Economics and Logistics in Short and Deep Sea Market - Coursework Example

 GLOBAL TRANSPORT SYSTEMS By (NAME) Course Professor University Date Introduction Commercial containerisation can be traced back to 1958-1970 as this was the period when this trend was introduced in the commercial arena. Over the years, the trend has been revolutionised to meet the increasing cargo demands of clients around the world thus making the whole concept of containerization change to fit the market demands. Despite its slow adoption in the marketplace as the transportation mode of choice for heavy and bulky goods across the continents the year 2008 marked the all-time high season for container operations across the globe as the number of container operations reached its all-time climax with a record number of containers being transported to various destinations across the world (Mikulski, 2010). Containerships vary in size and capacity depending on their exact use as well as the channel in which they are operating. They are grouped into various categories depending on their capacity as follows; small feeder, feeders, Panamax, post-Panamax, Suez Max and post-Suez Max. The order arranged the container ships in order of capacity from the smaller vessels to the mega vessels. With the increase in the size of the vessels, it had necessitated the increase of the ports in which these vessels will dock as well as differentiating them to cater for certain vessels to enhance efficiency. For instance, gateway ports are smaller in size and thus are ideal destinations for feeder vessels and other small vessels. On the other hand, hub, ports are mainly for transhipment purposes and thus act as the regional and global ports for massive vessels like the Panamax and post-Panamax vessels. Moreover, the gateway ports are often located along the major maritime routes to ensure the process of transhipment is conducted efficiently as it is from these ports that the feeder vessels get cargo to be transported to gateway ports which are mostly located onshore to be further transferred to road and rail transport. On the other hand, the feeder ships will embark with cargo from gateway [orts to the hub ports for transportation to other global destinations that can only be achieved by greater vessels. The whole process of transhipment involves a chain of operations between the ships of different sizes to achieve the common goal of ensuring cargo reaches its destination as planned and the demands of consumers are satisfied accordingly (Forte and Grimaldi, 2013). Increase in container vessels The capacity of container vessels has been increasing over time to accommodate more cargo and at the same time enable the investors to be able to enjoy the economies of scale of huge vessels. The trend is viable and will continue however it will be subjected to some limiting factors that will ensure the steady rise to come eventually to a halt. To begin with it is evident that virtually all countries, that are not land locked, have a national port to conduct their maritime operations including the loading and offloading of container ships. The increase of container vessels will mean that the mega vessels that will be constructed will not be accommodated in the national ports since the ports will prove to be small and at the same time the ship berth that mega vessels will require will not be possible in the national ports. That notwithstanding, since the mega vessels will accommodate thousands of containers the ports will need to be equipped with sophisticated machinery and equipment to ensure the process of loading and offloading is efficient so as not to lose the economies of scale that come with the mega vessels. Cost constraint is yet another factor that will limit the constant increase in the size of container vessels. Increasing the size of the container vessels will translate to a corresponding increase in the cost of operating those vessels. Since these vessels are managed by individual business entities they will ought to increase the size of their vessels until a point will reach whereby increasing the size of the vessels will not be economically viable for the firms will not be financially capable of footing all the operational cost that are associated with those vessels hence the process of increasing vessel size will stagnate. Conversely, maritime business is a delicate business venture that always comes with a lot of risks hence increase in the size of the vessels corresponds with increased risks this will mean that those using this mode of transportation will have to pay more in terms of insurance for their cargo where mega vessels are involved in the probability of misfortunes will be high with increase in the vessel size. Despite increase in size of the vessels being associated with economies of scale, it also comes with extra investment calls. For instance increasing the size of the vessels means that the ports in which the vessel will dock must be huge in size, have deeper water with greater berths and also be equipped with state of the art equipment to enhance the logistical process. This implies that extra investments have to be conducted to upgrade the ports or construction of modern ports to be initiated (Pearson and Fossey, 2003). Multimodal transport Multimodal transport system has been an emerging trend in the current shipping as more and more firms wants to transfer the logistical processes involved in shipping consignments across the globe to a single firm that has the capacity to ensure the cargo reaches its final destination as required. Shippers thus prefer multimodal transport since once the goods are loaded he/she can only wait for them in their final destination since they do not need to do any follow up or monitor the cargo since the contract involved in multimodal transport will ensure the firm caters for all the logistics involved in the transportation of the cargo from shipping, rail transport to road until they reach the stipulated