2011 mmui maersk line business environment


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Environment analysis for Maersk Line

MMUI Jakarta 2011

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2011 mmui maersk line business environment

  1. 1. Analysis of Maersk LineBusiness Environment Adeline Halim Kesuma (1006792735) Amelia Sudono (1006792943) Edwin Suparman (1006793315) Elly Wintania (1006793372) Pande Ketut Yodi (1006794103)
  2. 2. ExcerptMaersk Line, as one of the leading liner global shipping company, facesincreasing competition amongst the shipping lines. To stay relevant in theindustry, Maersk will have to ensure that it is able to capture the highestmarket share by means of pricing strategy, routes optimization, and fleetchoice.This paper attempts to discuss the global environment (i.e. external) effectson the Maersk Line global business. It will discuss the different factors suchas global market condition, environmental pressure, demands in Maersk Linestrategy. Ultimately, this paper will also analyze how piracy should be a factorof consideration in the current situation to strategize in the market.
  3. 3. ABOUT MAERSK LINEMaersk Line is reputedly one of the biggest and most profitable shipping lines in theworld1. It owns 198 vessels and operates more than 500 vessels worldwide, handling1.9 million TEUs2 yearly from all the regions. The sheer capacity of the company isbetter illustrated below, showing the global network of the Maersk Line. Source: Maersk Line (adapted)In general Maersk Line routes have 4 major routes: Trans-Atlantic (i.e. Americas –Europe), Trans-Pacific (i.e. Asia – America), Europe – Far East, Africa – Mediterranean.With such a vast network, it is no surprise and expected that a change in globalenvironment will have an effect in the business of Maersk Line.To understand more on the global environment consequence and how they are relatedto the company, we should look at the corporate business strategy. Maersk Line paysattention in its business to the fleet type and size as well as the route optimization asillustrated in below. The decision of fleet size and type will give birth to a verticaldiversification. This is exemplified form the acquisition and operation of harbours underAPM Terminal (which is under the same AP Moller – Maersk Group) and also horizontaldiversification in its supply chain services such as inland haulage and documentprocessing i.e. door-to-door services offered by Maersk Line.Obviously these decisions will indirectly affect the market price set by the company inlieu of the competition. The decision of the fleet type and size is crucial in this case, asthe correct vessel type and size will ensure Maersk to have the lowest cost while stillmaintaining the operating profit level expected by the shareholders.
  4. 4. The decision on the fleet type and size is obviously affected by the global environmentfactors such as the technological availability currently, the ever-increasing pressure ofbeing environmentally aware of ecological consequence (i.e. the issue of globalwarming, for example), and whether there is an actual need for long-haul services bythe customers. These three external factors will be the deciding aspects in the choice offleets.On the other hand, the global business environment the in shipping industry affects thepolicy of route optimization. The choice of route will be related to the market demandfrom the consumers of the need for the inter-connectivity between the two areas.However, we also need to look at the increasing movement towards market integrationin the recent years. The growth of manufacturing powerhouse, such as China andVietnam, and the movement of specific services to a certain area, such as call centersin India, are some examples of how economically, the world has flattened. Also marketdemand will be affected by the growth of the overall economy as well. Suchenvironmental factors will be discussed in detail in the next parts of this paper. Market Integration Technology and Market Growth Long Haul Demand Environment Market Demand Fleet Type & Route Size Optimization PRICE Horizontal / Vertical Diversification Maersk Line Business Strategy
  5. 5. WORLD ECONOMICAL STRUCTUREInternational TradeEconomic growth, which is evidenced by the increasing volume of global trade, hasbeen a great contributor to the increasing demand for global maritime transportationservices. This favorable condition is especially advantageous for a shipping line whichoffers efficiency in terms of cost i.e. Economies of scale is a crucial strategy to gainmarket power among competitors.According to UNCTAD (Review of Maritime transport in 2005), 3.8% increase of worldoutput in 2004 contributed to a significant increase of world seaborne trade where itreached 6,76 billion tons or 4,3% increase from the previous year.In the last two decades container shipping industry has been the fastest growing sectorof the maritime sector compared to bulk shipping and others. With annual growtharound 10%, container traffic is accounted for more than 70% of international seabornetrade in terms of its cargo value.Containerization like other industries has a business cycle. Recent studies haveindicated that the container industry has reached its maturity stage since it hasexperienced accelerated growth rate in the past 10 years.However, it will be followed by the declining growth rate where it entered the maturitystage. This will create a limited potential growth in terms of market scope and it willforce the container industry to find niche market opportunities such as commoditiesproducts that are commonly transported by bulk shipping. Fluctuation and rises incommodity prices and bulk shipping rates, along with the declining cost of containershipping have made containerization as a more favorable option with lesser cost andrisks.Under the assumption of containerization maturity stage in the figure below, theglobalization process will slow down since comparative advantageous has been fullyutilizied in the manufacturing sectors.The recent financial crisis in 2008, which has caused global recession and declininginternational trade volume (U.S. has suffered from the recession and lost its purchasingpower to import goods from China), will highly contribute to the declining demand incontainer shipping services.
