[email protected] geneva, may 2011 the demand and supply of international transport services:...

[email protected]

Geneva, May 2011

The demand and supply of The demand and supply of international transport services: international transport services: The relationships between trade, The relationships between trade, transport costs and effective access to transport costs and effective access to global marketsglobal markets

TransportTransportcostscosts

TradeTrade

TransportTransportServicesServices

More income to finance trade facilitation

-> Better trade facilitation-> More Trade-> More income to finance

trade facilitation

Ang

ola

Lower Transport Costs-> More trade-> Economies of scale-> Lower Transport

Costs

Better services-> More trade-> More income to

finance infrastructure-> Better services

Suez

Can

al

More trade-> More shipping supply-> More competition-> lower freights-> More trade

The challenge:The challenge:

• 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

Transport CostsConnectivityTrade

Geneva, May [email protected]

Trends in transport costsTrends in transport costs

Freight rates in January 2011Freight rates in January 201140’ container from Dalian to • DUBAI 1300 • COLOMBO 1600 • B.ABBAS 1400• CALCUTTA 2000• KARACHI 1600 • UM QUASER 2600 • PORT SUDAN 2500• ANTWERP 2500• TEMA 3500• SANTOS 3600• VALPARAISO 3600

Source: [email protected]

Freight costs in percent of imports

0

5

10

15

20

25

30

35

1980 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

Haiti

Jamaica

Mexico

Chile

Argentina

Antigua and Barbuda

Source: UNCTAD

Freight costs Freight costs for for countriescountries

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

Freight as % of Freight as % of commoditiescommodities value value

UNCTAD, Review of Maritime Transport

15Source: OECD (Jane Korinek), data for 2007; selected countries (mostly OECD members)


TradeTradeVolumesVolumes

TransportTransportServicesServices?

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

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


1) Distances2) Economies of scale

3) Imbalances


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

22

• http://www.youtube.com/watch?v=fxFs5LpDsQU&NR=1

http://www.youtube.com/watch?v=fxFs5LpDsQU&NR=1

Economies of ScaleEconomies of Scale

CRS, 25 April 2010

Port operationsPort operations

• 12 US$ per move savings with global operatorsDrewry

ImbalancesImbalances

CI-Online 10 May 2010



4) Type & value of goods

5) Competition6) Port characteristics

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%



4) Type & value of goods5) 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

Frei

ght r

ate

Source: Hoffmann, Wilmsmeier, IAME 2007

Competition between carriersCompetition between carriersCase study CaribbeanCase study Caribbean

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

Port reformPort reform• Difference between

“best” and “worst” case in Latin America: 25% of worst case

Dependent variable: maritime transport costs per tonne of containerizable cargo

Port reformPort reform

Wilmsmeier, Hoffmann, Sanchez, in: Porteconomics, 2006


Better Better port infrastructureport infrastructure reduces maritime transport costsreduces maritime transport costs




Better (perceived)Better (perceived) port efficiencyport efficiency reduces maritime transport costsreduces maritime transport costs



Better Better general transport infrastructuregeneral transport infrastructure does NOT reduce maritime transport costsdoes NOT reduce maritime transport costs


Port privatizationPort privatization in the EXPORTING country in the EXPORTING country reduces maritime transport costsreduces maritime transport costs



Trade facilitationTrade facilitation in the IMPORTING country in the IMPORTING country reduces maritime transport costsreduces maritime transport costs



Better Better connectivityconnectivity between ports/ between ports/ more competition among carriersmore competition among carriersreduces maritime transport costsreduces maritime transport costs


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




?

Transport Costs ConnectivityTrade


Trade grows faster than GDPTrade grows faster than GDP

Source: JH based on data from UNCTAD and from WTO

Elasticity Trade/GDPElasticity Trade/GDP

Source: UNCTAD

GDP

Exports

-15

-10

-5

0

5

10

15

1971 72 73 74 75 76 77 78 79

1980 81 82 83 84 85 86 87 88 89

1990 91 92 93 94 95 96 97 98 99

2000 01 02 03 04 05 06 07 08 09

2010

per cent annual growth

Exports = 2.5 GDP - 3

For a country’s GDP to grow, e.g., 5% For a country’s GDP to grow, e.g., 5% trade “needs” to grow 7 – 12% trade “needs” to grow 7 – 12%

Comercio crece 2Comercio crece 2--3 veces 3 veces mmáás rs ráápido que PGBpido que PGB


Comercio crece 2Comercio crece 2--3 veces 3 veces mmáás rs ráápido que PGBpido que PGB


