The benefits of containerization continue to be realized, as bigger and better containers facilitate global trade each year.

By Aswin Dorairaj

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Everything today literally comes in a box. People live in boxes in the crowded metropolises of the world. In fact, putting things in easy-to-handle-and-store square packaging is a no-brainer for most organizations and people.

In this context, it may be surprising to learn that the concept of containerization for transport traces its roots only as far back as the 1950s when Malcom McLean, a trucking entrepreneur from the United States, came up with the idea that it would be easier to ship cargo in their truck trailers instead of having to load and unload cargo at the port. This innovative idea cut shipping costs by 50% and has had a tremendous impact on international trade ever since.

The concept has grown dramatically since then, especially with the introduction of containers on a larger scale in the 1960s. The impact of containerization on global trade has never been accurately documented, and it has been the subject of debate over the years.

However a recent study designed to answer that very question claims that containerization has led to an increase of around 790% in bilateral trade over a 20-year period between countries that have embraced containers. This is definite evidence of a link between the introduction of containers and world trade.

The Container Advantage

Besides being a metal box that is easy to handle at a port, containers come with a lot of inherent features that make it a good proposition. Built-in safety measures ensure that your products are safe from theft and pilferage during transport. There is less exposure to the environment and the harsh weather of the sea. This can be an important factor when your goods are perishable food produce that can become easily contaminated.

With the variety of containers available on the market today, differing product needs can be met as well. IFT readers may especially be interested in ventilated and refrigerated containers (known as reefers); these important developments help to control the environment your products are shipped in.

Developing World Slow to Embrace Containers

Despite the inherent benefits of containerization, it has been awfully slow to catch on in many parts of the world. World Bank statistics show that the majority of container import, export and transhipment volumes are handled by countries such as China (which handled 139 million Twenty Foot Equivalent Units (TEU) in 2011), the United States and several European ports.

China is the only BRIC country that is in the top 10 list by way of million TEUs of cargo per annum. In contrast, Brazil and India handled less than 10 million TEUs respectively in 2011. Goods like food grains, pulses and other food produce tend to be shipped in bulk or occasionally break bulk at smaller ports.

A recent Port Regulation Law passed in Brazil allows for greater investment with less red tape where private terminals can be operated by commodity traders not just for their products but for others as well. These measures can help ease trade congestion and also allow large scale commodity traders to set up their own infrastructure instead of having to rely on existing port infrastructure.

Mining companies like Brazil’s Bamin have already signed agreements based on the new law to establish a maritime terminal at Porto Sul. A similar effort on the part of commodity traders could soon see more container terminals on the South American coast to boost trade.

Containerization as a concept has been late to catch on in India despite having been introduced in the 1980s. Multimodal transportation for domestic shipments is still very limited, leading to a lack of demand for containers domestically, especially with the costs of setting up the necessary infrastructure, traditionally outweighing the security benefits. The development of Inland Container Depots have helped to some extent and with rising global trade, exclusive container terminals such as Nhava Sheva in Mumbai and ICCT in Kochi have been set up around the country to handle the growth in demand for container-handling facilities.

A Bright Future

The future of containerization remains bullish despite the downturn in the global economy over the past few years. This positive attitude is best exhibited by the liner companies that continue to buy and build more container vessels that seemingly get bigger as well. The average container capacity of a ship in the 1980s was around 1600 TEUs. Today that figure has gone up drastically with the largest vessels owned by CMA-CGM able to carry 16,020 TEUs today.

Liner services like Evergreen offer fast point-to-point services connecting continents while the older established firms offer their traditional routes with reliable service. To help improve on efficiencies and costs, the three major liner firms, AP-Møller Maersk, CMA-CGM and MSC have formed the P3 alliance.

What does all this mean for IFT readers? Customers will enjoy access to more ports, more service options and the assurance that goods will reach their destinations on time, in full and at the best possible price.

Sources:

Estimating the Effects of the Container Revolution on World Trade, Bernhofen, El-Sahli and Kneller, Lund University, Working Paper 2013:4, February 2013

http://www.worldshipping.org/about-the-industry/containers http://data.worldbank.org/indicator/IS.SHP.GOOD.TU/countries?display=default http://online.wsj.com/article/BT-CO-20130607-710928.html