Shipping is indispensable

1. IMPORTANCE OF
SHIPPING IN
INTERNATIONAL
BUSINESS
Prof (Dr) Lalith Edirisinghe

2. "God must have been a shipowner,".
"He placed the raw materials far from
where they were needed and covered
two thirds of the earth with water”
-Erling Naess

3. Key words
Shipping
International business
23,992 TEU, Ever Ace largest container ship
in the world. length of 400 M, a width of 61.5
M draught 16 M,
Accommodates 28 TEU more than its
predecessor HMM Algeciras.

4. Source: Edirisinghe, L (2021) Ship, Port, and International Trade

5. Catamaran
Catamarans were invented by the
Austronesian peoples which enabled
their expansion to the islands of the
Indian and Pacific Oceans

6. Shipping Evolved
Source: Capt. Ajith Peiris (2019) Lecture at Dalian Maritime University

7. https://transportgeography.org/contents/chapter5/maritime-transportation/evolution-containerships-classes/
A) Early containerships. The first generation of
containerships was composed of modified bulk
vessels or tankers that could transport up to
1,000 TEUs. The first containership, the “Ideal-
X” was a converted World War II T2 tanker.
E) Very Large Containership (VLCS) and Ultra
Large Containership (ULCV). By 2006, the third
generation of post-Panamax containerships

8. Ro-Ro ships Heavy-lift carriers Oil tankers
Gas tankers Chemical tankers Passenger ships Reefer ships
Livestock carriers

9. Process of Shipping

10. International Business
Operates in more
than one country
Conducts
transactions of goods
and services at a
global scale
Large Firms
Foreign currency
earners
Mainly dominated by
multinationals from
developed countries
Access to the best
technological
facilities
Employing highly
skilled workers
Provide employment
to many people
Their employees
enjoy competitive
salaries and benefits
Quality products and
services cheaply due
to economies of
scale
https://financialyard.com/scope-of-international-business/

11. Canadian ship
owner
Panama Flag of
convenience
Russian ship
management
Chartered in
Ghana
Indian cargo
Destined to USA
Built in Chinese
Shipyard
Truly an
International
Business

12. Theoretical Context
SHIPPING
INTERNATIONAL BUSINESS

13. Commercial Shipping
◦ Freight & Shipping
1. Refers to a larger quantity of goods while shipping can refer to a smaller amount.
2. Freight denotes commercial purposes.
3. Not necessary via water/ships only; via land, water, or air is referred to as shipping.
◦ Bill of Lading
◦ A contract between a carrier and a shipper is known as bill of lading.
Carry articles intended to be transported to another state or country by
an individual or other business entity for the purpose of making a profit
or procuring customers.

14. International Trading
1. Economic transactions that are made between countries.
2. An exchange involving goods or services conducted between at least
two different countries.
3. The exchanges can be imports or exports.
a. An import refers to goods or services brought into the domestic country.
b. An export refers to a good or service sold to a foreign country.

16. Derived Demand in Economics
◦ The demand for transport is a derived demand
◦ It refers to demand for one good or service in one sector occurring as a result of demand from
another
◦ Users of transport are primarily consuming the service not because of its direct benefits, but
because they wish to access other services
◦ Freight shipping is an intermediate part of a process of production and that the demand
for shipping is a derived demand
◦ It is like the demand for raw materials or intermediate goods
◦ The demand is derived from the consumers' demand for the final product
Source: The Institute of Chartered Shipbrokers https://www.ics.org.uk

17. Source: Edirisinghe, L. (2021), page 50
How is Demand for Shipping Created ?

18. How is Supply for Shipping Generated ?

19. Economies of Scale in Shipping
Source: Edirisinghe, L. (2021), page

20. Trade structure by partner

21. Highlights of Shipping on International Business

22. Source: Review of Maritime Transport (2020)

23. Choke point
Source: Review of Maritime Transport (2019)

24. Freedom of the seas is a principle in the
international law and sea. It stresses freedom
to navigate the oceans.
Innocent passage is a concept in the law of the sea
SLNS PARAKRAMABAHU 22nd August 2019
SLNS PRATHAPA 11th June 2000

25. Development of Sea
Transport
Opportunity to Travel
Abroad
Discover Unseen
Resources
Act Against the
Disparity od Resource
Distribution in the
World
Transport Scarce
Resources to their
Country
Invade new
Lands to Use the
Resources that
are not found in
their Native
country
Create War & Establishing Colonies
Establishment of GATT (WTO) and Transform the
Cooperation through Trading Between Countries
International
Trade
Infrastructure
(Ports, Roads)
Technology
Derived Demand for
Low-Cost Sea
Transport
Trade Competition Based on Supply and Demand Mechanism
Monitoring & Control
through World Customs
Organization, World Bank,
International Maritime
Organization

26. International maritime trade, by cargo type, selected
years
(Million
tons
loaded)
Source: Review of Maritime Transport (2019)

27. The global health and economic
crisis triggered by the pandemic has
toppled the landscape for maritime
transport and trade and significantly
affected growth
prospects.
Amid supply-chain disruptions,
demand contractions and global
economic uncertainty caused by the
pandemic, the global economy was
severely affected by a twin supply
and demand shock.