  6. 6. Source: International Transport Forum 2010, Maritime Transportation: Drivers for The Shippingand Port IndustriesDespite the global recession in end of 2008, shipping industries have proven to striveand recovered significantly in 2010. With an outstanding growth rate of 14.5%, theyhave covered the loss suffered in 2009 when the overall ports output has declined to8.9% for the first time ever recorded in the industry history.The recovery was mainly contributed by significant growth of China’s ports, which grewby 17.9% in 2010, followed by South American ports that grew by 17.6%. As of today,nine of the world’s Top 20 ports is located in China. The growth rate is expected toreturn to its moderate level by 8.4% increase in 2011 with China’s port leading theoutput gains.Utilization of the container fleet has also recovered in 2010, which can be shown by thefigure below where the idle containership fleet has remained fairly steady at 1.9% of thetotal fleet. Number of smaller size ships that are staying idle has declined significantly,as the demand for smaller size ship has been replaced with the larger size ships. Thenumber of idle units is estimated to decline further in the coming periods. Suchconditions can be seen in the figures below.
  7. 7. Source: Alphaliner Newsletter No. 14 – 2011 Source: Alphaliner Newsletter No. 09 – 2011Maersk Line, as a global transportation company, need to be consciously aware thatany change in global economic conditions will directly or indirectly affect the way theydo the business. As shown earlier, a slight dip in the market can represent a magnifiedconsequence in the container business, or not. On the other hand, a bullish economiccondition may or may not contribute positively to the company’s bottom line. The choiceof routes is important in this case, to be able to spot and envisage the potential gain orloss due to global economic conditions.
  8. 8. Geographical StructureRegional GrowthBased on the increasing global trade volume, which has been proven by the growingrate of container utilization, we can conclude that the economy has recovered, andgrowing to its steady pace. This condition should be sustained with a more efficient andestablished transportation system. The figure below suggests the possible main routeswhich will be served by the global shipping carriers. Source: International Transport Forum 2010, Maritime Transportation: Drivers for The Shipping and Port IndustriesCircum Equatorial Route has high frequency and large trade volume along the route.Massive investment in ports especially in circum equatorial route to serve the largesized vessels is critical. From the figure above it is shown that more ports in Asia aregetting bigger compared to other regions. The expansion of China ports is instigated bythe increasing trade volume of China’s products to other countries. Multinational companies has constructed their production chains and assemblingprocess that exploit the comparative advantage of East Asian countries in terms of moreaffordable labor and material cost. Foxconn, one of the leading electronic assemblingand manufacturing company in China has been in contract to serve Apple, Dell, Sonyand other leading global electronic brands. Nowadays, they even reallocated theirmanufacturing plants and infrastructure to inland areas for the compensation of lowerlabor cost, rent expense and tax subsidies from the local government.
  9. 9. Source: US Department of Transportation, Bureau of Transportation, Research and Innovative Technology AdministrationThe extensive flow of imported goods from China to other countries especially UnitedStates has created an imbalance trade between both parties. In addition to that, the lowcurrency exchange rate of China to US dollar has also thrusted the flow of importedproducts from China. Although most people perceived this trade surplus as a good signfor China’s economic growth, the trade imbalance has triggered a question among theeconomists whether China is able to maintain its power in the global economy andprevent economic turmoil if US and other countries decided to discontinue the import ofChina’s goods.In November 2000, China-ASEAN Free Trade Area was established in order toenhances the close economic and trade relations between the China and countries inASEAN, and contributes to the Asian economic development and the world at large. Inthis scenario, China holds a key role in the contribution of regional integration sincemore than half of the total trade of East Asia has been carried out within China regioncurrently. The integration process could be implemented in several ways such assimplification of application procedures for the Certificates of Origin (C/O) and theCustoms clearance for companies within both regions. China also decides to speed upthe bilateral negotiations on health, plant health, technical barriers and trade facilitationto promote trade liberalization and economic and technical cooperation. It is undeniablethat East Asia is gradually moving toward regional economic integration.
