The viability of the international container ship transportation industry depends on vibrant trade between distant nations, and that trade depends on cost-competitive manufacturing industries in the exporting nations, mainly China.
From the early 1980s, China’s economy transformed from a medieval socialist economy to a vibrant and dynamic manufacturing economy based on state-of-the-art automated production technology.
The low cost of Chinese-made products was the result of low production costs that included low wages. In more recent years, Chinese hourly production wages have risen to levels approaching hourly production wages in several other nations that include Brazil and India. While Chinese textile products still prevail, clothing factories in nations such as Bangladesh, India, and Pakistan have made significant inroads into China’s international clothing market.
China versus India
India’s steel industry produces cost-competitive stainless steel that is used in a variety of household products that have been exported internationally, competing with Chinese made stainless steel household products. However, recent changes in India’s domestic fiscal policy includes the elimination of the widely circulated 500-rupee and 1000-rupees notes on which majority of Indian small businesses depended. That policy could adversely impact India’s entrepreneurial innovation and invention sector.
Over the short term, India could become more competitive in terms of exporting a wider variety of cost-competitive consumer products. India is upgrading their domestic railway freight network and improving domestic ports to enhance the performance of the domestic coastal maritime transportation sector. Increased exports from and around the Bay of Bengal and India’s west coast provides a market for India’s coastal maritime sector to interline with container mega-ships that could call at the Port of Colombo in Sri Lanka or for westbound exports, at the trans-shipment Port of Salalah in Oman.
In anticipation of a future export trade involving mega-size container ships that are too big to berth at any Indian port, India is developing the new Vizhinjam container terminal with 23-meter water depth near Trivandrum in south-western India. However, for westbound traffic being exported from northern India through the Port of Mumbai and from Pakistan, the trans-shipment terminal at Port of Salalah offers shorter sailing distance to European and east coast North American ports. Eastbound trans-Pacific export traffic from western India and from Pakistan would transfer to mega-ships at either the trans-shipment terminals at Vizhinjam or at Colombo.
Ships and Industries Compete
The combination of rising wages and rising manufacturing costs in China along with advancing manufacturing technology and advancing innovation in nations such as India, Indonesia, Malaysia, and Thailand could result is a shift in the Asian export trade involving manufactured goods, textiles and electronic hardware. Super trans-shipment container ports such as Singapore and nearby Tajun Pelepas in Malaysia could compete with a nearby trio of super ports of Hong Kong, Shenzhen, and Guangzhou in terms of exports to Western nations. Future competition could affect the nearby super ports of Busan, Shanghai, and Qingdao.
A future increase in the percentage of westbound exports from the combination of India, Pakistan, Bangladesh, Malaysia, Thailand and western Indonesia passing through trans-shipment super ports located between Jakarta and Oman enhances the economics of sailing mega-ships (18,000-TEU) via the Suez Canal to the North American east coast. The smaller neo-Panamax ships (13,000-TEU) may actually incur higher transportation costs per container sailing via the Panama Canal from these trans-shipment ports to east coast North American ports. Changes in competing for Asian industries could reduce the proportion of future exports from Yellow Sea ports to east coast North American ports.
The future viability of several of Asia’s trans-shipment super ports would depend on the future competitiveness of industries in the geographic region. Manufacturing industries will depend on lower energy costs to drive the machinery of production while innovation will seek methods by which to reduce manufacturing cost per item. While the competitiveness of many Asian industries depends on the combination of low wages and worker skill, there is potential for future automation to produce the same items while competing with low-paid, semi-skilled workers. The industries that produce cost-competitive goods will export and sustain operations at nearby ports.
Economy and Trade
Asian countries that ship containers through ports between Singapore and Colombo account for 5.71 percent of the world economy while Asian countries that ship containers around the Yellow Sea account for 16.7 percent, Japan for 5.91 percent, Western European countries for 11.66 percent and the U.S. for 24.32 percent. There is much scope for future economic development in India along with prospects for a future Indian manufacturing sector to increase exports to major markets in Europe and America. Main container ship routes reflect the economic strength of the various regions, with mega-size container ships sailing the trans-Pacific and Asian-European routes.
Major Asian transshipment ports of Hong Kong, Singapore and Colombo are located on the container ship route that links major Yellow Sea ports to major European ports. That existing route assures Indian exporters of competitive transportation costs to both European and east coast North American ports. A future major increase in the westbound export trade from ports between Singapore and Colombo would result in a minor decrease the export trade from Yellow Sea ports. Future changes in some Asian economies could assure viable operation of mega-size container ships to both Europe and east coast North America.
Non-Asian Economies and Trade
While Brazil and Argentina account for 3.18 percent of the world economy, domestic issues in both countries delay the development and expansion of manufacturing industries that would export to Asian, European and North American markets. To assure future viability, Brazilian ports that serve super-sized container ships would likely depend on traffic generated through trans-shipment and interlining. Central and southern African economies would likely undergo a minimal expansion of their manufacturing sectors and depend more on bulk export of mined ores and export of agricultural produce.
Over a short-term period of five to 10 years, mega-size container ships would sail the Asia – Brazil, and Brazil – Europe services. During an earlier period (apartheid), South Africa was Africa’s leading economy in terms of manufacturing and exports except that in recent years, Nigeria and Egypt have become Africa’s leading economies. Mega-size container ships will begin to sail within close proximity of South Africa that is unlikely to develop port accommodation for such ships for several years into the future. While possible, an east-west inland trans-Africa navigable waterway along the Congo River is also unlikely.
Conclusion
China faces looming competition from other Asian economies in such areas as textiles, electronic hardware and household manufactured good. Europe bound mega-ships also sail within close proximity to ports close to these economies.
Future mega-ship traffic destined for European and east coast North American ports could develop in the region between Singapore and Southern India.
There is future potential for mega-ships to carry container traffic on the Asia – Brazil, Europe – Brazil and Europe – east coast North America services.
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Source: Maritime Executive
