Untitled - China Europe International Business School

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Organization of the logistic chain in the Chinese international trade Sea transportation-Shipping lines Shippers find the sea-transportation one of the most challenging parts of the logistic chain between China and Europe. The high variability of the sea-freight rates, shortage of space in vessels in the peak seasons, the unreliability of the vessels schedules are main concerns for the companies. Big cargo owners usually negotiate directly long-term agreements with shipping lines while shippers with small and medium cargo volumes rely on forwarders for the relationship with shipping lines. International forwarders usually have long-term relationships with shipping companies in order to ensure cargo space and favorable freight rates for their customers. These agreements between forwarders and shipping lines are generally negotiated at a global level, involving main headquarters. Shipping companies, in the China-Europe trade, need to deal with the up and downs of the demand market and of their profits. The selection of their customers has to ensure volume and profitable freight rates. Shipping companies need to find a balance between direct customers, which are big cargo owners with stable demand but that involve lower freight rates, and small and medium size customers managed through forwarders. The destination of the shipper’s cargo and the type of cargo are key aspects in the negotiation with shipping companies. Container imbalance in flows between Europe and China is one of the main challenges for shipping companies which try to minimize destinations with no return-cargo, as moving empty containers can ruin profitability. Owners of hazardous and other special cargo can also meet more difficulties to ship their cargo as shipping companies, especially in peak seasons, tend to turn down this cargo in the first place. Ports and shipping routes The trade from China to Europe is mainly directed to the North European ports. The main ports of destination are Rotterdam, Hamburg, Antwerp, Bremen, Le Havre and Zeebrugge, (Felixstowe and Southampton) from where the cargo is distributed within Europe. Only around 20% of the cargo is shipped to Mediterranean ports. Northern and Mediterranean range of ports are considered to embrace different markets although the Northern range is also seen as a gateway to the whole Europe. CEIBS Port of Barcelona Chair of Logistics 51
Organization of the logistic chain in the Chinese international trade In the following table are gathered the comments of the interviewees about the ports in Europe. View of the European ports by the players in the logistic chain North-European Ports Mediterranean Ports Ports hinterland � Big Economies (Germany, UK, etc.), strong industries. � Big markets. For North-European markets and East-European markets same vessels and same routes are used. � Shared Hinterlands between ports. � Easier to find return cargo. Logistic and transportation network in the Ports’ hinterland Port Performances and Services � Traditionally developed � Extended scope (South and East-European markets) thanks to: – Multimodal connections with hinterland (road, rail, barge). – Inland terminals � Integrated hinterland developments (ex: Ports of Rotterdam, Antwerp, Zeebrugge connected to Duisport) � Congestion in the hinterland. � Smaller economies generating less trade � Fragmented markets � Regional hinterlands � Difficulties to find return cargo. � Recently started to be developed � Short scope (reaching only regional markets) because – Limited multimodal connections (rail mode is very limited) – Connections not reliable (congestion, strikes, incidents) � Not integrated developments (ex: rail Spain-France). � Congestion in the hinterland. � Congestion in terminals because of lack of capacity in all European ports. � Limited berth windows. (Berth windows are key for shipping lines to choose the first port of call) � Limited productivity in terminals compared to Chinese Ports. 1 � Different holidays periods per country, too many holidays in the European Union. � Although the same regulation controls customs in the E.U., the flexibility with which the law is enforced seems to vary considerably from port to port. Shippers and logistic providers, especially for hazardous cargo, prefer to call ports where customs are known to be quicker and more flexible to avoid delays in the delivery of the cargo (even if the port is further from the destination of the cargo). The Netherlands for example, is quoted by several interviewees, to have the most flexible customs procedures. � Not enough frequency of calls � Transit times too long because vessels call too many ports. (first port of call preferred by customers) � Limited liner services schedules � Limited feeder services The port of destination in Europe is mainly selected by the European buyer (sometimes with the Forwarder’s advice). The most important decision criterion is the port’s proximity to the buyer’s location in order to minimize the cost of land transportation within Europe. Sea freight rates for transportation from China to Western European ports are similar. 1 : For example, comparing the use of space in container terminals, the average land utilization is more efficient in China than in Europe or USA. (China: 18.000 TEU/pa; Europe: 6.000 TEU/pa; USA: 4.500 TEU/pa). Source: Global institute of Logistics. CEIBS Port of Barcelona Chair of Logistics 52
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Untitled - China Europe International Business School

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