81 Tanzania 8.7 8.6 8.1 0.1 82 Guinea 8.7 6.9 6.1 1.8 83 Algeria 8.7 9.7 10.0 -1.0 84 Finland 8.6 10.2 9.4 -1.6 85 Morocco 8.5 8.7 9.4 -0.1 86 Namibia 8.5 6.6 6.3 1.9 87 Madagascar 8.3 6.8 6.9 1.5 88 Honduras 8.3 8.6 9.1 -0.3 89 Ireland 8.2 9.7 8.8 -1.5 90 El Salvador 8.1 7.3 6.3 0.8 91 Nicaragua 8.1 5.2 4.8 2.8 92 Netherlands Antilles 7.8 8.2 8.2 -0.4 93 Aruba 7.5 7.5 7.4 0.0 94 Poland 7.5 7.5 7.3 0.0 95 Djibouti 7.4 7.6 6.8 -0.2 96 Norway 7.3 8.3 9.2 -1.0 97 Fiji 7.2 8.3 8.3 -1.1 98 Tunisia 7.0 7.6 8.8 -0.6 99 Mozambique 6.7 6.7 6.6 0.0 100 Cuba 6.4 6.5 6.8 -0.1 101 Paraguay 6.3 0.5 0.5 5.8 102 Mauritania 6.2 6.0 5.4 0.3 103 Estonia 5.8 6.5 7.1 -0.8 104 Sudan 5.7 6.2 6.9 -0.5 105 Lithuania 5.7 5.9 5.2 -0.2 106 St. Kitts and Nevis 5.6 5.3 5.5 0.3 7 Rank 2006 Country or territory 2006 2005 2004 Change 2006/05 Rank Country or territory 2006 2005 2004 Change 2006/05 2006 107 Comoros 5.4 5.8 6.1 -0.5 137 Brunei 3.3 3.5 3.9 -0.2 108 Barbados 5.3 5.8 5.5 138 Marshall Islands 3.3 3.7 3.5 -0.4 -0.4 109 Bangladesh 5.3 5.1 5.2 139 Virgin Islands (U.S.) 3.2 3.0 1.8 0.2 0.2 110 Seychelles 5.3 4.9 4.9 140 Switzerland 3.2 3.4 3.5 0.3 -0.2 111 Sierra Leone 5.1 6.5 5.8 141 Kiribati 3.1 3.3 3.1 -1.4 -0.2 112 Latvia 5.1 5.8 6.4 142 Serbia 3.0 2.9 2.9 -0.7 0.0 113 Samoa 5.1 5.3 5.4 143 Georgia 2.9 3.8 3.5 -0.2 -0.9 114 Guinea-Bissau 5.0 5.2 2.1 144 Cambodia 2.9 3.3 3.9 -0.2 -0.3 115 American Samoa 4.9 5.3 5.2 145 Haiti 2.9 3.4 4.9 -0.4 -0.5 116 Gambia, The 4.8 6.1 4.9 146 Cape Verde 2.8 2.3 1.9 -1.3 0.5 117 Iceland 4.7 4.9 4.7 147 Congo, Dem. Rep. 2.7 3.0 3.0 -0.1 -0.4 118 Libya 4.7 5.2 5.3 148 Belize 2.6 2.6 2.2 -0.5 0.0 119 Papua New Guinea 4.7 6.4 7.0 149 Myanmar 2.5 2.5 3.1 -1.7 0.1 120 Guyana 4.6 4.4 4.5 150 Antigua and Barbuda 2.4 2.6 2.3 0.2 -0.1 121 Liberia 4.5 6.0 5.3 -1.4 151 Somalia 2.4 1.3 3.1 1.1 122 Bulgaria 4.5 5.6 6.2 -1.1 152 Dominica 2.3 2.5 2.3 -0.2 123 Tonga 4.4 4.8 3.8 -0.3 153 Greenland 2.3 2.3 2.3 0.0 124 Bahrain 4.4 4.3 5.4 0.1 154 Eritrea 2.2 1.6 3.4 0.7 125 Faeroe Islands 4.4 4.4 4.2 0.0 155 Micronesia, Fed. Sts. 1.9 2.9 2.8 -0.9 126 Vanuatu 4.4 4.5 3.9 -0.1 127 Kuwait 4.1 6.8 5.9 -2.6 156 Palau 1.9 1.0 1.0 0.8 128 Iraq 4.1 1.6 1.4 2.4 157 Northern Mariana Islands 1.8 2.2 2.2 -0.3 129 Solomon Islands 4.0 4.3 3.6 -0.3 130 Qatar 3.9 4.2 2.6 -0.3 158 Cayman Islands 1.8 2.2 1.9 -0.4 131 Maldives 3.9 4.1 4.2 -0.2 159 Sao Tome and Principe 1.6 1.3 0.9 0.3 132 Suriname 3.9 4.2 4.8 -0.3 133 Equatorial Guinea 3.8 3.9 4.0 -0.1 160 Bermuda 1.6 1.6 1.5 0.0 134 St. Lucia 3.4 3.7 3.7 -0.3 161 Czech Republic 0.4 0.4 0.4 0.0 135 St. Vincent and the Grenadines 3.4 3.6 3.6 -0.2 162 Albania 0.4 0.4 0.4 0.0 136 Grenada 3.4 2.5 2.3 0.8 III. LINER SHIPPING CONNECTIVITY BETWEEN PAIRS OF COUNTRIES, JULY 2006 If we look at the connectivity between the 162 countries and territories included in Table 11, there are 13041 3 pairs of countries, i.e. countries that can in principle be connected with each other by liner shipping services. Many pairs of countries, however, are not connected by direct services, but require indirect services through one or more transshipment ports. In order to measure liner shipping connectivity between pairs of countries, we are at present undertaking research to investigate possible indicators that would provide quantitative information on the direct and indirect liner shipping services between pairs of countries. Such an indicator will have to include information on the number of vessels deployed, their TEU capacity, size, and the number of companies that provide services between pairs of countries. It will also need to be combined with information on maritime distances and the number of transshipments that are necessary for a maritime trade transaction when no direct liner service is available. Table 12 provides data for the top 25 routes between pairs of countries in terms of the TEU capacity of those vessels that are deployed on direct liner shipping services between the two countries.