Trade grows 2Trade grows 2--3 times 3 times faster than GDPfaster than GDP

Source: J H based on data from UNCTAD and from WTO

Elasticity containers/TradeElasticity containers/Trade

GuayaquilGuayaquilContainerizationContainerization… … HamburgHamburg

Tierra del Fuego in ChileTierra del Fuego in Chile

… … the world’s driest desertthe world’s driest desert

… … GuayaquilGuayaquil

……BeirutBeirut

… … LuandaLuanda

LimaLima

… … Bandar AbasBandar Abas

… … FranceFrance

……Suez CanalSuez Canal

……Panama CanalPanama Canal

Anyhow: e.g. intermodal Anyhow: e.g. intermodal connections in Mexicoconnections in Mexico

… … Mekong RiverMekong River

… … LahoreLahore

Anything: UN cargo in Tanzania

Anything: Anything: e.g. port library in Rio de Janeiroe.g. port library in Rio de Janeiro

Anything: Anything: e.g. shopping in Kabule.g. shopping in Kabul

Containerization of trade, and access Containerization of trade, and access to containerized transport services to containerized transport services

are important determinants of are important determinants of countries’ trade competitivenesscountries’ trade competitiveness

How can we measure this?

““Maritime connectivity”Maritime connectivity”

UNCTAD’s “Liner Shipping Connectivity Index” (LSCI): An indicator for the supply of liner shipping services

Components:

• Ships • TEU capacity• Shipping companies• Services• Maximum ship sizes

BarbadosBarbados

www.ci-online.co.uk

http://www.ci-online.co.uk/

TrendsTrends Maximum vessel size

TEU

Vessels

Services

Companies

70

80

90

100

110

120

130

140

150

160

170

2004 2005 2006 2007 2008 2009 2010

We have reached a peak We have reached a peak

Until very recently:• In spite of the (global) process

of concentration, the number of companies providing (local) services increased due to the expansion of global players into (so far) new markets

We have reached a peak We have reached a peak Today:• As global players are (now)

covering all regions of the world, mergers among them (start to) lead to a reduction of competition on individual routes.

TrendsTrends“The long term picture as regards the global liner shipping network appears to be mixed. On the positive side, larger ships and a higher total TEU carrying capacity can cater for the growing global trade in manufactured goods, and economies of scale help to reduce costs. On the other hand, the larger ships also pose a challenge to smaller ports as regards the necessary investments in infrastructure. The network as such is not expanding in terms of companies or services. The trend seems to be towards lower costs but also towards less choice for shippers.”

Direct connectivity?Direct connectivity?Out of 162 x 161 pairs of countries: How many are connected by direct

services?

Source: UNCTAD , based on data from Containerization International

What can we do with this dataWhat can we do with this data Observe trends in the shipping network,

levels of competition, and individual countries’ access to liner shipping services.

Use the data as explanatory variable in gravity models

Use the data as explanatory variable for other models about transport costs and trade competitiveness

Try to explain the data, i.e. what are the determinants of “connectivity” (development, trade volumes, geography, port efficiency…)

““A comparison of the LPI and the LSCI”A comparison of the LPI and the LSCI”

Partial correlation coefficientsPartial correlation coefficients

Causalities?Causalities?• Better perceived logistics

performance-> more attractive for carriers -> higher LSCI

• Better liner shipping connectivity-> better services -> higher LPI

• More trade-> higher LSCI + LPI-> More trade




?

Determinants of maritime connectivityDeterminants of maritime connectivity

• Trade volumes (+)

• Distance (-)

• GDP per capita in exporting country (+)

• Port infrastructure (+)

Transport Costs Connectivity Trade



TradeTrade


?

Gravity modelGravity model

• Participation of country B in global imports is the basic determinant of the share of country A’s exports that are destined for country B.

• Neighbouring countries can be expected to trade more with each other than those that are not neighbours.

Gravity model – what about distance?Gravity model – what about distance?

• Distance / trade: negative correlation (as expected)• But: the parameter for distance is not statistically

significant if other variables are incorporated that capture the supply of shipping services and transport costs.

• Instead of distance: – number of liner shipping companies that provide direct

services between a pair of countries.– Existence of direct liner shipping services.– Increase of the freight rate per TEU (twenty foot

equivalent unit) by 1000 USD: Reduction of the share of country A’s exports to country B of almost half a percentage point.

In Conclusion…In Conclusion…

In Conclusion…In Conclusion…

What I wanted to do in this first lecture:

• Present research on transport costs• Sell our “Connectivity Index”• Invite cooperation in future research

Transport Costs Connectivity Trade


[email protected] geneva, may 2011 the demand and supply of international transport services:...

Documents