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Transcript of [email protected] Geneva, May 2009 Determinants of Transport Costs.
![Page 2: Jan.Hoffmann@UNCTAD.org Geneva, May 2009 Determinants of Transport Costs.](https://reader038.fdocuments.us/reader038/viewer/2022103022/56649d135503460f949e6b2a/html5/thumbnails/2.jpg)
Maritime Freights
1: Determinants2: Fluctuations 3: What can we do?
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Maritime Freights
1: Determinants2: Fluctuations 3: What can we do?
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
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Maritime Freights
1: Determinants2: Fluctuations 3: What can we do?
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
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Maritime Freights
1: Determinants2: Fluctuations 3: What can we do?
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Differences in maritime freights depend on…Differences in maritime freights depend on…
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
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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
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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
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y = 0.6206x + 1019.9
R2 = 0.2058
0
500
1,000
1,500
2,000
2,500
3,000
3,500
0 500 1,000 1,500 2,000 2,500
Distance
Frei
ght r
ate
Freight rates and Freight rates and DistanceDistance in the Caribbean in the Caribbean
UNCTAD Transport Newsletter, 1st Quarter 2007
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DistanceDistance• Doubling the distance
leads to a increase of maritime transport costs (incl. insurance)by
about 15-20%
… averages, empirical dataECLAC, FAL 191, Wilmsmeier, HoffmannHandbook of Maritime Economics, Kumar, Hoffmann
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Differences in maritime freights depend on…Differences in maritime freights depend on…
1) Distances2) Economies of scale
3) Imbalances
4) Type & value of goods5) Competition6) Port characteristics
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Economies of ScaleEconomies of Scale
• moving 10 000 tons instead of 100 (in one transaction)
reduces unit costs by 40 to 50%
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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
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Economies of ScaleEconomies of Scale
CRS, 28 January 2009
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Container ship sizesContainer ship sizes• 27.- US$ saving/ container/ trip
using “post panamax” versus “panamax” (Drewry)
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Mergers of shipping companiesMergers of shipping companies• Savings thanks to larger volumes
(Roland & Berger)
0102030405060708090
100
medium large
ships
purchasing
containers
access
admin
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Port operationsPort operations
• 12 US$ per move savings with global operatorsDrewry
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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
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ImbalancesImbalances
CI-Online 28 January 2009
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Supply/demand Trans-Pacific trades
0
2000
4000
6000
8000
10000
12000
14000
16000
18000
2000 2003 2004 2005 2006 2007
'000 TEUs
Carrying capacity Cargo eastbound Cargo westbound
Containerization International
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ImbalancesImbalances
In Barbados, which freight rates would you expect to be higher: •Those for imports, or•Those for exports ?
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Differences in maritime freights depend on…Differences in maritime freights depend on…
1) Distances2) Economies of scale3) Imbalances
4) Type & value of goods
5) Competition6) Port characteristics
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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%
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Differences in maritime freights depend on…Differences in maritime freights depend on…
1) Distances2) Economies of scale3) Imbalances
4) Type & value of goods5) Competition
6) Port characteristics
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Competition with land transportCompetition with land transport
• If countries are neighbours, with paved roads, maritimetransport costs are around 10% lower
Fotos: Jan Hoffmann
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Competition between carriersCompetition between carriers
• Receiving 20 instead of 5 companies
freights go down by around 12%
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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
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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 20
Number of Carriers providing direct services
Frei
ght r
ate
Source: Hoffmann, Wilmsmeier, IAME 2007
Competition between carriersCompetition between carriersCase study CaribbeanCase study Caribbean
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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
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Port reformPort reform• Difference between
“best” and “worst” case in Latin America: 25% of worst case
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Port reformPort reform
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Dependent variable: maritime transport costs per tonne of containerizable cargo
Port reformPort reform
Wilmsmeier, Hoffmann, Sanchez, in: Porteconomics, 2006
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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
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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
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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
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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
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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
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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
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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
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Lower Transport Costs-> More trade-> Economies of scale-> Lower Transport Costs
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Maritime Freights
1: Determinants2: Fluctuations 3: What can we do?
