Books to make you better understand the Shipping Industry

Luc Castera founder of Octopi, a tech company in the logistics industry, has recommended a series books to broaden culture and learning about the shipping industry. Ninety percent of everything around you was carried over on a shipping container before it reached you. It’s the industry that puts food in your plate, clothes on your back and enables the success of e-commerce globally. Yet, very few companies are trying to solve the hard problems facing this industry, says Octopi co-founder Luc Castera. If you are new to this industry, or if you have been working it in for 20 years and believe that learning should be constant, Luc highly recommends the following books.

1. The Docks by Bill Sharpsteen

Focusing on the Port of Los Angeles, The Docks delves into the unseen world of this highly successful enterprise. Author Bill Sharpsteen paints a picture of the port’s origins, zeroing in on the people that helped contribute to its economic prosperity. While Sharpsteen emphasizes the Port’s success, he also talks about its vulnerability with security and labor, while including personal stories from industry insiders. One perspective he includes is that of one of the first women longshoremen. The Docks demonstrates the energy behind this incredible port through dramatic photographs and personal perspectives.

2. The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger by Marc Levinson

The Box tells the story of the container and its beginnings. What started as a simple box, changed the future of the shipping and transportation industries collectively. The container idea was slow on the uptake and economist Mark Levinson tells the story of how, after a decade of struggle, it came to fruition and changed the transport industry for good. Levinson includes key notes about how the inclusion of the “box” brought some ports back to life, whereas others suffered with its implementation. Thanks to this extraordinary box, costs were cut in the transport sector and the global economy is able to thrive, today.

3. Port Management and Operations by Maria G. Burns

Port Management and Operations has created a manual filled with insights and strategies into the world of shipping. Through examination of port management practices on a global level and deconstructing them on commercial and technological levels, this manual provides readers with a new set of skills and perspective. Port Management and Operations touches on 4 themes: “Port Strategy and Structure, Legal and Regulatory Framework, Input: Factors of Production, and Output and Economic Framework.” This book also identifies strategies and provides insight into the future of shipping.

4. Port Business by Jurgen Sorgenfrei

For veterans or those just starting out in the shipping industry, this book breaks down the meaning of ports and explains the role they play in the global supply chain. With globalization, exporting has increased exponentially, and the shipping market is changing. Port Business breaks down and analyzes the struggles for small to mega-sized ports, providing insight into the industry’s future.

5. The Travels of a T-Shirt in the Global Economy by Pietra Rivoli

Through the perspective of a T-shirt, this narrative has a lot to say about globalization and international business. Following a T-shirt from Texas to Africa, author Pietra Rivoli reveals political, cultural, economic, and moral issues associated with international business. The reader is challenged to view trade through an unconventional perspective while evaluating the complex layers of business crossing borders.

6.The Shipping Man by Matthew McCleery

Matthew McCleery tells the story of a hedge fund manager turned shipping man. After deciding to buy a ship on a whim, Robert Fairchild enters the complex world of shipping. A stark contrast to his New York life, Fairchild embarks on a journey where he learns about everything from Somali pirates to the wealthy folk of Wall Street. Though he ends up losing his hedge fund, he gains the title of shipping man along with the knowledge associated with it.

7. Ninety Percent of Everything: Inside Shipping, the Invisible Industry That Puts Clothes on Your Back, Gas in Your Car, and Food on Your Plate by Rose George

Ninety Percent of Everything unveils the invisible world of shipping to the commoner’s eye. Author Rose George divulges the secrets of the “invisible industry” through her incredible adventure sailing from southern England to Singapore. Five weeks aboard The Maersk Kendal and countless miles later, George lets readers into the shipping industry from the perspective of someone with little experience. Her objective in writing this tell-all piece is to shed light on the otherwise closed-door industry and to inform consumers about the shipping life and all that entails.

Published by Maritime Executive, Luc Castera, August 23, 2017

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An interesting take on SADC developments and the lack of progress

AfricaMap_SADCThe following article titled ‘Cross-border projects dependent on cost’ was recently published by Transport World Africa. It deals essentially with cross border logistics and provides an insight into regional infrastructure and logistics projects – successes, failures and their impact on transport logistics. It emphasizes the need for greater and closer public and private partnerships, but alas sovereign states appear to be more focused inwardly on their domestic affairs. 

Implementers of projects have the knack of focusing on what they know very well, often leaving out what they do not know. Usually, this comes back to bite them. An example is in the integration of leadership. Countries in the Southern African Development Community (SADC) region compete with each other for demand and capacity provision, which results in the inflated cost of logistics.

