[email protected] Geneva, May 2010
The demand and supply of The demand and supply of international transport services: international transport services: The relationships between trade, The relationships between trade, transport costs and effective access to transport costs and effective access to global marketsglobal markets
TransportTransportcostscosts
TradeTrade
TransportTransportServicesServices
More income to finance trade facilitation
-> Better trade facilitation-> More Trade-> More income to finance
trade facilitation
Ango
la
Lower Transport Costs-> More trade-> Economies of scale-> Lower Transport Costs
Better services-> More trade-> More income to
finance infrastructure-> Better services
Suez
Can
al
More trade-> More shipping supply-> More competition-> lower freights-> More trade
The challenge:The challenge:
• Avoid a vicious circle, where high transport costs and low service levels discourage trade, which will further endear transport and reduce connectivity…
• Instead: Initiate a virtuous circle
Transport CostsConnectivityTrade
Geneva, May [email protected]
Transport CostsConnectivityTrade
Geneva, May [email protected]
Freight rates in May 2010Freight rates in May 201040’ container from Dalian to • DUBAI 1200 • COLOMBO 1300 • B.ABBAS 1300• CALCUTTA 1700• BAHRAIN 1800 • UM QUASER 3000 • PORT SUDAN 3300• ROTTERDAM 3500• TEMA 4600• SANTOS 4800• VALPARAISO 5200
Freight costs in percent of imports
0
5
10
15
20
25
30
35
1980 1981 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Haiti Jamaica Mexico Chile Argentina Antigua and Barbuda
Source: UNCTAD
Freight costs Freight costs for for countriescountries
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
Per cent of goods' market price
Jute from Bangladesh 12.1% 19.8% 21.2% 44.2%Tea from Sri Lanka 9.5% 9.9% 10.0% 13.4%Coffee from Colombia 4.2% 3.3% 6.8% 2.5%Coca beans from Ghana 2.4% 2.7% 6.7% 3.5%
1970 1980 1990 2007
Freight as % of Freight as % of commoditiescommodities value value
UNCTAD, Review of Maritime Transport
TransportTransportcostscosts
TradeTradeVolumesVolumes
TransportTransportServicesServices?
Differences in maritime freights depend on…Differences in maritime freights depend on…
1) Distances2) Economies of scale3) Imbalances
4) Type & value of goods5) Competition6) Port characteristics
Differences in maritime freights depend on…Differences in maritime freights depend on…
1) Distances2) Economies of scale3) Imbalances
4) Type & value of goods5) Competition6) Port characteristics
y = 0.6206x + 1019.9R2 = 0.2058
0
500
1,000
1,500
2,000
2,500
3,000
3,500
0 500 1,000 1,500 2,000 2,500Distance
Frei
ght r
ate
Freight rates and Freight rates and DistanceDistance in the Caribbean in the Caribbean
UNCTAD Transport Newsletter, 1st Quarter 2007
Differences in maritime freights depend on…Differences in maritime freights depend on…
1) Distances2) Economies of scale3) Imbalances
4) Type & value of goods5) Competition6) Port characteristics
Feb 2008 costsFeb 2008 costs 11001100TEUTEU
42504250TEUTEU
87508750TEUTEU
13000TEU
Construction costs million USD
28 77 135 167
Construction costsUSD per TEU
25 000 18 117 15 430 12 850
Crew 15 to 17 15 to 17 15 to 17 15 to 17
Source: Dynamar, 2008, via Antonio Zuidwijk
Economies of ScaleEconomies of Scale
CRS, 25 April 2010
Container ship sizesContainer ship sizes• 27.- US$ saving/ container/ trip
using “post panamax” versus “panamax” (Drewry)
Mergers of shipping companiesMergers of shipping companies• Savings thanks to larger volumes
(Roland & Berger)
0102030405060708090
100
medium large
ships
purchasing
containers
access
admin
Port operationsPort operations
• 12 US$ per move savings with global operatorsDrewry
Differences in maritime freights depend on…Differences in maritime freights depend on…
1) Distances2) Economies of scale3) Imbalances
4) Type & value of goods5) Competition6) Port characteristics
ImbalancesImbalances
CI-Online 10 May 2010
Differences in maritime freights depend on…Differences in maritime freights depend on…
1) Distances2) Economies of scale3) Imbalances
4) Type & value of goods5) Competition6) Port characteristics
Merchandize type and valueMerchandize type and value