3 ((162 x 162) 162) / 2 8 Table 12: Assignment of vessels and their TEU capacity to routes between pairs of countries. Top 25 routes, ranked by TEU, June 2006 Route TEU Vessels Maximum vessel size Average vessel size Carriers China Hong Kong, China * 3839910 1028 9449 3735 68 Germany United Kingdom * 2250164 586 9449 3840 66 Germany Netherlands * 2130690 582 9449 3661 71 Netherlands - United Kingdom * 2090939 592 9449 3532 82 China United States ** 2027659 458 8238 4427 30 China Singapore * 1948345 514 9449 3791 50 China Taiwan, prov of China * 1936339 496 8073 3904 45 Hong Kong, China Taiwan, prov of China * 1914258 581 8073 3295 51 China Korea, Rep. * 1914018 574 9200 3335 61 Hong Kong, China Singapore * 1812848 517 9449 3506 50 China Germany ** 1662922 296 9449 5618 27 China United Kingdom ** 1571199 266 9449 5907 24 Belgium Germany * 1563971 538 9449 2907 76 China Malaysia * 1539303 385 8750 3998 37 Hong Kong, China Korea, Rep. * 1535001 481 9200 3191 53 Belgium United Kingdom * 1534819 510 9449 3009 72 China Netherlands ** 1501368 259 9449 5797 26 Hong Kong, China United States ** 1484955 326 8238 4555 28 China Japan * 1467611 481 8204 3051 51 Germany Hong Kong, China ** 1409978 244 9449 5779 26 Hong Kong, China United Kingdom ** 1326064 219 9449 6055 24 Hong Kong, China Malaysia * 1314977 349 8750 3768 36 Hong Kong, China Netherlands ** 1300770 220 9449 5913 26 Belgium Netherlands * 1223148 451 9449 2712 77 Hong Kong, China Japan * 1194285 391 7929 3054 41 Intra-regional routes are marked *; inter-regional routes are marked **. The route with the highest number of assigned vessels and TEU capacity is ChinaHong Kong (China) 1,028 vessels, with 3839910 TEU, deployed by 68 carriers. This reflects the fact that most ships that call at a port in one of these economies also call in a port in the other, neighbouring, economy. China is by far the largest exporter of containerized cargo, thus explaining the high supply of liner shipping services to its ports. None of the Top 25 pairs of countries include an African, Latin American or South Asian country. Seventeen out of the Top 25 routes in terms of TEU capacity are intra-regional routes, linking Asian countries (11 routes) or European countries (6 routes). Of the remaining 8 inter-regional routes, the most important ones terms of TEU are China-USA, followed by Asia-Europe and Hong KongUSA. No route between a European and a North American country is among the top inter-regional routes. The average vessel size is highest on the 8 inter-regional routes. In contrast, the 17 intra- regional routes in the table have smaller average vessel sizes because they include coastal and feeder services. The highest average vessel size in the table is on the route Hong KongUnited Kingdom (6055 TEU), and the smallest average vessel size is on the route BelgiumNetherlands (2712 TEU). Between the latter two countries there is a particularly high number of feeder, coastal and even river transport services. Seventeen out of the Top 25 routes include vessels that are larger than 9000 TEU. The present maximum vessel size of 9449 TEU is deployed on 15 of the Top 25 routes. Among the 8 inter-regional routes in the table, the two AsiaNorth America routes are those with the smallest average and maximum vessel sizes. This may partly be due to the vessel size restriction of the Panama Canal. Illustration shows containers on a panamax vessel, i.e. a ship that has the maximum dimensions allowed to pass through the Panama 9 Canal. The largest existing container ships have about twice the TEU carrying capacity of a panamax vessel. As regards the number of carriers that deploy container vessels for liner shipping services, these are highest on intra-European routes, reaching 82 companies on the route Netherlands-United Kingdom. The smallest number of carriers reported for the Top 25 routes is 24 for the routes Hong KongUnited Kingdom and ChinaUnited Kingdom. IV. THE POSITION OF KOREA The Republic of Korea is among the best connected countries of the world. It ranks 9 th on the J uly 2006 LSCI. Regarding the individual components of the index, Korea ranks 9 th
