LOOKING INSIDE THE BOX: EVIDENCE FROM
THE CONTAINERIZATION OF COMMODITIES
AND THE COLD CHAIN
Jean-Paul Rodrigue
Dept. of Global Studies & Geography, Hofstra University, New York, USA
Theo Notteboom
ITMMA - University of Antwerp and Antwerp Maritime Academy, Belgium
European Conference on Shipping & Ports – ECONSHIP 2011
Chios, Greece, June 22-24 2011
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Do you really know me?
Growth Factors
Market Potential
Commodities in
Containers
Commodity and
Cold Chains
The container is more than a transport unit; a
supply and commodity chain unit.
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GROWTH FACTORS FOR
CONTAINERIZATION
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Containerization as a Diffusion Cycles:
World Container Traffic (1980-2010) and Possible
Scenarios to 2015
1000
900
800
Million TEU
700
Adoption
Acceleration
Peak Growth
Maturity
1966-1992
1992-2002
2002-2008
2008 -
New (niche) services
Productivity gains
Reference
Network development
Productivity multipliers
Divergence
600
500
Depression
400
300
Niche markets
200
Massive diffusion
Network complexities
100
0
1980
1985
1990
1995
2000
2005
2010
2015
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The Main Driving Forces of Containerization: The
Importance of Niches
Derived
Substitution
Economic and
income growth
Functional and
geographical
diffusion
Globalization
(outsourcing)
Fragmentation of
production and
consumption
New niches
(commodities and
cold chain)
Incidental
Trade imbalances
Repositioning of
empty containers
Induced
Transshipment
(hub, relay and
interlining)
Capture of bulk
and break-bulk
markets
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MARKET POTENTIAL
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Commodity Group and Containerization Potential
Category (SITC)
Food & Live Animals
Beverages & Tobacco
Raw Materials
Fuels & Lubricants
Animal & Vegetable
Oils
Chemicals
Manufactured Goods
Machinery & Transport
Equipment
Miscellaneous
Manufactures
Examples
Meat, Fish, Wheat, Rice, Corn, Sugar, Coffee,
Cocoa, Tea
Wine, Beer, Tobacco
Rubber, Cotton, Iron ore
Coal, Crude oil, Kerosene, Natural gas
Containerization (Existing or Potential)
Low (grains) to high (coffee, cold chain
products)
High
Commodity specific
Very limited
Olive oil , Corn oil
High
Salt, Fertilizers, Plastics
Paper, Textiles, Cement, Iron & Steel, Copper
Low to average
Commodity specific
Computer equipment, Televisions, Cars
Very high (already containerized)
Furniture, Clothes, Footwear, Cameras, Books,
Toys
Very high (already containerized)
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Factor
Growth Factors behind the Containerization of
Commodities
Outcome
Growing availability of
containers
More containers available on freight markets.
Ubiquitous transport product.
But: container shortage peaks and slow steaming
Rising demand and commodity
prices
More commodities in circulation (usage of containerization to
accommodate growth).
New producers and consumers (marginal markets penetration).
But: equipment mismatch
Fluctuations and rises in bulk
shipping rates
Decrease in the ratio cargo value per ton shipping rate for
commodities.
Volatility (rates) and risk (hedging).
Search for options to bulk shipping.
Low container shipping rates
Increase in the ratio cargo value per TEU shipping rate for
commodities.
Relative rate stability.
Containerization more attractive as an option.
But: rate stability under pressure
Imbalances in container shipping
rates
Export subsidy for return cargo.
But: equipment mismatch
Empty containers repositioning
Pools of containers available for backhauls.
But: equipment and locational mismatch
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CRB Index (CCI), Monthly Close, 1970-2011
800
700
Paradigm shift in input costs…
Reaping the consequences of
monetary policy.
Could be positive for
containerization…
600
500
400
300
200
100
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
0
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Income per Capita and Perishable Share of Food
Imports
$35,000
“Permanent global summertime”
$30,000
$25,000
$20,000
$15,000
$10,000
$5,000
$0
0
5
10
15
20
25
30
35
40
45
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The Usual Suspect: China’s Share of the World
Commodity Consumption, c2009
Cattle
Oil
GDP (PPP)
Chickens
Wheat
Population
Soybeans
Rice
Nickel
Eggs
Copper
Aluminium
Zinc
Lead
Steel
Pigs
Coal
Iron Ore
Cement
9.5
10.3
13.6
15.6
16.6
19.4
24.6
28.1
36.3
37.2
38.9
40.6
41.3
44.6
45.4
46.4
46.9
47.7
53.2
0
10
20
30
40
50
60
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Continuous Commodity Index and Baltic Dry
Index, 2000-2011 (2000=100)
900
800
Continuous Commodity Index
Baltic Dry Index
700
600
500
400
300
200
100
0
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Continuous Commodity Index and Average
Container Shipping Rates, 1994-2011 (1994=100)
300
Continuous Commodity Index
Container Shipping Rates
250
200
150
100
50
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From Bulk to Containers: Breaking Economies of
Scale
Entry Barriers
• Container as an independent load unit.
• Minimal load unit; one TEU container.
Required
Volumes
• Limited differences in scale economies for a
producer.
• Incremental / linear cost-volume function.
Market
Potential
• New producers (smaller).
• Product differentiation (larger variety).