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Bulker Spot Earnings $/dayBulker Spot Earnings $/day
Source: Clarksons Research, 27 March 2009
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Containership charter rates $/dayContainership charter rates $/day
Source: Clarksons Research, 27 March 2009
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Causes of the (increased) volatility ?Causes of the (increased) volatility ?
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
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Causes of the (increased) volatility ?Causes of the (increased) volatility ?
1) Fluctuations in demand
2) The pig cycle 3) Speculation
4) Lower variable costs5) The oil price (?)6) Trying to avoid future
volatility…
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Less trust – less Less trust – less demanddemand
“If, for instance, an Indian importer wants to buy grain from the US, the exporter might not trust you and then the deal will not be done.”
Martin Sommerseth Jaer, shipping analyst at Arctic Securities in Oslo, as quoted in Fairplay on-line, October
2008.
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Less trust – less Less trust – less demanddemand
THE IMF predicted today a near-total standstill for the global economy in 2009, with sharply lowered trade projections. (…) world growth is expected to fall to its lowest rate since the Second World War
Fairplay on-line, 28 January 2009
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Causes of the (increased) volatility ?Causes of the (increased) volatility ?
1) Fluctuations in demand2) The pig cycle
3) Speculation
4) Lower variable costs5) The oil price (?)6) Trying to avoid future
volatility…
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The shipping cycleThe shipping cycle
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A presentation of four years ago…A presentation of four years ago…
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Pork meat is expensive: Pork meat is expensive: the farmer “orders” pigletsthe farmer “orders” piglets
5
15
25
35
45
55
06.9
4
09.9
4
12.9
4
03.9
5
06.9
5
09.9
5
12.9
5
03.9
6
06.9
6
09.9
6
12.9
6
03.9
7
06.9
7
09.9
7
12.9
7
03.9
8
06.9
8
09.9
8
12.9
8
03.9
9
06.9
9
09.9
9
12.9
9
03.0
0
06.0
0
09.0
0
12.0
0
03.0
1
06.0
1
09.0
1
12.0
1
03.0
2
06.0
2
09.0
2
12.0
2
03.0
3
06.0
3
09.0
3
12.0
3
03.0
4
06.0
4
09.0
4
12.0
4
10000
15000
20000
25000
30000
35000
40000New contracts Charter Rate
Data from Clarksons Research
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Piglets take time to grow Piglets take time to grow
5
15
25
35
45
55
06.9
4
09.9
4
12.9
4
03.9
5
06.9
5
09.9
5
12.9
5
03.9
6
06.9
6
09.9
6
12.9
6
03.9
7
06.9
7
09.9
7
12.9
7
03.9
8
06.9
8
09.9
8
12.9
8
03.9
9
06.9
9
09.9
9
12.9
9
03.0
0
06.0
0
09.0
0
12.0
0
03.0
1
06.0
1
09.0
1
12.0
1
03.0
2
06.0
2
09.0
2
12.0
2
03.0
3
06.0
3
09.0
3
12.0
3
03.0
4
06.0
4
09.0
4
12.0
4
5
15
25
35
45
55
Deliveries New contracts
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Pigs enter the market: Pigs enter the market: Price of pork meat fallsPrice of pork meat falls
10000
15000
20000
25000
30000
35000
40000
06.9
4
09.9
4
12.9
4
03.9
5
06.9
5
09.9
5
12.9
5
03.9
6
06.9
6
09.9
6
12.9
6
03.9
7
06.9
7
09.9
7
12.9
7
03.9
8
06.9
8
09.9
8
12.9
8
03.9
9
06.9
9
09.9
9
12.9
9
03.0
0
06.0
0
09.0
0
12.0
0
03.0
1
06.0
1
09.0
1
12.0
1
03.0
2
06.0
2
09.0
2
12.0
2
03.0
3
06.0
3
09.0
3
12.0
3
03.0
4
06.0
4
09.0
4
12.0
4
5
10
15
20
25
30Charter Rate Deliveries
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The model of a cycleThe model of a cycle
ORDERSt = CHARTERRATEt
