Container Shipping Services and their Impact on Container Port Competitiveness Proefschrift voorgedragen tot het behalen van de graad van Doctor in Transport en Maritieme Economie op 3 november 2009 om 15u Thesis submitted in order to obtain the degree of Ph.D. in Transport and Maritime Economics on 3 November 2009 at 15hOO B 375099 Door/by YAP Wei Yim Doctoraatsjury / Doctoral Jury: Voorzitter / Chairman: Prof. dr. Bruno De Borger (University of Antwerp) Promotor / Promoter: Prof. dr. Theo Notteboom (University of Antwerp) Leden / Members: Prof. dr. Jan Blomme (University of Antwerp) Prof. dr. Kevin Cullinane (Napier University, Edinburgh) Prof. dr. Wout Dullaert (University of Antwerp) Prof. dr. Peter de Langen (Eindhoven University of Technology) Prof. dr. Frank Witlox (Ghent University)
TABLE OF CONTENTS PAGE Acknowledgements Abstract Table of Contents List of Figures List of Tables List of Equations List of Abbreviations i iii xi xxix xli li liii Chapter 1: Introduction 1 1.1 Research Objective 1.2 Significance and Role of the Containerised Trade and Container Shipping Industry 1.3 Foundation of Containerised Trade 1.3.1 Users of Containerised Transportation System 1.3.2 Suppliers of Container Shipping Services 1.3.3 The Container Port 1.4 Organisation of the Thesis 1 2 4 4 5 6 7 Chapter 2: Review of Literature 9 2.1 Inferences for Port Competitiveness Offered by 2.1.1 Perspectives Drawn from Literatures Related to the Container Port 9 9 xi
2.1.2 Perspectives Drawn from Literatures Related to 11 Shipping Lines 2.1.3 Perspectives Drawn from Literatures Related to 14 Shippers 2.1.4 Perspectives Drawn from Literatures Related to 15 the Supply Chain 2.1.5 Perspectives Drawn from Literatures Related to 16 Container Terminal Operators 2.1.6 Perspectives Drawn from Literatures Related to 18 Container Port Performance 2.1.7 Towards a Broader and Holistic Approach 18 2.2 Going Beyond Port Competition 20 Chapter 3: Demand for Container Shipping Services 25 3.1 Overview of Actualised Demand for Transporting 26 Containers by Sea 3.2 Key Developments Affecting Demand for Transporting 27 Containers by Sea 3.2.1 Growing Share of Seaborne Trade in 28 Containerised Cargoes 3.2.2 Remaining Predominantly as an East-West 29 Trade 3.2.3 Substantial Amount of Intra-Regional Trade 30 3.2.4 Increasing Share of Transhipment Traffic 31 3.2.5 Gravity of Traffic Shifting to East Asia 33 3.3 Determinants of Demand for Seaborne Transport of 36 Containers 3.3.1 Demand for Container Shipping Services by 36 Shippers 3.3.2 Demand for Container Shipping Services by 39 Shipping Lines xn
3.3.3 Influence Exerted by Ports 40 3.4 In Summary 41 Chapter 4: Supply of Container Shipping Services 45 4.1 Overview of Supply of Container Shipping Services 45 4.1.1 Capacity Deployed on Major Trade Routes 46 4.1.2 Constitution of the Liner Fleet: Vessel Type 47 4.1.3 Constitution of the Liner Fleet: Container 48 Shipping Companies 4.2 Key Developments Affecting Supply of Seaborne 49 Transport for Containers 4.2.1 Potential Doubling of Capacity Within Five 49 Years 4.2.2 Increasing Vessel Size on Trade Routes 50 4.2.3 Concentration in the Liner Industry 53 4.2.3.1 Mergers and Acquisitions.53 4.2.3.2 Formation of Shipping Alliances 57 4.2.3.3 Emergence of New Industry Structure 61 4.2.4 Implications from Mounting Bunker Costs 62 4.2.5 Complexity of Maritime Security 65 4.3 Determinants of Supply of Container Shipping Services 66 4.3.1 Factors Influencing Supply of Container 66 Shipping Services 4.3.2 Factors Specific to the Cargo 68 4.3.3 Factors Specific to the Trade Route 69 4.3.4 Factors Specific to General Market Conditions 70 4.3.5 Factors Specific to Industry Dynamics 70 Xlll
