An Overview of Feeder Services in the Era of Mega Containerships

Introduction

International merchandise trade is one of the most important factors affecting the container shipping demand. Parallel to international merchandise trade, total world container shipping trade increased from 28.7 million TEU (Twenty-foot Equivalent Unit) in 1990 to 171 million TEU in 2014, and worldwide container port throughput has increased from 88 million TEU in 1990 to 684 million TEU in 2014 (UNCTAD, 2015). Despite the rise of trade, the cost of shipping containers (freight rates) has fallen dramatically since its initiation. Low freight rates, increasing oil costs and the recent financial crises of the 2000’s have tremendously affected the liner shipping industry. As a result, many shipping lines operate their service with margin losses ranging from -3% to -25% in 2011 (Alphaliner, 2016b). The decreasing margins resulted in increased focus of the industry to redesigning service networks in order to operate more efficiently.

Parallel to the increase in containerized trade, the complexity of liner shipping services has increased. A liner shipping carrier usually has a global service network, consisting of several main (i.e. trunk) line loops between multiple continents operating with fixed schedules. Liner shipping carriers have mainly two different design alternatives for their service networks: multi-port-calling (MPC) and Hub-and-Spoke (H&S) networks. In H&S networks, main ports are usually served by mega containerships travelling in deep seas and feeder ports are served by feeder containerships in regional seas.

The evolution of H&S networks, particularly in minor trade routes like the Black Sea, Africa and Latin America, is a recent popular challenge to deal with in liner shipping. The expansion of demand for containerized goods has developed a growing number of ports in both national and regional markets. The growths in the containerized trade, increasing global containership fleet, size of mega containerships, and the number of container ports are all results of expansion of global markets (Notteboom, 2004). This evolution has also led to the categorization of container ports into three categories: hub ports, feeder ports and trunk (main) ports (Zeng & Yang, 2002). The hub ports are located where container transshipment may take place between trunk (main) and feeder containerships. Feeder ports are regional hinterland gateways linked to over-sea ports with feeder containerships via hub ports. Trunk (main) ports are regional ports called by trunk ships due to their relatively high demand volumes.

The development of H&S networks has also driven the development of efficient feeder services. Feeder service networks comprise ships that visit a number of regional ports along predefined feeder ports and feed trunk containerships so as to avoid their calling at too many ports in the region. The container feeder network design depends on the characteristics of feeder ships, the feeder ship ports, the operating and chartering costs of the ships and bunker costs as well as container demand of the ports.

Logistics service providers play the role of intermediaries which take on the completion of logistics tasks and provide accurate and timely information among the whole partners (Spulber, 1996, 1999). Today, feeder lines are also play the intermediaries role for the complex service networks between regional shippers and trunk lines in global shipping networks. They are not only container transportation companies but also logistics service providers in trunk line for away secondary ports. It was the feeder service network design that made the entire container service economically rational, efficient and more profitable, and consequently cheaper and timely for the end users (Rudić & Hlača, 2005). While trunk lines connect main global ports to each other, feeder lines help secondary ports, which have irregular and low quantities, to survive.