CHARTERRATEt = (1/DELIVERIESt )
DELIVERIESt = ORDERSt-24
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A “forecast”A “forecast”
0
10
20
30
40
50
60
70
01.0
5
07.0
5
01.0
6
07.0
6
01.0
7
07.0
7
01.0
8
07.0
8
01.0
9
07.0
9
01.1
0
07.1
0
01.1
1
07.1
1
01.1
2
07.1
2
01.1
3
07.1
3
01.1
4
07.1
4
01.1
5
07.1
5
01.1
6
07.1
6
01.1
7
07.1
7
01.1
8
07.1
8
01.1
9
07.1
9
01.2
0
07.2
0
01.2
1
07.2
1
01.2
2
07.2
2
01.2
3
07.2
3
01.2
4
07.2
4
0
10000
20000
30000
40000
50000
60000
70000DELIVERIES CHARTER RATE
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“The shipping industry is now attempting to undo the self-inflicted damage of a bloated new building order book, the growth of which has encouraged a near doubling of shipbuilding capacity in the past ten years.” Lloyds List, January 2009
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Causes of the (increased) volatility ?Causes of the (increased) volatility ?
1) Fluctuations in demand2) The pig cycle 3) “Speculation”
4) Lower variable costs5) The oil price (?)6) Trying to avoid future
volatility…
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More “speculation”More “speculation”
… i.e. more traders who are not themselves users or providers of the goods or services.
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More traders are participating in the market who are not themselves users or providers of transport services, but purchase future positions aiming at speculative capital gains. As has been seen in other markets, such as shares, crude oil, or food commodities in early 2008, the expectation of future gains encourages traders to hold on to positions, thus further worsening the shortage of supply and increasing the prices - until the bubble bursts…
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Causes of the (increased) volatility ?Causes of the (increased) volatility ?
1) Fluctuations in demand2) The pig cycle 3) “Speculation”
4) Lower variable costs
5) The oil price (?)6) Trying to avoid future
volatility…
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Higher fix costs – lower variable costsHigher fix costs – lower variable costs
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Change of freight rateChange of freight rate
capacity limit
Demand 1
Demand 2
Freight
Volume of tradechange in volume
Supply with high variable and low fix costs
change
in
freight
rate
rate
short term
OLD
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Change of freight rateChange of freight rate
capacity limit
Demand 1
Demand 2
Freight
Volume of tradechange in volume
Supply with low variable and high fix costs
change
in
freight
rate
rate
short term
NEW
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Causes of the (increased) volatility ?Causes of the (increased) volatility ?
1) Fluctuations in demand2) The pig cycle 3) “Speculation”
4) Lower variable costs5) The oil price (?)
6) Trying to avoid future volatility…
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What about the oil price? What about the oil price?
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Oil price and freight ratesOil price and freight rates
Bunker Prices
Freight Rate Transatlantic
Freight Rate Pacific
Freight Rate Asia-Europe
0
200
400
600
800
1000
1200
1400
1600
Q1
2001
Q2
2001
Q3
2001
Q4
2001
Q1
2002
Q2
2002
Q3
2002
Q4
2002
Q1
2003
Q2
2003
Q3
2003
Q4
2003
Q1
2004
Q2
2004
Q3
2004
Q4
2004
Q1
2005
Q2
2005
Q3
2005
Q4
2005
Q1
2006
Q2
2006
Q3
2006
Q4
2006
Q1
2007
Q2
2007
Q 3
200
7
Q4
2007
Q1
2008
US$
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Causes of the (increased) volatility ?Causes of the (increased) volatility ?
