hsh nordbank2007 jpr

8/12/2019 HSH Nordbank2007 JPR

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Fall Summit, HSH Nordbank, Hamburg, Germany,

November 15, 2007

Logistics and Global

Commodity Chains

Jean-Paul RodrigueAssociate Professor, Dept. of Economics &

Geography, Hofstra University, New York, USA

Email: [email protected]

Paper available at:

http://people.hofstra.edu/faculty/Jean-paul_Rodrigue
http://www.hsh-nordbank.de/index.jsp?subId=0


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Introduction: Capital on the Move

Trimodal Container Terminal, Willebroek, Belgium

Changes in Global Trade

Global Production Networks andCommodity Chains

The China Effect and Global

Commodity Chains

Integrating Commodity Chains into

Containerized Supply Chains

2


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The Emergence of Supply Chain

Management

Demand Forecasting

Purchasing

Requirements Planning

Production Planning

Manufacturing Inventory

Warehousing

Materials Handling

Packaging

Inventory

Distribution Planning

Order Processing

Transportation

Customer Service Strategic Planning

Materials

Management

Physical

Distribution

LogisticsSupply Chain

Management

Information Technology

Marketing

1980s 1990s 2000s1960sFragmentation Consolidation

Warehousing

Materials Handling

Packaging

Functional Integration Value Capture

3


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Flow

s

Market

Transpo rt Chain

Parts and raw

materials

Manufactur ing

and assemb ly

Distr ibut ion

and the Setting of Commodity Chains

Market

Stag

e

Bulk sh ipp ing Uni t sh ipp ing

High volumesLow frequency

Low volumesHigh frequency

LTL shipping

Average volumesHigh frequency

4

Comm odit ies Final GoodsIntermediate Good s


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Major Factors Driving the Integration of

Transportation with Distribution

Factor Cause Consequence

Technology Containerization & IT Modal and intermodal

innovations; Tracking shipments

and managing fleets

Capitalinvestments

Returns on investments Highs costs and longamortization; Improve utilization

to lessen capital costs

Alliances and

M&A

Deregulation Easier contractual agreements;

joint ownership

Commodity

chains

Globalization Coordination of transportation

and production (integrated

demand)

Networks Consolidation and

interconnection

Multiplying effect5


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Changes in Global Trade

Acute Trade Imbalances

Economic Cycles

Globalization and Production

Container yard, Port of Yantian, China6


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A Changing Trade Environment

Stage Nature Function

Until the 1970s Immobile factors of

production

Cope with scarcity

Late 20thcentury Mobility of factors of

production

Promote economic

efficiency

Early 21stcentury Global production

networks

Added value within

commodity chains

7


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and the Cycles of International Trade

Changes in the Value Worlds Merchandise Trade, Production and GDP,

1950-2005 (in %)

-10

-5

0

5

10

15

20

25

30

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

Total Merchandise Trade

World GDP

World Merchandise Production

8


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The Cycle is Strongly Upward for Latin

America

Latin American Trade (1995-2005) Billions USD

0

50

100

150

200

250

300

350

400

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Exports

Imports

9

Commodities Boom


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as Well as for Eastern Europe

Share of World Trade, Eastern Europe (1995-2005)

1.0

1.5

2.0

2.5

3.0

3.5

4.0

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Exports

Imports

10


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International Trade Involves Acute

Imbalances

Worlds 10 Largest Exporters and Importers, 2005

0 200 400 600 800 1,000 1,200 1,400 1,600 1,800

Germany

United States

China

Japan

France

Netherlands

United KingdomItaly

Canada

Belgium

Billions of $US

Imports

Exports

11


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that Resulted in Imbalanced Containerized

Freight Flows

Balance of Containerized Cargo Flows along Major Trade

Routes, 1995-2006

-18

-16

-14

-12

-10

-8

-6

-4

-20 1995 1996 1997 1998 2000 2001 2002 2003 2004 2005 2006

Europe/USA

Asia/Europe

Asia/USA12


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with Imbalanced Freight Rates as Well

Maritime Freight Rates (USD per TEU), 1993-2006

$0

$500

$1,000

$1,500

$2,000

$2,500

1993-4

1994-2

1994-4

1995-2

1995-4

1996-2

1996-4

1997-2

1997-4

1998-2

1998-4

1999-2

1999-4

2000-2

2000-4

2001-2

2001-4

2002-2

2002-4

2003-2

2003-4

2004-2

2004-4

2005-2

2005-4

Asia - US

US- Asia

Asia - Europe

Europe - Asia


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Globalization; Changing the Profit Structure

Commodity chain

Added

value

Low

High

Manufacturing

R&D Globalization

DistributionDesign

Branding Marketing

Sales / Service

Concept Logistics

14


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As Well As Disconnecting Production and

Distribution

Manufacturing Base

Core BaseDistribution Marketing / RetailR&D

15


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Containerization and Global Commodity

Chains

Containerization

Intermodal Transportation

Ports and Terminal Operators

Container waiting to be loaded, Shenzhen, China16


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Containerization has Integrated Different