4.3.6 Constituents of Container Shipping Services and 71 Network Configurations 4.4 In Summary " ~ 73 Chapter 5: The Container Port 75 5.1 Role and Objective of the Container Port 75 5.2 Relationship with the Containerised Transportation 76 System 5.3 Definition of Container Port Competitiveness - 77 5.4 Measuring Container Port Competitiveness 78 5.5 Determinants of Container Port Competitiveness 84 5.5.1 Factor Conditions 88 5.J.2 Demand Conditions 90 5.5.3 Relating and Supporting Industries 90 5.5.4 Firm Strategy, Structure, and Rivalry 91 5.5.5 Role of the Government 91 5.5.6 Chance 92 5.6 In Summary 92 Chapter 6: Implications for Container Port Competitiveness 95 6.1 Challenges Faced by the Container Port 95 6.1.1 Catering to Higher Traffic Volumes 96 6.1.2 Optimise Land Use in Face of Stringent 102 Requirements from Port Users and Other Parties 6.1.3 Handling Diverse Range of Cargoes 107 6.1.3.1 Diversity in Geographical Reach 108 6.1.3.2 Diversity in Vessels that Call at 110 Container Ports
6.1.4 Dealing with Demands Required by Entire 111 Logistics Chain 6.1.5 Addressing Increasing Power Wielded by Large 114 Industry Entities 6.1.6 Entrance of Non-Traditional Players in Port 119 Sector 6.1.7 Competition with a Wider Range of Ports 120 6.1.7.1 Container Port Competition 120 6.1.7.2 Container Port Complementarity 122 6.1.7.3 Inter-Container Port Relationship for 123 the Case of Two Hinterlands 6.1.7.4 Inter-Container Port Relationship for 124 Setting with Hinterlands and Port Ranges 6.1.7.5 Inter-Container Port Relationship in 125 Global Network of Value-Driven Chain Systems 6.2 From Container Port to Container Port Cluster 127 Chapter 7: Research Methodology 131 7.1 Research Objective 131 7.2 Research Approach 131 7.3 Analysis of Container Shipping Services and Their 134 Impact on Inter-Container Port Dynamics 7.3.1 Calculating Annualised Slot Capacity 134 7.3.2 Framework for Analysing Inter-Container Port 139 Relationships 7.4 Ascertaining Impact of Inter-Container Port Dynamics 142 on Container Port Competitiveness (from the Supply Perspective) xv
7.5 Towards a General Framework for Analysing Container 147 Port Competitiveness 7.5.1 Demand and Supply Conditions Faced by the 148 Container Shipping Line at the Container Port 7.5.1.1 Applicability of the Assumptions to 149 the Container Port 7.5.1.2 Elaboration on Characteristics of the 152 Supply and Demand Functions 7.6 Issues Relating to Coverage of Research and Data 157 7.6.1 Coverage of Research: Geographical Region 157 7.6.2 Coverage of Research: Time Period 159 7.6.3 Sources of Data 159 7.6.3.1 Data on Container Throughput 159 7.6.3.2 DataonASC 159 7.7 In Summary 161 Chapter 8: Results for Southeast Asia 163 8.1 Container Port Landscape 164 8.2 Major Developments Affecting Inter-Container Port 169 Dynamics in Southeast Asia 8.3 Analysis of Inter-Container Port Dynamics 171 8.3.1 Overview of ASC Connected to the Selected 171 Ports 8.3.2 Development of ASC Connected to the Selected 174 Ports on the Europe-Far East Trade Route: Rank 1 (Share of 32.6%) 8.3.2.1 Period 1: Prior to 1999 177 8.3.2.2 Period 2: 1999 to 2002 178 8.3.2.3 Period 3: 2003 to 2005 181 xvi