Rather, countries should work together. Integrating ports and funding is relatively easy. What is not available is integrated leadership in the region (excluding heads of various states), agreeing that SADC is ‘one country’. Logistics planning is still done at the country level, which is not practical, because then supply chains are being developed that are competing with each other. The sector should be cautious about acceleration, and about what is funded. One example is Transnet, whose plans should fit into regional plans, but right now they do not.

The softer issues in project development often go ignored, but they are at times the most important. There should be a halt to focusing mainly on mega-projects, since they take time and money, as well as resulting in complications (excluding Grand Inga). Despite this, mega projects do create a common vision for a region. Do sponsors have the capacity to support these projects? Institutional capacity is certainly needed. At the political level, southern Africa has done well, top–down approaches are there, but things go off course when there is the attempt to get others to plug-in to this.

One-stop border posts are very important. It was cautioned that the region must be careful not to follow the architecture of colonial extraction, which means focusing on intra-Africa trade rather than too great a focus on ports and exports. Government and private sector must both drive natural winners and losers in markets. There is sufficient funding and policies, but project preparation is limited. What is needed is to decide how to make hubs of excellence, and decide who is going to do what.

The high-level work has been done, but now the sector is facing an implementation challenge. Governments do not do regional integration very well. The private sector does the regional integration, and they suffer most when it does not work. Regional infrastructure will not happen unless there is public support for it. The most successful cross-border project was a PPP: the M4 toll road. This had a large economic impact.

Also, the Port of Maputo has been successful in generating income. Ports without land side integration are useless. Projects need a soft-issue mediator; otherwise there are great ideas, but no implementation. The private sector should not see itself as a messiah, but should rather have a sense of responsibility for developing supply chains. There needs to be a clear understanding of soft issues, clear legal and policy understanding, and communication. SADC has been driving the implementation of harmonisation of vehicle load management for twenty years. A mediator between the public and private sector (such as Maputo Corridor Logistics Initiative (MCLI) is absolutely necessary.

It is a stark reality how little intra-African trade there is. To address this there should be a clear target for development in future. In Namibia, there are efforts to focus on the positives in regards to transport development, even with limited resources. Namibia has been independent for 25 years; 15 years ago the Walvis Bay Corridor was created as a focus on regional integration and regional development. There are 2.2 million people in Namibia, which means a small economy.

There is no real choice but to take into consideration the region and recognise the value Namibia can add. In regards to planning, in 1995 it developed its first transport master plan, and in 2014 it developed its second transport master plan (this was twenty years apart). In February 2015, it developed a logistics master plan to develop Namibia into a logistics hub in the region. It has focused on transport modes because it has a port emphasis. It started roads development.

Currently, Namibia is building its first dual-carriage road (65 km), which is a big step for such a small economy. It would like to do more with sufficient funding. Namibia is also looking into what to do with aviation. As a whole, the country is trying to develop as an alternative trade route for southern Africa. Five to seven years ago, Walvis Bay was just a fishing port, but now R500 million is coming into Namibia’s economy through this post (from zero rand 10 years ago). Namibia is trying to create a better alternative in the SADC region. Now it is looking to focus on developing the manufacturing sector. Namibia is working with South Africa to develop partnerships (excluding transport corridors to production corridors). Continue reading →

Have Mega Containerships reached their Size Limit?

Majestic MaerskContainer shipping lines are poised to take delivery of a new generation of “megaships” over the next two years, just as the growth of world trade is slowing down, contributing to massive overcapacity in the market.

Megaships, which can be up to 400 meters long, seem to be here to stay, not least because so many more are already on order, the product of high fuel costs and low interest rates.

But the trend towards larger vessels is not without problems especially for other businesses in the transport system, and the trend could be nearing its limit as the economies of scale associated with megaships decline.

Container shipping capacity has doubled every seven years since the turn of the millennium and will reach nearly 20 million TEU in 2015 up from five million TEUs in 2000.

But since the financial crisis, container capacity has continued to grow rapidly, even as the growth in freight volumes has slowed, creating a massive overhang in shipping capacity and pressuring freight rates.

Capacity growth is being driven by the trend towards larger vessels. The size of container ships has been growing faster than for any other ship type according to the OECD’s International Transport Forum.

Between 1996 and 2015, the average carrying capacity of container ships increased 90 percent, compared with a 55 percent increase for dry bulk carriers and 21 percent for tankers.

The growth in container ship size has been accelerating. It took 30 years for the average container ship size to reach 1,500 TEU but just one decade to double from 1,500 to 3,000 TEU.

Between 2001 and 2008, the average size of newly built ships hovered around 3,400 TEU but then jumped to 5,800 TEU between 2009 and 2013, and hit 8,000 TEU in 2015.

