LINER SHIPPING CONNECTIVITY:

THE DETERMINANTS AND IMPACT OF GLOBAL

CONTAINER SHIP DEPLOYMENT
Jan HOFFMANN, Trade Logistics Branch, UNCTAD, Palais des Nations, Geneva, Switzerland
Jan.Hoffmann@UNCTAD.org
Presented to International Port Forum, Pyeongtek, Republic of Korea, December 2006

This paper presents recent and ongoing work seeking to measure the level of liner
shipping connectivity on the basis of the number of container vessels deployed, their size,
as well as liner shipping companies and their services made available in different
countries and routes. It consists of five parts:
I. The concept of liner shipping connectivity
II. Liner shipping connectivity per country, July 2006
III. Connectivity for shipping routes, July 2006
IV. The position of Korea
V. Trade, liner shipping connectivity, and maritime freight rates
Key words: liner shipping, freight rates, connectivity, geography of trade, container ships
Disclaimer: the opinions expressed in the conference paper are those of the author; they do
not necessarily coincide with those of UNCTAD.

I. THE CONCEPT OF LINER SHIPPING CONNECTIVITY

The geography of trade, i.e. the question of who trades what with whom, depends not
only on the demand and supply of goods, but also on the ability to deliver the goods to the
market. Relevant aspects in this regard include geographical factors such as distance,
landlockedness, as well as transport costs. Another important, yet often neglected,
determinant of trade competitiveness is transport connectivity, defined as access to
regular and frequent transport services.
Except for bulk commodities, most intercontinental trade is transported by liner shipping
services. Therefore, access to such services is a determinant of competitiveness and of the
geography of trade. This paper presents measures that could possibly be used as
indicators of liner shipping services available in different countries. The indicators are
generated from data obtained through Containerization International Online. They reflect
the services, vessels and their TEU capacity deployed by international liner shipping
companies.
Recent research has examined various aspects of maritime connectivity. Kumar and
Hoffmann (2002), Marquez Ramos et al (2006) and Wilmsmeier et al (2006) incorporate
measures of connectivity into research on maritime transport costs. Angeloudis et al
(2006), and Bichou (2004) look at connectivity in the context of maritime security.
McCalla et al (2005) measures connectivity for Caribbean shipping networks and
Notteboom, (2006b) for seaport systems. Notteboom (2006b) also looked into the time
factor in liner shipping services.

1
In various issues of UNCTADs quarterly Transport Newsletter, liner shipping
connectivity was discussed in the context of trade competitiveness and the geography of
trade. As a follow-up, this contribution provides a general overview on how well different
countries are connected to the global liner shipping network. It reports on work in
process; future research should attempt to incorporate transshipment services, land-side
connections, and qualitative aspects of liner shipping services such as frequencies and
speed. Readers are encouraged to contact the author for comments and suggestions.

II. LINER SHIPPING CONNECTIVITY BY COUNTRY, JULY 2006

In the UNCTAD Transport Newsletters # 27 (1st Quarter 2005) and # 29 (3rd Quarter
2005), we presented an index that provided an indicator of liner shipping connectivity for
162 countries for July 2004 and July 2005, respectively. In this paper, a July 2006 update
of the different components of the index is provided.

1) Deployment of container ships

The fleet deployment is the number of ships that national and international liner
shipping companies assign to the liner services from and to the countrys ports. 1 A larger
number of ships is an indicator of the opportunities a countrys shippers have to load their
containerized exports, i.e. their connectivity to foreign markets. Table 1 shows the ten
economies with the highest number of container ships deployed on liner services from
and to their ports in 2006, together with the respective data for July 2005 and July 2004.
Between July 2004 and July 2006, the number of container ships servicing ports in China
has gone up by almost 18%, from 1228 to 1448 vessels.
Table 1: Fleet assignment (number of ships)
Rank Country or territory 2006 2005 2004 change
2006 2006/2005
1 China 1,448 1,354 1,228 6.9%
2 Hong Kong, China 1,242 1,175 1,166 5.7%
3 United States 1,037 1,094 1,074 -5.2%
4 Singapore 947 930 916 1.8%
5 United Kingdom 842 825 861 2.1%
6 Germany 821 820 810 0.1%
7 Netherlands 797 797 785 0.0%
8 Belgium 777 793 774 -2.0%
9 Korea, Rep. 706 767 734 -8.0%
10 Malaysia 700 607 588 15.3%
Source: www.ci-online.co.uk, July2006.

2) Deployment of container carrying capacity (TEU)

A similar picture is obtained if we look at the deployment of container carrying capacity,
measured by the number of TEU slots (Table 2). During the last two years, 100 countries
experienced an increase in the TEU deployment to their ports, while 60 countries have
recorded a decrease. Two countries experienced no change in TEU capacity deployed.

1
For the purposes of this article, deployment and assignment are used synonymously. Although a ship
can only be deployed at one place at one point in time, if it is assigned to a given route covering several
countries it will effectively be deployed to these same countries over a period of time.