Transport Systems

17

Containerization of Maritime Transport Systems

Containerport

Containerization of Inland Transport Systems

Intermodalterminal

PendulumServices

Intermodal and Transmodal Operations

Corridor

Offshorehub

InlandPort


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which Makes the Container more than a

Box

Container

Production Distribution

Transport

Modes, terminals, intermodal and

transmodal operations

Flow management (time-based),

warehousing unit

Synchronization of inputs and

outputs (batches)

18


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Connecting the Dots: Intermodal Transport

Chain

Composi t ion

Transfer

Interchange

Decomposi t ion

Local / Regional Distribution

National / International Distribution

Transport Terminal

First mile

Last mile

19


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Composition: Pallets waiting to be loaded in a

container (APL DC - Shenzhen, China)


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Interchange: Post-Panamax Containership (Le

Havre)

I h UPS Will S i Di ib i


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Interchange: UPS Willow Springs Distribution

Center, Chicago

22

D iti U l di C t i d


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Decomposition: Unloading Containers and

Palletizing Shipments (Antwerp)

23

Th W ld L t M iti T d


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The Worlds Largest Maritime Trade

Gateways

Dubai

Tacoma

Santos

Jeddah

Seattle

Salalah

Oakland

Colombo

Savannah

Melbourne

Long BeachCharleston

Nhava Sheva

Los Angeles

Hampton Roads

New York/New Jersey

Kobe

Tokyo

BusanXiamen

Ningbo

Nagoya

Manila

Dalian

Tianjin

Keelung

Yokohama

Shenzhen Shanghai

Quingdao

Singapore

Kaohsiung

Hong KongGuangzhou

Port Kalang

Ho Chi Minh

Laem Chabang

Tanjung Priok

Tanjung Pelepas

LeHavre

Hamburg

Antwerp

Valencia

Rotterdam

Barcelona

Algeciras

Felixstowe

Gioia Tauro

Bremen/Bremerhafen

Pacifi c Asia Europe

TEU

Less than 2 million

2 to 4 million

4 to 7 million

7 to 10 million

More than 10 million

24

Traffic at the 50 Largest Container Ports,

2005

M i l C t ll d b L H ldi


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Mainly Controlled by Large Holding

Conglomerates

Pacific Asia Europe

APM Terminals

Dubai Ports World

Hutchison Port Holdings

Port of S ingapore Authority

Eurogate

Stevedoring Services of America

Dedicated Maritime Container Terminals

25

Major Port Holdings, 2007

Th t F ll i V l C t


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Commodity Chain

That are Following a Value Capture

Strategy

Port Hold ing

Por

tA

uthor

ity

Maritime Services

Inland Services

Port Services

Horizontal Integration / VerticalVertical Integration

MaritimeShipping

Port TerminalOperations

Inland Modesand Terminals

DistributionCenters

26

Wh th G i G t T h Th L t Mil


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Where the Going Gets Tough: The Last Mile

in Freight Distribution

GatewayInland

TerminalDistribution

Center

Capacity

Frequency

CorridorCustomer

Last Mile

Segment

GLOBAL HINTERLAND REGIONAL LOCAL

Shipping Network

Massification Atomization

27

Th Chi Eff t d Gl b l C dit


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Empty trucks waiting to enter China, Hong Kong

The China Effect and Global Commodity

Chains

Debt and the Currency Leverage GameProduction and Distribution Dislocations

Shift in the worlds commercial balance

28

Th Chi Eff t i M i l Ab t L


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The China Effect is Mainly About Low

Manufacturing Wages

Major Components to Price Reductions by the Chinese

Manufacturing Sector, 2005

39.4%

16.7%

16.0%

11.4%

8.6%

3.1%

2.4%

2.3%

0% 10% 20% 30% 40% 50%

Wages

Export Industry Subsidies & Preferences

Industrial Network Clustering

Undervalued Currency

Counterfeiting & Piracy

Foreign Direct Investments

Lax Health & Safety Regulations

Lax Environmental Regulations

29

W ll th L t B Fi i


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as Well as the Largest Buyer Financing

Scheme in History

Goods

Bo nds (IOUs)

Asset InflationDebt

Reserves

Interest RatesUnemployment

$ for goods

$ for bonds

United StatesChina USD

USD

BorrowingInvestment

30

Where Exchange Rates were Used as


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Where Exchange Rates were Used as

Leverage

Yuan Exchange Rate ( per USD) , 1981-2007

0

1

2

3

4

5

67

8

9

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

2006

2007

Yuan per USD

Real per USD

31

Discount WindowExport Oriented

Debasement Closing of the

Discount Window



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Emma Maersk, 12,500 TEU, Rotterdam, Netherlands


Containerized Supply Chains

Maritime Shipping Networks

Containerized Commodities

Cold Chain Logistics

32

The Three Major Corridors of Maritime


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The Three Major Corridors of Maritime