  10. 10. Regional IntegrationAnother factor, which should be considered by Maersk Line, is the shared functions andco-dependence between economies within the region.In the past decades, the container terminal industry witnessed horizontal and verticalintegration processes. Mergers and acquistions are the most obvious, however, weshould also look at the assimilation of inland depots, conventional ports and harbours,train network, intra regional terminal network, etc. The figure below shows the differentphases of evolution of ports.Source: International Transport Forum 2010, Maritime Transportation: Drivers for The Shippingand Port IndustriesOn this case, let us zoom into more detail on Asian region. The emergence of majortranshipment3 hubs in Asia such as Singapore and Hongkong, gives the evidence thatthe face of Asian transportation has evolved rather significantly. However, is Asiamoving towards regionalization of transport industry? We are of an opinion, unlikely atleast for now. Regionalization should be supported by a good network assimilation andconnectivity of various mode of transportation. A link between an harbour with an inlanddepot, for example, must be supported by good infrastructure of roads and railways.
  11. 11. The fact that Asian infrastructure is notoriously imbalanced in terms of development,hinders the effort to regionalize Asia4.One way to measure the integration of one country to the shipping network (i.e. theconnectivity to maritime shipping and as a measure of trade facilitation) is by using TheLiner Shipping Connectivity Index (LSCI)5. It reflects the strategies of container shippinglines seeking to maximize revenue through market coverage.The countries that have the highest LSCI values are actively involved in trade. Namely,the export-oriented economies of China and Hong Kong rank firsts, which thetransshipment hub of Singapore ranking third. Large traders such as the UnitedKingdom (6), Germany (8) the United States (9) and Japan (15) also rank among thetop 15. Countries such as Malaysia (10), Spain (11), the United Arab Emirates (16),Egypt (17) and Oman (19) also rank high because of the major transshipment functiontheir ports perform.Do look at the map below showing the amount of traffic handled by different major portsaround the world.Source: International Transport Forum 2010, Maritime Transportation: Drivers for The Shippingand Port Industries
  12. 12. Unsurprisingly, Asian region handled the most TEUs. This is contributed by 2 mainfactors: population (hinterland size) and Asian role in global economy6. Most of thebiggest global ports are located in Asia.However, it is technically and economically impossible to establish direct shippingconnections between every country7. There may not be enough volume or the portsmay be far too distant from one another. Unlike bulk shipping, container shippingnetworks are established. Hence, the rise of transshipment hubs as mentioned earlier.Let us take the example of Singapore ports. 92% of Singapore’s traffic is transshipment.It is amazing that a country with residence of about 4 million people can generate trafficof more than 28 million TEUs as of 2011. A rising star such as Singapore is notnecessarily surprising, considering the limitation of Asian infrastructure as mentionedearlier. However, the point is that the rise of a port to be a major transshipment hubsuch as Singapore should be considered by Maersk.The Case of Route OptimizationWe can see earlier that there are external factors such as the increased co-dependenceof inter-regional trade, imbalances of trade, emergence of major hubs, and the potentialof regionalization. These factors, obviously, will influence Maersk Line to decide andplan on the most optimized route to ensure: enough cargoes from each stops,connection of ‘crucial’ areas to ensure market presence, and the economics of cost.