2
 Table 2: Fleet assignment (TEU)
Rank Country or territory 2006 2005 2004 change
2006 2006/2005
1 China 5,068,909 4,442,070 3,928,913 14.1%
2 Hong Kong, China 4,345,864 3,936,129 3,749,697 10.4%
3 United States 3,162,767 3,014,748 2,978,193 4.9%
4 Germany 2,689,753 2,341,410 2,249,857 14.9%
5 Singapore 2,672,541 2,477,400 2,471,635 7.9%
6 United Kingdom 2,599,120 2,204,620 2,169,336 17.9%
7 Netherlands 2,411,338 2,120,237 2,083,832 13.7%
8 Taiwan, prov of China 2,264,185 2,001,254 1,959,434 13.1%
9 Korea, Rep. 2,092,781 2,215,415 2,110,367 -5.5%
10 Malaysia 2,046,129 1,737,298 1,716,361 17.8%

3) Deployment of container ships per capita

Everything else being equal, a larger country will usually have more ships and TEU
assigned to its ports than a smaller country. However, if these ships or TEU have to be
shared by a larger population, an individual shipper may not necessarily be better
connected than his colleague in a smaller country (Table 3).

4) Deployment of container carrying capacity per capita

The TEU capacity can also be calculated on a per capita basis (Table 4). Most countries
with the highest TEU assignment per capita are also important transshipment or transit
traffic centres, since their own population would not economically justify such a high
connectivity.

Table 3: Fleet assignment (ships) per capita Table 4: Fleet assignment (TEU) per capita
Rank Country or territory Ships Rank Country or territory TEU
2006 per million capita 2006 per thousand capita
1 St. Kitts and Nevis 281 1 Malta 635
2 Palau 251 2 Singapore 618
3 American Samoa 231 3 Hong Kong, China 617
4 Aruba 231 4 Bahamas, The 355
5 Malta 219 5 Aruba 239
6 Singapore 219 6 Panama 234
7 Hong Kong, China 176 7 United Arab Emirates 187
8 Bahamas, The 152 8 Belgium 184
9 Tonga 137 9 French Polynesia 159
10 New Caledonia 135 10 Guam 149

5) Number of liner shipping companies

This indicator is of particular interest in view of the recent mergers in the shipping
industry. Globally, the market share of the largest liner shipping companies has been
increasing over the last years, and there have been concerns about the resulting process of
concentration of market power.
According to latest data from Clarksons Container Intelligence Monthly (CIM), the
process of concentration in liner shipping has been continuing apace during 2006. In
January 2003, the 10 largest container ship operators accounted for 44.4 per cent of global

3
container carrying capacity; at the beginning of September 2006, the percentage had risen
to 54.8 per cent. The growth is partly due to two major acquisitions in 2005, namely
Maersks takeover of P&O Nedlloyd and Hapag Lloyds takeover of CP Ships. But
organic growth has also led to a continuous gradual increase in the market share of the
largest carriers. Monitoring this trend is of particular interest to shippers and also to
regulatory bodies who, for example, oversee the issue of anti-trust immunity.
Table 5: Liner companies providing services to the countrys ports
Rank Country or territory 2006 2005 2004 change
2006 2006/2005
1 Netherlands 118 126 131 -6.3%
2 Belgium 113 119 123 -5.0%
3 United Kingdom 108 117 133 -7.7%
4 Germany 103 110 114 -6.4%
5 France 97 100 105 -3.0%
6 United States 91 101 77 -9.9%
7 Singapore 89 95 98 -6.3%
8 China 84 87 96 -3.4%
9 Spain 83 88 91 -5.7%
10 Italy 79 82 87 -3.7%

An individual shipper or port will be particularly concerned about the effect of global
consolidation on competition in his port or on a specific trade route. According to our
research, up to the beginning of 2005, it appeared that the number of carriers offering
services at individual ports had continued to increase despite the global process of
concentration. Mergers and acquisitions mean while there are fewer carriers today than
ten years ago, same global carriers continued to expand into new markets. As a result the
number of carriers providing services to a specific port had actually increased for the
majority of countries. Since mid-2005, however, the average number of carriers per
country has started to decline. In order to complement Table 5 above, Table 6 compares
the averages per country for the months of July 2004, July 2005 and July 2006.
Table 6: Fleet deployment and companies providing services per country, 2004-2006
2004 2005 Percentage 2006 Percentage change Percentage
change 2006/2004 change
2005/2004 2006/2005
Average TEU capacity deployed per 296025 309658 +4.6% 337940 +14.2% +9.1%
country
Average vessel size, TEU 1212 1254 +3.4% 1399 +15.4% +11.6%
Average # of companies per country 21.7 21.5 -0.7% 20.3 -6.2% -5.5%

While the deployed TEU capacity per country and the average vessel sizes continue to
increase, the average number of companies that provide services to an average countrys
ports has decreased from 21.5 (July 2005) to 20.3 (July 2006). Although the reduction of
an average of around one company per country may not, at first sight, appear to be
significant, for smaller markets it can make a considerable difference. Among the 161
countries in the database, in July 2004 there were 79 countries which were served by only
10 or even fewer companies; this number increased to 80 in July 2005 and to 85 in July
2006.

