The Containerization of Commodities is an article by Dr. Jean-Paul Rodrigue and Dr. Theo Notteboom that talks about how commodities can be containerized just like any other goods. According to the article, studies have not put much focus on commodities and how they can be transported in containers like cargo. The authors have highlighted what is defined as commodity, potential markets for containerized commodities, commodities in containers, trans-loading and terminal issues, and containerized commodity chains. This paper discusses the article and how it addresses the containerization of commodities.
According to the article, commodities are resources that can be consumed, and they have no qualitative differentiation. Such resources can be accumulated with times, exchanged as part of transactions, or even be purchased in particular markets. Commodities can either be fixed or bulk whereby fixed commodities are those that are not transferable while bulk commodities are those that are transferrable. Examples of fixed commodities include land, fishing rights, or even mining. Examples of bulk commodities include grains, livestock, metals, oil, sugar, and cocoa. Most of these commodities are traded globally and so they can be containerized for global trade.
As much as there has been long standing global trade of commodities, the potential of containerization of commodities has not been fully exploited. This means that containerization would involve commodities, which will ensure that a huge market potential is realized. There are many commodities produced globally, and their markets are also found across regions. Containerization of commodities would therefore enhance the global trade of commodities. Bulk and containerized transport systems will be equally important when it comes to the containerization of commodities. This means that both systems of transport will be considered when it comes to the containerization of commodities as each system has its own advantages.
According to the authors, the containerization of commodity chains would most likely be based on complementarity rather than competition of the two transport systems. For various commodities such as grain, iron and coal, containerization would yield more benefits. According to the article, both transport systems are likely to benefit because containerization offers speed and flexibility while bulk offers lowered transport costs. This is a winning situation for commodity containerization. This would in turn lead to commodity producers benefiting from various opportunities as a result of vested interests.
According to the article, the markets for containerized commodities is yet to be fully assessed, and there are still various ways in which containerization can be integrated to various commodity chains. Some commodities have managed to be fully containerized, while some are yet to reach these levels of containerization. For example, European coffee imports are mostly containerized as coffee is of high value with universal consumption and mass-market level. Coffee is also easy for containerization, particularly due to its demand structure, and this means that the commodity can attain full benefits of containerization. Commodities in high demand universally, highly consumed, or have a high mass-market level are easy to containerize, and they are more likely to be fully containerized. This explains why coffee or even tea has reached full containerization.
According to the article, other commodities such as raw materials and food items are also in the process of being containerized. The containerization of such commodities is being enhanced by various factors including increased numbers and availability of containers in the transport market, economies of scale in bulk shipping, increasing prices of commodities and their growing demand in new markets, fluctuations in bulk shipping rates, stable and declining container shipping costs, global trade imbalances that cause imbalances in container shipping rates, and empty container repositioning that makes a pool of containers available. As long as containers are increasingly available and commodities prices and demand is increasing in new markets, more commodities will be containerized. Economies of scale in bulk shipping are making it easier to containerize commodities as it is cheaper, easier and more accessible. The stability and gradual reduction in container shipping costs make containerization more attractive to exporters too. All these factors have made the containerization of commodities more attractive than ever before.
The main success factor in the growth of the containerization business is economies of scale. The containers are unique transport units and containerized shipping networks are universal. This form of transport has small barriers of entry as every container is an independent load unit. Due to economies of scale, containerization of commodities can enable the development of global niche markets for small exporters and provide new development avenues. According to the article, more attention should be paid to analysing the potential of containerization of commodity markets. This means that there should be more analysis of opportunities and other hidden benefits to tap into.
Another thing to consider is the impact of containerization on the commodity markets. Since containerization involves large volumes of goods, the commodities are traded in markets that involve large brokers. These brokers obtain security from legally binding agreements such as commodity futures, forward contracts, or even spot trading. Such contracts require certain standards to be set and met, and these impacts the commodity markets.
According to the article, containerization of commodities brings a new set of commodities to the transport system. Just as in any other goods containerization, there are various challenges, but commodities bring a new set of challenges. The first challenge is the availability of containers in location and for load unit. Commodities require containers to be readily available in location and in sufficient quantities so that the commodities can be just loaded directly from where they are produced.
Another challenge is the preparation of the container so that commodities can be loaded. Containers are generally made in such a way that they easily handle packaged goods either directly or on pallets. This can be challenging for commodities and particularly bulks as the containers have to be thoroughly cleaned or fixed with liners that will protect the commodities. Some commodities need a level of air circulation while others need thermal protection. These new sets of demand can be challenging to the containerization business as more time and resources will be needed to prepare the containers.
Another problem comes when it comes to loading, unloading, and transloading of the containers. According to the article, containers carrying manufactured goods are mostly loaded horizontally using forklifts or manually. However, loading containers with bulk goods is complex as it requires the container to be handled in a certain way, such as blocking the back door or holding the loose cargo. The containers can also be flipped vertically to be loaded or unloaded, but this requires the use of specialized equipment. Some commodities also require special handling and transloading in order to maintain their integrity from their origins to their destination. All these unique demands lead to additional costs that have to be incurred while containerizing commodities.