8.3.2.4 Period 4: After 2005 184 8.3.2.5 In Summary 185 8.3.3 Development of ASC Connected to the Selected 186 Ports on the Mediterranean-Far East Trade Route: Rank 2 (Share of 15.4%) 8.3.3.1 Period 1: Prior to 2001 188 8.3.3.2 Period 2: 2001 to 2002 190 8.3.3.3 Period 3: After 2002 191 8.3.2.4 In Summary 193 8.3.4 Development of ASC Connected to the Selected 194 Ports on the Intra-Southeast Asia Trade Route: Rank 3 (Share of 11.8%) 8.3.4.1 Period 1: Prior to 2002 196 8.3.4.2 Period 2: 2002 and after 198 8.3.4.3 In Summary. 200 8.3.5 Development of ASC Connected to the Selected 201 Ports on the Far East-Middle East Trade Route: Rank 4 (Share of 11.5%) 8.3.5.1 Period 1: Prior to 1999 203 8.3.5.2 Period 2: 1999 to 2000 204 8.3.5.3 Period 3: 2001 and after 206 8.3.5.4 In Summary 207 8.3.6 Development of ASC Connected to the Selected 208 Ports on the Transpacific Trade Route: Rank 5 (Share of 8.1%) 8.3.6.1 Period 1: Prior to 2001 210 8.3.6.2 Period 2: 2001 and after 212 8.3.6.3 In Summary 214 xvii
8.4 Summary of Inter-Container Port Dynamics and 215 Implications for Port Competitiveness in Southeast Asia Chapter 9: Results for East Asia (Pearl River Delta) 223 9.1 Introduction 223 9.2 Container Port Landscape 224 9.3 Major Developments Affecting Inter-Container Port 230 Dynamics 9.4 Analysis of Inter-Container Port Dynamics 231 9.4.1 Overview of ASC Connected to Hong Kong and 231 Shenzhen 9.4.2 Development of ASC Connected to the Selected 235 Ports on the Transpacific Trade Route: Rank 1 (Share of 33.7%) i 9.4.2.1 Period 1: 1995 to 2002 237 9.4.2.2 Period 2: 2003 to 2006 239 9.4.2.3 In Summary 240 9.4.3 Development of ASC Connected to the Selected 241 Ports on the Europe-Far East Trade Route: Rank 2 (Share of 24.4%) 9.4.3.1 Period 1: 1995 to 2001 243 9.4.3.2 Period 2: 2002 to 2006 244 9.4.3.3 In Summary 246 9.4.4 Development of ASC Connected to the Selected 246 Ports on the Southeast Asia-Far East Trade Route: Rank 3 (Share of 12.5%) 9.4.4.1 Period : 1995 to 2006 248 9.4.4.2 In Summary 249 9.4.5 Development of ASC Connected to the Selected 250 Ports on the Mediterranean-Far East Trade Route: Rank 4 (Share of 12.0%) xvui
9.4.5.1 Period 1: 1995 to 2003 252 9.4.5.2 Period 2: 2004 to 2006 253 9.4.5.3 In Summary 254 9.4.6 Development of ASC Connected to the Selected 255 Ports on the Far East-Middle East Trade Route: Rank 5 (Share of 8.1%) 9.4.6.1 Period 1: 1995 to 1999 257 9.4.6.2 Period 2: 2000 to 2004 257 9.4.6.3 Period 3: 2005 to 2006 258 9.4.6.4 In Summary 260 9.5 Summary of Inter-Container Port Dynamics and 260 Implications for Port Competitiveness in the Pearl River Delta Chapter 10: Results for East Asia (Yangtze River Delta) 269 10.1 Container Port Landscape 269 10.2 Major Developments Affecting Inter-Container Port 277 Dynamics 10.3 Analysis of Inter-Container Port Dynamics 279 10.3.1 Overview of ASC Connected to Shanghai, 279 Busan, Kaohsiung and Ningbo 10.3.2 Development of ASC Connected to the Selected 282 Ports on the Transpacific Trade Route: Rank 1 (Share of 41.6%) 10.3.2.1 Period 1: Prior to 1998 285 10.3.2.2 Period 2: 1998 to 2001 287 10.3.2.3 Period 3: 2002 and after 289 10.3.2.4 In Summary 293