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6) Liner services
Usually, shipping companies provide more than one regular service. The recorded
reduction in the number of services per country (Table 7) does not necessarily mean a
lower connectivity. In fact, the quality and frequency of these services and their
connection to other services may improve via transshipment ports. These elements have
(so far) not been covered in our connectivity measures for (direct) services.
Table 7: Liner services from the countrys ports
Rank Country or territory 2006 2005 2004 change
2006 2006/2005
1 China 943 957 863 -1.5%
2 Hong Kong, China 743 738 738 0.7%
3 Singapore 689 687 669 0.3%
4 United States 594 621 623 -4.3%
5 Korea, Rep. 531 567 569 -6.3%
6 Japan 496 540 539 -8.1%
7 United Kingdom 469 503 538 -6.8%
8 Germany 461 474 472 -2.7%
9 Netherlands 454 498 506 -8.8%
10 Malaysia 445 436 431 2.1%
Note: Includes some double counting if services are being sold under different names.

7) Average vessel sizes

Combining a data on vessels (Table 1) and TEU (Table 2), the average vessel size is
calculated. Saudi Arabia, Egypt, and Oman are among the top 10 countries in this regard,
which is due to their location on the main Asia-Europe route.
Table 8: Average vessel sizes
Rank Country or territory 2006 2005 2004 change
2006 2006/2005
1 Saudi Arabia 3,616 3,097 2,882 16.7%
2 China 3,501 3,281 3,199 6.7%
3 Hong Kong, China 3,499 3,350 3,216 4.5%
4 Taiwan, prov of China 3,354 3,147 3,115 6.6%
5 Egypt, Arab Rep. 3,347 2,846 2,542 17.6%
6 Germany 3,276 2,855 2,778 14.7%
7 Canada 3,211 3,074 3,022 4.5%
8 Oman 3,199 3,595 3,215 -11.0%
9 Panama 3,111 2,855 2,895 9.0%
10 United Kingdom 3,087 2,672 2,520 15.5%

8) Maximum vessel sizes

In July 2006, there were 11 countries that were served by ships of 9200 TEU and above.

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 Table 9: Maximum vessel sizes
Rank Country or territory 2006 2005 2004 change
2006 2006/2005
1 Belgium 9,449 8,468 8,076 11.6%
1 China 9,449 9,200 8,238 2.7%
1 Egypt, Arab Rep. 9,449 8,073 6,978 17.0%
1 Germany 9,449 8,750 8,076 8.0%
1 Hong Kong, China 9,449 9,200 8,238 2.7%
1 Netherlands 9,449 8,750 8,076 8.0%
1 Singapore 9,449 8,750 8,063 8.0%
1 United Kingdom 9,449 8,750 8,076 8.0%
9 France 9,200 9,200 6,978 0.0%
9 Korea, Rep. 9,200 8,189 6,978 12.3%
9 Spain 9,200 8,189 6,742 12.3%

9) Vessels per liner shipping company

This indicator attempts to measure Economies of scale as regards the number of operated
vessels per liner shipping company (Table 10).
Table 10: Vessels operated per liner shipping company
Rank Country or territory 2006 2005 2004 change
2006 2006/2005
1 China 17.2 15.6 12.8 10.8%
2 Hong Kong, China 16.6 13.8 12.5 19.8%
3 Oman 12.4 14.3 10.4 -12.8%
4 Taiwan, prov of China 11.4 9.6 13.4 18.7%
5 United States 11.4 10.8 13.9 5.2%
6 Singapore 10.6 9.8 9.3 8.7%
7 Panama 9.7 9.5 9.0 2.3%
8 Japan 9.7 9.0 9.1 7.9%
9 Malaysia 9.6 8.1 7.7 18.5%
10 Korea, Rep. 9.5 9.5 9.2 0.8%

The new LSCI 2006

If we combine the available information about fleet assignment, liner services, and vessel
and fleet sizes, it is possible to generate an overall Liner Shipping Connectivity Index
(LSCI) (Table 11). In order to allow a comparison over time, the maximum value of the
LSCI is set to be equal to 1.0 in 2004.
Note: The indexes for 2004, 2005 and 2006 presented above are a simplified version of
the LSCI initially presented in UNCTADs Transport Newsletters for the years 2004 and
2005. For clarity purposes and long term consistency we recalculated the index to include
only the five original components, i.e. number of ships, TEU, number of companies,
number of services and the maximum vessel size. 2

2
The two per-capita indicators (i.e. ships/capita and TEU/per capita) that had been included in the 2004 and
2005 index are no longer included because the adjustment for population sizes was considered somewhat
arbitrary; furthermore it was found that available data for population sizes of several countries and
territories could not be updated annually. The two coefficients of original indicators (i.e. TEU/ship and
ships/company) were excluded because of methodological concerns regarding the calculation of an index if
components of the index are included more than once and in different forms. The new, simplified, index is
easier to calculate and it allows for a clearer interpretation: It is the un-weighted average of five
components, i.e. ships, TEU, companies, services and maximum vessel size.