Circulation

Fos

Tokyo

Genoa

Ningbo

Hamburg

Shanghai

Le Havre

KaohsiungHong Kong

Singapore

Barcelona

Rotterdam

Port Kelang

Southampton

Laem Chabang

OaklandLos Angeles

NorfolkNew York

Charleston

Orig in Dest ination Transi t Ti me (days)

Southampton New York 8

New York Norfolk 2

Norfolk Charleston 2

Charleston Rotterdam 10

Rotterdam Hamburg 2

Hamburg Le Havre 2

Le Havre Southampton 1

Origin Destination Transit Time (days)Tokyo Kaohsiung 4

Kaohsiung Shekou 1

Shekou Laem Chabang 4

Laem Chabang Singapore 3

Singapore Kaohsiung 3

Kaohsiung Los Angeles 11

Los Angeles Oakland 4

Oakland Tokyo 9

Orig in Destination T ransit T ime (d ays)Port Kelang Genoa 14

Genoa Barcelona 2

Barcelona Fos 2

Fos Singapore 15

Singapore Hong Kong 4

Hong Kong Shanghai 2

Shanghai Ningbo 2

Ningbo Shekou 2

Shekou Hong Kong 1

Hong Kong Singapore 4

Singapore Port Kelang 1

Atlantic Express (ATX) European Union / Mediterranean (EUM) South China Express (SCX)

Note: Transit time includes port time

Source: OOCL Web Site

27 Days

49 Days

39 Days

Note: Paths are approximate

Atlantic Express (ATX)

European Union / Mediterranean (EUM)

South China Express (SCX)

33

Three Major Pendulum Routes Serviced by OOCL, 2006

Which Implies the Emergence of Global


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Which Implies the Emergence of Global

Trade Highways

North American Landbridge

Eurasian Landbridge

Circum-Equatorial Maritime Highway

Arctic Routes

34

The Potential of Containerization of


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The Potential of Containerization of

Commodities

For bulk transport Economies of scale confer a net benefit.

Specialization: Low utilization levels and time delays for the assembly of loads.

At most 50% due to empty backhauls, but much lower in reality.

Containerization: Flow concept; lower transshipment costs.

Its own warehouse unit.

Faster distribution (extending the realm of perishables).

Levels the playing field, particularly in view of established commodity

shippers.

Respective benefits for bulk and container carriers.

Handle variety requirements.

Rise in commodity prices makes them increasingly suitable

for containerization.35

Where Each System has its own


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Where Each System has its own

Advantages

Bulk (Grain, Oil) Containerized

Driving force Cost / Volume Time / Flexibility

Mode of shipment Large output Small shipments

Flows Specialized Mixed

Terminals Dedicated General Container

Markets Mass Niche

36

Will Likely See the Emergence of a


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Will Likely See the Emergence of a

Complementarity

Bulk Commodity Chain

Containerized Commodity Chain

Consolidation

center

PortSupplier Customer

Intermodalterminal

Container

port

PendulumServices

Point-to-Point

Complementarity

37

Commodities are more Containerized than


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Commodities are more Containerized than

Expected

US Containerized Trade, 2003

0

5,000

10,000

15,000

20,000

25,000

Total Imports Exports

Thousand

TEU Food

Consumer products

Technology products

Capital equipment

Raw materials

38

Leading to the Setting of New


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Leading to the Setting of New

Containerized Commodity Chains

Shipping Time between Bulk Handling and Containerization (CanadianWheat)

Bulk Handling System Days Container System Days

Farm storage Start Farm storage Start

Local delivery 1 Local delivery 1Primary elevator 40 Intermodal terminal 2

Rail hopper cars 11 Double stack train 2

Export terminal 19 Container port 2

Bulk ship 15 Containership 11

Import terminal 10 Container port 2

Local delivery 1 Local delivery 1

Final customer End Final customer End

Total 97 Total 2139

What Could be the Impacts on Commodity


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What Could be the Impacts on Commodity

Markets?

Containerization and commodity markets Futures / forward contracts are often conditioned by the

capacity for delivery.

What would be the impacts of containerization on this market

structure? A contract could involve the allocation of containers.

What type of price discovery this would entail.

From futures to spot markets?

Transportation flexibility will increase financial flexibility.

40

Cold Chain Logistics is Getting Increasingly


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Cold Chain Logistics is Getting Increasingly

Reliable

Potential integrity breach

Temperature

Temperature Range

Potential integrity breach

Transport

Time

Unloading Warehousing Loading Transport41

Deep Freeze

Frozen

Chill

Pharmaceutical

"Banana"

-30 -20 -10 0 10 20

Deep Freeze

Frozen

Chill

Pharmaceutical

"Banana"

Degrees Celcius


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Conclusion: Commodities on the Move

42

Adapting to a Challenging Environment with many


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Adapting to a Challenging Environment with many

Opportunities

Global trade Imbalances and dislocations.

Global commodity chains Added value and value capture.

The China Effect Trade and financial process.

Containerized commodity chains Opportunities to rectify imbalances.

Setting of new commodity chains.

Global prospects Positive for commodities.

New markets and investment opportunities.

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