Lalith EdirisingheCINEC Maritime Campus

Seminar organized by Ceylon Association of Ships’ Agents –CASA to commemorate the

Maritime week of Sri Lanka21.09.2015 -2.30 pm to 5.30 pm

at the Main Auditorium Ceylon Chamber of Commerce

PreambleWhat is collaboration?Can Shipping lines collaborate?Collaboration in Container Shipping

industryDiachronic view (Historical development)Synchronic view (at a point in time)

The way forward; Collaborating for Container Inventory Management

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CollaborationCollaboration involves two or more

independent firms

The players with different complementary capabilities may achieve their common aspirations and goals in a competitive environment [(1+1) > 2]

Collaboration leads to achievement of collective goals

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What is collaboration?

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It positively affects corporate profitability by both increasing sales and decreasing costs

Therefore, collaboration among container lines in the form of container sharing could be a solution to the container imbalance.

Can shipping lines collaborate?

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Yes, Like in any other businessSupply chain collaboration

Vertical – Trade (Shippers & Consignees) >> Ports >> Boarder Management >> Agents >> CFS>> Banks >> Training institutes>> etc.etc.

Horizontal- Between carriers

Diachronic PerspectivesThe form of liner conferences is evident since

the nineteenth century They are associations of ship-owners

operating on the same route, served by a secretariat

They fixed prices and regulate capacityLiner conferences were most prevalent on

routes between Europe, North America and the Far East

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Collaboration between Carriers

Examples: IPBCC

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IPBCC - the oldest liner shipping conferenceEstablished initially as the Calcutta Steam Traffic

ConferenceLater became IPBCC- India-Pakistan-Bangladesh-

Ceylon Conferences 15-member s

ANL, CMA CGM, Hamburg Sud, Hapag-Lloyd, "K" Line, Maersk Line, MISC Berhad, CSAV Norasia, Shipping Corp. of India, PNSC, Rickmers, Safmarine, United Arab Shipping Corp., Yang Ming and Zim Integrated Shipping Services.

It ceased operations, 2008 Oct. 17

Conference LineOperators agree to maintain a similar rate

structure to all the advertised portsLines operating within that Conference

maintain a full monopoly on that trade route Vessel operators within the same conference

maintain their own rate structures

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Demise of ConferencesAnti-trust rules opposed cartel-like anti-

competitive behavior However, liner-shipping conferences

survived until 2008Shippers and trade bodies had persistent

complaints about these cartelsUnited States Shipping Acts of 1984 and 1998

have weakened the ability of conferencesThe EC regulated conferences more severely

since the late 1980 s05/02/23 10

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The Transpacific Trade For 2006 Through 2010Carrier Agreements

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The Transpacific Trade For 2006 Through 2010Carrier Agreements contd…

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US/North Europe Trade for 2006 through 2010

Carrier Agreements contd…

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Source: Federal Maritime Commission, Bureau of Trade Analysis, Agreements Library

US/North Europe Trade for 2006 through 2010

Carrier Agreements contd…

2M Maersk Mediterranean Shipping

Co. Ocean 3 CMA CGM United Arab Shipping Co. China Shipping

CKYHE Cosco “K” Line Yang Ming Hanjin Evergreen

G6 APL MOL Hyundai Merchant Marine OOCL NYK Line Hapag-Lloyd

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Synchronic view 2+2=95

Four carrier alliances will control 95 percent of the cargo volumes moving in the major east-west trades - Journal of Commerce (JOC) ,2015

P3 — a different kind of allianceTraditional alliances co-operate in the form of vessel

sharing and slot exchangesParticipants in P3will set up a service network centre

to oversee day-to-day operation and reserve technical management only to themselves (Lloyd's List .Com,2015)

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The way forward; Collaborating in Container Management

Containers are not ‘one time investment’The management of container fleets, is a

costly operationShipping companies globally spend $110

billion per year in the management of their container fleets

This involves purchase, maintenance and repairs

A major challenge revolves around repositioning empty reusable containers

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Collaborating in Container management

Container Re-positioning Empty containers accounted for 23% of port

handlings worldwide in 2002This percentage has remained fairly

consistent for the past 20 yearsRepositioning of global empties costs $16

billion annuallyExtensive researches on empty re-positioning

are evident

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Statistics from Sri Lanka289,474 TEU s empty containers (MTY) were

evacuated from port of Colombo in the year 2014

11.6 percent growth against 2013

Paradoxically, shipping lines have imported 48,629 TEUs of empty containers to SL in 2014

24.3 percent growth from 2013

(CASA Per. Review, 2015)

