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STRICTLY PRIVATE & CONFIDENTIAL

IMPROVING THE LOGISTICS OF MOVING EMPTY CONTAINERS

Not to be distributed to any third party without approval from the author

11th April 2008

Index
Container Volume & Trade Forecast Estimated and Forecast Growth Rates for Container Trade and Geographical Distribution of Container Volumes World Container Forecast to 2024 Transport of Empty Containers Volume of Empty Containers Shipped vis--vis the Fulls Empty Container Volumes and Imbalances on the East/West Trades Estimated development of Empty Containers Issues Related to Empty Containers Patterns of Empty Container Movement & Causes of Empty Container Accumulation The Imbalance Problem Observations Empty Container Repositioning & the Container Transport Costs Strategies to Reduce the Costs of Empty Transport Past Attempts Reasons for Failure Necessary Features for a Successful Folding Container Our Design Solution Benefits of Our Design Solution References

10 March 2008

Estimated and Forecast Growth Rates for Container Trade

Geographical Distribution of Container Volumes (%)


2002
South Asia, 3.9 Middle East, 2.5 Africa, 2.9 South-East Asia, 10.1

Year

Container Volumes (m TEUs)

CAGR over Previous Period

East Asia, 24.1

Europe, 21.8

1980

13.5

Latin America, 5.4 North Asia, 10.0 ANZ/Pacific, 2.7 North America, 16.6

1990

28.7

7.8%

2015
2000 68.7 9.1%

South Asia, 5.3 Middle East, 2.4 South-East Asia, 10.3 Africa, 3.0 Europe, 17.5

2010

138.9

7.3%

East Asia, 32.0


2015 177.6 5.0%

Latin America, 5.6 North Asia, 8.4 North America, 13.3 ANZ/Pacific, 2.3

Source: United Nations White Paper: Regional Shipping and Port Development Strategies (Container Traffic Forecasts) Study Estimates

10 March 2008

Past and Forecast Global Container Volumes (1980-2015)

Container Trade By Trade Group (2002 & 2015)

Source: United Nations White Paper: Regional Shipping and Port Development Strategies (Container Traffic Forecasts) Study Estimates

The CAGR for global container trade volumes from 2002 to 2015 is estimated to be 6.6%, compared to 8.5% p.a. during 1980-2002 shipment to grow to 177.6 m TEU by 2015, up from 77.8 m TEU in 2002. The average growth rate through 2002 to 2010 has been estimated at 7.5% p.a., while for the following five years, the growth rate is expected to decline to 5%. For every 1% increase or decrease in estimated global economic growth, the rate of growth in container volumes changes by approximately 1.5%.
10 March 2008

Container trade volumes on the East-West routes will increase from 34 m TEU in 2002 to 70 m TEU in 2015 representing a CAGR of 5.8% p.a. The intraregional trades will show solid growth from 28 m TEU to 72 m TEU with a CAGR of 7.5% p.a. The North-South trade is also expected to grow at a CAGR of 6.2% p.a., exceeding the growth rate of the East-West trade.

World Container Forecast to 2024 in TEUs : (186% Increase in Next 20 Years)

Source: Global Insight, 2004


10 March 2008

CAGR Compound Annual Growth Rate

Transport of Empty Containers


Empty Share of Container Movements (1990-2006, 2015)

Source: Drewry Shipping Consultants, Study estimates

It can be seen that until approximately 1996 there was a clear declining trend in the ratio of empty to full containers, as increasingly sophisticated container logistics gradually reduced the number of empty container movements. In 1998, the ratio increased to well over 20%. This was due to the emergence of very pronounced imbalance in the two main Asian trades with Europe and North America caused by the Asian currency crisis. This imbalance has persisted though to see present day and repositioning of empty containers has remained a major concern for carriers. The declining trend that was evident prior to 1998 is unlikely to re-emerge with the proportion of empty containers increasing to nearly 23% in 2015. Carriers will do well to achieve levels which are lower.
10 March 2008

Empties vs. Fulls


Volume of Empties as against Total Containers Shipped
700 600 492 500 Million TEUs 400 300 200 100 0 30.4
21.7% 23 .3%