  13. 13. SUSTAINABLE DEVELOPMENTContribution of Shipping Transportation to EnvironmentDespite the fact that shipping is the most efficient mode of transportation compared totrucks or airplanes, it is unarguable that ships also produce a substantial amount ofCarbon dioxide emissions and other greenhouse gases to our environment8.The figure below shows Carbon Dioxide emissions from global shipping activities whichare estimated to account for 1.6 per cent to 4.1 per cent of world Carbon Dioxideemissions from the fuel combustion.Source: UNCTAD, based on IMO 2000 Updated Study on Greenhouse Gas Emissions from Ships, 2008The increased concentration of Carbon Dioxide in the atmosphere has been the majorcontributor to the increased climate temperature change, which is known as the globalwarming effect. To ensure that the increase in temperature does not exceed the normallimit, the concentration levels of Carbon Dioxide in the atmosphere should be stabilizedbetween 350–400 ppm, where emissions should peak by 2015 and decline thereafter.In addition to that, over 90 percent of world trade is carried across the oceans by some90,000 marine vessels. This condition implies that global shipping activities contributesignificantly to Carbon Dioxide emission. In fact, if global shipping activity is comparedas a country it would be the sixth largest producer of greenhouse gases following theUnited States, China, Russia, India, and Japan as illustrated in the figure below.
  14. 14. Source: Oceana Shipping Reports: Shipping Impacts on ClimateAlthough emissions from global shipping activities are significant, ships with larger sizehave good record in fuel efficiency and environmental friendliness than other modes oftransportations.The table below illustrates that sea transportation is by far the most efficient way ofcargo transportation in energy consumption. It also shows, expectedly, that largevessels are more efficient than smaller vessels. The table also indicates that shippingtransportation has room for improvement in terms of SOX, NOX and PM9. Source: Network for Transport and Environment
  15. 15. On a per ton kilometre (km) basis and ship sizes, Carbon Dioxide emissions fromshipping are lower than emissions from other modes of transportation. As shown below,emissions from railway transportation could be 3 to 4 times higher than emissions fromtankers. While emissions from road and air transportation could, respectively, be 5 to150 times and 54 to 150 times higher. Equally, in terms of fuel consumption (kilowatt(kW)/ton/km), a container ship (3,700 twenty-foot equivalent units (TEUs)), for instance,is estimated to consume on average 77 times less energy than an aircraft (Boeing 747-400), about 7 times less than a heavy truck and about 3 times less than rail10. Source: Maersk Lines Environmental Report 2007Evolution of Container ShipsDue to increasing global trade volume, shipping carriers have continuously modified thesize of their vessels to conform to the economies of scale strategy. By having largervessels, they will be able to optimize the fuel consumption, which ultimately reducestheir operating cost.Fuel cost effeciency is very crucial in the shipping industry since the oil price trend isalways increasing over the time and fuel cost approximately accounts for 50% of thetotal operating shipping cost. The figure below shows that the dimension of vessels hasalmost doubled in the past 40 years.
  16. 16. Source: Port Technology International Issue 34The largest Maersk’s vessel until now is Emma Maersk with 11,000 TEUs capacity.Maersk has signed contract to build ten unit of Triple E , the world largest vesselwithcapacity of 18.000 TEU , 16 % greater than Emma Maersk, but lower in fuelconsumption, CO2 emmision, and unit cost11. All those are analogous to the naming ofTriple E, which stands for Economies of scale, Energy-efficient and Environmentallyimproved.Crane Size and Cost IncreasesWith the increasing vessel size, there is an increasing need for the size and quality ofequipments to serve them such as the quay cranes. However, evolution of the harborssize, equipment availability is not fast enough to follow the trend of vessel’s size.Also, any improvements require an extensive infrastructure capital cost. The tandem liftcrane approach12 requires considerable additional capital cost and potentially higherwharf expense either to build new or modify the existing structure. With largerequipments deployed, terminal operators will face a variety of costs such asmaintenance, fuel, and consumables. Hence, thorough business analysis from theoperators are needed preceding the investment. And this should be a concern andconsideration for Maersk to move into bigger vessels.Evoulution of capacity and cost of cranes from generations to generation can be foundon the figure below.
  17. 17. Source: Port Technology International Issue 35Previously, we have talked about how the Asian region is the busiest region in terms ofcargo globally due to the hinterland demand and the emerging role in manufacturing. Itwas also discussed that an increase in vessel size should be supported by the properinfrastructure. The figure below shows shipping density and hectare per port. Withrespect to that picture, shipping activity will be very high on the world’s busiest port,such as China’s ports. When big size container ship goes into this busiest port, it needsbigger cranes and also more hectares per port to handle the loading and unloadingactivity.The irony of this situation is of course the cause and effect of switching to a more fuelefficient vessel. No doubt that the bigger vessel will means better emission standardand fuel efficiency, but it comes at the expense of the need for more land to be clearedto serve those bigger vessels – the oxymoron of development.
