CONTAINER PROBLEM

Hüseyin Cahit SOYSAL
Board Member

 I couldn't help but smile when I heard the statement of the entrepreneurial group that emerged recently, following complaints that our exporters could not find containers to load their export cargo into, saying, "So let's produce containers." I wanted to tell them, "Gentlemen, the problem is not producing containers but managing the container business," but the words stuck in my throat. After all, the issue concerned our exporters, and I did not want to further their troubles.

Today, maritime transportation continues to maintain its importance. Maritime transportation is the largest share of the transportation pie in terms of volume and weight. While 2.6 billion tons of cargo were transported on sea routes in the 1970s, reaching 11 billion tons in 2018.

Today, "container transportation" has the largest share of maritime transportation. In the 1950s, US ship operator Malcolm McLean realized that much time could have been better spent transferring cargo from ship to land and from land to ship, and he developed giant steel boxes. Containers, revolutionizing transportation, were first used in transatlantic trade in 1966.

As container transportation began to become widespread, the issue of whether a container is a container or an item began to be discussed. The problem was brought to the United Nations platforms. In 1972, the "Container-Related Customs Convention" was signed by the United Nations member states. 

• In the contract, the container is defined as "used in transportation operations (large chest, mobile cistern or similar and; 
• Fully or partially enclosed to form a compartment for storing belongings; It has the feature of continuous use and is accordingly durable enough to be used many times; 
• Specially manufactured to facilitate the transportation of goods by one or more types of transportation without requiring reloading; 
• It is made for practical use, especially in cases of transfer from one kind of transportation to another;
• It is manufactured to be quickly filled and emptied; 
• And a transport vehicle with an internal volume of one cubic meter or more;

It was defined as "it means".

Article 3 of the contract includes the following provisions:

“1. Subject to the conditions laid down in Articles 4 to 9, each Contracting Party shall permit the temporary admission of containers whether or not loaded with goods.

2. Each Contracting Party has the right to deny temporary admission to containers which have been the subject of sale, lease, or an agreement of a similar nature by a person resident or settled in its territory."

Articles 4 to 9 underscore the obligation to comply with the temporary acceptance rules and the provisions that allow the acceptance country to take action by obtaining a guarantee in case the rules are not complied with, emphasizing the gravity of compliance.

The 'Regulation on the Implementation of the Container-Related Provisions' is a crucial aspect of container operations in Turkey. According to this regulation, a container belonging to an operator in a foreign country can remain in Turkey for 6 months under the 'Temporary Import Regime'. If a time extension is requested, the container may be granted a stay in the dormitory for an additional 6 months. The 'Entry Container Registration and Tracking Form' is a key document in this process, uploaded to the Container Tracking Program. It's important to note that containers that are not exported within the specified period are monitored. Similarly, exit procedures for containers to be temporarily taken abroad, full or empty, are carried out with the 'Exit Container Registration and Tracking Form '.

 It's not just the legal aspect that's important when it comes to containers. The operational aspect is also crucial. Since the container is subject to customs surveillance as a 'temporary import item' not only in Turkey but all over the world, each operating organization has to constantly deal with dozens of customs administrations and carry out thousands of bureaucratic procedures. Understanding and managing these operational aspects is key to successful container operations.

 In container transportation, 20'Dc, 40'Dc, and 40 HIGH CUBE-type containers are generally used. The 20-type container is 5.9 meters long, 2.35 meters wide, and 2.39 meters high. With an empty weight of 2,240 kilograms, 21 tons of goods can be loaded into this container's 33 cubic meters of cargo area.

The 40'Dc type container is 12 meters long, 2.35 meters wide, and 2.28 meters high. With an empty weight of 3,750 kilograms, 27 tons of goods can be loaded into this container's 68 cubic meters of cargo area.

The 40-high CUBE-type container is 12 meters long, 2.35 meters wide, and 2.70 meters high. With an empty weight of 3,940 kilograms, 27 tons of goods can be loaded into this container's 76 cubic meters of cargo area.

Can you visualize it? If you try to store 500 empty 40 HIGH CUBE containers, you need a storage area of ​​38,000 cubic meters. Where are the empty areas close to the port in big cities? Until 15 years ago, container operators in Istanbul had used empty streamside plains at the E-5 Göztepe Junction as container storage areas. How is it possible to easily find these areas where skyscrapers are rising? The back area of ​​the Ambarlı Port area is already narrow and terrace-shaped. However, loaded containers can be stored. It is not possible to find free space in the districts around Ambarlı.