656

318.4 186.1 118.7 44.1


2 0.2% 22 .7% 19 .2% 1 8.4% 21.2% 20 .5%

70.2

1980

1985

1990

1995 Empties

2000 Total

2005

2010

2015

Source: Drewry Shipping Consultants, Institute of Shipping Economics & Logistics (ISL) and Global Insight projections

The graph above shows the ratio of empty containers to total container port throughput for the period 1980-2015. In 2000, the ratio increased to well over 20%. With no sign of any reversal of the imbalance trends in the Asian east/west trades, the global incidence is unlikely to revert to the sub-19% level which was common-place in the mid 1990s. This is irrespective of any further improvements which may be developed in equipment management systems, or what additional equipment pooling arrangements are instituted. Carriers will do well to hold the empty incidence at current levels of just under 21%.

10 March 2008

Empty Container Volumes and Imbalances on the East / West Trades

Source: Drewry Annual Container Market Review and Forecast 2006-07

10 March 2008

Estimated Development of Empty Containers Volumes and Incidence by Region (1980-2005)

Source: Drewry Annual Container Market Review and Forecast 2006-07


10 March 2008

Issues Related to Empty Containers


An increasing number of containers are being sent back to their origins empty. This results in increased repositioning costs as companies struggle to maintain effective asset utilization of containers (which typically make up 25% of the operational balance sheet). A decade ago it was estimated that empty boxes accounted for 20% of the ocean container movements, at a cost to the industry of $3.5 b a year. In 2003 the percentage of empty movements was about the same, but the estimated cost has escalated to more than $11 b, not counting overland repositioning and costs of idle containers at depots. It is not unusual today for entire ships to be chartered to shift empties from surplus to demand locations. Ocean carriers currently spend close to $100 b per year operating their container assets; of this, approximately $16 b is directly attributable to the total cost of repositioning (globally) empty equipment to the point of its next cargo. (International Assets Systems (IAS)). Also empty containers are cluttering the ports all over the world; for example, it is estimated that there are at least 100,000 empty containers in storage yards around the Port of Jersey that belong to container leasing companies and an additional 50,000 belonging to ocean carriers. In US it is estimated there are between 300,000 to 400,000 empty containers. To reimburse the cost of these empty returns, shipping companies impose heavy surcharges on loaded containers exported from industrialized countries, with the agreement of shipping conferences that represent operators in various locations in the world. These surcharges can vary from US$100 to US$1000 per TEU and form a noticeable proportion of freight rates on sea routes from the industrialized nations to many countries in Asia, Africa and the Caribbean. They result in increased cost of goods imported by developing countries - an additional burden. Storing empty containers takes up prime real estate near port areas. A potential solution to the empty container accumulation problem is the promotion of alternative container designs, such as the collapsible, or folding container; they can save space and reduce the cost of moving empties. It has been estimated that if 75% of empty containers shipped were foldable in 2010 this would amount to a saving of some 25 m equivalent TEU per annum in shipping transportation, or 50% of the total volume of empty containers shipped. In financial terms this would equate to over $1000 per empty container when using folding containers, a considerable benefit to shippers, particularly in the industrially developing countries where empty container movements are 30% to 40% of all containers shipped.
10 March 2008

Patterns of Empty Container Movement


Container movement is governed by a different set of factors at each level and comprises of different set of stakeholders. To better understand the flow of containers at each level, three different case scenarios should be examined: container movement on a global, regional and local level. At a global level, containers move between surplus and deficit regions with main actor the shipping line. With reference to a Major Coastal Economic Activity Center, if the inflow of containers is greater than outflow (import center) then the area shows a surplus of empty containers. When outflow is greater than inflow there is demand for empty containers in the area. In each case, ocean carriers are faced with a set of options on how to move containers. Depending on these carrier choices as well as level activity and operations, the empty container movement and accumulation conditions are defined on a regional and local level.

