The effect of high fuel costs on liner service configuration in container shipping

For shipping activities, not least container shipping, bunker fuel is a considerable expense. In the last 5 years, bunker prices have risen considerably. An increasing bunker price in container shipping, especially in the short term, is only partially compensated through surcharges and will therefore affect earnings negatively. This paper deals with the impact of increasing bunker costs on the design of liner services on the Europe–Far East trade. The paper assesses how shipping lines have adapted their liner service schedules (in terms of commercial speed, number of vessels deployed per loop, etc.) to deal with increased bunker costs. The paper also includes a cost model to simulate the impact of bunker cost changes on the operational costs of liner services. The cost model demonstrates for a typical North Europe–East Asia loop that the current bunker prices have a significant impact on the costs per TEU even when using large post-panamax vessels. The model also shows shipping lines are reacting quite late to higher bunker costs. The reasons that explain the late adaptation of liner services relate to inertia, transit time concerns, increasing costs associated with fixing schedule integrity problems and fleet management issues.     

Estimating attributes importance for container shipping industry by closing the listening gap with maximum convergent validity

This paper estimates the relationship of attributes importance (AI) to prospect purchase intention by closing the listening gap between customers and managers of container shipping companies. A proposition of minimum cross entropy is proposed to find a solution to the problem with maximum convergent validity, and this proposition is used to estimate AI, in which both opinions about AI of customers and managers of container shipping companies are included. Results indicate that price, discount, personal selling, and word of mouth, are the most important attributes to prospect purchase intention, within the industry. In addition, managerial implications are also discussed.     

The effect of multi-scenario policies on empty container repositioning

This paper addresses a container maritime-repositioning problem where several parameters are uncertain and historical data are useless for decision-making processes. To address this problem, we propose a time-extended multi-scenario optimization model in which scenarios can be generated taking into account shipping company opinions. We then show that multi-scenario policies put shipping companies in the position of satisfying empty-container demands for different values that may be taken by uncertain parameters.     

Dynamics of liner shipping network and port connectivity in supply chain systems: analysis on East Asia

The study of ports in supply chain systems is an emerging area of importance which has drawn more attention from researchers in recent years. This paper presents a new perspective in this research area by examining the calling patterns of container shipping services in order to understand the dynamics of port connectivity and inter-port relationships in the supply chains. Empirical evidence is drawn from four major ports in East Asia, namely Shanghai, Busan, Kaohsiung and Ningbo. The study identifies the shipping capacity, trade routes and geographical regions connected to the ports, shipping lines involved, and the extensity and intensity of inter-port relationships among the four container ports from liner shipping network’s perspective. The findings show that most of the shipping capacity employed on the major east–west trade routes became non-exclusive and involved calls at two or more of the four ports. Port planners, terminal operators and carriers could capitalise on opportunities through exploitation of complementary relationships that exist among the selected ports, such as offering a package for shipping lines to call at a portfolio of terminals owned by the same terminal operator. Policy and research implications as well as recommendations are discussed for various stakeholders concerned with port planning and regional development.     

Competition and horizontal integration in maritime freight transport

This paper models competition for freight transport between the road and maritime sectors. Operators offer differentiated services and there are economies of scale in the oligopolistic shipping line sector. Two types of integration between shipping lines are considered: in one of them the liners production processes remain separate (like in an alliance); in another economies of scale are further exploited. Typically maritime freight post-merger goes down. However, it may increase if the merger exploits further economies of scale, they are important and transport services are sufficiently differentiated. An empirical application to the routes Valencia–Antwerp and Valencia–Genoa is undertaken to confirm the predictions of the model. It is shown that, for both types of merger, user surplus increases when transport services are weakly differentiated and economies of scale are sufficiently small. These conditions also guarantee that a merger is socially beneficial.     

Capital structure decisions of globally-listed shipping companies

Debt capital has traditionally been the most important source of external finance in the shipping industry. The access that shipping companies nowadays have to the capital markets provides them with a broader range of financing instruments. As such, this study investigates the determinants of capital structure decisions using a sample of 115 exchange-listed shipping companies. We test whether listed shipping companies follow a target capital structure, and we analyze their adjustment dynamics after deviations from this target leverage ratio. When compared with industrial firms from the G7 countries, shipping companies exhibit higher leverage ratios and higher financial risk. Standard capital structure variables exert a significant impact on the cross-sectional variation of leverage ratios in the shipping industry. Asset tangibility is positively related to corporate leverage, and its economic impact is more pronounced than in other industries. Profitability, asset risk, and operating leverage are all inversely related to leverage. There is only weak evidence for market-timing behavior of shipping companies. Because demand and supply in the maritime industry are closely related to the macroeconomic environment, leverage behaves counter-cyclically. Using different dynamic panel estimators, we further document that the speed of adjustment after deviations from the target leverage ratio is lower during economic recessions. On average, however, the capital structure adjustment speed in the maritime industry is higher compared with the G7 benchmark sample. These findings indicate that there are substantial costs of deviation from the target leverage ratio due to high expected costs of financial distress. Our results have implications for shipping companies’ risk management activities.     

