Anyone wanting to grasp the growing complexity of the once-simple job of shipping new cars need only peer down at the ramp beside the main berth at Shanghai's Haitong Automotive Terminal.
The ramp, which floats on a pontoon in the Yangtze River, has been installed to let barges unload cars built by the booming car factories of Chongqing and Wuhan, in central China. Some sail down more than 2,500km of the river for export.
In the yard behind the berth, meanwhile, the vehicles awaiting export are mainly heading not to the traditional markets of western Europe and north America but to ports such as Hodeida in Yemen, Tartous in Syria and Algiers in Algeria.
The scene sums up the rapid change in the market for shipping new cars, which just 15 years ago was dominated by movements of millions of cars annually on three main routes – from Japan and South Korea to Europe, from the same countries to north America and from Europe to north America. The production sites were mostly either near the sea or linked to ports by well-established logistics chains.
The market has changed not only because of the rise of new producers – such as China's Chery, a big customer of the Haitong terminal – but also because established manufacturers have moved production to lower-cost Brazil and South Africa. In addition, growing prosperity in many once-poor countries has created demand for cars – though often the emerging countries’ cheaper marques, rather than the best-known brands.
The changes have created growth in car shipments – 13m cars, about 11m new and 2m used – are expected to travel in car-carriers this year, against 11m, including 2m used, in 2005. They have also required car-carrier operators to increase vastly the complexity of their route networks. Cars are often now driven on and off ships at hubs such as Gioia Tauro in southern Italy or Zeebrugge in Belgium and switched between large, long-distance vessels and smaller vessels serving minor ports.
Unfortunately for shipowners, the development has coincided with a dearth of ships caused by their wrong calculation in the early 1990s that demand would decline as Japanese manufacturers built new plants nearer to European and north American consumers. New orders have since been hard to place because of competition for space in shipyards from booming sectors such as tanker, bulk and container shipping.
The financial problems of manufacturers such as the US’s Ford and General Motors have also helped to depress freight rates, which might otherwise have risen sharply to compensate for the growing pressure on vessel space.
Svein Steimler, a senior executive in the car-carrier operations of Japan's NYK, the sector's biggest single operator, says production is not only growing in China but in many other once-insignificant regions such as south-east Asia and eastern Europe. “The fragmentation of the former trade lanes is continuing,” he says. “That, together with the shortage of tonnage, is... adding up to a pretty big challenge for us.”
However, Arild Iversen, who takes over on April 1 as chief executive of Wallenius Wilhelmsen, the Swedish-Norwegian joint venture which is number two in the market, says current circumstances can present an opportunity for well-organised carriers – although things are growing more complicated.
“Instead of just loading at one port in Japan and discharging at two ports in Europe and going back again, you now have a multitude of ports and manufacturers – and a lot more demand on logistics and vessel operation planning,” he says.
China by some measures looks like only a small part of the challenge. Chinese domestically-owned manufacturers are expected to export 450,000 vehicles on car-carriers this year, compared with the 5.5m shipped annually from Japan. There is also continuing debate about whether China’s and India’s manufacturing will be aimed mainly at the domestic market or will also target foreign trade. Yet this year’s projected figure is three times that achieved in 2005, Mr Steimler points out. Haitong, China’s largest car export terminal, last year exported 112,761 vehicles, nearly double the 61,198 handled in 2005. “In the big picture, it’s still small,” Mr Steimler says. “But there can be no doubt about it – the Chinese are coming.”
For the shipowners, the good news is that China’s growth comes as vessel deliveries are finally under way. The world carrier fleet – 584 vessels – will grow to 632 vessels by the end of this year, according to Wallenius Wilhelmsen. NYK alone expects to receive 40 new vessels before the end of 2009. For China, the challenge is to improve the transport networks. Owen Xie, general manager of the auto logistics group of NYK’s China logistics subsidiary, says the company prefers barge to truck to move cars from central China because each barge carries nearly 200 vehicles, against eight on each truck.
There are plentiful signs that China could soon have almost the same importance for car-carriers as it has for container lines. Owen Xie points out that Shanghai International Port Group is about to close the Haitong Auto Terminal. Its replacement will be the highest-capacity car-handling port in Asia.
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