I will give an example that I will not mention to avoid any problems for the business. A container port on the Marmara coast. It is not enough to store the available space. There are villas with sea views in the rear area where it can expand. How can you make these people give up their villas? They stack the containers in four layers in the farthest region of ​​the port from the sea, blocking the view. After a while, all villa owners must sell their land to the port management. The enterprise can also expand the port area backward.

So, the first business problem is the need for a suitable container port and container storage areas. Undoubtedly, the operation of these ports and storage areas depends on efficient management and creating more favorable conditions than alternative investments.

Another crucial issue is the strategic intertwining of ship management and container management. This necessitates large companies operating container ships to either establish their own container businesses or form partnerships with global container suppliers. The strategic stacking of loaded containers in customs areas, timely connection of the container ship to the port, and efficient unloading and loading operations are all part of what we now term the 'containerization of cargo.'

In particular, the "empty container repositioning" problem is this field's most critical business issue. If you, as an operator, cannot determine cargo routes in advance, you can neither assign container flows nor reposition empty containers. If you cannot establish the "Milk Run System" effectively, your chance of success in container transportation decreases rapidly.

As you may recall, the Milk Run System is a logistics supply method designed to maximize efficiency by consolidating the products for transport in a single vehicle. This System, inspired by the milk trucks that distribute milk to houses in London and collect the empty containers on a set route, has proven to be a cost-effective way to distribute various goods, including product containers, samples, and other necessary items.

You must operate the container ship on such a rotary route that you can load both loaded and empty containers back from the port where you unloaded the full containers. This way, when you return to your port of departure, you can bring back your empty containers at a minimum cost. Otherwise, to return 300 empty containers with an average size of 63 cubic meters, you would have to allocate 18,900 cubic meters of space on your ship for transportation with no freight income.

Global trade dynamics vary significantly from continent to continent and region to region. Some countries are heavy exporters, while others rely on imports and attempt to balance the deficit through service sales. This disparity often leads to trade imbalances, resulting in container accumulation in some regions and occasional shortages in others. The emergence of import-export imbalances in global trade further complicates the issue, leading to challenges in repositioning empty containers.

Until the 1980s, the relocation problem could be solved by keeping it to a minimum by 7-8 large container operators in the USA and Europe. In Europe, the ports of Hamburg, Rotterdam, and Antwerp were used as container storage areas. However, when China stepped in after these years, all the game rules changed. China, which previously needed the container ships and container parks of the USA and Europe, increased its production hundreds of times and began producing its own container ships and containers to escape the grip of this global oligopoly. It has increased its attempts to establish or purchase existing ports in Western countries.

When high profitability could not be achieved with small container ships, giant container ships began to be built. South Korea produced the world's largest container ship with a capacity of 20,564 TEU. This capacity means that 20,564 20'Dc containers can be transported simultaneously with this ship. In other words, those who want to engage in container shipping will no longer have the chance to compete in global markets with ships carrying 500 or 1000 containers.

China's strategic planning and execution in the container shipping industry is truly impressive. During a period of low steel sheet prices in global markets, China was producing new containers and sending its export goods to Europe and America without waiting for the return of the containers it sent. When steel sheet became scarce, China planned to bring back the containers empty, without worrying about repositioning them. The People's Republic of China solved the problem of transporting empty containers from tens of thousands of kilometers away and provided state support for this. As of now, China does not keep its containers waiting for more than 3 months in any country to find cargo and carries them back to its country empty.

Container shipping companies and container businesses in the Western world, despite the lack of government support, have realized that they could not cope with China with their current structure. However, they have not given up. A shift from the oligopoly market to the monopoly market has begun in the sector. 15 large businesses in the Western world are taking steps to unite under 3 umbrellas. This strategic move promises a future where we will begin to deal with only three container and container ship operators that have reached a size that can compete with the fleets of China and South Korea.

Let me finish by repeating what I said at the beginning of the article: Turkey's problem, which cannot find containers for its export cargo, is not that it cannot produce containers but that the enterprises that have established an effective "empty container restructuring" system have not yet been organized in the country.