Corporate social responsibility disclosure: The case of international shipping

Based on practices and legislation in the shipping industry, we construct a corporate social responsibility (CSR) disclosure index for listed shipping companies. We use Markov Chain Monte Carlo (MCMC) techniques for Bayesian inference, and we estimate the marginal effects of firm characteristics on CSR disclosure for each firm. Our results show a positive relationship between CSR disclosure and financial performance for each firm in our international sample. Firm size, financial leverage, and ownership structure are also associated with CSR disclosure. Our findings suggest that a majority of listed shipping companies have integrated CSR practices into their strategic planning and operations.     

Understanding hinterland service integration by shipping lines and terminal operators: a theoretical and empirical analysis

In the present competitive environment of ports, the key determinant in port competition is the ability of a port to be integrated into the local maritime and hinterland transportation chain. Creating effective integrated hinterland chains requires the coordination of several actors both in port and the hinterland. By making use of insights from Transaction Cost Economics and Resource-based View, the paper helps to understand why and how shipping lines and terminal operating companies enlarge their scope in intermodal transport and in inland terminals. The paper discusses a number of cases from the Hamburg–Le Havre range, where shipping lines and terminal operating companies have changed their scope of activities in ports and hinterland networks. After the theoretical and empirical analysis the papers draws conclusions on the explanatory power of the theories in understanding hinterland service integration by shipping lines and terminal operators.     

Levels of internationalization in the container shipping industry: an assessment of the port networks of the large container shipping companies

This paper examines the internationalization level of the world’s largest container shipping companies by examining their port networks. The results of our analysis show that only three of the nineteen companies could be considered as being truly ‘International’ and service the ‘lion’s share’ of the major and minor ports distributed across the globe. The port networks of the other companies in our survey, whilst having individualized features, shared common characteristics. Guided by the ‘Uppsala Model of Incremental Internationalization’ (Johanson and Vahlne, 1977), we were able to identify four internationalization levels of a container shipping company that are indicated by their port network.We argue that the port network plays an additional role as it contributes to the internationalization level of the container shipping companies. This is important because the internationalization level affects the container shipping company’s ability to expand its customer base both at a local and international level. Local customers would have access to a larger international destination network and international customers would be able access a larger local distribution network without transhipping between different companies.Amongst other issues, we were able to determine that, for the analyzed container shipping companies, ‘Internationalization’ of a port network means including or excluding ports in specific regions or sub-regions in their own network, and that a company’s home base or history plays a significant role in this development.     

How thick is the border: the relative cost of Canadian domestic and cross-border truck-borne trade, 2004–2009

Despite the elimination of tariff barriers between Canada and the United States, the volume of trade between the two countries is less than would be expected in the absence of impediments. While considerable work has been done to gauge the degree of integration between the Canadian and U.S. economies through trade, relatively little analysis has parsed out the underlying costs of the border. The costs of crossing the border can be divided into formal tariff barriers, non-tariff barriers, and the cost of the transport system. This paper focuses on the latter by estimating the cost of shipping goods by truck between Canada and the U.S. during the 2004–2009 period. The incremental cost of import and export over domestic shipments is measured in both absolute and ad valorem terms. The latter provides an estimate of the border increment in transportation cost as a tariff equivalent. The incremental cost is further broken down into fixed and variable (line-haul) components. Higher fixed costs are consistent with border delays and border compliance costs being passed on to the consumers of trucking services. Higher line-haul costs may result from difficulties obtaining backhauls for a portion of the trip home, which may stem from trade imbalances and regulations that restrict the ability of Canadian-based carriers to transport goods between two points in the U.S.     

Determinants of spreads on new high yield bonds of shipping companies

This paper investigates determinants of pricing of new high yield bond offerings of shipping companies. New high yield bond offerings issued by shipping companies in the US market, during the period 1993–1998, are used in the investigation. The empirical results suggest that credit rating is the major determinant of the price spread of the bond offerings. Financial leverage and shipping market conditions also account for a significant part of the price variability.     

Bunker consumption optimization methods in shipping: A critical review and extensions

It is crucial nowadays for shipping companies to reduce bunker consumption while maintaining a certain level of shipping service in view of the high bunker price and concerned shipping emissions. After introducing the three bunker consumption optimization contexts: minimization of total operating cost, minimization of emission and collaborative mechanisms between port operators and shipping companies, this paper presents a critical and timely literature review on mathematical solution methods for bunker consumption optimization problems. Several novel bunker consumption optimization methods are subsequently proposed. The applicability, optimality, and efficiency of the existing and newly proposed methods are also analyzed. This paper provides technical guidelines and insights for researchers and practitioners dealing with the bunker consumption issues.     

Knowledge management enablers in liner shipping

This study empirically identifies crucial knowledge management enablers and examines their impacts on organizational performance using survey data collected from liner shipping firms include shipping companies and agencies. Results indicated that knowledge management enablers such as organizational structure and knowledge management culture are found to have significantly positive effects on the organizational performance aspects of innovativeness, financial performance, and customer service, whereas information technology support is a positive effect on organizational performance aspect of innovativeness. Theoretical and managerial implications of the research findings on knowledge management for liner shipping companies are discussed.     