Megaships
Both the average size of new container ships and the maximum size are set to continue growing over the next five years. Shipping lines have already taken ownership of 20 megaships with a capacity of more than 18,000 TEU each and another 52 are on order, according to the OECD.

The largest ship so far delivered has a capacity of 19,200 TEU, but carriers with capacity up to 21,100 have been ordered and will be in service by 2017.

Megaships are being introduced into service between the Far East and North Europe, the world’s largest route by volume, where potential economies of scale are greatest, but are having a cascade effect on other routes.

Large ships that formerly plied the Far East-North Europe route are being displaced into Trans-Pacific service, and former Trans-Pacific carriers are moving to the Trans-Atlantic route.

The new generation of ultra-efficient megaships is credited with cutting the cost of shipping even further and lowering greenhouse gas emissions.

But researchers for the OECD question whether megaships are contributing to unsustainable overcapacity and imposing unintended costs on shippers, port operators, freight forwarders, logistics firms and insurers.

Fuel Costs
The new generation of megaships is the lagged effect of the era of high oil prices between 2004 and 2014 and low interest rates since the financial crisis in 2008.

Costs in the shipping industry can be divided into the capital costs associated with the construction of new vessels, operating costs, and voyaging costs primarily related to fuel consumption.

Construction costs increase more slowly than ship size. Increasing a container ship from 16,000 TEU to 19,000 TEU cuts the annual capital cost per TEU-slot by around $69 according to the OECD.

Larger ships are slightly more operationally efficient than smaller ones, with an annual saving of perhaps $50 per slot on a 19,000 TEU ship compared with a 16,000 TEU vessel.

But the real savings are on the fuel bills. Megaships are “astonishingly fuel efficient” and actually consume less fuel on a voyage than 16,000 TEU carriers, according to the OECD.

With overwhelming cost advantages, especially on fuel, and cheap finance readily available, the upsizing decision appears to have been a straightforward one for shipping lines.

Slow Steaming
The new generation of megacarriers has been optimized to save fuel by voyaging much more slowly than previous container vessels.

Fuel consumption is related to the cube of speed. If a vessel travels twice as fast it will consume eight times as much fuel. The cube-rule has important implications for the economics of the shipping industry.

When fuel prices are high, it makes sense to voyage slowly to cut fuel bills, even if it means operating more ships to move the same amount of cargo. When fuel prices are low, it makes sense to travel faster and use fewer ships.

During the period of soaring oil prices, container lines instructed captains to cut speed in order to conserve fuel.

The new ships ordered were specifically designed to operate most efficiently at slower speeds to take advantage of slow steaming economies. In fact some carriers are so large they cannot operate at higher speeds.

Crucially, slow steaming has now been designed into the new generation of vessels entering container service, so it will not be easily reversed, even though fuel prices have plunged since 2014.

According to the OECD, most of the voyaging cost reductions in the new generation of megaships come from their optimization for slow steaming rather than from increased size.

“Between 55 and 63 percent (at least) of the savings per TEU when upgrading the vessel size from an early 15,000 TEU design to a modern 19,000 TEU design are actually attributable to the layout for lower operation speeds,” the OECD estimated.

“Cost savings are decreasing as ships become bigger,” the OECD concluded. “A large share of the cost savings was achieved by ship upsizing to 5,000 TEU, which more than halved the unit costs per TEU, but the cost savings beyond that capacity are much smaller.”

Unintended Costs
The consolidation of container volumes into fewer, larger megaships is creating challenges for other firms in the freight business.

Insurers are worried about the costs if a megaship sinks or develops mechanical problems. Insurer Allianz has warned the industry must prepare for losses of more than $1 billion, or even up to $2 billion in the event of a collision between two megaships.

Economies of scale depend on megacarriers being loaded close to maximum capacity and spending as much time as possible at sea rather than in port.

The need to fill megaships is one reason that the industry is consolidating into an alliance network.

Shipping lines are also adopting the hub-and-spoke system employed by airlines to ensure their ultra-large container vessels sail nearly full.

Shipping schedules for the megacarriers have been consolidated into fewer sailings each week from fewer ports (about six in North Europe and eight in Asia).

Containers for other destinations must be transhipped, either on a smaller container vessel or by road, rail and barge. Schedule consolidation is not necessarily favored by shippers and freight forwarders who prefer regular and reliable service (fewer sailings can mean more concentrated risk).

Port operators, too, have been forced to invest heavily to attract and handle the new megacarriers. Port channels must be dredged to greater depths to handle the deeper drafts of the megaships. Quaysides must be raised and strengthened to handle the increased forces when a megaship is tied up.

The biggest problem comes from the scramble to unload a megacarrier quickly so it can put to sea again. The average turnaround time for a container ship is now just one day, and less in Asia.

