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MariNova Consulting Ltd.
6525 Waegwoltic Ave.
Halifax
NS, Canada
B3H 2B5
Tel: 902.429.3121
Fax: 902.429.8342
www.marinova.com
MARINE
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The Changing Face of Containerization
James Frost, MA, MBA, CMC
October 7, 2015
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Agenda
• Introduction
• Evolution of containerization
• Canadian context
• The Future
• Conclusions
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Personal background
• Started career in 1980
• Containerization was 20 years
old but still evolving
• Have seen 35 years of
development
• Travelled globally at young age
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Background cont’d
• Experienced and saw early
stages of globalization in Asian
Tigers
• Has fascinated me as both a
historian, a participant and
consultant in shipping industry
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Containerisation
• “invented” by Malcolm MacLean, a US trucker, in 1956
– “Ideal X” between NY and Houston
– A converted tanker
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But…
• A similar concept used in Canada in 1953 on east and 1955 on west coast
– Ferry William Carson – NS-NL
– White Pass & Yukon – Vancouver-Skagway
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The concept
• It revolutionized liner shipping in all its physical, functional, organizational and human dimensions
• It also coincides with the computer age
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The concept…
• Improved productivity of ships –less time in port – 750 tonnes per hour vs. 30
• Reduced number of lifts
• Contents remain intact throughout voyage – lessens pilferage
• Needed specialized facilities and vessels
• Changed waterfronts and skylines
• Really took hold in 1970s
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The concept
• Inland transportation became important in port selection and success of early investments
• Also coincided with development of freeway systems in US and Europe
• An example of “complex innovation”
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Early development
• By 1970 – five trade routes containerized – US (and Canada) – UK/Continent
– US-Japan
– UK/Continent – Australia
– Australia/NZ – US
– Japan- Australia
• One (big one) is missing…
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1970s
• By late 1970s became a worldwide system of transportation
• By 1978 83% of Europe-East Asia trade was containerized; 99% of Europe-Japan
• Also began to be adopted in other less developed regions i.e. South America
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1970s
• Rise of mfg in Japan and East Asia; shift to Pacific trade – NY no longer biggest port by 1981
• Emergence of Kobe, H-K, Kaohsiung, Singapore by end of decade
• East-west routes predominated; north-south lagged except Australasia
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1980s
• Next stage took the box idea to its logical consequence through global services, intermodalism and logistics management
• Decade marked by rationalization, consolidation and withdrawal of traditional companies
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1980s
• Hong Kong and Singapore take over from Rotterdam as largest ports
• Top 20 companies increase market share
• Vessel size grows from 3,000 TEU G3s to Panamax, 4,000+ TEUs, and some post-Panamax (APL)
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Intermodalism
• East and west coasts of US had been served separately
• East coast & interior (Chicago) could be served faster via west coast & landbridge
• APL and Sea-Land pioneered landbridge in US
• At first charged a premium for service to US east coast
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Intermodalism cont’d
• CN had been doing this since Day 1 in Halifax, Montreal and Vancouver
• APL let railways use marine carriers for domestic use on return leg –lowered costs
• APL time chartered trains to meet ship schedules
• Seamless transfer between modes
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APL Linertrain
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1990s
• Advent of Globalisation
• Not entirely new concept
• Mercantilism in 17th and 18th centuries
• Industrialization in 19th century i.e. Britain supported by colonies –triangular trade
• Massive increase in industrial production in US after 1900 –railways
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1990s
• Shipping lines now had to deal with large transnational companies such as Wal-Mart, duPont, Heineken, Toyota
• Shippers preferred to deal with 2-3 shipping companies for all their needs
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1990s
• Costs and rates declining in the decade
• Overcapacity and more ships on order – nothing has changed!
– Low cost shipbuilding
– German tax advantages
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1990s
• Imbalances beginning to appear as mfg shifted to East Asia
• Enlargement of scale and concentration of power
• Low economic returns for shipping companies
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1990s
• Acquisitions – Maersk & Sea-Land + Safmarine; P&OCL + Nedlloyd; CP Ships + many more
• Emergence of alliances – e.g. Grand Alliance – initially 3 companies
• Retained their own identities
• Demise of US shipping lines and reduction in number of Japanese from 6 to 3
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1990s
• Increase in frequency of sailings –from weekly to bi-weekly or more
• Blanket coverage of globe; higher frequency and denser coverage
• Needed to do this to offer global companies greater choice of sailings, destinations, direct service, intermodal service
• Some remained outsiders – Maersk; Zim, Evergreen, COSCO (at first), MSC
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Global networks
Huge number of container ports
– In 2000 over 60 handled over 1 m TEUs
– 235 over 100,000 TEUs
• Where do they all fit?
