2006 Seoul JanHoffmann Linershippingconnectivity

8/11/2019 2006 Seoul JanHoffmann Linershippingconnectivity

1/13

LINER SHIPPING CONNECTIVITY:

THE DETERMINANTS AND IMPACT OF GLOBAL

CONTAINER SHIP DEPLOYMENTJan HOFFMANN, Trade Logistics Branch, UNCTAD, Palais des Nations, Geneva, [email protected]

Presented to International Port Forum, Pyeongtek, Republic of Korea, December 2006

This paper presents recent and ongoing work seeking to measure the level of linershipping 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 differentcountries and routes. It consists of five parts:I. The concept of liner shipping connectivity

II. Liner shipping connectivity per country, July 2006III. Connectivity for shipping routes, July 2006IV. The position of KoreaV. 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 donot 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 notonly on the demand and supply of goods, but also on the ability to deliver the goods to themarket. 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 toregular and frequent transport services.

Except for bulk commodities, most intercontinental trade is transported by liner shippingservices. 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 asindicators of liner shipping services available in different countries. The indicators aregenerated from data obtained through Containerization International Online. They reflectthe services, vessels and their TEU capacity deployed by international liner shippingcompanies.

Recent research has examined various aspects of maritime connectivity. Kumar andHoffmann (2002), Marquez Ramos et al (2006) and Wilmsmeier et al (2006) incorporatemeasures 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
mailto:[email protected]:[email protected]


2/13

In various issues of UNCTADs quarterly Transport Newsletter, liner shippingconnectivity was discussed in the context of trade competitiveness and the geography oftrade. As a follow-up, this contribution provides a general overview on how well differentcountries 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 andspeed. 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 (1st Quarter 2005) and # 29 (3rd Quarter2005), we presented an index that provided an indicator of liner shipping connectivity for162 countries for July 2004 and July 2005, respectively. In this paper, a July 2006 updateof 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 linershipping companies assign to the liner services from and to the countrys ports.1A largernumber of ships is an indicator of the opportunities a countrys shippers have to load theircontainerized exports, i.e. their connectivity to foreign markets. Table 1 shows the teneconomies with the highest number of container ships deployed on liner services fromand to their ports in 2006, together with the respective data for July 2005 and July 2004.Between July 2004 and July 2006, the number of container ships servicing ports in Chinahas gone up by almost 18%, from 1228 to 1448 vessels.

Table 1: Fleet assignment (number of ships)

Rank2006

Country or territo ry 2006 2005 2004 change2006/2005

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 countriesexperienced an increase in the TEU deployment to their ports, while 60 countries haverecorded 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 shipcan only be deployed at one place at one point in time, if it is assigned to a given route covering severalcountries it will effectively be deployed to these same countries over a period of time.

2
http://www.ci-online.co.uk/http://www.ci-online.co.uk/


3/13

Table 2: Fleet assignment (TEU)

Rank2006


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 beshared by a larger population, an individual shipper may not necessarily be betterconnected 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 countrieswith the highest TEU assignment per capita are also important transshipment or transittraffic centres, since their own population would not economically justify such a highconnectivity.

Table 3: Fleet assignment (ships) per capita

Rank2006

Country or territory Shipsper 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

Rank2006

Country or territor y TEUper 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 shippingindustry. Globally, the market share of the largest liner shipping companies has beenincreasing over the last years, and there have been concerns about the resulting process ofconcentration 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. InJanuary 2003, the 10 largest container ship operators accounted for 44.4 per cent of global

3


4/13

container carrying capacity; at the beginning of September 2006, the percentage had risento 54.8 per cent. The growth is partly due to two major acquisitions in 2005, namelyMaersks takeover of P&O Nedlloyd and Hapag Lloyds takeover of CP Ships. Butorganic growth has also led to a continuous gradual increase in the market share of thelargest 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 count rys port s

Rank2006

Country or territory 2006 2005 2004 change2006/2005

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 globalconsolidation on competition in his port or on a specific trade route. According to ourresearch, up to the beginning of 2005, it appeared that the number of carriers offeringservices at individual ports had continued to increase despite the global process ofconcentration. Mergers and acquisitions mean while there are fewer carriers today thanten 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 themajority of countries. Since mid-2005, however, the average number of carriers percountry has started to decline. In order to complement Table 5 above, Table 6 comparesthe averages per country for the months of July 2004, July 2005 and July 2006.

