Containerization of bulk trades: A case study of US–Asia wood pulp transport

Abstract

Containerization of bulk cargo has gradually emerged in recent decades, particularly along the US–East Asia trade route (China, Japan and South Korea). One of the background factors in the emergence of this phenomenon is an imbalance between eastbound and westbound container cargo movements along this route. Nonetheless, the factors that affect containerization have not yet been identified. We conduct an empirical analysis to understand how shippers choose transport modes, depending on the prevailing economic conditions. We aim to reveal the critical factors in choosing bulk carriers versus container vessels in hauling wood pulp, a bulk commodity that ships from the United States to East Asia. Our results can assist shippers and shipping companies in securing the most advantageous transport mode. Our main finding is that the effect of economic factors on the transport mode decision differs among the three East Asian countries. The Japan route is mostly subject to economic factors. Economic factors other than freight rates have no significant effect on the South Korea route. In the case of China, none of the economic factors was identified as being of great importance. Hence, in the latter case, rational decision making, based on prevailing economic conditions, might not take place when choosing the transport mode.