28. International maritime trade in cargo ton-miles, 2000–
2020 (Billion ton-miles)

29. Source: Review of Maritime Transport (2019)
Development of international maritime trade and global output,
2006–2020 (Annual percentage change)

30. Source: UNCTAD
Global containerized trade, 1996–2020
(Million TEUs and annual percentage change)

31. Growth of world fleet by principal vessel type, 2014–2020
(Dead-weight tonnage and percentage change)
Source: UNCTAD

32. Ship Arrivals by Type in Sri Lanka (Annual Average)
Containers
86%
Conventional
1%
Other Cargo
10%
Repairs
1%
Bunkering
1%
Others
1%
Source: SLPA

33. Port Performance –Sri Lanka
Name/Location of Port 2014 2015 2016 2017 2018 2019
Colombo 3742 4197 4405 4329 4331 4198
Trincomalee 127 164 216 233 189 142
Galle 60 72 96 87 84 43
Kankasanthurei,Myliddy,Point
Pedro,Karainagar 34 32 25 63 59 11
Hambanthota 335 295 281 230 270 214
All ports in Sri Lanka 4298 4760 5023 4942 4933 4608
Colombo
88%
Trincomalee
4%
Galle
1%
Kankasanthurei,Myliddy,Poin
t Pedro,Karainagar
1%
Hambanthota
6%
Source: SLPA

34. 2011 2012 2013 2014 2015 2016 2017 2018 2019
EXPORT 260,047 265,039 256,396 269,931 263,363 270,561 277,563 290,223 303,070
y = 4843.5x + 248693
220,000
230,000
240,000
250,000
260,000
270,000
280,000
290,000
300,000
310,000
TEUS
EXPORT
2011 2012 2013 2014 2015 2016 2017 2018 2019
IMPORT 487,901 466,661 476,982 518,951 573,518 631,032 668,226 648,478 607,868
y = 25331x + 437745
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
TEUS
IMPORT
Source: SLPA
Port of Colombo Performance in International
Business -Domestic Import & Exports

35. Port of Colombo Performance in International
Business – Transshipments & Restowing
0
1000000
2000000
3000000
4000000
5000000
6000000
2011 2012 2013 2014 2015 2016 2017 2018 2019
EMPTY 357742 347521 352603 421235 492993 481989 520424 737219 759585
LADEN 2766086 2717246 2855514 3278475 3395328 3873272 4221158 4865139 5042475
TEUs
TRANSHIPMENTS
0
20000
40000
60000
80000
100000
120000
140000
160000
2011 2012 2013 2014 2015 2016 2017 2018 2019
EMPTY 44533 60348 29906 50293 41635 34055 24969 23645 66118
LADEN 47640 41750 36206 30927 37540 45757 58966 78234 86827
TEUs
RESTOWING
Source: SLPA

36. TOP 10 DEEP-SEA
CONTAINER SHIPPING
LINES, RANKED BY
DEPLOYED CAPACITY
AND MARKET SHARE,
MAY 2020 (TEUS AND
PERCENTAGE)

37. PERORMANCE
INDICATORS
Source: UNCTAD

38. Port calls, all vessel types, 2019
Source: UNCTAD calculations, based on data provided by MarineTraffic.
Notes: Ships of 1,000 gross tons and above.

39. Port calls by container ships, 2019

40. Liner shipping connectivity index of top 10 economies, first
quarter 2006– second quarter 2020

41. Liner shipping connectivity index of leading regional ports,
first quarter 2006–second quarter 2020

42. Liner Shipping Connectivity Index - Sri Lanka
The LSCI allows the
assessment of
maritime connectivity
for container shipping,
enabling comparisons
between countries and
over time.

43. alphaliner

44. Annual carbon-dioxide emissions per vessel-by-vessel
type, 2011–2019

45. Empty
Container
Problem
The shipping industry still
suffers from huge inefficiencies.
Every 1 in 3 containers globally
is moved empty.
It costs the industry $15 to $20
billion per year.

46. The context of
Sri Lanka (SL)
The empty container problem costs
USD 135 Million in SL alone
The VCY can reduce this burden by
14 %
This saving eventually could result a
USD 50-85 reduction of freight rate
for each container exporting from SL

47. UNESCAP REPORT2021
JUNE
“SUSTAINABLE
FREIGHTTRANSPORT
IN SRILANKA”
PROPOSESA DIGITAL
LOGISTICSPLATFORM
FOR MANAGINGFLOW
OF CONTAINERS
Import
67%
Export
33%
TEUS 2011 to 2020

48. Establishment of GATT (WTO) and
Transform the Cooperation through Trading
Between Countries
International
Trade
Infrastructure (Ports,
Roads) Technology
Trade Competition
Based on Supply and
Demand Mechanism
Monitoring & Control through World Customs
Organization, World Bank, International
Maritime Organization
Shipping
Importance of shipping in international business
Derived Demand for
Low-Cost Transport

49. Thank you…………
Please feel free to visit my websites for more details
https://professorlalithedirisinghe.lk/ https://virtualcontaineryard.lk/