Containerization Growth Factors

Containerization Growth Factors

The growth of containerization mainly relies on four major factors:

  • Derived. Often labeled as organic growth, an outcome of economic and income growth, leading to a growing quantity of freight in circulation. Additionally, globalization has relied on outsourcing and offshoring of complex and fragmented supply chains that implied a growth of the average distance over which containerized freight is being carried. In both cases, greater containerized capacities (modes and terminals) are required. On the opposite side, economic recessions negatively impact transport demand, so as any form of trade protectionism. An emerging trend concerns automation where the goods being manufactured are less resource-intensive and using new material types. Further, automation is changing the locational behavior of many manufacturing activities, particularly those highly dependent on labor, which may result in near-shoring and less long-distance transportation.
  • Substitution. Initially, substitution was the main factor driving the growth of containerization with the gradual capture of the breakbulk cargo market. This was particularly the case for retail goods that were the first to be containerized. Since about 90% of the break-bulk cargo has been containerized, this process is essentially completed, leading growth options to the containerization of niche markets, namely commodities and temperature-sensitive cargo (cold chain). However, most of the cargo that could be containerized has been containerized, implying such a growth driver remains limited.
  • Incidental. Containerized flows are rarely balanced, implying that empty containers must be repositioned to locations where export cargo is available. Thus, the more imbalanced the traffic is, the more containerized capacities are required for repositioning. This also leaves opportunities to take advantage of empty backhauls and the lower freight rates they imply. These repositioning flows can be counterbalanced with trade policies such as protectionism. Further, changes in cabotage regulations could result in fewer empty containers being repositioned as well. Changes in the location of manufacturing (nearshoring) because of automation can result in fewer containers being repositioned.
  • Induced. Global freight distribution implies the setting of a transport chain where several modes are used to move cargo between its origin and destination. On the maritime segment, this has led to the emergence of intermediary hubs connecting different systems of circulation, namely deep sea and feeder services. This requires transshipment, which is a double count of container volumes, and consequently, additional containerized capacities to maintain feeder services. On the other end, if maritime shipping companies (and alliances) decide to reconfigure their networks to involve more direct services, this can involve less transshipment.

Globalization and containerization as closely interrelated. According to UNCTAD, between 1970 and 1990, trade facilitation measures accounted for 45% of the growth in global trade while membership to global trade organizations such as GATT/WTO accounted for another 285%. Containerization accounted for an additional 790%, exceeding all the other trade growth factors put together.