GLOBAL LOGISTICS AND LINER COMPANY

Global Logistics and Liner Company

Global Logistics and Liner Company

TASK 01

The Container Shipping Market

The growth in global trade and freight distribution has led to a demand for new containers. Each year, about 2 to 2.5 million TEUs worth of containers are manufactured, the great majority of them in China, taking advantage of its containerized export surplus. Production peaked to 3.9 million TEU in 2007 with the global inventory of containers estimated to be at 28.2 million TEUs. This approximately implies 3 TEUs of containers for every TEU of maritime containership capacity. The standard 20 foot container costs about $2,000 to manufacture while a 40 footer costs about $3,000. Therefore, a twenty foot container costs $1.71 per cubic feet to manufacture while a forty foot container costs $0.80, which underlines the preference for larger volumes as a more effective usage of assets. Even so, the twenty foot container remains a prime transport unit, particularly for the shipping of commodities such as grain where it represents an optimal size taking account of weight per unit of volume capacity of containers, around 34 metric tons.

The great majority of containers are either owned by maritime shipping companies or container leasing companies. With the beginning of containerization in the 1970, a container leasing industry emerged to offer a flexibility in the management of containerized assets, enabling shipping companies to cope with temporal and geographical fluctuations in the demand. Following a period of growth correlated with the ebbs and flows of global trade, the leasing industry went through a period of consolidation in the 1990s, on par with the container shipping industry. An important trend in recent years has been the growing share of container ownership attributed to maritime shipping companies, which reached 59.8% in 2008. It can be explained by the following:

A growing level of intermodal integration where maritime shippers are interacting with port terminal operators (some directly operate port terminals such as APM) as well as with inland transport systems. In such a context, controlling container assets enables a more efficient use of intermodalism.

The rising cost of new containers, the repositioning of empties and systematically low freight rates along several trade routes, have made the container leasing business less profitable. Ocean carriers also have a greater ability to reposition empty containers since the control a fleet and can reposition their containers when capacity is available. It is also not uncommon that a whole containership will be chartered to reposition empties.

Empty Container Flows

A container is a transport as well as a production unit and can move as an export, import or repositioning flow. Once a container has been unloaded, another transport leg must be found as moving an empty container is almost as costly as moving a full container. Shipping companies need containers to maintain their operations and level of service along the port network they call. Containers arriving in a market as imports must eventually leave, either empty or full. The longer the delay, the higher the ...