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 Table 11: UNCTAD Liner Shipping Connectivity Index for 2004, 2005 and 2006

(Maximum index 2004 = 100)

Rank Country or territory 2006 2005 2004 Change Rank Country or territory 2006 2005 2004 Change
2006 2006/05 2006 2006/05
1 China 113.1 108.3 100.0 4.8 54 Vietnam 15.1 14.3 12.9 0.8
2 Hong Kong, China 99.3 96.8 94.4 2.5 55 Costa Rica 15.1 11.1 12.6 4.0
3 Singapore 86.1 83.9 81.9 2.2 56 Ukraine 14.9 10.8 11.2 4.1
4 United States 85.8 87.6 83.3 -1.8 57 Puerto Rico 14.7 15.2 14.8 -0.6
5 United Kingdom 81.5 79.6 81.7 1.9 58 Ecuador 14.2 12.9 11.8 1.3
6 Netherlands 81.0 80.0 78.8 1.0 59 Ghana 13.8 12.6 12.5 1.2
7 Germany 80.7 78.4 76.6 2.3 60 Nigeria 13.0 12.8 12.8 0.2
8 Belgium 76.1 74.2 73.2 2.0 61 Cote d'Ivoire 13.0 14.5 14.4 -1.5
9 Korea, Rep. 71.9 73.0 68.7 -1.1 62 Jordan 13.0 13.4 11.0 -0.4
10 Malaysia 69.2 65.0 62.8 4.2 63 Russian Federation 12.8 12.7 11.9 0.1
11 France 67.8 70.0 67.3 -2.2 64 Mauritius 11.5 12.3 13.1 -0.7
12 Taiwan, prov of 65.6 63.7 59.6 1.9 65 Cameroon 11.4 10.6 10.5 0.8
China 66 Syrian Arab 11.3 11.8 8.5 -0.6
13 Japan 64.5 66.7 69.1 -2.2 Republic
14 Spain 62.3 58.2 54.4 4.1 67 Senegal 11.2 10.1 10.1 1.2
15 Italy 58.1 62.2 58.1 -4.1 68 Trinidad and 11.2 10.6 13.2 0.6
16 Egypt, Arab Rep. 50.0 49.2 42.9 0.8 Tobago
17 United Arab 46.7 39.2 38.1 7.5 69 Togo 11.1 10.6 10.2 0.5
Emirates 70 Slovenia 11.0 13.9 13.9 -2.9
18 India 42.9 36.9 34.1 6.0 71 Benin 11.0 10.2 10.1 0.8
19 Saudi Arabia 40.7 36.2 35.8 4.4 72 Croatia 10.5 12.2 8.6 -1.7
20 Sri Lanka 37.3 33.4 34.7 4.0 73 Guam 9.6 10.5 10.5 -1.0
21 Canada 36.3 39.8 39.7 -3.5 74 Angola 9.5 10.5 9.7 -1.0
22 Thailand 33.9 31.9 31.0 2.0 75 Yemen, Rep. 9.4 10.2 19.2 -0.8
23 Brazil 31.6 31.5 25.8 0.1 76 Kenya 9.3 9.0 8.6 0.3
24 Greece 31.3 29.1 30.2 2.2 77 Congo, Rep. 9.1 9.1 8.3 0.0
25 Malta 30.3 25.7 27.5 4.6 78 New Caledonia 9.0 10.3 9.8 -1.3
26 Mexico 29.8 25.5 25.3 4.3 79 French Polynesia 8.9 11.1 10.5 -2.2
27 Sweden 28.2 26.6 14.8 1.6 80 Gabon 8.7 8.8 8.8 0.0
28 Panama 27.6 29.1 32.1 -1.5 81 Tanzania 8.7 8.6 8.1 0.1
29 Turkey 27.1 27.1 25.6 0.0 82 Guinea 8.7 6.9 6.1 1.8
30 Australia 27.0 28.0 26.6 -1.1 83 Algeria 8.7 9.7 10.0 -1.0
31 South Africa 26.2 25.8 23.1 0.4 84 Finland 8.6 10.2 9.4 -1.6
32 Indonesia 25.8 28.8 25.9 -3.0 85 Morocco 8.5 8.7 9.4 -0.1
33 Argentina 25.6 25.0 20.1 0.6 86 Namibia 8.5 6.6 6.3 1.9
34 Lebanon 25.6 12.5 10.6 13.0 87 Madagascar 8.3 6.8 6.9 1.5
35 Denmark 25.4 24.2 11.6 1.1 88 Honduras 8.3 8.6 9.1 -0.3
36 Portugal 23.5 16.8 17.5 6.7 89 Ireland 8.2 9.7 8.8 -1.5
37 Jamaica 23.0 22.0 21.3 1.0 90 El Salvador 8.1 7.3 6.3 0.8
38 Pakistan 21.8 21.5 20.2 0.3 91 Nicaragua 8.1 5.2 4.8 2.8
39 New Zealand 20.7 20.6 20.9 0.1 92 Netherlands Antilles 7.8 8.2 8.2 -0.4
40 Colombia 20.5 19.2 18.6 1.3 93 Aruba 7.5 7.5 7.4 0.0
41 Israel 20.4 20.1 20.4 0.4 94 Poland 7.5 7.5 7.3 0.0
42 Oman 20.3 23.6 23.3 -3.4 95 Djibouti 7.4 7.6 6.8 -0.2
43 Venezuela, RB 18.6 19.9 18.2 -1.3 96 Norway 7.3 8.3 9.2 -1.0
44 Guatemala 18.1 13.9 12.3 4.3 97 Fiji 7.2 8.3 8.3 -1.1
45 Romania 17.6 15.4 12.0 2.2 98 Tunisia 7.0 7.6 8.8 -0.6
46 Cyprus 17.4 18.5 14.4 -1.1 99 Mozambique 6.7 6.7 6.6 0.0
47 Iran, Islamic Rep. 17.4 14.2 13.7 3.1 100 Cuba 6.4 6.5 6.8 -0.1
48 Uruguay 16.8 16.6 16.4 0.2 101 Paraguay 6.3 0.5 0.5 5.8
49 Philippines 16.5 15.9 15.4 0.6 102 Mauritania 6.2 6.0 5.4 0.3
50 Peru 16.3 15.0 14.8 1.4 103 Estonia 5.8 6.5 7.1 -0.8
51 Bahamas, The 16.2 15.7 17.5 0.5 104 Sudan 5.7 6.2 6.9 -0.5
52 Chile 16.1 15.5 15.5 0.6 105 Lithuania 5.7 5.9 5.2 -0.2
53 Dominican Republic 15.2 14.0 12.4 1.2 106 St. Kitts and Nevis 5.6 5.3 5.5 0.3