Table 6: Fleet deployment and companies providing services per country , 2004-2006

2004 2005 Percentagechange

2005/2004

2006 Percentage change2006/2004

Percentagechange

2006/2005

Average TEU c apaci ty d eplo yed p ercountry

296025 309658 +4.6% 337940 +14.2% +9.1%

Average vessel size, TEU 1212 1254 +3.4% 1399 +15.4% +11.6%

Average # of com pani es per cou ntr y 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 toincrease, the average number of companies that provide services to an average countrys

ports has decreased from 21.5 (July 2005) to 20.3 (July 2006). Although the reduction ofan average of around one company per country may not, at first sight, appear to besignificant, for smaller markets it can make a considerable difference. Among the 161countries in the database, in July 2004 there were 79 countries which were served by only10 or even fewer companies; this number increased to 80 in July 2005 and to 85 in July2006.

4


5/13

6) Liner services

Usually, shipping companies provide more than one regular service. The recordedreduction in the number of services per country (Table 7) does not necessarily mean alower connectivity. In fact, the quality and frequency of these services and theirconnection 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 countr ys ports

Rank2006

Country or territory 2006 2005 2004 change2006/2005

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 iscalculated. 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

Rank2006


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 July 2006, there were 11 countries that were served by ships of 9200 TEU and above.

5


6/13

Table 9: Maximum vessel sizes

Rank2006

Country or territor y 2006 2005 2004 change2006/2005

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 operatedvessels per liner shipping company (Table 10).

Table 10: Vessels operated per liner shipp ing company

Rank2006


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 vesseland 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 theLSCI is set to be equal to 1.0 in 2004.

Note: The indexes for 2004, 2005 and 2006 presented above are a simplified version ofthe LSCI initially presented in UNCTADs Transport Newsletters for the years 2004 and2005. For clarity purposes and long term consistency we recalculated the index to includeonly the five original components, i.e. number of ships, TEU, number of companies,number of services and the maximum vessel size.2

2The two per-capita indicators (i.e. ships/capita and TEU/per capita) that had been included in the 2004 and2005 index are no longer included because the adjustment for population sizes was considered somewhatarbitrary; furthermore it was found that available data for population sizes of several countries andterritories could not be updated annually. The two coefficients of original indicators (i.e. TEU/ship andships/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 iseasier to calculate and it allows for a clearer interpretation: It is the un-weighted average of fivecomponents, i.e. ships, TEU, companies, services and maximum vessel size.

6


7/13

Table 11: UNCTAD Liner Shipp ing Connectivi ty Index fo r 2004, 2005 and 2006

(Maximum index 2004 = 100)

Rank

2006

Country or territ ory 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 ofChina

65.6 63.7 59.6 1.9

13 Japan 64.5 66.7 69.1 -2.214 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 ArabEmirates

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 4.626 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 0.339 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 0.552 Chile 16.1 15.5 15.5 0.6

53 Dominican Republic 15.2 14.0 12.4 1.2

Rank

2006


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 andTobago

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 -1.379 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 2.892 Netherlands An tilles 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 -0.5105 Lithuania 5.7 5.9 5.2 -0.2

106 St. Kitts and Nevis 5.6 5.3 5.5 0.3

7


8/13

Rank

2006


2006/05

Rank Country or territ ory 2006 2005 2004 Change

2006/052006

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 1.80.2 0.2

110 Seychelles 5.3 4.9 4.9 140 Switzerland 3.2 3.4 3.50.3 -0.2

111 Sierra Leone 5.1 6.5 5.8 141 Kiribati 3.1 3.3 3.1-1.4 -0.2112 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 Amer ican 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 Ant igua andBarbuda

2.4 2.6 2.30.2 -0.1

121 Liberia 4.5 6.0 5.3 -1.4151 Somalia 2.4 1.3 3.1 1.1122 Bulgaria 4.5 5.6 6.2 -1.1152 Dominica 2.3 2.5 2.3 -0.2123 Tonga 4.4 4.8 3.8 -0.3153 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 0.7125 Faeroe Islands 4.4 4.4 4.2 0.0155 Micronesia, Fed.