  18. 18. Source: International Transport Forum 2010, Maritime TransportationEven though it is clear that the energy requirements for cargo transportation by Maerskvessels are lower per ton of cargo than any other mode of transportation and has thelowest overall impact on air quality as shown in the figure below. Maersk constantlyseek to identify and implement cleaner and more fuel-efficient means in order tomaximize energy efficiency and reduce air pollutions from their vessels. Source: www.maerskline.com
  19. 19. We can see very clearly how the pressure of being more environmentally conscious hasforced Maersk to reconsider of its assets (i.e. vessels). However, Maersk Line will alsoneed to be aware of the consequences of the choice of vessel is depending on theavailability of infrastructure and equipment to serve them. Emma Maersk in Singapore being served by 10 Quay CranesTechnology Solutions & OpportunitiesThere are some immediate technological solutions to solve the environmental concernfor Maersk available in the market. Perhaps the simplest of all is simply speedreductions.Speed reductions yield immediate and sizeable reductions in emissions and fuel costs.Emissions (such as COx, PM, NOx, & N2O) are directly proportional to fuelconsumptions. Thus, when ships travel at very high speeds, the fuel consumption andemission will be high.The IMO (International Maritime Organization) and Hapag-Llyod has done calculatedwith respect to the relation between ship speed, fuel consumption and emission. IMOshows that a speed reduction of just 10 percent across the global fleet would result in a23.3 percent reduction in emission. Hapag-Llyod found that slowing their ship speed byjust five knots, or 20 percent, resulted in savings of around 50 percents on fuel cost.
  20. 20. Source: Energy Information Administration and Bureau of Labor StatisticsGraph above indicates that oil price trend increases over the years. Ship speedreduction is unarguably one of the solutions to anticipate the increased fuel cost. Fromthe explanation above, reducing ship speed will reduce fuel consumption, thereforecutting the fuel cost.Hence, as speed reductions are not only the effective and easy way to reduceemissions but also can cut your fuel consumption, it does not only give benefitenvironmentally but also economically.Another problem for Maersk Line to be considered due to the speed reduction is thedelivery time of the cargo. Inevitably, reducing speed means more time travelledbetween destinations. This might or might not affect the consumers. Some time-sensitive cargo such as perishables or spare parts, might be affected due to the longersailing time. Maersk should consider the type of cargo served between two destinationsand consulting the related consumers before deciding to cut speed on certain routes.
  21. 21. Switching to Cleaner Fuels Can Reduce Emissions across the BoardMost of shipping company use low quality residual oil because of its low cost, around$550 per metric ton. Low quality fuel means high content of sulfur. The sulfur content ofresidual fuel is varying, but typically averages 2.5 percent.Switching to low sulfur fuels would reduce emission of fine particles, including blackcarbon, as well as carbon dioxide, nitrogen oxide, and nitrous oxide. Marine diesel oiland marine gas oil are example of cleaner fuel contain 0.5 percent sulfur and 0.1percent sulfur, respectively.Based on IMO (International Maritime Organization), the usage of marine diesel oil ormarine gas oil is summarized on the table below. Source: IMO (2000) and Winebrake, J. and Corbett, J. (2007)Thus, two simple steps are available for Maersk to alleviate the ecological impact due toits operations. Other steps such as cold ironing13, air cavity system, and hull designimprovement14 are available.From the above explanations, it is clear that the choice of fleet type and size are limitedby the technological availability in the market and the infrastructure constraints of theserving harbors.Undoubtedly, the market demand for long haul services will also drive Maersk inchoosing the most optimal type and size of vessels. However, we can see that with thegrowing pressure towards environmental protection, Maersk will be forced to be morefuel efficient and reduce emissions using the most effective and available technologycurrently. All these external factors will be the drivers towards Maersk’s goals.