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Rank Country or territory 2006 2005 2004 Change Rank Country or territory 2006 2005 2004 Change
2006 2006/05 2006 2006/05
107 Comoros 5.4 5.8 6.1 -0.5 137 Brunei 3.3 3.5 3.9 -0.2
108 Barbados 5.3 5.8 5.5 -0.4 138 Marshall Islands 3.3 3.7 3.5 -0.4
109 Bangladesh 5.3 5.1 5.2 0.2 139 Virgin Islands (U.S.) 3.2 3.0 1.8 0.2
110 Seychelles 5.3 4.9 4.9 0.3 140 Switzerland 3.2 3.4 3.5 -0.2
111 Sierra Leone 5.1 6.5 5.8 -1.4 141 Kiribati 3.1 3.3 3.1 -0.2
112 Latvia 5.1 5.8 6.4 -0.7 142 Serbia 3.0 2.9 2.9 0.0
113 Samoa 5.1 5.3 5.4 -0.2 143 Georgia 2.9 3.8 3.5 -0.9
114 Guinea-Bissau 5.0 5.2 2.1 -0.2 144 Cambodia 2.9 3.3 3.9 -0.3
115 American Samoa 4.9 5.3 5.2 -0.4 145 Haiti 2.9 3.4 4.9 -0.5
116 Gambia, The 4.8 6.1 4.9 -1.3 146 Cape Verde 2.8 2.3 1.9 0.5
117 Iceland 4.7 4.9 4.7 -0.1 147 Congo, Dem. Rep. 2.7 3.0 3.0 -0.4
118 Libya 4.7 5.2 5.3 -0.5 148 Belize 2.6 2.6 2.2 0.0
119 Papua New Guinea 4.7 6.4 7.0 -1.7 149 Myanmar 2.5 2.5 3.1 0.1
120 Guyana 4.6 4.4 4.5 0.2 150 Antigua and 2.4 2.6 2.3 -0.1
121 Liberia 4.5 6.0 5.3 -1.4 Barbuda
122 Bulgaria 4.5 5.6 6.2 -1.1 151 Somalia 2.4 1.3 3.1 1.1
123 Tonga 4.4 4.8 3.8 -0.3 152 Dominica 2.3 2.5 2.3 -0.2
124 Bahrain 4.4 4.3 5.4 0.1 153 Greenland 2.3 2.3 2.3 0.0
125 Faeroe Islands 4.4 4.4 4.2 0.0 154 Eritrea 2.2 1.6 3.4 0.7
126 Vanuatu 4.4 4.5 3.9 -0.1 155 Micronesia, Fed. 1.9 2.9 2.8 -0.9
127 Kuwait 4.1 6.8 5.9 -2.6 Sts.
Iraq 4.1 1.6 1.4 2.4 156 Palau 1.9 1.0 1.0 0.8
128
Solomon Islands 4.0 4.3 3.6 -0.3 157 Northern Mariana 1.8 2.2 2.2 -0.3
129
Islands
130 Qatar 3.9 4.2 2.6 -0.3
158 Cayman Islands 1.8 2.2 1.9 -0.4
131 Maldives 3.9 4.1 4.2 -0.2
159 Sao Tome and 1.6 1.3 0.9 0.3
132 Suriname 3.9 4.2 4.8 -0.3 Principe
133 Equatorial Guinea 3.8 3.9 4.0 -0.1 160 Bermuda 1.6 1.6 1.5 0.0
134 St. Lucia 3.4 3.7 3.7 -0.3 161 Czech Republic 0.4 0.4 0.4 0.0
135 St. Vincent and the 3.4 3.6 3.6 -0.2 162 Albania 0.4 0.4 0.4 0.0
Grenadines
136 Grenada 3.4 2.5 2.3 0.8