• Increase the value by 1% implies an increase of transport and insurance costs by around 0.3 – 0.4%
Differences in maritime freights depend on…Differences in maritime freights depend on…
1) Distances2) Economies of scale3) Imbalances
4) Type & value of goods5) Competition6) Port characteristics
Competition with land transportCompetition with land transport
• If countries are neighbours, with paved roads, maritimetransport costs are around 10% lower
Fotos: Jan Hoffmann
Competition between carriersCompetition between carriers
• Receiving 20 instead of 5 companies
freights go down by around 12%
Competition between carriersCompetition between carriersCase study CaribbeanCase study Caribbean
• If the company itself has no direct service (i.e. it only has a service with transshipment): This company’s freight rate + $650
• If other, competing, companies do provide a direct service: This companies freight rate - $425
y = 1814.9e-0.0671x
R2 = 0.4348
0
500
1'000
1'500
2'000
2'500
3'000
3'500
0 2 4 6 8 10 12 14 16 18 20Number of Carriers providing direct services
Frei
ght r
ate
Source: Hoffmann, Wilmsmeier, IAME 2007
Competition between carriersCompetition between carriersCase study CaribbeanCase study Caribbean
Differences in maritime freights depend on…Differences in maritime freights depend on…
1) Distances2) Economies of scale3) Imbalances
4) Type & value of goods5) Competition6) Port characteristics
Port reformPort reform• Difference between
“best” and “worst” case in Latin America: 25% of worst case
Dependent variable: maritime transport costs per tonne of containerizable cargo
Port reformPort reform
Wilmsmeier, Hoffmann, Sanchez, in: Porteconomics, 2006
Dependent variable: maritime transport costs per tonne of containerizable cargo
Better Better port infrastructureport infrastructure reduces maritime transport costsreduces maritime transport costs
Port reformPort reform
Dependent variable: maritime transport costs per tonne of containerizable cargo
Port reformPort reform
Better (perceived)Better (perceived) port efficiencyport efficiency reduces maritime transport costsreduces maritime transport costs
Dependent variable: maritime transport costs per tonne of containerizable cargo
Port reformPort reform
Better Better general transport infrastructuregeneral transport infrastructure does NOT reduce maritime transport costsdoes NOT reduce maritime transport costs
Dependent variable: maritime transport costs per tonne of containerizable cargo
Port privatizationPort privatization in the EXPORTING country in the EXPORTING country reduces maritime transport costsreduces maritime transport costs
Port reformPort reform
Dependent variable: maritime transport costs per tonne of containerizable cargo
Trade facilitationTrade facilitation in the IMPORTING country in the IMPORTING country reduces maritime transport costsreduces maritime transport costs
Port reformPort reform
Dependent variable: maritime transport costs per tonne of containerizable cargo
Better Better connectivityconnectivity between ports/ between ports/ more competition among carriersmore competition among carriersreduces maritime transport costsreduces maritime transport costs
Port reformPort reform
To sum up: To sum up: Differences in maritime freights depend on…Differences in maritime freights depend on…• Distances• Type & value of
goods• Imbalances
• Competition• Economies of
scale• Port
characteristics
TransportTransportcostscosts
TradeTradeVolumesVolumes
TransportTransportServicesServices
?
Transport Costs ConnectivityTrade
Geneva, May [email protected]
• TradeTrade grows faster than GDP
• Containerized tradeContainerized trade grows even faster than trade in general
• Containerized port trafficContainerized port traffic grows even faster than containerized trade…
Containerized port throughput Containerized port throughput
UNCTAD RMT, based on data from Drewry
Containerization of trade, and access Containerization of trade, and access to containerized transport services to containerized transport services
are important determinants of are important determinants of countries’ trade competitivenesscountries’ trade competitiveness
How can we measure this?