The arrival of fewer vessels but with larger numbers of containers is creating intense peak time pressure on the ports.
Ports need more cranes, more highly skilled staff to operate them fast, more space in the yard, and the ability to handle more trucks, railcars and barges to move the containers inland.

The OECD estimates megaships are increasing landside costs by up to $400 million per year (one third for extra equipment, one third for dredging, and one third for port infrastructure and hinterland costs). Source: Maritime Executive/Reuters.

Vietnam Tightens Container-Weighing Rules

High quality 3D render shipping container during transportIn a bid to tackle overweight containers at its ports, Vietnam is seeking to address this issue with domestic legislation on container weighing practices. This is in contrast to the International Maritime Organisation, which had agreed on an amended rule that would see shipping containers being weighed before they are loaded onto ships – a rule which will come into effect in 2016.

Weighbridges have since been installed at Vietnamese ports, container yards and even highways to monitor weights of containers for both importing and exporting. A new law was endorsed in 2014 by the Vietnamese government that limited the total weight of 20 and 40ft containers to a maximum of 20 tonnes, including the weight of the container itself.

Containers found to violate the weight limits are likely to incur a fine. Source: Port Technology International

South African Port Handbook Launched

South African Port Hanbook [SAOGA]Following a successful SAOGA (South African Oil & Gas Alliance) has launched the second edition of the South African Port Handbook at the Offshore Technology Conference in Houston during the first week of May 2014. The book is available in a user-friendly .pdf format on the internet. To view the online version in an e-book format please click the hyperlink – SA Port Handbook. For a downloadable (.pdf) version of the book please visit SAOGA’s website.

Outlook and reliability of African ports in question

Port of Mombasa

Port of Mombasa

The reliability of African ports for import and export traffic is likely to deteriorate before getting better, according to Portoverview.com which advises importers, exporters and traders in planning their supply chain to and from the continent.

Speaking earlier this week at the Cool Logistics Conference in Cape Town, Africa. Portoverview.com’s Victor Shieh said almost 2,000 incidents were recorded on its portal over the last 16 months, with an average of one weather-related incident per day for South Africa alone.

Current congestion issues will remain a problem whilst port infrastructure is renewed over the next years. However, we see African hinterland connections beyond the terminal gates as the biggest challenge facing shippers,” Shieh emphasised.

In a study presented at the conference, road and rail construction as well as investment in port infrastructure were identified as the main positive developments recorded on the portal.

Greenfield sites along the African coast are cited as having the greatest potential to improve cargo efficiency. Projects such as the 2.5 million teu site at Lekki in Nigeria and the 5 million teu expansion at Tangier-Med, in Morocco, will require similar investments on the intermodal leg to succeed.

Recent research by SeaIntel Maritime Analysis, which is co-owner of the portal, revealed that African exporters have no more than an average 60% chance that their containers will arrive on time in Asia with the percentage falling to 55% for Europe.

“For shippers – especially ones who produce and distribute perishable products – that’s a real challenge” commented Morten Berg Thomsen, a shipping analyst at SeaIntel.

Helen Palmer, director, Sutcliffe’s Maritime, a UK-based shipping agent told Lloyd’s Loading List.com that as far as ro-ro traffic was concerned she was not aware of any serious congestion and delays into African ports

“I can’t speak for box traffic but in the case of ro-ro into ports such as Mombasa, in East Africa, transit is extremely smooth with trucks waiting on the quayside as soon as the ship’s ramp comes down. Dar es Salaam, is perhaps a little less straightforward but certainly nothing major,” she said. Source: Lloydsloaddinglist.com

Debate or Mitigate?

City Deep1_SnapseedBrowsing my various sources of news I came across this article featured in the FTW Online a few weeks ago. It prompted me to post it as an item for some detailed discussion in a follow-up post. Many followers have enquired what happened to my discussion on Inland Ports and the National Transit procedure. I guess it’s now time to respond, but not just yet – perhaps after what materializes at the event below.

What will be the impact of the new Customs Bill on City Deep’s inland port status?
This is the issue to be debated at a JCCI event scheduled for March 15. “The Johannesburg Chamber has been closely involved with City Deep, our international gateway for containerised cargo, for the past 36 years,” says the JCCI’s Pat Corbin. “We have actively promoted the benefits for traders of a combined transport (multi-modal) bill of lading allowing seamless movement through the coastal ports.

“But diametrically opposed developments are taking place which could have far-reaching impact on not just the future of the dry port, the supporting logistical suppliers and local employment, but also the coastal ports and the transport mode for inland movement.”

The event will examine Transnet’s major investments in City Deep and the Durban corridor, SACD’s expanded facilities and services, and the Customs Bill – with its intended removal of inland port status. Source: FTW Online