Global intermodal liner shipping network design

This paper presents a holistic analysis for the network design problem of the intermodal liner shipping system. Existing methods for liner shipping network design mainly deal with port-to-port demand. However, most of the demand has inland origins and/or destinations. Thus, it is necessary to cope with inland origin–destination (OD) pairs involving a change in transport mode from inland transportation to maritime shipping. A method is first proposed to convert inland OD demand to port-to-port demand. Then, a framework for global intermodal liner shipping network design is proposed. Finally, the proposed methodology is applied to and numerically verified by a large-scale network example.     

A novel modeling approach for the fleet deployment problem within a short-term planning horizon

This paper is concerned with model development for a short-term fleet deployment problem of liner shipping operations. We first present a mixed integer nonlinear programming model in which the optimal vessel speeds for different vessel types on different routes are interpreted as their realistic optimal travel times. We then linearize the proposed nonlinear model and obtain a mixed integer linear programming (MILP) model that can be efficiently solved by a standard mixed integer programming solver such as CPLEX. The MILP model determines the optimal route service frequency pattern and take into account the time window constraints of shipping services. Finally, we report our numerical results and performance of CPLEX on randomly generated instances.     

Policy and politics behind Shanghai’s Free Trade Zone Program

China launched the Shanghai Free Trade Zone (FTZ) Program on September 29, 2013 in a bid to reduce administrative interventions, ease restrictions on investments, further open up its financial system, and internationalize its currency to booster shipping, logistics, and commerce. This article aims to present a background of the Shanghai FTZ and some reflections on it. China’s economic reconstruction has made a major impact on its port cities. Competitions between ports are gradually evolving into competitions between supply chains, with ports no longer considered as isolated links in the transport chain but rather as integral links in the supply chain. Ports are transitioning into fourth-generation ports with the establishment of logistics and value-added activities, which are developed in conjunction with local industrial and service businesses. In this trend, China’s port cities can provide a wide range of value-added services and become centers of commodity flow, capital flow, and information flow. Specifically, the combined effects of driving the development of peripheral industries and actively coordinating the activities of relevant parties help regulate the operations of the entire supply chain to obtain potential value-added benefits. The implementation of the Shanghai FTZ will not only stimulate trade but will also bring increased shipping and finance opportunities to the city. With free trade as the new direction and focus of the country’s economic initiatives, the Shanghai FTZ will hopefully lay the groundwork for a new round of reforms and restructuring of the Chinese economy.     

Study on China-EU container shipping network in the context of Northern Sea Route

The emerging Northern Sea Route (NSR) represents change to the existing liner network for China-EU container shipping. It is necessary to re-examine the container network in this context and assist liner companies in decision-making. This paper assesses the potential of the NSR based on designing a multi-port multi-trip liner service by establishing a two-stage optimization model. Based on the estimated data of NSR shipping, ship routing schemes on both the NSR and conventional routes are proposed. It is determined that container service along the NSR is largely influenced by ice-breaking charge, seasonality, and cargo volume, which makes NSR more likely to act as a supplementary line of the liner network in the short or medium term. The results also indicate that use of NSR may drive the redeployment of shipping network and hub ports in the long term. This study's conclusions may prove useful for strategic planning by liner companies, port authorities, and governments to assess the operation of liner service via the NSR.     

Is the container liner shipping industry an oligopoly?

This paper focuses on the question whether or not the container liner shipping industry is an oligopoly. Although liner shipping literature has been occupied with this question, few authors have examined the market structure of the containerised liner shipping industry. The study of the market form at trade level fills in a gap in the literature. The empirical investigation uses concentration ratios to measure the degree of concentration. The results allow us to determine the degree and type of oligopoly. The conclusion shows that the containerised shipping industry is characterised by increased concentration. Some trade lanes may be characterised as a loose oligopoly; others as a tight oligopoly.     

Factors affecting the dynamics of yield premia on shipping seasoned high yield bonds

This paper investigates factors that can explain the dynamics of yield premia on seasoned high yield bonds of shipping companies. Our analysis utilises 40 seasoned high yield bonds offered by 32 shipping companies between April 1998 and December 2002 and a set of microeconomic, macroeconomic and, industry related factors. Our model suggests that the dynamics of credit premia of seasoned shipping high yield bonds can be explained by: credit rating; term-to-maturity; changes in earnings in the shipping market, as well as in the yield on 10-year Treasury bonds; and the yield on the Merrill Lynch single-B index.     

Designing a sustainable maritime supply chain: A hybrid QFD–ANP approach

This study aims to design a sustainable maritime supply chain by taking customer requirements as the focus. This is achieved by an analytical approach combining Quality Function Deployment (QFD) and Analytical Network Process (ANP) for guiding shipping companies’ design. An analysis of a major container shipping line is conducted to illustrate and validate the approach. The four main customer requirements are: (1) Cost and Price Competitive, (2) Pollution Reduction, (3) Efficient Use of Fuel and Resources, and (4) Health, Safety, and Security. The Use of Green Design Ships, Engines and Machinery is found to be the most important design requirement.