The Changing Face of Containerization MariNova Consulting Ltd. 6525 Waegwoltic Ave. Halifax NS, Canada B3H 2B5 Tel: 902.429.3121 Fax: 902.429.8342 defrost@marinova.com James Frost, MA, MBA, CMC October 7, 2015 Agenda Introduction Evolution of containerization Canadian context The Future Conclusions 1
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 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 2
Containerisation invented by Malcolm MacLean, a US trucker, in 1956 Ideal X between NY and Houston A converted tanker 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 3
The concept It revolutionized liner shipping in all its physical, functional, organizational and human dimensions It also coincides with the computer age 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 4
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 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 5
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 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 6
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 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) 7
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 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 8
APL Linertrain 1990s Advent of Globalisation Not entirely new concept Mercantilism in 17 th and 18 th centuries Industrialization in 19 th century i.e. Britain supported by colonies triangular trade Massive increase in industrial production in US after 1900 railways 9
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 1990s Costs and rates declining in the decade Overcapacity and more ships on order nothing has changed! Low cost shipbuilding German tax advantages 10
1990s Imbalances beginning to appear as mfg shifted to East Asia Enlargement of scale and concentration of power Low economic returns for shipping companies 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 11
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 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 12
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 Vessel Size 13
Evolution of ships TEUs - Twenty-Foot Equivalent Units 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 14
Canada Montreal - Manchester Liners - 1968 Halifax Halterm - 1969 Saint John Brunterm - 1971 Vancouver Centerm & Vanterm 1971 & 1975 Canadian container volumes 1970-2014 15
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 The Future Expansions at: Vancouver Prince Rupert Montreal Saint John Extension completed at Halifax New terminals? 16
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 The Future Shift from west to east coast (mostly US) Asia Suez had larger share as of late 2014 Fewer but bigger ships 17
The Future Impact of Expanded Panama Canal Ships increase from 5,000-13,000 TEUs a non-event or significant? Panama Expansion 18
Impact on Montreal New expansion underway Saint John 19
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 Channel Depths - Rodrigue 20
Big Ships - Pendulum CETA Not ratified Commodities Seafood Beef Pork Cheese Auto parts shipping aspects Feeder Montreal-Halifax 21
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 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 22
Thank-you! James Frost defrost@marinova.com 902-429-3121 23