Establishing direct connections in container shipping

Abstract

The establishment of direct connections between trading countries in container shipping may be the joint result of various contributing factors, ranging from trade dynamics to carrier strategies. However, there has been only limited research on the systematic identification and quantification of the respective factors. This research investigated under which circumstances two trading countries may manage to attract the interest of a shipping line in order to support their existing bilateral trade flow with a direct connection. This research embraced a mixed methods approach which was organised in three Phases. In Phase 1, a Systematic Literature Review of 130 publications identified 23 factors (variables) across 5 Themes that the literature has discussed as potential drivers for the establishment of direct connections between trading countries. In Phase 2, based on the principles of Causal Inference this research selected 9 variables of primary interest and employed an econometric model which quantified the relative importance of the identified variables. Those 9 variables were measured by employing 5 metrics from existing databases as well as 4 prototype metrics. The model utilised the UK as a case study and considered its connections with 114 trading partners across 2012-2020. Finally, in Phase 3 the research cross-checked the statistical results with the views of selected practitioners in order to validate the analysis. This research concluded that certain variables (i.e. Colonial Ties, Connectivity, ECA Routing, Logistics Performance, MSR Routing, Trade Facilitation and Trade Imbalance) may be conditionally important for the establishment of direct connections between trading countries. Nevertheless, Trade Flow is the decisive driver, while for niche markets Reefer Cargo is also likely to be pivotal. Trade Flow and Reefer Cargo are important for connections that are active for both short and long periods of time, although the long-established connections are seemingly less sensitive to marginal Trade Flow fluctuations.