  22. 22. Other Factors: Global Political Risk and PiracyWith the political instability heightening and the ever-changing map of global politicalrisk, it is becoming more crucial for businesses (specifically Maersk Lines in this case)to make a thorough assessment across all its global operations and investments, andplan accordingly on the future potential risk.It is no rocket-science that a continuing economic turmoil may impact significantly onthe on the levels of stability and political risk of the global businesses – which mayoutlast the recession15. In the recent times, we observed the political uprising ofnorthern African and middle-eastern countries (which were partially fueled by thewidening gap of the rich and poor). Let us take a look at the map below showing the2008 global political and piracy map16. Source: 2008 Economist Intelligence Unit Risk Briefing and various sourcesA quick look at the map shows that the Europe – Far East route is the most hazardousroute: passing countries with medium to high political risk countries, through the SuezCanal, and finally reached the Gulf of Aden – an area with an extremely high risk of(Somalia) pirates. Although this is not the only route affected, others such as MiddleEast – East Africa, or India – Central Africa routes bear the brunt as well.The effects on Maersk on this are two folds: Revenue and Cost.Let see a specific example of Libya. The recent western sanctions on Libya werealready hurting the shipping industry17. The traffic in and out of Libya definitely droppedquite substantially. London’s insurance market had added Libya into a high-risk areawhich adds to the war-risk premium on shipments. The domino effects will hurt trade
  23. 23. more. The market will reconsider the destination once the situation stabilized, and thiswill not be immediate. Hence, political instability forces Maersk Lines to reconsider theport of calls and analyze whether it makes business sense to stop or even pass acertain area. On the extreme-side re-routing might be needed.The effect of cost is clearly illustrated in the exposure of shipping line to piracy risk.Firstly, any vessel going through an area with high risk of pirates’ attacks will have toforego the slow-steaming option. This is obviously for security reasons. Hence, Maerskwill have to sacrifice the fuel-cost savings due to this. Secondly, If any vessel isattacked and held ransom, shipping line will normally want to get over it as quickly aspossible by paying the ransom. Any exorbitant ransom paid will still be better thanfreezing the vessel, causing the shipping line opportunity cost due to the loss ofbusiness and potential loss of business due to customers’ lack of confidence.The third effect is of the increased cost of insurance. Why the increase? To explain this,the figure below on the number of attacks for part of the year 2008 and 2009. The figureexplains the increasing threat of pirates’ attacks for part of year 2008 and 2009. Source: Lloyd 360°Global Insight on Global RiskIn fact, piracy insurance premiums are about 10 times what they were a year and a halfago — due entirely to the increased threat off Somalia18. Although insurance cost is nota large part of operational cost for shipping lines, such as Maersk (normally not morethan 3% of operational cost), it is still need to be monitored. With the increasing goal tofight piracy by all shipping lines, it is anticipated that the danger of piracy will be reducedin the future.
  24. 24. ConclusionsShipping carriers have invested heavily to absorb the rapid recovery from the weakdemand caused by economic recession in 2009. The growing international trade volumeis expected to contribute an increase of 8.4% annual growth of container throughput.This condition implies that, despite the maturity stage in container industry, the demandof container utilization as the main transportation mode is still significant.The rise of manufacturing sectors in Asian economic growth also enables a strongposition of Asian countries towards economic independency from Europe and Westerncountries, such as United States. Trend of regional integration especially in Asia regionhas created less geographical borders between regions. Small ports are being replacedby major ports, which finally emerged as transshipments hubs. Therefore, a thoroughanalysis to choose the most optimal routes that serves these major transshipment hubswill be a challenge for Maersk Line, to gain competitive advantages in the shippingindustry. On the other hand, Asia should strive to establish and improve a betterinfrastructure system and technology in ports, along with reliable inland transportationsystem. All these will ensure the regional integration can function more effectively. Maersk’s Volumes 2010 Source: Alphaliner Newsletter no 09 – 2011From the figure above, it is illustrated that 66% of the 2010 Maersk container volumebelong to long haul routes (comprising Asia-Europe, Trans-pacific, Trans-atlantic andOceania). Increase in long haul demand routes along with environmental pressure toreduce emissions has influenced the choice of Maersk Line’s fleet type and vessel size.The issue of security should always be included in the long-term goal planning ofMaersk Line. Looking forward, Maersk Line should continuously monitor the evolution ofglobal trade, technology, and consumers’ demand trend to constantly shape thecorporate strategy to achieve its objective.
