WOR 1 Living with the oceans. A report on the state of the world’s oceans | 2010

Global shipping


Extra Info The container revolution

What ships carry – Oil, containers, and dry cargo

Ocean shipping can roughly be divided into two sub-markets – on the one hand liquid cargo such as oil and petroleum products, on the other dry cargo. Dry cargo is made up of bulk goods, the five most important being iron ore, coal, grain, phosphates and bauxite. Other dry cargo consists of bulk materials such as non-ferrous metal ores, feed and fertilizers, and particularly a variety of goods packaged in smaller transportation units. The latter are labelled as general cargo and shipped on liners, i.e. vessels with scheduled sailings, chiefly in containers. Liner shipping usually offers its services according to fixed conditions that are agreed on between competitors at so-called liner conferences.
The single most significant type of cargo worldwide is crude oil, which alone accounts for roughly a quarter of all goods transported by sea. The major importers are the European Union, the United States of America and Japan. All three are supplied by the Middle East, the most important oil-producing region. North America also obtains oil from West Africa and the Caribbean, while Europe imports from North and West Africa. The main shipping lanes therefore stretch westward from the Arabian Gulf around the Cape of Good Hope or through the Suez Canal, and from Africa northward and westward to Europe and North America. Others connect the Arabian Gulf to East Asia and the Caribbean to the Gulf Coast of the United States.

Extra Info The problem of empty runs – unbalanced cargo flows

Of course, crude oil is not the only commodity transported by sea. Smaller, specialized ships (product tankers) carry processed petroleum products from major peripheral refinery locations to the consumption areas of North America and Japan. This amounted to about 815 million tonnes worldwide in 2007. In terms of quantity, iron ore and coal are significant dry-bulk goods. Iron ore is transported over long distances in very large ships, mainly from Brazil to Western Europe and Japan, and from Australia to Japan. The most important coal routes are from the major export countries of Australia and South Africa to Western Europe and Japan and also from Colombia and the East Coast of the United States to Western Europe, as well as from Indonesia and the West Coast of the United States to Japan. Most of the coal transported is utilized as steam coal to generate electricity in power stations. A third is used as coking coal for smelting in the iron and steel industry. Dry bulk goods also include grain and oil-bearing seeds (wheat, barley, rye, oats, sorghum and soya beans). Here however, the quantities and direction of transport routes fluctuate much more than other vital commodities de- pending on harvest seasons and yields. The USA, Canada, Argentina, Australia and France are the major grain exporters. Africa and East Asia are major importers due to frequent local shortages. Although the main grain producers (the United States, Russia, China and India) retain most or even all of their production in their own country, what remains for global trade is still enough to include grain among the bulk commodities.
Increased international division of labour, in motor vehicle production for instance, has led to general cargo such as cars and parts accumulating in such large quantities that entire shiploads can be forwarded on specialized ships outside the scheduled liner services. Large car carriers and special tankers for chemicals or fruit juice concentrate also belong to this special shipping sector, operating on contracted routes. Today most other dry cargo is transported in container ships. These standardized containers have brought a flood of technical innovations (such as special cranes at transshipment points) and fundamental organizational innovations in their wake. Being standardized, they can be transported with any mode of transport and rapidly transferred to trucks or railway cars fitted with the appropriate equipment. From an economic point of view this has dramatically reduced transportation costs, mainly as a result of faster loading and unloading. Capital investment along the entire transport chain was necessary to ensure the containers were used efficiently, considerably increasing capital intensity. In contrast, labour intensity was sustainably reduced, as fewer dockworkers were needed for loading and unloading. Since 1985 global container shipping has increased by about 10 per cent annually to 1.3 billion tonnes (2008). During the same period its share of the total dry cargo transportation rose from 7.4 per cent to a quarter. A total of 137 million containers, measured in TEU, were transported in 2008. This quantity, however, decreased again in 2009 by 10 per cent. Typically the cost of transporting a TEU containing more than 20 tonnes of freight from Asia to Europe is roughly the same as a one-way Economy Class flight along the same route. This weight in everyday goods such as electrical appliances in most cases represents a transportation cost of less than 1 per cent of the selling price.

8.4 > The containerization of shipping has dramatically accelerated the unloading of cargo. © Cultura/plainpicture 8.4 > The containerization of shipping has dramatically accelerated the unloading of cargo.

The key shipping routes

If all commercial goods are taken into account it becomes clear that there is a relatively small number of principal transport routes, and these pass through only a few areas of the oceans. The busiest are the approaches to the ports of Europe and East Asia, particularly Japan but also Shanghai, Singapore and Hong Kong, and the United States. The East Coast of the United States in particular is a major sender and receiver of cargo. Narrow straits further concentrate maritime traffic. Bottlenecks include the Straits of Dover, Gibraltar, Malacca, Lombok and Hormuz, and the Cape of Good Hope at the southern tip of Africa. Traffic builds up in these areas, making ships vulnerable to attack by pirates.

Cargo imbalances are a typical feature of the traffic with Asia – depending on the trade balance. Much more cargo is being shipped from Asia than in the opposite direction. This imbalance is particularly notable on the Pacific route, at almost 10 million TEU (2007). From Asia to Europe it is almost 8 million TEU. The North Atlantic traffic between the highly-developed economies of North America and Europe, however, are much better balanced, registering a difference of barely 2 million TEU. The reason for this situation is that since the mid-1980s so many manufacturing processes have been relocated from the traditional industrial countries to the developing nations and emerging economies, particularly China and the countries of South East Asia. With the prevailing exchange rates, China in particular has become the cheap “workshop of the world”. This process has been promoted by the introduction of the container and the corresponding increase in shipping productivity. The transportation costs between where goods are manufactured and where these goods are consumed have been reduced considerably. Dry cargo such as automobile and machinery parts – until now transported by conventional means – has been increasingly containerized, contributing to the growth in container traffic. Until the global economic downturn the demand for new ships was great, but as the effects of the crisis were felt the tide turned and many companies cancelled their orders. All the same we can assume that even more ma- rine transport capacity will become available in the near future as new ships are delivered, overtaking demand. Freight rates are therefore unlikely to recover from their current all-time lows any time soon. Textende