10.3.3 Development of ASC Connected to the Selected 294 Ports on the Europe-Far East Trade Route: Rank 2 (Share of 18.4%) 10.3.3.1 Period 1: Prior to 2000 296 10.3.3.2 Period 2: 2000 to 2002 298 10.3.3.3 Period 3: 2003 and onwards 300 10.3.3.4 In Summary 303 10.3.4 Development of ASC Connected to the Selected, 304 Ports on the Intra-Far East Trade Route: Rank 3 (Share of 13.2%) 10.3.4.1 Period 1: Prior to 1998 307 10.3.4.2 Period 2: 1998 and after 309 10.3.4.3 In Summary 311 10.3.5 Development of ASC Connected to the Selected 311 Ports on the Southeast Asia-Far East Trade Route: Rank 4 (Share of 10.7%) 10.3.5.1 Period 1: Prior to 2001 313 10.3.5.2 Period 2: after 2000 315 10.3.5.3 In Summary 317 10.3.6 Development of ASC Connected to the Selected 317 Ports on the Mediterranean-Far East Trade Route: Rank 5 (Share of 7.8%) 10.3.6.1 Period 1: before 2002 319 10.3.6.2 Period 2: 2002 and after 321 10.3.6.3 In Summary 323 10.4 Summary of Inter-Container Port Dynamics and 324 Implications for Competitiveness of Ports Located Around the Yangtze River Delta Chapter 11: Results for Northwest Europe 331 xx
11.1 Container Port Landscape 331 11.2 Major Developments Affecting Inter-Container Port 340 Dynamics 11.3 Analysis of Inter-Container Port Dynamics 342 11.3.1 Overview of ASC Connected Rotterdam, 342 Hamburg, Antwerp and Bremerhaven 11.3.2 Development of ASC Connected to the Selected 345 Ports on the Europe-Far East Trade Route: Rank 1 (Share of 34.3%) 11.3.2.1 Period 1: Prior to 2000 347 11.3.2.2 Period 2: 2000 to 2003 350 11.3.2.3 Period 3: After 2003 353 11.3.2.4 In Summary 357 11.3.3 Development of ASC Connected to the Selected 358 Ports on the Intra-Europe Trade Route: Rank 2 (Share of 30.1%) 11.3.3.1 Period 1: Prior to 2004 362 11.3.3.2 Period 2: After 2003 365 11.3.3.3 In Summary 367 11.3.4 Development of ASC Connected to the Selected 369 Ports on the Transatlantic Trade Route: Rank 3 (Share of 20.9%) 11.3.4.1 Period 1: Before 1999 372 11.3.4.2 Period 2: 1999 to 2002 374 11.3.4.3 Period 3: After 2002 377 11.3.4.4 In Summary 380 11.3.5 Development of ASC Connected to the Selected 3 81 Ports on the Europe-Mediterranean Trade Route: Rank 4 (Share of 5.9%) 11.3.5.1 Period 1: Before 2000 385
11.3.5.2 Period 2: 2000 to 2003 387 11.3.5.3 Period 3: After 2003 389 11.3.5.4 In Summary - 391 11.3.6 Development of ASC Connected to the Selected 393 Ports on the Europe-Africa Trade Route: Rank 5 (Share of 4.7%) 11.3.6.1 Period 1: Before 1997 395 11.3.6.2 Period 2: 1997 to 2002 396 11.3.6.3 Period 3: After 2002 398 11.3.6.4 In Summary 400 11.4 Summary of Inter-Container Port Dynamics and 401 Implications for Port Competitiveness in Northwest Europe Chapter 12: Summary and Conclusion 409 12.1 Summary of Findings for Inter-Container Port Dynamics 409 and Container Port Competitiveness In the Four Regions 12.2 Contribution of Research 413 12.3 Limitations of Study and Recommendations for Future 419 Research Annexes Annex 1 Porter's 'Diamond' Model Applied to the 423 Analysis of Container Port Competitiveness Annex 2 The Current Value Stream In International 424 Logistics Annex 3 Seaborne Container Trade in Year 2007 425 Annex 4 Evolution of the Top Twenty Container 426 Ports (1987-2007) xxii
Annex 5 List of Mergers and Acquisitions in the 427 Liner Shipping Industry (1990-2007) Annex 6 Schematic Representation of Mergers and 430 Acquisitions for Top 20 Carriers Annex 7 Commitment by Container Shipping Lines 431 to Their Respective Alliances (1996-2006) Annex 8 Example of Integrated Service Network 433 Operated by Maersk Line in 2006 Annex 9 Examples of Service Configurations and 434 Transhipment Forms Operated by Various Shipping Entities A9.1 Example of Pendulum Service Operated by 434 Grand Alliance in 2006 A9.2 Example of North-South Service Operated 434 by MSC in 2006 A9.3 Example of Butterfly Service Operated by 435 Samudera in 2006 A9.4 Example of Triangle Service Operated by 