  25. 25. NOTES                                                            1 Maersk Line recorded an operating profit of almost US$ 3 Billions in 2010, a great bounce from a loss ofalmost US$ 2 Billions in 2009 due to the crisis. Source: Alphaliner Newsletter No. 17/ 2011.2 Twenty-Equivalent-Units i.e. a unit measurement corresponding to a 20 feet container.3 Transhipments or ship-to-ship transportation is a term used in which cargoes are stored ‘in transit’.These cargoes will be distributed regionally using feeder or small intra-regional service to other smallerports.4 Asia’s trade competitiveness depends heavily on efficient, fast, reliable, and seamless infrastructureconnections. However, many parts of Asia are isolated economically as well as geographically. Whilesome of the existing infrastructure is world class, much of it is below average. Source: Infrastructure forSeamless Asia, Asian Development Bank 2009.5 The Liner Shipping Connectivity Index captures how well countries are connected to global shippingnetworks. It is computed by the United Nations Conference on Trade and Development (UNCTAD) basedon five components of the maritime transport sector: number of ships, their container-carrying capacity,maximum vessel size, number of services, and number of companies that deploy container ships in acountrys ports.6 The best estimate for Asian population is almost 4 billion people. Besides the hinterland size, hence thedemand for goods, Asian region is also known for the centre for cheap manufacture and fabrication. Thiscontributes the size of traffic going in and out of Asia.7 17% of all country pairs are directly linked, 62% of all country pairs need at least one transshipment,18.6% of all country pairs require two transshipments. Source: International Transport Forum Paper 2010.8 Source: Shipping Impacts on Climate: A Source With Solution, OCEANA, July 20089 Emissions standards are made to regulate the emissions of nitrogen oxides (NOx), sulfur oxides,particulate matter (PM), or carbon monoxide (CO).10 The Network for Transport and the Environment (NTM) data published in Environment, ContainerShipping Information Service, 10 January 2008. See also World Shipping Council (2008). Record FuelPrices Places Stress on Ocean Shipping. 2 May11 The Triple-E will produce 20 percent less CO2 per container moved compared to Emma Mærsk and 50percent less than the industry average on the Asia-Europe trade lane. In addition, it will consumeapproximately 35 percent less fuel per container than the 13,100 TEU vessels being delivered to othercontainer shipping lines in the next few years, also for Asia-Europe service. Source: www.maerskline.com12 A tandem lift crane approach involves lifting two 20-feett containers at the same time. Thus, doublingthe productivity of the equipment.13 Cold ironing is where vessels that are docking at ports will shut off their engines and plug into the portpower.14 Improving hull design to reduce fuel consumption and gas emission is done by reducing the frictionbetween the hull and the water. One of the most effective ways of doing that is to encase the hull in alayer of air, or bubbles. The other is air lubrication uses compressor to blow air under vessel.
  26. 26.                                                                                                                                                                                                  15 Llyod’s 360° Insight on Global Risk gave a detailed analysis on the effect of global recession on theincreased global risk as the recession intensifies. It opines that the global recession will increase theexpropriation risk of businesses. Although we do not out rightly object on the risk elevation contributed bythe economic turmoil, such somber view is not supported by us.16 The map shows the 2008 condition. Recently, due to political instability in some of the Middle East andNorth African countries, the map might change. However, the figure is still a representative look on thevolatility of European – Mediterranean – Middle East route.17 Source: Sanctions kill of Libya’s vital shipping trade, Reuters, 14 March 2011.18 Source: As Insurance Piracy gets pricier, Owners try guards, NPR, 8 May 2009.
  27. 27. ReferencesRodrigue, Jean-Paul. Maritime Transportation: Drivers for the Shipping andPort Industries. Paper Commissioned for the International Transport Forum,2010.-. Alphaliner Newsletter Issue No.09. 2011.-. Alphaliner Newsletter Issue No.14. 2011.-. United Nations Conference on Trade and Development Summary ofProceedings. United Nations, 2009.Harrould, Ellycia. et al. Shipping Impacts on Climate: A Source WithSolutions. Oceana, 2008.Rudolf III, C.Davis. Ship-to-Shore productivity: Can it keepup with mega-ship size increases? Part 1 and 2. Port TechnologyInternational, 2007.Bergsten, Fred. C. China and Economic Integration in East Asia: Implicationsfor the United States. Peterson Institute for International Economics, 2007Gaulier, Guillaume et al. China’s Integration in Asian Production Networksand Its Implications. Paper prepared for the conference “ Resolving NewGlobal and Regional Imbalances in an Era of Asian Integration”. Tokyo, 2004-. Maersk Environmental Report 2007. Maersk, 2007.Various Maersk Line presentations, Reports, and Internal Articles.Online sources:www.maerskline.comwww.wtrg.com