III. LINER SHIPPING CONNECTIVITY BETWEEN PAIRS OF

COUNTRIES, JULY 2006
If we look at the connectivity between the 162 countries and territories included in Table
11, there are 13041 3 pairs of countries, i.e. countries that can in principle be connected
with each other by liner shipping services. Many pairs of countries, however, are not
connected by direct services, but require indirect services through one or more
transshipment ports.
In order to measure liner shipping connectivity between pairs of countries, we are at
present undertaking research to investigate possible indicators that would provide
quantitative information on the direct and indirect liner shipping services between pairs of
countries. Such an indicator will have to include information on the number of vessels
deployed, their TEU capacity, size, and the number of companies that provide services
between pairs of countries. It will also need to be combined with information on maritime
distances and the number of transshipments that are necessary for a maritime trade
transaction when no direct liner service is available. Table 12 provides data for the top 25
routes between pairs of countries in terms of the TEU capacity of those vessels that are
deployed on direct liner shipping services between the two countries.

3
((162 x 162) 162) / 2

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 Table 12: Assignment of vessels and their TEU capacity to routes between pairs of countries.
Top 25 routes, ranked by TEU, June 2006
Route TEU Vessels Maximum Average vessel Carriers
vessel size size
China Hong Kong, China * 3839910 1028 9449 3735 68
Germany United Kingdom * 2250164 586 9449 3840 66
Germany Netherlands * 2130690 582 9449 3661 71
Netherlands - United Kingdom * 2090939 592 9449 3532 82
China United States ** 2027659 458 8238 4427 30
China Singapore * 1948345 514 9449 3791 50
China Taiwan, prov of China * 1936339 496 8073 3904 45
Hong Kong, China Taiwan, prov of China * 1914258 581 8073 3295 51
China Korea, Rep. * 1914018 574 9200 3335 61
Hong Kong, China Singapore * 1812848 517 9449 3506 50
China Germany ** 1662922 296 9449 5618 27
China United Kingdom ** 1571199 266 9449 5907 24
Belgium Germany * 1563971 538 9449 2907 76
China Malaysia * 1539303 385 8750 3998 37
Hong Kong, China Korea, Rep. * 1535001 481 9200 3191 53
Belgium United Kingdom * 1534819 510 9449 3009 72
China Netherlands ** 1501368 259 9449 5797 26
Hong Kong, China United States ** 1484955 326 8238 4555 28
China Japan * 1467611 481 8204 3051 51
Germany Hong Kong, China ** 1409978 244 9449 5779 26
Hong Kong, China United Kingdom ** 1326064 219 9449 6055 24
Hong Kong, China Malaysia * 1314977 349 8750 3768 36
Hong Kong, China Netherlands ** 1300770 220 9449 5913 26
Belgium Netherlands * 1223148 451 9449 2712 77
Hong Kong, China Japan * 1194285 391 7929 3054 41
Intra-regional routes are marked *; inter-regional routes are marked **.

The route with the highest number of assigned vessels and TEU capacity is ChinaHong
Kong (China) 1,028 vessels, with 3839910 TEU, deployed by 68 carriers. This reflects
the fact that most ships that call at a port in one of these economies also call in a port in
the other, neighbouring, economy. China is by far the largest exporter of containerized
cargo, thus explaining the high supply of liner shipping services to its ports. None of the
Top 25 pairs of countries include an African, Latin American or South Asian country.
Seventeen out of the Top 25 routes in terms of TEU capacity are intra-regional routes,
linking Asian countries (11 routes) or European countries (6 routes). Of the remaining 8
inter-regional routes, the most important ones terms of TEU are China-USA, followed by
Asia-Europe and Hong KongUSA. No route between a European and a North American
country is among the top inter-regional routes.
The average vessel size is highest on the 8 inter-regional routes. In contrast, the 17 intra-
regional routes in the table have smaller average vessel sizes because they include coastal
and feeder services. The highest average vessel size in the table is on the route Hong
KongUnited Kingdom (6055 TEU), and the smallest average vessel size is on the route
BelgiumNetherlands (2712 TEU). Between the latter two countries there is a particularly
high number of feeder, coastal and even river transport services.
Seventeen out of the Top 25 routes include vessels that are larger than 9000 TEU. The
present maximum vessel size of 9449 TEU is deployed on 15 of the Top 25 routes.
Among the 8 inter-regional routes in the table, the two AsiaNorth America routes are
those with the smallest average and maximum vessel sizes. This may partly be due to the
vessel size restriction of the Panama Canal. Illustration shows containers on a panamax
vessel, i.e. a ship that has the maximum dimensions allowed to pass through the Panama

9
Canal. The largest existing container ships have about twice the TEU carrying capacity of
a panamax vessel.
As regards the number of carriers that deploy container vessels for liner shipping services,
these are highest on intra-European routes, reaching 82 companies on the route
Netherlands-United Kingdom. The smallest number of carriers reported for the Top 25
routes is 24 for the routes Hong KongUnited Kingdom and ChinaUnited Kingdom.