435 HRC Shipping in 2006 A9.5 Example of Simple End-to-End Service 436 Operated by Various Carriers in 2006 A9.6 Example of Inter-Lining Transhipment for 436 Services Operated by Grand Alliance in 2006 A9.7 Example of Hub-and-Spoke Transhipment 437 for Services Calling at Busan in 2006 A9.8 Example of Relay Transhipment for 437 Services Operated by CMA-CGM in 2006 Annex 10 Comparison of Capital Expenditure for 438 Terminal Development Annex 11 Measures to Boost Container-Handling 439 Capacity with Existing Space 11.A Port of Hamburg 439 11.B Port of Long Beach 439 xxni
ll.c Annex 12 12.A 12.B 12.C 12.D 12.E 12.F Annex 13 13.A 13.B 13.C 13.D 13.E Annex 14 14.A 14.B Annex 15 Port of New York/New Jersey Expanding Container-Handling Capacity Into Adjacent Areas Port of Singapore Port of Shanghai Port of Hong Kong Port of Shenzhen Port of Port Klang Port of Tanjung Pelepas Developing Container-Handling Capacity In New Areas Port of Singapore Port of Shanghai Port of Busan Port of Dubai Port of Guangzhou Examples of Major Container Terminal Operating Companies Associated With Shipping Lines Global Investment Locations of APM Terminals Global Investment Locations of COSCO Pacific Examples of Pure Stevedores 440 441 441 441 442 442 443 443 444 444 444 445 445 446 447 447 448 449 15.A Global Investment Locations of Hutchison Port Holdings 449 15.B Global Investment Locations of PSA 450 International 15.C Global Investment Locations of DP World 451 Annex 16 List of Terminal Buyouts Involving Non- 452 Traditional Players in the Port Sector (2006-2007) XXIV
Annex 17 Annex 18 Annex 19 Schematic Summarising Relationship 453 Between the Determinants of Container Port Competitiveness Institutional Framework for Container Port 454 Cluster Development in Singapore Model of Demand and Supply of ASC for 455 the Case of Non-Linear Supply Annex 20 20.A 20.B 20.C Annex 21 21.A Background on the Container Port Landscape of the Largest Container Ports in Southeast Asia Port Klang Container Throughput Market Structure Future Development Singapore Container Throughput Market Structure Future Development Tanjung Pelepas Container Throughput Market Structure Future Development Background on the Container Port Landscape of the Largest Container Ports in the Pearl River Delta Hong Kong Container Throughput Market Structure Future Development 456 456 456 457 458 459 459 459 460 461 462 462 462 463 464 464 465 465 465 466 467 468 XXV
21.B Annex 22 22.A 22.B 22.C 22.D Annex 23 23.A Shenzhen Container Throughput Market Structure Future Development Background on the Container Port Landscape.of Shanghai, Busan, Kaohsiung and Ningbo Busan Container Throughput Market Structure Future Development Kaohsiung Container Throughput Market Structure Future Development Ningbo Container Throughput Market Structure Future Development Shanghai Container Throughput Market Structure Future Development Background on the Container Port Landscape of the Largest Container Ports in Northwest Europe Antwerp 469 469 469 471 472 473 473 473 474 475 477 \ 477 477 478 478 479 480 480 480 481 482 482 482 483 484 485 486 486 486 XXVI
Container Throughput 487 Market Structure 487 Future Development 489 23.B Bremerhaven 489 489 Container Throughput 490 Market Structure 490 Future Development 491 23.C Hamburg 491 491 Container Throughput 492 Market Structure 493 Future Development 494 23.D Rotterdam 495 495 Container Throughput 495 Market Structure' 496 Future Development 497 References 499 xxvu