for ships and for TEU, 12 th for the number companies, 5 th for the number of services, and again 9 th for the maximum vessel size. Unlike most other countries among the top 10, Korea has however experienced a slight decline in its connectivity during the last two years. The number of ships that are assigned to services from and to Korean ports has decreased by 8% between 2004 and 2006. More specifically, the TEU decreased by 0.8%, the number of companies by 7.5% and the number of services by 6.7%. On the other hand, the maximum vessel size has increased by an impressive 31% between J uly 2004 and J uly 2006. The average vessel size, too, has increased by 2.6% during the last two years. In other words, by using larger vessels, fewer companies are deploying fewer ships on fewer services to provide approximately the same overall TEU deployment to Korean ports. Two out of the top 25 global routes in terms of TEU fleet deployment between pairs of countries include Korea (China Korea, and Hong Kong Korea). IV. TRADE, LINER SHIPPING CONNECTIVITY, AND MARITIME FREIGHT RATES Most international trade in manufactured goods is transported by containerized liner shipping services. The supply of such liner shipping services, the traded volumes, and liner shipping freight rates are closely related to each other. Figure 2 illustrates the longer term effects that trade volumes, the supply of shipping services and maritime freight rates can be expected to have on each other. An arrow with a negative sign indicates a negative causal relationship; for example, it can be expected that an increase in maritime freight rates will lead to a decrease in containerized maritime trade volumes. An arrow with a positive sign, on the other hand, highlights a positive causal relationship; for example an increase in containerized maritime trade volumes can be expected to lead to an increase in the number of services provided by liner companies. Several of these relationships have been looked at in previous issues of the Transport Newsletter. For instance, it has been shown that distance, trade balances, economies of scale, the type and value of commodity, various port characteristics as well as the supply of direct liner shipping services are among the main determinants of maritime freight rates. 4 The supply of direct liner shipping services, in turn, appears to, a large extent, be determined by traded volumes, port characteristics as well as of course the geographic
4 All past Transport Newsletters can be downloaded via www.unctad.org/Templates/Page.asp?intItemID=2651 10 position of a countrys ports. Transport efficiency in general has been identified as an important determinant of the trade competitiveness of nations. Figure 1: Expected causal relationships between trade volumes, shipping services and freight rates Containerized Maritime Trade Maritime Freight Rates Liner Shipping Services - - + + + -
Ongoing research by UNCTAD on liner shipping services in the wider Caribbean region helped shed some light on the determinants of freight rates, trade volumes and liner shipping supply. Combining data on the supply of liner shipping services, freight rates, maritime distances, national income and trade in manufactured goods, and undertaking linear regressions, the following preliminary conclusions can be drawn. 5
