Containerized transport has emerged as a pivotal mode of transportation in global trade, which accounted for approximately 60% of total global trade volume. A core challenge within the shipping industry today is the issue of trade imbalances, which are rooted in factors such as gaps in income levels between domestic and foreign markets, variations in wage-bargaining structures, trade policies, and geopolitical tensions. The implications of trade imbalances are shown in regional surpluses and deficits. Surplus regions reflect a higher volume of imports than exports, which results in the accumulated containers used from sea transport. In contrast, deficit regions experience higher export volume than imports, which results in less containers available to transport goods due to less container input from import activities.
These imbalances significantly impact shipping companies' revenue, as they are required to meet container demand in deficit areas to capture customer demand across all regions. A commonly adopted strategy to address this challenge is empty repositioning, which involves relocating empty containers from surplus regions to deficit regions. However, this practice is associated with the trade-off of adding higher additional costs without generating direct significant revenue in the short-term for shipping companies.
Maersk, a leading player in the industry and acts as the case study for this research, also faces trade imbalance issues. Currently, Maersk prioritizes the demand from the deficit region, which is Far East (such as China), specifically Far East to Europe journey, which represents the journey with the highest revenue contribution in its operations. However, Maersk, especially the Equipment Flow team, who are in charge of planning the container allocation in European trade, wants to confirm whether their current approach is optimal or needs further improvement. . This thesis project aims to confirm whether the strategy they implemented in 2023 (reflected in Alternatives 1) is better than prioritizing the containers allocation to deficit regions, which is Far East (Alternatives 2).
The insights derived from this study are expected to contribute to a broader understanding of how shipping companies can manage their strategies in container allocation in response to trade imbalances. By examining these alternatives, the research seeks to provide actionable recommendations to address how they should allocate their containers in case of trade imbalances, ultimately supporting shipping companies in navigating this long-standing challenge more effectively.
The analysis of the alternative’s evaluation shows that overall total revenue when prioritizing empty container allocation to deficit regions compared to maintaining the export level alternative shows minimal effect due to the slight differences in both total revenues. In terms of total revenues, maintaining export level alternative’s (Alternative 1) yield slightly higher total revenues. However, if we look at the range of total revenues generated in Far East after curtailment, prioritizing empty containers to deficit regions depicted (Alternative 2) slightly higher range compared to Alternative 1 with the increase on total revenue’s range about 0.75%. However, this increase is not significant compared to the annual growth of revenue in the shipping industry which accounts for 2.7% per year (Cargo Shipping Market Revenue, 2024). In addition to the small increase in total revenue range in Alternative 2, the variation of total revenue in each region also increases. In the context of seasonality, the data distribution in Africa and Latin Africa shows no significant difference when performing Alternative 2. Far East and North America are affected by the seasonality due to their higher volume of trade. Amid these notable differences, seasonality does not affect the range of revenue in each region, but it makes the revenue more stable due to the nature of high contractual customer percentage in Maersk. This nature makes the demand more predictable.