Wednesday, March 22, 2017

Why is South China Sea important to the world?

International trade is conducted through three main transportation methods:

1) Road Transportation and Railaway - all are land transportation and work well for within the trade area, continent or connectivity via land. Some countries use land and load trucks and containers onto ferries to deliver across large bodies of water to the destination.

2) Air Freight is via airplanes as you can imagine.  You load your goods at the nearest airport and they end up in an airport in another country.  Such freight is based on the cost and benefit of the goods.  Normally perishables fly depending on their life span (e.g. Lobster) or they travel in refeers (road, then ocean) under temperature control.  Canada has done some work around transporting live lobster via Ocean using live holding tanks.

Air cargo / freight also relies on trucks meeting the planes at the airport and then taking the goods to various major cities.  The airport of Liege in Belgium is an example. Its central location and low landing fees allow cargo planes to bring in perishables which are then loaded onto trucks and the trucks go to other major cities in Europe which would have cost a lot more via airplanes to deliver the goods.  The trucks are temperature controlled (reefers).  Many exporters rely on delivering their perishable and none perishables to airports which are central in the region and then usually have distributors or other partners to move the goods to the destination cities.

Air Freight is also used for none perishables like cars, equipment and many things as long as the price is right. Many vehicles made in Germany are flown to North America instead of being put on ships. This has to be looked at in the light that North America has assembling plants to produce such vehicles and if the cost does not justify the profit, then fly the cars over. High end cars do get flown to destination countries instead of going by sea.  Ocean Freight involves many days of sailing.

You should remember that fighter jets can be loaded onto a big airplane and flown to wherever the war is gonna benefit someone yet in the past all war equipment sailed the oceans.  These days they fly. One plane that does this is the Antonov An-225 Mriya which can carry up to 640 tonnes (640,000,000 kilos). A big plane like this can carry smaller planes, cars and machines for anything.  It needs a long runway though or else it would crash.

When it comes to cargo, we do not always need a big plane like the Antanov.  Any passenger plane which flies internationally can take cargo in the belly.  Most shipments of products use Belly Cargo. These are passenger planes which maximize the space for luggage and include cargo. Do not be surprised when you see pallets of cargo being downloaded off the plane you are on while suitcases are being taken off as well.

Airports which make money benefit from passenger planes and cargo planes. The passenger planes will transport people with their luggage (limited per person) with pallets of shipments stored on the plane.  The same airports will have cargo planes which transport strictly goods with a limited number of staff on the plane.  A cargo plane can have as few as 8 people aboard since cargo does not eat or ask for drinks.

3) Ocean Freight is the crust of business.  You can pack locomotives, trucks, cars, clothes, vegetables, fruits, fish, meat, coffee, gold, iron, etc.. and ship them by sea.  The shipments will be at the right holding temperature which the shipping liner will hold till the goods are delivered to the end buyer.  We have customs clearance and ports will have storage where everything will be held at its ideal temperature till it is cleared and the customer picks it up.  We will get into shipping terms later.

Ocean Freight is very cheap for exporters and buyers.  It is the most traditional way of exporting and importing.  A few ships run into problems at sea but one would usually have bought insurance to cover their shipment.  The cost per kilo can range from $0.10 to $0.50 per kilo as the costing is based on volume.  Ocean freight tends to use a 20ft container which takes around 12,500 kilos and the 40ft container which takes around 25,000 kilos. This is net weight but also depends on the packaging because sometimes depending on the way the product is packed, the packing material might eat into these numbers.  Suffice it to say that it is cheap.

Uganda produces exportable products which go by air or by ocean. The minerals and coffee / cotton / tea certainly go by ocean freight.  Flowers, fruits and vegetables go by plane. Uganda loses out a bit by not having its own airline,

4) Ocean Freight requires secure shipping routes.  Some of you know about pirates off the coast of West Africa and the Coast of East Africa (Somalia).  The insecurity increases the insurance for the product being shipped.  This is one of the reasons you see waters being patrolled to stop the pirates from hijacking products, ships and people and demanding for ransom.

SOUTH CHINA SEA handles about a third of all Ocean Freight. This is why it is important.  It is a collection of disputed islands in a far away place where the Indian Ocean meets the Pacific Ocean but controls so much of international commerce everyone is scrambling to control it.  Sure, it has massive deposits of Oil and Natural Gas and this is crucial for the countries claiming to own and control it.

It is still not the main objective (goal); the oil and gas.  Oil and Gas still needs to move via Ocean Freight from this region and it cannot move if you do not have free international waters or you are held at a ransom in order to allow your shipping liners to sail through.  TRANSPORTATION is the main reason. You can be sure that when the shipping routes are secured and shared, the next fight will be over the oil and gas!

If you think about it, it would be nothing short of insanity for us to let one country control one third of ocean freight routes.  This is why USA and other countries are telling China to back off from taking over the region. It is like Canada or Russia claiming the Northern Sea (too much ice but they try) and that would also cut off another shipping route.

Martha Leah Nangalama
Moncton, Canada

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