IV. THE POSITION OF KOREA

The Republic of Korea is among the best connected countries of the world. It ranks 9th on
the July 2006 LSCI. Regarding the individual components of the index, Korea ranks 9th
for ships and for TEU, 12th for the number companies, 5th for the number of services, and
again 9th for the maximum vessel size.
Unlike most other countries among the top 10, Korea has however experienced a slight
decline in its connectivity during the last two years. The number of ships that are assigned
to services from and to Korean ports has decreased by 8% between 2004 and 2006. More
specifically, the TEU decreased by 0.8%, the number of companies by 7.5% and the
number of services by 6.7%. On the other hand, the maximum vessel size has increased
by an impressive 31% between July 2004 and July 2006. The average vessel size, too, has
increased by 2.6% during the last two years. In other words, by using larger vessels, fewer
companies are deploying fewer ships on fewer services to provide approximately the
same overall TEU deployment to Korean ports.
Two out of the top 25 global routes in terms of TEU fleet deployment between pairs of
countries include Korea (China Korea, and Hong Kong Korea).

IV. TRADE, LINER SHIPPING CONNECTIVITY, AND MARITIME

FREIGHT RATES
Most international trade in manufactured goods is transported by containerized liner
shipping services. The supply of such liner shipping services, the traded volumes, and
liner shipping freight rates are closely related to each other. Figure 2 illustrates the longer
term effects that trade volumes, the supply of shipping services and maritime freight rates
can be expected to have on each other.
An arrow with a negative sign indicates a negative causal relationship; for example, it can
be expected that an increase in maritime freight rates will lead to a decrease in
containerized maritime trade volumes. An arrow with a positive sign, on the other hand,
highlights a positive causal relationship; for example an increase in containerized
maritime trade volumes can be expected to lead to an increase in the number of services
provided by liner companies.
Several of these relationships have been looked at in previous issues of the Transport
Newsletter. For instance, it has been shown that distance, trade balances, economies of
scale, the type and value of commodity, various port characteristics as well as the supply
of direct liner shipping services are among the main determinants of maritime freight
rates. 4 The supply of direct liner shipping services, in turn, appears to, a large extent, be
determined by traded volumes, port characteristics as well as of course the geographic
4
All past Transport Newsletters can be downloaded via
www.unctad.org/Templates/Page.asp?intItemID=2651

10
position of a countrys ports. Transport efficiency in general has been identified as an
important determinant of the trade competitiveness of nations.
Figure 1: Expected causal relationships between trade volumes, shipping services and freight rates

Containerized
Maritime
Trade

- +
- +

Maritime + Liner
Freight Shipping
Rates Services
-
Ongoing research by UNCTAD on liner shipping services in the wider Caribbean region
helped shed some light on the determinants of freight rates, trade volumes and liner
shipping supply. Combining data on the supply of liner shipping services, freight rates,
maritime distances, national income and trade in manufactured goods, and undertaking
linear regressions, the following preliminary conclusions can be drawn. 5

Trade in manufactured goods

Most Central American countries and the Caribbean countries trade very little with each
other. By way of example, less than 0.001 per cent of Guatemalas exports in
manufactured goods are destined for Surinam, 0.24 per cent for Jamaica, 1 per cent for
the Dominican Republic and around 8 per cent for Costa Rica. What are the main
explanations for such differences?
According to the standard gravity model, the participation of country B in global
imports is the basic determinant of the share of country As exports that are destined for
country B; i.e. if for example country Bs imports are 5 per cent of all the worlds
imports, it can, ceteris paribus, be expected that 5 per cent of country As exports will be
destined for country B. Also in line with the gravity model, neighbouring countries can be
expected to trade more with each other than those that are not. The estimated parameters
in our regressions confirms such expectations, i.e. A can be expected to export
significantly more to country B if A and B share a common border.
As regards the impact of distance, the gravity model would suggest that countries that are
further away from each other will trade less. Although in principle such a positive
correlation also exists in the wider Caribbean, it is interesting to note that in our
regressions the parameter for distance is not statistically significant when other variables
that capture the supply of shipping services and transport costs are also incorporated. For
example, a larger number of liner shipping companies that provide direct services
between a pair of countries appears to significantly enhance trade volumes. In fact, the
simple existence of direct liner shipping services, versus the alternative situation where
5
Sources are www.ci-online.co.uk for liner shipping services, www.world-register.org for distances,
commercial data from a liner shipping company, as well as UNCTAD for economic data on trade and
income. The number of observations in the data base is 189. The R2 in the various regressions ranges
between .35 and .61.

