Michele Kearney's Nuclear Wire

Major Energy and Environmental News and Commentary affecting the Nuclear Industry.

Thursday, June 18, 2015

The Infrastructure Edge


The new locks of the Panama Canal will be flooded in the coming weeks as the expansion project to create a new lane of traffic along the Canal enters its final phase of completion (watch videos of construction here).  After expansion, the Panama Canal will be able to accommodate Post-Panamax vessels that carry up to 13,000 TEUs (a unit of measure for cargo capacity), enabling the Canal to double its current volume.*

The new shipping lane in Panama will become operational 50 years after the dawn of containerization.  Shipping cargo in standard-sized containers that do not have to be unloaded at each point of transfer between trucks, trains and ships, revolutionized the transportation of goods. 

International agreement in 1965 to standardize container sizes opened the gates to widespread adoption of containers in international trade.  On 23 April 1966, the Fairland sailed from Port Elizabeth, New Jersey to Rotterdam in the Netherlands carrying 236 containers. According to the World Shipping Council, this was the first international voyage of a container ship. 

Between 1966 and 1983, 122 countries introduced containers at their ports, resulting in dramatic increases in shipping capacity, port efficiencies, reduced costs and gains in delivery time through more seamless intermodal cargo movements between ships, trains and trucks. 

In 1972, McKinsey was commissioned to study the effects of containerization in the UK and Western Europe.  By their calculation, in 1965 before containers were deployed at the ports, dock workers could move 1.7 tons per hour.  Five years after containers were introduced, dock worker productivity had increased to 30 tons per hour. 

The impact on commercial productivity was substantial.  New port efficiencies freed half of the capital previously locked up as inventory in transit and substantially reduced both insurance costs and product loss due to damage and theft.

Why is the history of containerization important today?

90% of goods traded internationally reach their destination by ships.  50,000 vessels carry $13 trillion in goods each year. Integration of digital technology spawned a new wave of efficiencies enabling cost-effective, flexible supply chain operations and growth of intra-firm trade globally.

Container technology initially boosted trade between developed countries where its uptake was swift and deep.  Today, emerging markets dominate the top 20 exporters of containerized cargo.  Seven of the world's top ten ports are in China.

Whether by sea, air or land, or all of the above, efficiency in logistics is a critical factor in decreasing the cost of production and improving the affordability of everyday essentials, whether electronics, clothes, or medicines.  Transportation costs have an exponential impact on volume of goods traded. 

Better infrastructure accommodates higher volumes of trade.  Higher transportation costs, on the other hand, can greatly reduce the volume of trade.  A 10% increase in transportation costs can reduce trade by as much as 20%.

Transportation costs vary greatly across regions and types of products-reducing them is critical to a country's competitiveness and a key factor in development.  Many studies show that transportation costs outweigh tariff barriers and explain bilateral trade patterns better than tariff preferences.  Quite simply, trade liberalizing policies matter a great deal, but reaping the gains from trade depends on the quality of a country's infrastructure and related services.

Top 20 Exporters and Importers of Containerized Cargo in 2010

Rank
Exporter
TEUs (millions)

Rank
Importer
TEUs (millions)
1
China
31.3

1
United States
17.6
2
United States
11.2

2
China
12.0
3
Japan
5.7

3
Japan
6.1
4
South Korea
5.2

4
South Korea
4.5
5
Taiwan
3.4

5
Germany
2.8
6
Thailand
3.4

6
Arabian Gulf
2.7
7
Germany
3.0

7
UK
2.5
8
Indonesia
3.0

8
Indonesia
2.5
9
Malaysia
2.5

9
Taiwan
2.5
10
Brazil
2.3

10
Hong Kong
2.5
11
India
1.9

11
W. Africa
2.4
12
Vietnam
1.6

12
UAE
2.1
13
Saudi Arabia
1.6

13
Malaysia
2.1
14
Italy
1.6

14
Thailand
2.0
15
Turkey
1.6

15
Vietnam
2.0
16
Netherlands
1.6

16
India
2.0
17
Canada
1.5

17
Brazil
1.9
18
UK
1.5

18
Australia
1.8
19
France
1.3

19
Italy
1.8
20
Hong Kong
1.3

20
Netherlands
1.7

 
Source: HIS Global Insight, World Trade Service (World Shipping Council website)      



*For the history books, the lead engineer for the Panama Canal expansion is a woman.  Ms. Ilya Espino de Marotta is Executive Vice President of the expansion project's Engineering and Program Management.  She is the only woman to hold the highest post in the Panama Canal's management in its 100-year history.
 

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