Other new challenges that arise include weight and weight distribution. According to the article, containers that carry conventional freight are lighter than those carrying commodities. Conventional freight which is mostly retail goods also has a higher volume to mass ratios. When it comes to shipping commodities, they tend to occupy more volume for lesser load. Containers are meant to accommodate a particular weight load and distribution. However, in some situations like in North America, some export containers are twice as heavy as the import containers mainly because commodities are heavier loads. This would therefore require adjustments of these loads so that the weight limits are maintained. Weight can therefore be a challenging factor when it comes to containerization of commodities.
According to the article, issues can arise regarding transloading and terminals when it comes to commodities containerization. Most regions that extract commodities are located inland, while manufacturing of goods tend to take place along the coast. This means that manufactured goods are most often directly loaded to containers straight from the manufacturing facilities. However, containerization of commodities will require interaction between gateway ports and inland terminals. A large amount of containerized freight has to be transloaded once they gate to gateways and so the containers have to be transported between the ports and inland gateways. This can however be an issue because most maritime shipping companies prefer keeping their containers within their networks, and so they are reluctant to have the containers move inland. There is therefore, a preference of transloading maritime containers into domestic containers. The maritime containers are usually 40 footers and domestic containers are mostly 53 footers and so contents of three maritime containers can be transloaded to two domestic containers. However, the domestic containers are not specially designed to ship commodities and so they are not ideal for export markets. This might in turn impair inland commodity-exporting.
Bulk terminals and containers have different terminal characteristics and dynamics. According to the article, bulk terminals are designed to handle particular goods and cannot be converted to other uses. Bulk commodities can be stored in a compact manner at the terminals. However, the same volume of containerized bulk can occupy more volume that the terminal space. This can also take place of the loading process takes place inland. In addition, containerized load do not spend much time at the terminals as containers are easy to load to ships for shipping. This means that a container port that specializes in exporting commodities is likely to experience increased demand on storage space. As said earlier in the article, containerized commodities tend to be heavier than retail container loads. This means that ports and terminals handling containerized commodities would need to adapt their terminal management and operations in order to adjust to the weight issues. However, large volumes of containerized commodities can yield economies of scale as more containers would be loaded at reduced costs. As a result, such ports and terminals are likely to have more sections for containerized commodities as this would be a major activity.
According to the article, there is little evidence showing that containerization of commodities is competing with the current commodity chains. The relationship between the two is mostly complementary as each commodity chain has its own characteristics. Competition can arise only when the two commodity chains have similar characteristics. However, this is not much, so there are more differences than similarities. Bulk commodity chains involve specialization of terminals for particular commodities as each commodity require specialized storage and handling.
Another feature of bulk commodity chains is that there is the issue of empty return movements as carrying of commodities only happens in one direction, with backhaul cargo being non-existent. Such a system is characterized by inefficiencies and minimal usage that is made even worse by the seasonality of some commodity markets. Containerized commodity chains, on the other hand involve integrating commodity flows with the containerized distribution system. A higher integration of commodities into the containerized freight distribution would mitigate some of the imbalances that are witnessed, such as the empty movement challenge.
According to the article, the transport of commodities already has a substantial investment in bulk handling equipment and so stakeholders in the industry are less likely to change practices to containerization. This is a major factor, and it determines how containerized commodity chains can be established. What is more likely to happen are capturing niche markets, accommodating the fluctuating demands, and servicing new markets and opportunities whereby bulk infrastructure are inadequate. The stakeholders are also likely to choose containerization in situations whereby economies of scale are not easy to achieve. This means that bulk commodity chains are more stable and established, and stakeholders would only opt for containerization when bulk commodity chain is inadequate.
The empty container overhauls is a problem that is not likely to be solved by the presence of substantial imbalances because of demand mismatches. Import regions are usually consumption related and they include large metropolitan areas while export regions are usually rural areas. This means that it is easy to attract a large quantity of containers, but it is equally difficult to provide a similar volume of export. Another shortcoming, as mentioned in the article is the seasonality of commodities and particularly agricultural products. This means that at times, demand will be very high, and in other seasons, the demand can be very low. The seasonality also causes commodity price fluctuations which threatens containerization.
Further growth in containerized niche markets depends on supply chain integration mainly because containerized commodity movements are suitable when there is a backhaul movement of empty containers. Inland ports can be used as platforms whereby inbound and outbound flows can be successfully reconciled.
In summary, the article talks about containerization of commodities the factors that contribute to the growth of the commodity containerization. Also addressed are the new sets of challenges and short comings that accompany commodity containerization. The article discusses the nature of containerization and how containerization of commodities is different from containerization of commodity goods. The article implies that commodity containerization is increasingly growing, but the growth is also affected by various challenges. despite these challenges, the article holds a positive view on the future of commodity containerization and perceives more potential that is ought to be tapped. This article provides important views on containerization of commodities, and it highlights all factors that affect commodity chains.