11
maritime trade has to be transshipped in a foreign port, is estimated to enhance the share
of country As exports to country B by around 0.7 percentage points. These results
support the expected positive (+) sign in Figure 1 as regards the impact of liner shipping
supply on trade volumes.
As regards the impact of transport costs on trade volumes, the empirical results suggest
that an increase of the freight rate per TEU (twenty foot equivalent unit) by 1000 USD
will reduce the share of country As exports to country B by almost half a percentage
point. These results support the expected negative (-) sign in Figure 1 for the impact of
transport costs on trade volumes.

The supply of liner shipping services

Approximately half of the 189 routes covered in our data base are served by regular direct
liner shipping services, whereas the other half includes transshipments in ports of third
countries. By way of example, between Costa Rica and Colombia, there are 14
companies, that deploy a total of 50 container ships, with a combined container carrying
capacity of around 61,000 TEU; the largest vessel being of 2,500 TEU. Between Costa
Rica and Jamaica, there are 5 companies/ 16 ships/ 17,400 TEU/ 2105 TEU maximum
size. Between Costa Rica and Guyana, there are no direct services.
The farther two countries are geographically apart, the more likely it is that they are not
connected by direct liner shipping services. Also, trade volumes are a statistically
significant determinant of the number of companies, the number of ships, as well as the
TEU capacity deployed on direct liner shipping services between a pair of countries.
These results support the expected positive (+) sign in Figure 1; supply certainly follows
demand. It is further interesting to note that a higher GDP per capita in the exporting
country also appears to attract additional liner shipping services. This coincides with other
research whereby a higher GDP per capita was found to be a statistically significant
explanatory variable for port efficiency and liner shipping connectivity.

Liner shipping freight rates

Freight rates on 189 routes of our sample range between $600 and $3,300 per twenty foot
container. In our regressions, a longer distance between a pair of countries, for obvious
reasons (such as additional fuel expenditure), leads to higher freight rates. However, the
actual impact of distance on freight rates is not very strong. For example, doubling the
distance between a pair of countries, according to our empirical results, can be expected
to lead to an increase in the freight rate of only around $50 to $76.
If the freight rate is for a route where the liner shipping company itself does not have a
direct service, but instead includes a transshipment, the freight rate can be expected to be
$600 to $700 higher. Interestingly, the freight rate will be significantly lower if other,
competing, companies do provide a direct service; i.e. although the shipping company
itself does not provide a direct service, the freight rate it charges to its clients is
influenced by the given market situation. If the market provides a direct service, the
freight rate can be expected to be around $425 lower as compared to a situation where no
single company provides a direct service between a pair of countries. Similarly, a higher
number of companies in the market, more ships, and a larger total container carrying
capacity on direct services all have significant negative impact on the freight rate; i.e.
more competition and economies of scale appear to confirm the negative (-) sign in
Figure 1 above as regards the impact of liner shipping supply on freight rates.

12
Another variable with an apparent impact on freight rates include the GDP per capita in
the exporting country, where higher income helps reduce freight rates. Also trade
balances have the expected impact on freight rates as these go up whenever the shipping
company needs to import empty containers or ships because country As exports to
country B are higher than its imports from country B.
The estimated impact of the total exports of country A to country B has a negative sign,
most likely because of the impact of economies of scale. However, once variables for
liner shipping connectivity, such as the number of liner shipping companies in the market,
are incorporated in the regression, the total volume of exports is no longer statistically
significant.
The linear regressions do not prove actual causalities, which in any case go both ways for
most variables. For example, freight rates have an impact on trade, just as the volume of
trade has an impact on freight rates. The empirical research on liner shipping and trade in
the wider Caribbean supports the results of previous research on the various relationships
between trade volumes, the supply of shipping services and freight costs. Although the
exact values of the estimated parameters reported above are only indicative for one region
at a given point in time, they, nevertheless, provide useful insight into quantifying the
effects different variables can have on trade volumes, supply of shipping services and
freight rates. The above described empirical results strongly suggest that international
trade models should always attempt to include hard data on transport costs and shipping
supply capacities, rather than rely on distance as a proxy for transaction costs. Freight
rates, competition and economies of scale in liner shipping are important issues to take
into account when looking at the trade competitiveness of nations.

REFERENCES
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Bichou, Khalid (2004): The ISPS Code and The Cost of Port Compliance: An Initial Logistics and
Supply Chain Framework for Port Security Assessment and Management, in: Maritime Economics and
Logistics, 6, p. 322-348
Clarkson Research Services: www.crsl.com/acatalog/Container_Intelligence_Monthly.html
Containerization International Online: www.ci-online.co.uk
Kumar, Shashi and Jan Hoffmann (2002): Globalization, the Maritime Nexus, in: Handbook of
Maritime Economics, LLP, London
Marquez Ramos, Laura; Immaculada Martinez Zarzoso; Eva Perez Garcia and Gordon Wilmsmeier
(2006): Determinants of maritime transport costs. Importance of connectivity measures, presented to
International Trade and Logistics conference, Le Havre
McCalla, Robert; Brian Slack and Claude Comtois (2005): The Caribbean basin: adjusting to global
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Notteboom, Theo (2006b): The Time Factor in Liner Shipping Services, in: Maritime Economics
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Notteboom, Theo (2006b): Traffic inequality in seaport systems revisited, in: Journal of transport
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