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Container Exchange between carriersCarriers’ agreements have provisions to

exchange containers but no evidence of exchange in reality

Sri Lanka spends $ 100 Million every year on empty container re-position

This money is ultimately borne by consumersCarriers may find a mechanism to reduce

repo cost through collaboration

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Ground work is done17 mega carriers are members of alliance

agreements that facilitates equipment interchange

They represent approximately 82% of the total container trade

If carriers form a Virtual Container Pool (VCP) empty REPO cost may be reduced

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Carrier Agreements that facilitate Container exchange(US/North Trade for 2006 through 2010)

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Number Name Members

1 11375 Trans-Atlantic Conference Agreement ACL, Maersk, MSC, NYK, OOCL

2 11280 Star West Joint Service Agreement Albion, Overseas

3 11854 Greensea Inc. Joint Service Agreement Green Chartering,

4 11982 Evergreen Line Joint Service Agreement Evergreen, Hatsu, Italia

5 11602 The Grand Agreement II HL, NYK, OOCL

6 11960 New World Agreement APL, Hyundai, MOL

7 10955 ACL/H-L Reciprocal Space Charter and Sailing Agreement ACL, HL

8 11415 MPA Space Charter and Sailing Agreement ACL, MSC

9 11705 Grand Alliance-CP Ships Atlantic Agreement CP, HL, NYK, OOCL, PO

10 11794The COSCON/KL/YMUK/ Hanjin Worldwide SlotAllocation and Sailing Agreement Cosco, HJ, KL, YM

11 11867Norasia/GSL Round The World Service AgreementCMA CGM/CSCL/ELJSA Cross Space Charter, Gold, Norasia

12 11955 Sailing, and Cooperative Working Agreement China, CMA, Evergreen

13 11912 Dole-HSud Space Charter and Sailing Agreement Dole, HSud

14 11927 ITS/Hatsu Marine MUS Slot Charter Agreement Italia, Hatsu

Source: Federal Maritime (2012)

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Number Name Members1 11602 The Grand II NYK, OOCL, HL 2 11435 APL/HLAG Space Charter Agreement APL, HL3 11794

COSCO/KL/YMUK/ HANJIN/Senator Worldwide SlotAllocation & Sailing Agreement K-Line, Yang Ming, Hanjin, COSCO

4 11885

CMA CGM/MSC Reciprocal Space Charter, SailingAnd Cooperative Working Agreement

CMA CGM, MSC

5 11940

Cross Space Charter, Sailing And Cooperative Working Agreement CMA CGM, Shipping

6 11948

CMA CGM/CSCL Cross Space Charter, Sailing And CWA-Central China/US West Coast, Yang Tse/ AAC2 Service Shipping, CMA CGM

Source: Federal Maritime (2012)

Carrier Agreements that facilitate Container exchange (Transpacific Trade For 2006 Through 2010)

VCP -Virtual Container PoolVCP is a strategic CIM solutionIt can operate globally while keeping

carriers’ individual identities intactEach carrier may continue to control its own

inventories and exchange containers subject to mutual agreement on case by case basis

As the pooling is done virtually the physical storage of containers will not be a constraint

VCP expands the inventory of a carrier beyond its existing individual capacity

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Evaluating Opportunities to Exchange containers in Sri Lanka (based on 2014 statistics)

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Container Type& Size

Imbalance when Work alone

Imbalance when Collaborate

Opportunity to Exchange

Saving @ $ 500 per REPO

20'GP 158221 156285 01.20% $968,000 40'GP 10486 794 92.40%$4,846,000 40'HC 44586 27842 37.60%$8,372,000 45'HC 2155 101 95.30%$1,077,500 20'&40'RF 5975 4791 19.80% $592,000

Total 221423 189813 14.30%$15,855,50

0

Source: Industry data

The way forward……..Create the industry awareness regarding the

opportunities to exchange containersEncourage scholars to do scientific research

to find a container exchange mechanismCarriers should evaluate the provisions to

exchange containers in the existing alliance agreements and implement them

Develop an software application to help Container Exchange decisions

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First article on Evaluation of expected payoff through container interchange was published in the International Journal of Logistics Systems and Management –Switzerland in 2015

Container Exchange Model was first presented at the Global Port Research Alliance held in May 2015 in Hong Kong

The idea of Virtual Container Pool will be presented at the Colombo International Maritime Conference on 26th this month in Colombo

Container Inventory Management Matrix (6 ‘R’ Model) will be introduced at the  14th World Conference on Transport Research that will be held in Shanghai in 2016

The 3F Model and Multidimensional Index for Container Inventory Management will be introduced in 2016

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My contribution to this concept….

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