““Connectivity”Connectivity”1) Per country – in a “point”2) Per route – between pairs of countries
““Connectivity”Connectivity”1) Per country – in a “point” (162)
2) Per route – between pairs of countries
““Connectivity”Connectivity”1) Per country – in a “point” (162)
2) Per route – between countries (13041)
““Maritime connectivity”Maritime connectivity”UNCTAD’s “Liner Shipping Connectivity Index” (LSCI):
An indicator for the supply of liner shipping servicesComponents:• Ships • TEU capacity• Shipping companies• Services• Maximum ship sizes
The UNCTAD LSCI componentsThe UNCTAD LSCI componentsIndex of country averagesIndex of country averages Maximum vessel size
TEU
VesselsServices
Companies
70
80
90
100
110
120
130
140
150
160
2004 2005 2006 2007 2008 2009
Source: UNCTAD , based on data from Containerization International
We have reached a peak We have reached a peak Until very recently:• In spite of the (global) process
of concentration, the number of companies providing (local) services increased due to the expansion of global players into (so far) new markets
We have reached a peak We have reached a peak Today:• As global players are (now)
covering all regions of the world, mergers among them (start to) lead to a reduction of competition on individual routes.
Connectivity per countryConnectivity per country
based on www.ci-online.co.uk
Container ship deployment 2009Container ship deployment 20091446
Source: UNCTAD , based on data from Containerization International
Number of companiesNumber of companies96
Source: UNCTAD , based on data from Containerization International
The UNCTAD “LSCI”The UNCTAD “LSCI”
Connectivity per routeConnectivity per route
Top 25 routes (out of 13041)
Direct connectivity?Direct connectivity?Out of 162 x 161 pairs of countries: How many are connected by direct
services?
Source: UNCTAD , based on data from Containerization International
How to deal with How to deal with indirect connections?indirect connections?For all pairs of countries• Direct services yes/no?• How many transshipments do I need?• Shortest distance with transshipments?• Largest vessels with transshipments? • Highest competition with transshipments
TransportTransportcostscosts
TradeTradeVolumesVolumes
TransportTransportServicesServices
?
Determinants of maritime connectivityDeterminants of maritime connectivity
• Trade volumes (+)
• Distance (-)
• GDP per capita in exporting country (+)
• Port infrastructure (+)
Transport Costs Connectivity Trade
Geneva, May [email protected]
TransportTransportcostscosts
TradeTrade
TransportTransportServicesServices
?
Gravity modelGravity model
• Participation of country B in global imports is the basic determinant of the share of country A’s exports that are destined for country B.
• Neighbouring countries can be expected to trade more with each other than those that are not neighbours.
Gravity model – what about distance?Gravity model – what about distance?
• Distance / trade: negative correlation (as expected)• But: the parameter for distance is not statistically
significant if other variables are incorporated that capture the supply of shipping services and transport costs.
• Instead of distance: – number of liner shipping companies that provide direct
services between a pair of countries.– Existence of direct liner shipping services.– Increase of the freight rate per TEU (twenty foot
equivalent unit) by 1000 USD: Reduction of the share of country A’s exports to country B of almost half a percentage point.
In Conclusion…In Conclusion…
In Conclusion…In Conclusion…
In Conclusion…In Conclusion…
In Conclusion…In Conclusion…
In Conclusion…In Conclusion…
What I wanted to do in this first lecture:
• Present research on transport costs• Sell our “Connectivity Index”• Invite cooperation in future research
What’s next? What’s next?
• Improve measurement of “connectivity”– Developments over time.
2010 will be 7th year with data.– Incorporate distance, transshipments,
frequencies, direct/indirect connections…– In-land connections, land-locked countries ?
• Identify determinants of “connectivity”• Use “connectivity” as determinant for
trade, transport costs et al .
Transport Costs Connectivity Trade
Geneva, May [email protected]