1) Fluctuations in demand2) The pig cycle 3) “Speculation”
4) Lower variable costs5) The oil price (?)6) Trying to avoid
future volatility…
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And if I want to protect myself…? And if I want to protect myself…?
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The higher the volatility…
… the more the traders and providers will want to purchase protection, i.e. future contracts (e.g. Forward Freight Contracts – FFCs)…
… and the more future contracts there are, the more volatility we get.
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Causes of the (increased) volatility ?Causes of the (increased) volatility ?
1) Fluctuations in demand2) The pig cycle 3) Speculation
4) Lower variable costs5) The oil price (?)6) Trying to avoid future
volatility…
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Maritime Freights
1: Determinants2: Fluctuations 3: What can we do?
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What can we do? What can we do?
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To reduce fluctuations of freightsTo reduce fluctuations of freights
• Carriers: Think long term
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To reduce fluctuations of freightsTo reduce fluctuations of freights
• Carriers: Think long term
• Ports: invest and reform to avoid congestion
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To reduce fluctuations of freightsTo reduce fluctuations of freights
• Carriers: Think long term
• Ports: invest and reform to avoid congestion
• Governments: Do not re-invent “national fleets”.
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To reduce fluctuations of freightsTo reduce fluctuations of freights
• Carriers: Think long term
• Ports: invest and reform to avoid congestion
• Governments: Do not re-invent “national fleets”.
this would be a pig cycle of ideas…
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Maritime Freights
1: Determinants2: Fluctuations 3: What can we do?
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What UNCTAD does…What UNCTAD does…
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UNCTAD’s Trade Logistics BranchUNCTAD’s Trade Logistics Branch
Sections:
Trade FacilitationTransportTransportLegal and PolicyLegal and Policy
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UNCTAD’s Trade Logistics BranchUNCTAD’s Trade Logistics Branch
Activities:
Meetings and seminarsResearch and publicationsResearch and publicationsTechnical cooperation Technical cooperation projectsprojects
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UNCTAD’s Trade Logistics BranchUNCTAD’s Trade Logistics Branch
Activities:
Meetings and seminarsMeetings and seminarsResearch and publicationsResearch and publicationsTechnical cooperation Technical cooperation projectsprojects
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““Expert Meetings” Expert Meetings”
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Conference on ICT and LogisticsConference on ICT and Logistics
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Workshops on Workshops on WTO – NegotiationsWTO – Negotiationson Trade Facilitationon Trade Facilitation
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UNCTAD’s Trade Logistics BranchUNCTAD’s Trade Logistics Branch
Activities:
Meetings and seminarsResearch and Research and publicationspublicationsTechnical cooperation Technical cooperation projectsprojects
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Review of Review of Maritime TransportMaritime Transport
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UNCTAD UNCTAD Transport NewsletterTransport Newsletter
QuarterlyQuarterly
Electronic distributionElectronic distribution
Articles, Articles,
and news and news
about publication about publication
and eventsand events
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StudiesStudies
e.g. on legal aspects e.g. on legal aspects
of international of international
tradetrade
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UNCTAD’s Trade Logistics BranchUNCTAD’s Trade Logistics Branch
Activities:
Meetings and seminarsMeetings and seminarsResearch and publicationsResearch and publicationsTechnical cooperation Technical cooperation projectsprojects
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Global Projects: Global Projects: e.g. Customs Automatione.g. Customs Automation
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e.g. “Capacity Building in Trade and Transport e.g. “Capacity Building in Trade and Transport Facilitation for Land Locked and Transit Developing Facilitation for Land Locked and Transit Developing
Countries ”Countries ”
Corridor:Walvis Bay - Gaborone
Corridor:Asuncion - Montevideo
Corridor:Bangkok - Vientiane
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Port Training Programme Port Training Programme
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Integrated country projects: Integrated country projects: e.g. Afghanistane.g. Afghanistan
“Emergency Customs Modernization and Trade Facilitation project”
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Maritime Freights
1: Determinants2: Fluctuations 3: What can we do?
Thank You