• Mainline service or feeder?
• Development of hubs
• Post-Panamax vessels limit some vessels to pendulums
• Choose optimal geographic configuration of liner networks
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2000-2015
• BIG ships –19,224 TEU
• Ships spending up to 5 days in port
• Massive impact on supply chains
• For whose benefit?
• Asia-Suez services
• New hubs
• In NA – west coast congestion
• Revival of all water services
• Expansion of Panama Canal in 2016
• Impact on trade routes
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Vessel Size
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Evolution of ships
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RANK PORT COUNTRY TEUS
1 Shanghai China 33,617,000
2 Singapore Singapore 32,578,700
3 Shenzhen China 23,278,000
4 Hong Kong China 22,352,000
5 Busan South Korea 17,611,882
6 Ningbo China 17,326,800
7 Qingdao China 15,520,000
8 Guangzhou China 15,309,200
9 Dubai Ports United Arab Emirates 13,600,000
10 Tianjin China 12,996,510
11 Rotterdam Netherlands 11,664,195
12 Port Kelang Malasyia 10,350,410
13 Kaohsiung Taiwan 9,978,857
14 Dalian China 9,912,000
15 Hamburg Germany 9,257,358
16 Antwerp Belgium 8,578,269
17 Xiamen China 8,007,900
18 Los Angeles United States 7,868,572
19 Tanjung Pelepas Malasyia 7,416,518
20 Long Beach United States 6,730,573
21 Laem Chabang Thailand 6,041,476
22 Bremen/Bremerhaven Germany 5,830,711
23 Lianyungang China 5,488,000
24 New York / New Jersey United States 5,467,345
25 Tanjung Priok Indonesia 5,466,048
26 Yingkou China 5,301,000
27 Saigon Port Co. LTD Viet Nam 5,112,319
28 Tokyo Japan 4,885,271
29 Jeddah Saudi Arabia 4,561,364
30 Valencia Spain 4,327,838
TEUs - Twenty-Foot Equivalent Units
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Canada
• Montreal - Manchester Liners -
1968
• Halifax – Halterm - 1969
• Saint John – Brunterm - 1971
• Vancouver – Centerm &
Vanterm – 1971 & 1975
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Canadian container
volumes 1970-2014
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Canadian ports - 2014
• Total market 5.6M TEUs
• Vancouver 3M
• Montreal 1.4M
• Prince Rupert 600k
• Halifax 400k
• Saint John 100k
• St. John’s 100k
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The Future
• Expansions at:
– Vancouver
– Prince Rupert
– Montreal
– Saint John
– Extension completed at Halifax
– New terminals?
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The Future
• Gradual shift of mfg westward
– Growth of Vietnam, ISC
– Africa?
• Growing importance of intra-
Asia
– Now top 3 trade
• Near-shoring?
• Back to Mexico and Central
America / Caribbean
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The Future
• Shift from west to east coast
(mostly US)
– Asia Suez had larger share as of late 2014
– Fewer but bigger ships
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The Future
• Impact of Expanded Panama
Canal
– Ships increase from 5,000-13,000 TEUs
– a “non-event” or significant?
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Panama Expansion
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Impact on Montreal
• New expansion underway
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Saint John
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Big Ships
• Impact of larger vessels
– When do they arrive on west coast
– When do they arrive on east coast?
• Largest now 10,000 TEU
• EC Canada – 8,700 TEU
– Service rotations?
• Pendulums?
– Impact on ports esp in US
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Channel Depths - Rodrigue
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Big Ships - Pendulum
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CETA
• Not ratified
• Commodities
– Seafood
– Beef
– Pork
– Cheese
– Auto parts
• shipping aspects
– Feeder – Montreal-Halifax
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TPP
• Overall increase in trade with
12 countries
• Details in next few days?
– Dairy
– Auto parts
• Given changing trade patterns
will impact west and east coast
ports
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Summary
• The container has vastly reduced transportation costs – had been a trade barrier, like tariffs
• “Without the container, the global village would only be a concept, not reality, because manufacturing would still be a local process” – C.C. Tung, 1997
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Thank-you!
James Frost
902-429-3121