destination. However, the since the process involved enamours logistical process not all firms will be able to carry out all the required logistics thus smaller firms will opt to specialise in intermodal transport whereby a different contract is issued for each and every mode of transport that is used. This will alternatively transfer the burden of logistics to the shipper since he/she will have to enter into new transport contract each time he/she utilises a different mode for instance he will have to sign a different contract for shipping, rail and road transport (Aldcroft and Maunder, 2013). Multimodal transport has thus remained a preserve for major shipping alliances that are established and have the relevant capital to run enamours logistical processes that are involved to ensure the consignments reaches their destinations as required. Major shipping lines including Emirates and Maersk have dominated the shipping industry for a long time has established themselves as the main market players in the industry. This has enabled them to be very influential in that particular market since they are the ones that dictate the policies and changes in the market since the smaller firms cannot match their capital reserves and thus they do influence all the major policies and decisions that are made as far as maritime transport is concerned (Great Britain, 2006). It creates a monopolistic kind of a business environment whereby a few market players are the ones that command a considerable percentage of the market share and thus are the ones that set market prices. Their influence cannot be ignored since they are essentially the market drivers and if they choose to withdraw their services the market will collapse or face a major crisis due to the fact that the smaller firms will not offer equivalent services (Núñez, 2004). However, this does not mean that maritime transport is a preserve of the established firm since shippers have the free choice of choosing their preferred shipping line depending on their needs, preferences and also cost involved. For instance an investor who wants to ship his cargo to a warehouse in the port of Singapore from China will have to consider a number of factors before choosing the shipping line to provide him with the maritime transport services (Alderton, 2005). The initial and most important factor will be cost the established shipping lines will tend to provide quality services at a lower cost as compared to the smaller firms since they enjoy economies of scale as they run mega vessels that carry huge cargo haulage as compared to their counterparts. The next factor will be flexibility and convenience of the shipping line chosen (George, 2013). In addition, since established shipping lines want to leverage from the advantages that come with economies of scale will tend to run mega vessels to ensure they carry huge capacity of cargo at a go however this may not be convenient to some shippers since the mega vessels will only dock at hub ports that are large enough to accommodate the mega vessels. The cargo has to be transferred to feeder ships that will in turn transport the cargo to its desired destination port (Publishing and Transport, 2001). The smaller firms, that run small and moderate ships, will be convenient for the investors since they can virtually dock in any national port hence ensuring flexibility and convenience of cargo dispatch. Hence it is prudent to not that shippers have the freedom of choosing their shipping partner of choice though it is limited to some extent since some situations will force them to go with the major shipping alliances without considering the other firms in the market (Tiffin and Kissling, 2007). Carbon and sulphur emission Global warming that is occasioned by environmental pollution has been headlined in numerous global forums and the resolution from each of these meetings is to find an alternative way of being eco-friendly in all the activities and operations of man so as to mitigate effects on the environment (Dolman and Ettinger, 2002). For instance, carbon and sulphur have been earmarked as the major pollutants that come from fuels that are used to drive the major machineries that man use for their day to day activities. For instance, in the transport sector all modes of transport are dependent on fuels that come from fossils and hence they are rich in carbon and sulphur compounds. After undergoing combustion, they release vast amounts of carbon and sulphur to the atmosphere thus contributing to environmental pollution, which has adverse effects on the life of human kind on earth (Alderton, 2005). In the shipping industry, fuel is the conventional propellant for the massive engines that drives the sea vessels so far there is no alternative technology that has been advanced to be utilised as an alternative. The European Union agreed on a directive controlling carbon and sulphur emissions from fuels used by ships in the seas this directive was received by criticism and praise in equal measure. For the environmental conservation groups is was a breakthrough that was set to regulate and control the massive water and air pollution that is rampant on the seas while for the industry players in the maritime transport industry it was a huge blow since the ban would lead to use of alternative fuels that have less carbon and sulphur compounds, which are relatively expensive meaning the cost of operations will increase (Dolman and Ettinger, 2002). That notwithstanding, economic analysts argue that the directive was not well researched on and a feasibility study of its implications carefully analysed since it will be virtually difficult for maritime players who operate at short distances or those that operate ferry services to continues conduction business since the cost that will be shelved on them in terms of cost of fuels will be very expensive thus making it difficult for them to operate. Altogether if they have to continue providing their services, it means the