Containerized Trade Imbalance Set to Worsen

A third of all shipping containers that land in Singapore are empty, according to recent surveys. This trend is set to continue throughout Asia, as more manufacturing shifts to the region. But shipping empty containers is costly – and worrisome to operators of shipping lines. The current imbalance, say observers, is partly due to the rise of countries like China, whose cheaper labor constitutes a considerable comparative advantage in manufacturing. The trend has only been compounded by the worldwide drop in shipping costs – now a third of what they were 35 years ago. As manufacturing concentrates in an even smaller number of countries, says one scholar, shipping lines will be hard-pressed to fill the empty containers. – YaleGlobal

Containerized Trade Imbalance Set to Worsen

Academic blames it on push for cheaper manufacturing bases
Beth Jinks
Thursday, March 25, 2004

(SINGAPORE) The imbalance of containerised trade flows is set to worsen as global manufacturing becomes even more concentrated in Asia and seaborne cargo becomes cheaper, according to a top maritime economics academic.


The volume of containerised cargo shipped from Asia to Europe and the US - known as Westbound - has long outstripped the volume of full boxes returning - known as Eastbound - an imbalance already considered one of the biggest headaches for mainline shipping companies such as APL, Maersk Sealand and P&O Nedlloyd.


And World Maritime University vice-president (academic) Professor Shuo Ma told the Asia Pacific Maritime 2004 Summit yesterday the costly problem of shipping back empty containers to Asia shows no signs of easing.


'The imbalance in volumes of containerised cargo will continue to worsen. This is because the world's production will be concentrated on fewer countries,' he said in his keynote address.


'More containerised cargo will be moving out of China and other (cheaper labour) countries like that, and relatively fewer containers moving in. The trade imbalance is certainly one of the biggest challenges to the liner shipping industry, and that will continue.'


His prediction was echoed by National University of Singapore (NUS) Department of Economics Associate Professor Jose Tongzon in his presentation on trade patterns, and confirmed in figures provided by the Maritime and Port Authority of Singapore (MPA) policy division director Mary Seet-Cheng.


Describing the trade imbalance as one of the most 'important factors our port has to deal with', Mrs Seet-Cheng told delegates that on the Asia-Europe trade lanes, every three full Westbound containers leaving the port of Singapore were matched by just two full Eastbound containers entering the port.


This means one-third of all boxes are shipped empty to Asia from Europe - amounting to an enormous accumulated cost for shipping lines.


Prof Shuo Ma explained that the global shift in manufacturing and trade trends came from the lower cost of shipping, which today is one-third of what it was 35 years ago. He said sea trade also takes half the time it used to, making multinational production possible.


He predicted that the relentless search for cheaper manufacturing bases would see it 'continue to be very much centralised and concentrated in a very small part of the world', and drive down the prices of manufactured goods.


On the other side of the trade pattern, the increasingly limited supply of natural resources meant that the price of commodities and raw materials would continue to rise.


'The volume of trade - both bulk and container market - will keep on increasing,' he said.


Prof Shuo Ma added that China's manufacturing explosion was a product of globalisation, with parts being shipped to the mainland for assembly or contribution, rather than produced there completely.


'To a large extent what is happening in China is actually an outcome of globalisation rather than an achievement of China or wonder of China,' he said, adding that the same outsourcing phenomenon had happened much earlier elsewhere in Asia, but in China it 'happened on a much larger scale'.


'This is a new type of world production and a new type of world trade, and the I think world trade will continue to be like that, concentrating in a smaller number of countries - and world shipping will have to cope with that.'

Copyright © 2004 Singapore Press Holdings Ltd.