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Containerized Cargo Flows along Major Trade
Routes, 1995-2009 (in millions of TEUs)
2009
11.5
2008
6.9
14.5
15.2
2006
15.0
4.4
2004
12.4
4.2
10.2
4.1
8.8
2001
7.2
3.9
2000
5.6
3.3
1998
5.2
3.3
1995
4.0
0
3.5
10.8
4.5
4.2
3.5
4.0
2.2 2.9
2.7 1.31.7
9.1
5.2
4.9
6.1
3.6
10.1
5.5
8.9
5.9
10.5
15.3
7.3
3.9
5.3
17.2
4.7
12.4
2.5
16.7
5.0
2005
2002
5.5
5.6
2007
2003
11.5
2.1
4.3
2.7
4.5
4.4
3.8
1.7 3.2
1.7 2.9
1.5 2.6
2.7
2.5
2.9
3.6
Empties; an export
subsidy
Asia-USA
USA-Asia
Asia-Europe
Europe-Asia
USA-Europe
Europe-USA
2.8 2.3 1.21.4
10
20
30
40
50
60
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COMMODITIES IN CONTAINERS
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Challenges for the Containerization of
Commodities
Challenge
Issues
Container availability
Locational and load unit availability.
Weight
Limitations to about 30 tons (40 footer).
20 footer the preferable load unit (26-28 tons).
Weighting Out versus Cubing Out: What is a Proper
Distribution of Containerized Assets?
Composition of the Global Fleet of Containers, 2008 (26.2 M TEU)
33%
4%
6%
6%
Balance between retail,
intermediate goods and
commodities
24%
27%
20 Foot
40 Foot
40 Foot High
Cube
Reefer
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Challenges for the Containerization of
Commodities
Challenge
Issues
Container preparation
Pre-use and post-use cleaning (avoid contamination).
Dedicated containers?
Container loading, unloading
and transloading
Bulks difficult to load horizontally. Vertical loading / unloading
(equipment). Transloading issues. Source loading.
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Challenges for the Containerization of
Commodities
Challenge
Issues
Weight distribution
Containership load (10-14 tons per TEU).
Trade imbalances create mitigation strategies.
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Challenges for the Containerization of
Commodities
Challenge
Issues
Land consumption at port
terminals
Space consumption (4 times more than bulk) mitigated by
velocity.
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Asymmetries between Import and Export-Based
Containerized Logistics
Gateway
Inland
Terminal
Distribution Customer
Center
Import-Based
Many Customers
•Function of population density.
•Geographical spread.
•Product customization.
•Incites transloading.
•High priority (value, timeliness).
Repositioning
Supplier
Export-Based
Few Suppliers
•Function of resource density.
•Geographical concentration.
•Lower priority.
•Depends on repositioning
opportunities.
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CONTAINERIZED COMMODITIES
AND COLD CHAINS
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Bulk and Containerized Commodity Chains: An
Emerging Complementarity
Cost / volume driver
Low frequency
Dedicated terminals
One way flows
Bulk Commodity Chain
Supplier
Port Point-to-Point
Customer
Consolidation
center
Time / flexibility driver
High frequency
General terminals
More balanced flows
Complementarity
Container
port
Pendulum
Services
Intermodal
terminal
Containerized Commodity Chain
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The Cold Chain: A Highly Constrained Niche
Conditional demand
• Each product has a specific perishability.
• Shelf life and revenue.
• Demand conditional to qualitative attributes.
Load integrity
• Reefers as the common load unit.
• Packing, packaging and preparation.
• Empty backhauls.
Transport integrity
• Uninterrupted integrity of the transport chain (modes, terminals
and DC).
• Specialized modes (speed) and terminals?
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Conditional Demand: Shelf Life of Selected
Produce
Produce
Shelf Life
Optimum Temperature
(Celsius)
Apples
90-240
0
Bananas
7-28
14
Bell Peppers
12-18
10
Cabbage
14-20
0
Carrots
14-28
0
Onions
30-180
10
Grapes
10-25
0
Oranges
10-15
7
Potatoes
30-50
10
Strawberries
5-10
0
Tomatoes
7-14
12
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Conditional Demand: Lettuce Shelf Life by Storage
Temperature
14
Shelf Life (Days)
12
10
8
6
4
2
0
0
5
10
15
Temperature (Celsius)
20
25
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Temperature Integrity along a Cold Chain
Potential integrity breach
Temperature
Temperature Range
Potential integrity breach
Time
Transport
Unloading – Warehousing – Loading
Transport
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Reefers and Source Loading: Securing Cold Chain
Integrity
Cold Transport Chain
Transit Time (days) Typical Shelf Life (days)
Refrigerated truck / Cold-storage facility
transloading / Air
Refrigerated truck / Cold-storage facility
transloading / Maritime shipping
Source loading with Reefer / Maritime
shipping
4-5
30-35
15-16
30-35
15-16
55-60
Gain 25 days of shelf life (10 days net
gain)
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Slow Steaming: Potential Impacts on
Commodities and the Cold Chain
Longer transit times may compromise some cold chains.
More containerized inventory tied in transit (heavier use of
modes and terminals).
More containers for the same flow capacity (10-30%?).
Lower availability of containers in the hinterland.
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Conclusion: Commodities and the Cold Chain as
Value Propositions
Retail and
intermediate
goods
Commodities
(balancing)
Cold chain
(revenue)
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