increased cost of operations will be transferred to the customers (Johansson and Donner, 2015). Nations that are surrounded by water will have to experience high cost of living since everything that comes to their land have to pass through water hence the increased fuel cost will be injected in the cost of goods and services thus leading to high cost of living being experienced on those islands (Pallis, 2007). Pundits argue that the whole measure will not be effective since it will be just a transfer of carbon pollution from the sea to the roads. Since the directive will be marked by tough regulation that will ensure refined fuels to be in use which are ideally expensive most shippers will opt for road transport where possible to avoid incurring the extra cost associated with sea transport. This implies that most of the cargo haulage will be transported by trucks on the roads this implies diesel will be used to drive those trucks. Essentially the diesel, which is in use in the world is very rich in carbon and thus will significantly contribute to increasing the amount of carbon in the atmosphere. In essence, the directive will not have solved the issue of carbon and sulphur pollution but only shifted pollution occasioned in the sea to offshore pollution that is experienced on the roads (Faure and Hu, 2006). That notwithstanding, since road transport will account to almost seventy percent of cargo transportation the roads will be congested, will trucks ferrying goods to various destinations hence creating traffic jams along the way. The result will be reduced efficiency of road transport since the cargo will have to be delayed before it finally reaches its destination as the congestion on the roads will mean more time being spend while the goods are in transit (Tiffin and Kissling, 2007). Since road transport will be mode of transport of choice by most people since it is cheap as compared to sea transport most of the sea fearers jobs are going to be cost as the industry will be cutting down jobs to reduce the cost of operations since the volume of work is less than before the directive came into place (Thomas and Copeland, 2008). The result will be unemployment among the people who were unfortunate to have their services terminated leading to an economic crisis since the taxes they used to pay the state will be no more as well as the revenues their companies generated and later paid a portion to the state in terms of tax will be significantly reduced due to lack of business. Finally, the directive requires that by the year 2015, all the fuel, which is used in the maritime industry, should be refined into low sulphur content fuel. This means that before that deadline is reached the refining firms, which will be charged in the production of low sulphur fuels, will release approximately twelve million tons of carbon into the atmosphere in the process of refining fuel. There will be massive pollution to the atmosphere as carbon is one of the greenhouse gases responsible for global warming. Essentially despite the directive on carbon and sulphur emissions being taunted as the breakthrough in curbing maritime pollution it only serves to regulate one element of pollution while leaving room for other elements of pollution to escalate (Tiffin and Kissling, 2007). Canals Canals are man-made waterways that are constructed along major maritime routes to ease the process of transportation or provide alternative or shorter routes across large water bodies (Mikulski, 2010). The construction of the Panama canal, for instance, was mainly meant to open the American continent to rest of the world as it opened access for vessels to connect from the Atlantic ocean to the Pacific ocean thus acting as a gateway of the American countries and other adjacent nations to the rest of the world in terms of global economics. The canal revolutionized the process of international shipping as USA came on board in the business of global logistics since it was deemed as a powerhouse that produced significant goods and services which were in demand in the African and Asian continents. Moreover, the canal provided a shorter route for vessels coming from the American continents via the Pacific Ocean thus reducing the cost associated with transportation of cargo from the American continents to the rest of the world (Pallis, 2007). This lead to USA being an important world player in determining global economics since it was industrialized as thus had to be the main supplier of goods and services to markets that were in demand for the same products. Nicaragua canal, on the other hand, is an alternative route that is still under construction that seeks to decongest the Panama Canal by providing another maritime link between the Pacific and Atlantic Ocean. The canals in general will thus provide shorter maritime routes and also alternative routes to ensure faster and cheaper costs to be incurred in maritime transportation of cargo. Since the canals serve as shortcuts they will thus reduce the cost incurred in operation the vessels across the distances travelled since they will cover shorter distances and this will be translated to cheaper cost of transportation thus making sea transport an ideal mode of transportation for goods across continents. The second Suez Canal, that is set to be constructed parallel to the existing once, links the Red Sea to the Mediterranean Sea in North Africa. This will increase the volume of goods being transported across the canal as more vessels will be accommodated since the presence of two canal will mean it will be a dual carriageway hence increasing efficiency as the passage will be faster as it will not be prone to congestion thus reducing the cost of transportation while enhancing efficiency at the same time (Mikulski, 2010). Bibliography Aldcroft, D. H., Mort, D., & Maunder, W. F., 2013. Rail Transport and Sea Transport. Burlington, Elsevier Science. Alderton, P. M., 2005. 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