addressing the transport and trade logistics challenges of ... · liner shipping connectivity and...

Ad Hoc Expert Meeting on

Addressing the Transport and Trade Logistics Challenges of the

Small Island Developing States (SIDS): Samoa Conference and Beyond

11 July 2014

Liner shipping connectivity and transport costs in SIDS

Presentation by

Mr. Jan Hoffmann Chief, Trade Facilitation Section, Trade Logistics Branch

Division on Technology and Logistics, UNCTAD

This expert paper is reproduced by the UNCTAD secretariat in the form and language in which it has been received.

The views expressed are those of the author and do not necessarily reflect the views of the UNCTAD.

1

Jan.Hoffmann@UNCTAD.org, Geneva, July 2014

Liner shipping connectivity and

transport costs in SIDS

Transport

costs

Trade

Connectivity

2

Lower transport costs

-> More trade

-> Economies of scale

-> Lower transport costs

More income to finance trade and transport facilitation

-> Better trade facilitation

-> More Trade

-> More income to finance trade and transport facilitation

3

Better services

-> More trade

-> More competition

-> Better services

The challenge for SIDS:

• Avoid a vicious circle, where high

transport costs and low service levels

discourage trade, which will further

endear transport and reduce

connectivity…

• Instead: Initiate a virtuous circle

4

Transport

costs

Trade

Connectivity

Freight costs % of import value

Source: UNCTAD estimates. Data: 10 year moving average

5

Freight costs % of import value

Source: UNCTAD estimates. Data: 10 year moving average. Note: unweighted average for SIDS groupings

Differences in maritime freights depend on…

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Differences in maritime freights depend on…

1) Distances

2) Economies of scale

3) Imbalances

4) Type & value of goods

5) Competition

6) Port characteristics

Differences in maritime freights depend on…

1) Distances

2) Economies of scale

3) Imbalances

4) Type & value of goods

5) Competition

6) 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

Fre

igh

t ra

teFreight rates and Distance in the Caribbean

UNCTAD Transport Newsletter, 1st Quarter 2007

Differences in maritime freights depend on…

1) Distances

2) Economies of scale

3) Imbalances

4) Type & value of goods

5) Competition

6) Port characteristics

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Sample costs 1100

TEU

4250

TEU

8750

TEU

13000

TEU

Construction costs

million USD

28 77 135 167

Construction costs

USD 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

Differences in maritime freights depend on…

1) Distances

2) Economies of scale

3) Imbalances

4) Type & value of goods

5) Competition

6) Port characteristics

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Cargo imbalances Merchandise Imports and Exports as % GDP

Region/Country Imports Exports Region/Country Imports Exports

Caribbean Pacific

Antigua and Barbuda 45.8 5.7 Fiji 62.7 24.1

Bahamas 42.3 12.3 Kiribati 57.1 5.7

Barbados 41.9 13.5 Marshall Islands 76.8 19.2

Dominica 41.7 7.3 Micronesia (Federated States of) 64.4 10.7

Grenada 43.7 4.6 Nauru na na

Jamaica 45.4 10.8 Palau 61.3 3.1

Saint Kitts and Nevis 30.0 5.9 Papua New Guinea 35.1 41.5

Saint Lucia 56.5 15.3 Samoa 50.5 11.1

Saint Vincent and the Grenadines 49.1 6.2 Solomon Islands 49.6 46.6

Trinidad and Tobago 40.3 56.2 Timor-Leste 28.6 0.9

Tonga 44.5 3.4

Indian Ocean Tuvalu 62.7 0.8

Comoros 50.3 4.2 Vanuatu 37.5 7

Maldives 69.9 14.1 West Africa

Mauritius 49.6 25.3 Cape Verde 41.9 2.9

Seychelles 70.9 44.0 Sao Tome and Principe 53.2 4.2

Source: World Bank, World Development Indicators

Cargo imbalances

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Differences in maritime freights depend on…

1) Distances

2) Economies of scale

3) Imbalances

4) Type & value of goods

5) Competition

6) Port characteristics

Merchandize type and value

High value, perishable goods…

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Differences in maritime freights depend on…

1) Distances

2) Economies of scale

3) Imbalances

4) Type & value of goods

5) Competition

6) Port characteristics

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

Fre

igh

t ra

te

Competition between carriers

Case study Caribbean

UNCTAD Transport Newsletter, 1st Quarter 2007

12

Differences in maritime freights depend on…

1) Distances

2) Economies of scale

3) Imbalances

4) Type & value of goods

5) Competition

6) Port characteristics

Dependent variable:

maritime transport costs per tonne of containerizable cargo

Better port infrastructure

reduces 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) port efficiency

reduces maritime transport costs

Dependent variable:

maritime transport costs per tonne of containerizable cargo

Port privatization in the EXPORTING country

reduces maritime transport costs

Port reformPort reform

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Dependent variable:

maritime transport costs per tonne of containerizable cargo

Trade facilitation in the IMPORTING country

reduces maritime transport costs

Port reformPort reform

Dependent variable:

maritime transport costs per tonne of containerizable cargo

Better connectivity between ports/

more competition among carriers

reduces maritime transport costs

Port reformPort reform

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Transport

costs

Trade

Connectivity

Introducing containerization

leads to more trade

(Bernhofen et al, 2013)

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Containerization of trade, and

access to containerized transport

services are important determinants

of SIDS’s trade competitiveness

How can we measure this?

“Maritime connectivity”

UNCTAD’s “Liner Shipping Connectivity Index” (LSCI):

An indicator for access to liner shipping services

Components:

• Ships

• TEU capacity

• Shipping companies

• Services

• Maximum ship sizes

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Higher Liner Shipping Connectivity

leads to lower trade costs

(Arvis et al, 2013)

UNCTAD’s LSCI

available on-line

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A global trend towards concentration

A global trend towards concentration

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Determinants of maritime connectivity

• Geography

• Trade volumes

• Port characteristics

Transport

costs

Trade

Connectivity

22

Jan.Hoffmann@UNCTAD.org, Geneva, July 2014

Liner shipping connectivity and

transport costs in SIDS