Looking inside the box: evidence from the containerization of commodities and the cold chain

Abstract

Conventional investigations about containerized transportation tend to overlook the goods being carried to focus upon the associated modes and terminals. Containerization is entering a new phase in its global diffusion and adoption by freight distribution systems. The emerging phase of containerization encompasses a complementarity with the commodity sector and the extraction of niche market opportunities to satisfy new demands. This phase is driven by a commodity-wise approach, which inherently creates an array of challenges. For instance, niche markets develop or disappear based on temporary market conditions, the balance of flows on trade routes, and the need for market size. Still, the nature of the commodities being carried is a fundamental element in the emerging containerization of commodities. This article aims at analyzing this emerging niche in the containerization process by ‘looking inside the box’. It particularly unravels the dynamics for a number of commodities and demonstrates which role the container fulfills in these commodity markets. The underlying factors that enable the growth or decline of commodity-based niche markets in containerization are discussed. It also looks at the dynamics of the specialized reefer market of cold chain logistics.

Notes

1. During the TOC Europe (Terminal Operators Conference) in Antwerp in early June 2011, Eivind Kolding—CEO of Maersk Line—unveiled the new mission for container shipping. Based on an investigation of customer’s requirements, the liner shipping industry should, according to Maersk, focus on three key factors: (a) on time performance/reliability; (b) ease of business (i.e., avoid complexity, increase transparency); and (c) environmental performance. These three aspects should be considered in a supply chain perspective.

2. Container shipping demand in 2010 was rebounding so fast after the crisis year 2009 that there were not enough containers available for Asia’s exporters during the peak season that runs from June to October (Wright 2010). During 2009, shipping lines and container leasing companies hardly ordered any new containers as market expectations were weak. Neither the shipping lines nor their customers had anticipated the unprecedented surge in demand in most trades. The container shortage was further exacerbated by labor shortages in Chinese container factories and slow steaming practices, which lower container round-trip time. Also in 2011, the problem of container shortages reemerged as the production of boxes lagged growing cargo capacity.

3. Many container lines have introduced new services on the routes between the southern and northern hemispheres that have traditionally been reefer vessel markets. In June 2009, the reefer TEU capacity on full container vessels was 16.7% of the total containership TEU capacity or equal to 2.19 million TEU. Maersk Line is operating ships on north–south services with up to 1700 plugs for refrigerated containers per vessel.