Sts.1.9 2.9 2.8 -0.9126 Vanuatu 4.4 4.5 3.9 -0.1

127 Kuwait 4.1 6.8 5.9 -2.6156 Palau 1.9 1.0 1.0 0.8128 Iraq 4.1 1.6 1.4 2.4157 Northern Mariana

Islands1.8 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 -0.3158 Cayman Islands 1.8 2.2 1.9 -0.4

131 Maldives 3.9 4.1 4.2 -0.2159 Sao Tome and

Principe1.6 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 0.0134 St. Lucia 3.4 3.7 3.7 -0.3 161 Czech Republic 0.4 0.4 0.4 0.0135 St. Vincent and the

Grenadines3.4 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 Table11, there are 130413pairs of countries, i.e. countries that can in principle be connectedwith each other by liner shipping services. Many pairs of countries, however, are notconnected by direct services, but require indirect services through one or moretransshipment ports.

In order to measure liner shipping connectivity between pairs of countries, we are atpresent undertaking research to investigate possible indicators that would providequantitative information on the direct and indirect liner shipping services between pairs ofcountries. Such an indicator will have to include information on the number of vesselsdeployed, 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 maritimedistances and the number of transshipments that are necessary for a maritime tradetransaction when no direct liner service is available. Table 12 provides data for the top 25routes between pairs of countries in terms of the TEU capacity of those vessels that aredeployed on direct liner shipping services between the two countries.

3((162 x 162) 162) / 2

8


9/13

Table 12: Assignment of vessels and their TEU capacity to rou tes between pairs of count ries.Top 25 routes, ranked by TEU, June 2006

Route TEU Vessels Maximumvessel size

Average vesselsize

Carriers

China Hong Kong, China * 3839910 1028 9449 3735 68Germany United Kingdom * 2250164 586 9449 3840 66

Germany Netherlands * 2130690 582 9449 3661 71Netherlands - United Kingdom * 2090939 592 9449 3532 82

China United States ** 2027659 458 8238 4427 30

China Singapore * 1948345 514 9449 3791 50China Taiwan, prov of China * 1936339 496 8073 3904 45

Hong Kong, China Taiwan, prov of China * 1914258 581 8073 3295 51China Korea, Rep. * 1914018 574 9200 3335 61

Hong Kong, China Singapore * 1812848 517 9449 3506 50China Germany ** 1662922 296 9449 5618 27

China United Kingdom ** 1571199 266 9449 5907 24Belgium 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 72China Netherlands ** 1501368 259 9449 5797 26

Hong Kong, China United States ** 1484955 326 8238 4555 28China Japan * 1467611 481 8204 3051 51

Germany Hong Kong, China ** 1409978 244 9449 5779 26

Hong Kong, China United Kingdom ** 1326064 219 9449 6055 24Hong 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 reflectsthe fact that most ships that call at a port in one of these economies also call in a port inthe other, neighbouring, economy. China is by far the largest exporter of containerizedcargo, thus explaining the high supply of liner shipping services to its ports. None of theTop 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 8inter-regional routes, the most important ones terms of TEU are China-USA, followed byAsia-Europe and Hong KongUSA. No route between a European and a North Americancountry 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 coastaland feeder services. The highest average vessel size in the table is on the route HongKongUnited Kingdom (6055 TEU), and the smallest average vessel size is on the routeBelgiumNetherlands (2712 TEU). Between the latter two countries there is a particularlyhigh number of feeder, coastal and even river transport services.

Seventeen out of the Top 25 routes include vessels that are larger than 9000 TEU. Thepresent 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 arethose 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 panamaxvessel, i.e. a ship that has the maximum dimensions allowed to pass through the Panama

9


10/13

Canal. The largest existing container ships have about twice the TEU carrying capacity ofa 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 9thonthe July 2006 LSCI. Regarding the individual components of the index, Korea ranks 9 thfor ships and for TEU, 12thfor the number companies, 5thfor the number of services, andagain 9thfor the maximum vessel size.