Trade in manufactured goods Most Central American countries and the Caribbean countries trade very little with each other. By way of example, less than 0.001 per cent of Guatemalas exports in manufactured goods are destined for Surinam, 0.24 per cent for J amaica, 1 per cent for the Dominican Republic and around 8 per cent for Costa Rica. What are the main explanations for such differences? According to the standard gravity model, the participation of country B in global imports is the basic determinant of the share of country As exports that are destined for country B; i.e. if for example country Bs imports are 5 per cent of all the worlds imports, it can, ceteris paribus, be expected that 5 per cent of country As exports will be destined for country B. Also in line with the gravity model, neighbouring countries can be expected to trade more with each other than those that are not. The estimated parameters in our regressions confirms such expectations, i.e. A can be expected to export significantly more to country B if A and B share a common border. As regards the impact of distance, the gravity model would suggest that countries that are further away from each other will trade less. Although in principle such a positive correlation also exists in the wider Caribbean, it is interesting to note that in our regressions the parameter for distance is not statistically significant when other variables that capture the supply of shipping services and transport costs are also incorporated. For example, a larger number of liner shipping companies that provide direct services between a pair of countries appears to significantly enhance trade volumes. In fact, the simple existence of direct liner shipping services, versus the alternative situation where
5 Sources are www.ci-online.co.uk for liner shipping services, www.world-register.org for distances, commercial data from a liner shipping company, as well as UNCTAD for economic data on trade and income. The number of observations in the data base is 189. The R 2 in the various regressions ranges between .35 and .61. 11 maritime trade has to be transshipped in a foreign port, is estimated to enhance the share of country As exports to country B by around 0.7 percentage points. These results support the expected positive (+) sign in Figure 1 as regards the impact of liner shipping supply on trade volumes. As regards the impact of transport costs on trade volumes, the empirical results suggest that an increase of the freight rate per TEU (twenty foot equivalent unit) by 1000 USD will reduce the share of country As exports to country B by almost half a percentage point. These results support the expected negative (-) sign in Figure 1 for the impact of transport costs on trade volumes. The supply of liner shipping services Approximately half of the 189 routes covered in our data base are served by regular direct liner shipping services, whereas the other half includes transshipments in ports of third countries. By way of example, between Costa Rica and Colombia, there are 14 companies, that deploy a total of 50 container ships, with a combined container carrying capacity of around 61,000 TEU; the largest vessel being of 2,500 TEU. Between Costa Rica and J amaica, there are 5 companies/ 16 ships/ 17,400 TEU/ 2105 TEU maximum size. Between Costa Rica and Guyana, there are no direct services. The farther two countries are geographically apart, the more likely it is that they are not connected by direct liner shipping services. Also, trade volumes are a statistically significant determinant of the number of companies, the number of ships, as well as the TEU capacity deployed on direct liner shipping services between a pair of countries. These results support the expected positive (+) sign in Figure 1; supply certainly follows demand. It is further interesting to note that a higher GDP per capita in the exporting country also appears to attract additional liner shipping services. This coincides with other research whereby a higher GDP per capita was found to be a statistically significant explanatory variable for port efficiency and liner shipping connectivity. Liner shipping freight rates Freight rates on 189 routes of our sample range between $600 and $3,300 per twenty foot container. In our regressions, a longer distance between a pair of countries, for obvious reasons (such as additional fuel expenditure), leads to higher freight rates. However, the actual impact of distance on freight rates is not very strong. For example, doubling the distance between a pair of countries, according