The Hindu Business Line : Container rates still opaque

Containerisation is `the fastest growing cargo segment in shipping', Edelweiss Capital has said. Container traffic in India has grown at a CAGR (compound annual growth rate) of 14 per cent during 2000-06 to 4.7 million TEUs (twenty-foot equivalent units), according to Edelweiss, as reported in a November 23 posting on www. moneycontrol.com. And the traffic is estimated to reach 20 million TEUs by 2015, even as `growing external trade and containerisation are expected to boost container traffic at a CAGR of 17.5 per cent'.

For starters, `containerisation' is "a system of intermodal freight transport using standard ISO containers (also known as isotainers) that can be loaded and sealed intact onto container ships, railroad cars, planes, and trucks," as Wikipedia defines. Till about half a century ago, which was when the `simple steel box' came by, `cargo was literally manhandled', recounts www.apl.com in a page on the history of containerisation. "Cranes with slings unloaded crates onto pallets. Longshoremen then muscled the crates into place, and forklifts moved the pallets to warehouses. Damage and delays were common."

But the innovation has had both gainers and losers, writes Nirmal Sengupta in The Economics of Trade Facilitation, from Oxford (www.oup.com). Job losses among port employees ranged from 40 per cent to 60 per cent in many countries, and the transition to containers was painful for many investors too, notes the author. Economies of scale have driven the industry towards ships with high TEU capacity. But not all ports can handle such vessels. "About 60 per cent of containerised cargo in the world is handled by the top 30 ports," and their trafficshare has been steadily rising.

"Simultaneously, the industry has witnessed rapidly increasing concentration of ownership." Sengupta cites Unctad (United Nations Conference on Trade and Development) to say that the main providers of international transport services are concentrated in half a dozen shipping companies, terminal operators, and logistics providers.

The book highlights problems such as containers travelling empty owing to `directional imbalances in trade'; lack of support transport systems to facilitate container traffic; and secrecy in containerised shipping rates. Sengupta rues that published tariff rates are used `mostly for the cargo of small exporters' and are not proper indicators of actual shipment tariff. "Price statistics for ocean shipping are hard to obtain."

D. Murali