Unlike most other countries among the top 10, Korea has however experienced a slightdecline in its connectivity during the last two years. The number of ships that are assignedto services from and to Korean ports has decreased by 8% between 2004 and 2006. Morespecifically, the TEU decreased by 0.8%, the number of companies by 7.5% and thenumber of services by 6.7%. On the other hand, the maximum vessel size has increased

by an impressive 31% between July 2004 and July 2006. The average vessel size, too, hasincreased by 2.6% during the last two years. In other words, by using larger vessels, fewercompanies are deploying fewer ships on fewer services to provide approximately thesame overall TEU deployment to Korean ports.

Two out of the top 25 global routes in terms of TEU fleet deployment between pairs ofcountries 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 linershipping services. The supply of such liner shipping services, the traded volumes, andliner shipping freight rates are closely related to each other. Figure 2 illustrates the longerterm effects that trade volumes, the supply of shipping services and maritime freight ratescan be expected to have on each other.

An arrow with a negative sign indicates a negative causal relationship; for example, it canbe 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 containerizedmaritime trade volumes can be expected to lead to an increasein the number of services

provided by liner companies.

Several of these relationships have been looked at in previous issues of the TransportNewsletter. For instance, it has been shown that distance, trade balances, economies ofscale, the type and value of commodity, various port characteristics as well as the supplyof direct liner shipping services are among the main determinants of maritime freightrates.4The supply of direct liner shipping services, in turn, appears to, a large extent, bedetermined by traded volumes, port characteristics as well as of course the geographic

4All past Transport Newsletters can be downloaded viawww.unctad.org/Templates/Page.asp?intItemID=2651

10
http://www.unctad.org/Templates/Page.asp?intItemID=2651http://www.unctad.org/Templates/Page.asp?intItemID=2651


11/13

position of a countrys ports. Transport efficiency in general has been identified as animportant determinant of the trade competitiveness of nations.

Figure 1: Expected causal relationships between trade volumes, shipping services and freight rates

Containerized

MaritimeTrade

Maritime

Freight

Rates

Liner

Shipping

Services

-

-

+

+

+

-

Ongoing research by UNCTAD on liner shipping services in the wider Caribbean regionhelped shed some light on the determinants of freight rates, trade volumes and linershipping supply. Combining data on the supply of liner shipping services, freight rates,maritime distances, national income and trade in manufactured goods, and undertakinglinear 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 eachother. 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 Jamaica, 1 per cent forthe Dominican Republic and around 8 per cent for Costa Rica. What are the mainexplanations for such differences?

According to the standard gravity model, the participation of country B in globalimports is the basic determinant of the share of country As exports that are destined forcountry B; i.e. if for example country Bs imports are 5 per cent of all the worldsimports, it can, ceteris paribus, be expected that 5 per cent of country As exports will bedestined for country B. Also in line with the gravity model, neighbouring countries can beexpected to trade more with each other than those that are not. The estimated parametersin our regressions confirms such expectations, i.e. A can be expected to exportsignificantly 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 arefurther away from each other will trade less. Although in principle such a positivecorrelation also exists in the wider Caribbean, it is interesting to note that in ourregressions the parameter for distance is not statistically significant when other variablesthat capture the supply of shipping services and transport costs are also incorporated. Forexample, a larger number of liner shipping companies that provide direct services

between a pair of countries appears to significantly enhance trade volumes. In fact, thesimple 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 andincome. The number of observations in the data base is 189. The R2 in the various regressions ranges

between .35 and .61.

11
http://www.ci-online.co.uk/http://www.world-register.org/http://www.world-register.org/http://www.ci-online.co.uk/