Causes of Empty Container Accumulation


Container movement is governed by a different set of factors at each level and comprises of different set of stakeholders. The major cause of the empty container accumulation problem is the fundamental global imbalance of trade between the East and the West and the associated trade imbalance in the US. Other causes of empty container accumulation are associated with: tariff imbalances and the related cost of repositioning empty containers from surplus to deficit areas, The cost of inland transportation, marginal and volatile profitability of the leasing industry, The cost of manufacturing and purchasing new boxes in relation to the cost of leasing containers, The terms of leasing contracts between leasing companies and ocean carriers and The cost of inspection and maintenance for aged containers.

10 March 2008

Patterns of Empty Container Movements The Holistic Network

Source: Adapted from Boile, M., Theofanis S., Golias M. and Mittal N. (2006) Empty Marine Container Management: Addressing Locally a Global Problem. TRB Annual Meeting, Washington, DC. Paper # 06-2147

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The Imbalance Problem - Observations


At least one in four containers currently moving through major U.S. container ports is an empty container being repositioned, with no cargo revenue offsetting the cost of the move In 2005, 6 m of the 20.6 m containers passing through five key U.S. container ports were empty About 2.5 m TEUs of empty containers are stored in yards and depots around the world, underlining the issue of the movement and accumulation of empty containers A US$320 b annual U.S. trade deficit with Asia; more than US$200 b with China alone, has resulted in a near 3:1 cargo and equipment imbalance favoring imports in the Pacific market

According to International Asset Systems Research, the average container is idle or undergoing empty repositioning for over 50% of its life-span (see figure below on container usage)

Source: Container Usage Asset Management in the Global Container Logistics Chain by Paul Crinks, President & CEO, International Asset Systems

10 March 2008

Empty Container Repositioning the Cost Aspect


In 2003, empty containers accounted for 20% of the ocean container movements, at a cost of US$11 b as compared to a cost of US$3.5 b a year in early 1990s (Drewry Shipping Consultants) US$110 b per year spent to manage shipments globally, 15% (US$16.8 b) associated with inefficiencies in container operations (including empty containers idle time) To reimburse the costs of empty container returns, shipping companies impose heavy surcharges on loaded containers exported from industrialized countries with the agreement of shipping conferences that represent operators in various locations in the world These surcharges can vary from US$100 to US$1000 per TEU and form a noticeable proportion of freight rates on sea routes from the industrialized nations to many countries in Asia, Africa and the Caribbean resulting in increased cost of goods imported by developing countries Costs associated with repositioning include an allowance for terminal handling, the costs of rest wage, administration, container storage, ships time, equipment per diems and repair (US$14.9 b in 2004) Additional costs include overland repositioning, inland imbalance costs estimated at another US$7.7 b, for a total empty container cost direct and indirect of an estimated US$22.6 b (Drewry, 2003)

Container Transport Costs


The costs of moving a container fall into five major categories: The ship which includes operating expenses, capital costs and bunkers 23% The containers including maintenance 18% Ports and terminals 21% Inland transport 25% Other costs, including container repositioning 13%

10 March 2008

Strategies to Reduce the Costs of Empty Transport

To help to reduce the transportation and terminal handling cost of empty containers and to solve the space shortage problem, the concept of a Collapsible Container with the following characteristics has been innovated: Conserve 75% space Reduce transportation cost accordingly Comply with ISO standard Can be folded and unfolded in just three minutes Manufacturing cost not greater than that of standard containers Smart design, such as smart locking mechanism, water tightness, low tare weight, etc.

Source: Imbalances and Container Repositioning Strategies by Theofanis, Rodrigue and Boile (2007)

10 March 2008

Past Attempts The Folding Process of the Fallpac Container

(1)

(3)

(2)
Source: Fallpac AB, The Folding Process of the Fallpac Container

(4)

Past Attempts The Folding Process of the Six-in-One Container

Source: See Six-In-One Containers Company S.A., Figure 1. The Folding Process of the Six-in-One Container

Past Attempts Holland Container Innovation

Reasons For Failure


Although the concept of collapsible containers has been around for some time, they have not been successful for the following reasons:
Folding was manual Parts were separated Time required for dismantling an assembling was significant Structurally not as strong Insufficient protection because of insufficient seals High wear and tear of hinge resulting in high costs for repair and maintenance Loss of component parts during the hectic transportation business Complicated assembling in connection with insufficient handling by poorly educated workers Higher initial costs for collapsible containers against standard containers Long delays in collapsing and reassembling containers