to our empirical results, can be expected to lead to an increase in the freight rate of only around $50 to $76. If the freight rate is for a route where the liner shipping company itself does not have a direct service, but instead includes a transshipment, the freight rate can be expected to be $600 to $700 higher. Interestingly, the freight rate will be significantly lower if other, competing, companies do provide a direct service; i.e. although the shipping company itself does not provide a direct service, the freight rate it charges to its clients is influenced by the given market situation. If the market provides a direct service, the freight rate can be expected to be around $425 lower as compared to a situation where no single company provides a direct service between a pair of countries. Similarly, a higher number of companies in the market, more ships, and a larger total container carrying capacity on direct services all have significant negative impact on the freight rate; i.e. more competition and economies of scale appear to confirm the negative (-) sign in Figure 1 above as regards the impact of liner shipping supply on freight rates. 12 Another variable with an apparent impact on freight rates include the GDP per capita in the exporting country, where higher income helps reduce freight rates. Also trade balances have the expected impact on freight rates as these go up whenever the shipping company needs to import empty containers or ships because country As exports to country B are higher than its imports from country B. The estimated impact of the total exports of country A to country B has a negative sign, most likely because of the impact of economies of scale. However, once variables for liner shipping connectivity, such as the number of liner shipping companies in the market, are incorporated in the regression, the total volume of exports is no longer statistically significant. The linear regressions do not prove actual causalities, which in any case go both ways for most variables. For example, freight rates have an impact on trade, just as the volume of trade has an impact on freight rates. The empirical research on liner shipping and trade in the wider Caribbean supports the results of previous research on the various relationships between trade volumes, the supply of shipping services and freight costs. Although the exact values of the estimated parameters reported above are only indicative for one region at a given point in time, they, nevertheless, provide useful insight into quantifying the effects different variables can have on trade volumes, supply of shipping services and freight rates. The above described empirical results strongly suggest that international trade models should always attempt to include hard data on transport costs and shipping supply capacities, rather than rely on distance as a proxy for transaction costs. Freight rates, competition and economies of scale in liner shipping are important issues to take into account when looking at the trade competitiveness of nations. 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Importance of connectivity measures, presented to International Trade and Logistics conference, Le Havre McCalla, Robert; Brian Slack and Claude Comtois (2005): The Caribbean basin: adjusting to global trends in containerization, in: Maritime Policy and Management, 32, p. 245261 Notteboom, Theo (2006b): The Time Factor in Liner Shipping Services, in: Maritime Economics and Logistics, 8, p. 1939 Notteboom, Theo (2006b): Traffic inequality in seaport systems revisited, in: Journal of transport geography, 14:2 (2006), p. 95-108 UNCTAD, Transport Newsletter, various issues: http://extranet.unctad.org/transportnews Wilmsmeier, Gordon; J an Hoffmann, and Ricardo Sanchez (2006): The impact of port characteristics on international maritime transport costs, in Port Economics, Research in Transportation Economics, Volume 16, edited by Kevin Cullinane and Wayne Talley, Elsevier 13