12/13

maritime trade has to be transshipped in a foreign port, is estimated to enhance the shareof country As exports to country B by around 0.7 percentage points. These resultssupport the expected positive (+) sign in Figure 1 as regards the impact of liner shippingsupply 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 USDwill 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 oftransport 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 directliner shipping services, whereas the other half includes transshipments in ports of thirdcountries. By way of example, between Costa Rica and Colombia, there are 14companies, 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 CostaRica and Jamaica, there are 5 companies/ 16 ships/ 17,400 TEU/ 2105 TEU maximumsize. 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 notconnected by direct liner shipping services. Also, trade volumes are a statisticallysignificant determinant of the number of companies, the number of ships, as well as theTEU capacity deployed on direct liner shipping services between a pair of countries.These results support the expected positive (+) sign in Figure 1; supply certainly followsdemand. It is further interesting to note that a higher GDP per capita in the exportingcountry also appears to attract additional liner shipping services. This coincides with otherresearch whereby a higher GDP per capita was found to be a statistically significantexplanatory 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 footcontainer. In our regressions, a longer distance between a pair of countries, for obviousreasons (such as additional fuel expenditure), leads to higher freight rates. However, theactual impact of distance on freight rates is not very strong. For example, doubling thedistance between a pair of countries, according to our empirical results, can be expectedto 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 adirect 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 companyitself does not provide a direct service, the freight rate it charges to its clients isinfluenced by the given market situation. If the market provides a direct service, thefreight rate can be expected to be around $425 lower as compared to a situation where nosingle company provides a direct service between a pair of countries. Similarly, a highernumber of companies in the market, more ships, and a larger total container carryingcapacity 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


13/13

Another variable with an apparent impact on freight rates include the GDP per capita inthe 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 shippingcompany needs to import empty containers or ships because country As exports tocountry 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 forliner 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 statisticallysignificant.

The linear regressions do not prove actual causalities, which in any case go both ways formost variables. For example, freight rates have an impact on trade, just as the volume oftrade has an impact on freight rates. The empirical research on liner shipping and trade inthe 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 regionat a given point in time, they, nevertheless, provide useful insight into quantifying theeffects different variables can have on trade volumes, supply of shipping services andfreight rates. The above described empirical results strongly suggest that internationaltrade models should always attempt to include hard data on transport costs and shippingsupply capacities, rather than rely on distance as a proxy for transaction costs. Freightrates, competition and economies of scale in liner shipping are important issues to takeinto account when looking at the trade competitiveness of nations.

REFERENCES

Angeloudis, Panagiotis; Khalid Bichou; Michael Bell, and David Fisk (2006): Security andreliability of the liner containershipping network: Analysis of robustness using a complex networkframework, presented to IAME 2006 conference, Melbourne

Bichou, Khalid (2004): The ISPS Code and The Cost of Port Compliance: An Initial Logistics andSupply Chain Framework for Port Security Assessment and Management, in:Maritime Economics and

Logistics, 6, p. 322-348Clarkson Research Services: www.crsl.com/acatalog/Container_Intelligence_Monthly.htmlContainerization International Online: www.ci-online.co.ukKumar, Shashi and Jan Hoffmann (2002): Globalization, the Maritime Nexus, in:Handbook of

Maritime Economics, LLP, LondonMarquez Ramos, Laura; Immaculada Martinez Zarzoso; Eva Perez Garcia and Gordon Wilmsmeier

(2006): Determinants of maritime transport costs. Importance of connectivity measures, presented to

International Trade and Logistics conference, Le HavreMcCalla, Robert; Brian Slack and Claude Comtois (2005): The Caribbean basin: adjusting to globaltrends in containerization, in:Maritime Policy and Management, 32, p. 245261

Notteboom, Theo (2006b): The Time Factor in Liner Shipping Services, in:Maritime Economicsand Logistics, 8, p. 1939

Notteboom, Theo (2006b): Traffic inequality in seaport systems revisited, in:Journal of transportgeography, 14:2 (2006), p. 95-108

UNCTAD, Transport Newsletter, various issues: http://extranet.unctad.org/transportnewsWilmsmeier, Gordon; Jan Hoffmann, and Ricardo Sanchez (2006): The impact of port

characteristics on international maritime transport costs, in Port Economics, Research in TransportationEconomics, Volume 16, edited by Kevin Cullinane and Wayne Talley, Elsevier

13
http://www.crsl.com/acatalog/Container_Intelligence_Monthly.htmlhttp://www.ci-online.co.uk/http://extranet.unctad.org/transportnewshttp://extranet.unctad.org/transportnewshttp://www.ci-online.co.uk/http://www.crsl.com/acatalog/Container_Intelligence_Monthly.html

Documents

2006 Seoul JanHoffmann Linershippingconnectivity