Necessary Features for a Successful Folding Container


Low Cost for folding and unfolding containers Low manufacturing costs ( purchase price) Compatibility with existing equipment for intermodal transport The external dimensions and gross weight The strength & stiffness Water tightness Corner fittings at the bottom and top of the container Ability to merge folded containers to a bundle with external standard dimensions Ability to lift a bundle of folded containers on top Simple & effective consolidation of a bundle of folder containers Specific Technical Features Robustness for damages Avoiding loose parts Use of high-quality joint-hinge constructions Simple and safe bundling of a package of empties Simple folding and unfolding

Source : Professors Rob Konning & Remmelt Thijs

Our Design
Diagram 1

(Patent applications filed )

Diagram 3

Folding Size

Folding Base

(Unfolded Container)

(Second Step of Folding)

(First Step of Folding)

(Folded Container) Diagram 4

Diagram 2

Our Design Solution


Our folding container has been designed by two professors from one of the best engineering colleges in India Our design features will meet all the above requirements as stated and is expected to conform with ISO standards for ocean going containers It will automatically fold to one quarter its size within three to four minutes It will require between one to two unskilled labor There will be no separate parts which might get lost It is expected to cost 10-15% more than a standard container The additional weight will be between 10-15 % The cost of the folding mechanism is estimated to be approximately the cost of two to three containers Four containers stacked vertically will have a self locking mechanism When stacked the pillars will have the necessary holes for lifting and lashing on board Additional containers can be stacked on the folded container and will carry the same weight load as a normal container We have filed the patents applications We would be happy to show you a video demonstration We have shown the proof of concept to a number of shipping lines and have received very encouraging feedback

Benefits of Our Design Solution


Benefits to the Shipper At the point of unloading, the container is folded to one quarter of its size. This enables them to use fewer trailers to ship the empties back i.e. four containers in the space of one Significant cost savings Less traffic at his unloading dock Faster loading of empties Less space occupied by empties Benefits to the Port Operator Faster turnaround of ships after unloading i.e. one ship can carry the same amount of empties instead of four No new handling equipment required. Fewer trailers visiting the yard to unload empties. Less traffic, less pollution In the same space stack as many as three time more empty containers Security The folding container ensures better security since the empty container cannot be used to smuggle any prohibited item out of the country

Benefits to the Environment With fewer trailers and trucks on the road particularly near the ports, less pollution Lesser traffic on the roads near the ports

References
United Nations White Paper: Regional Shipping and Port Development Strategies Empty Intermodal Container Management by Maria Boil, Ph.D., 2005 NJDOT Research Showcase, October 2005 Empty Marine Container Management: Addressing Locally a Global Problem. TRB Annual Meeting, Washington, DC. Paper # 06-2147 Container Usage Asset Management in the Global Container Logistics Chain by Paul Crinks, President & CEO, International Asset Systems Conventional Empty Repositioning, IAS InterChange, International Asset Systems Conventional Empty Repositioning, IAS InterBox, International Asset Systems Container Repositioning, Boston Consulting Group, 2007 Is the Drive for Ever Bigger Containerships Irresistible?, Lloyds List Shipping Forecasting Conference by M. Stopford Cost of Operations and Time for Shipping a 40 Container; in APECs Congestion Points Study, Phase III, Best Practices Manual and Technical Report, Volume 2, Sea Transport, Feb 1997 Imbalances and Container Repositioning Strategies by Theofanis, Rodrigue and Boile (2007) White Paper By Drewry Shipping Consultants Shipping Container Housing Guide: Inefficiencies and Risks The Geography of Transport Systems, Chapter 4 Transportation Terminals, Concepts Empty Intermodal Container Management, Final Report, July 2006, by Dr. Maria P. Boile http://www.worldcargonews.com/htm/nf20041130.535525.htm, November 2004, Tackling the Empty Container Problem http://www.metrans.org/research/final/01-05_Final.pdf Pg.35 http://www.ejtir.tudelft.nl/issues/2001_04/pdf/2001_04_01.pdf

10 March 2008