The major industrialised countries (see the map below showing the industrialised regions) are consumers of raw materials (e.g. iron ore, coal, oil, a range of other minerals) and, because there are large concentrations of people in those countries, they also need to import large amounts of food (e.g. grain, fruit).

Their industries also produce a range of goods (steel, machinery, textiles, vehicles, chemicals, etc.).

Therefore, those countries are both areas of demand (for raw materials and agricultural products) and areas of supply (the range of finished goods that they produce).

Although South Africa exports large volumes of minerals and agricultural products, it also has to import a large range of goods such as machinery, vehicles, chemicals, and, importantly, oil.

The maps that follow show the areas of supply of various raw materials and the areas of demand for those commodities.

1 North America; 2 Western Europe; 3 Russia; 4 South Africa (shown here for identification purposes only.); 5 India; 6 China; 7 South Korea; 8 Japan; 9 Australia; 10 Arabian Gulf

The major trading areas are Europe, North America (USA and the southern part of Canada), China, Russia, Korea and Japan. Singapore could also be counted as a major shipping hub as it is a very busy bunker and trans-shipment port, while the Arabian Gulf – the world’s most important oil producing area – is also very important in global shipping. Large volumes of trade are conducted between each of these regions and countries, – and therefore shipping routes between these are very important.

11_3_1_brics

1 Brazil; 2 Russia; 3 India; 4 China; 5 South Africa

BRICS countries – Brazil, Russia, India, China and South Africa – have formed an alliance to promote trade. Although the economies of Brazil and South Africa lag behind the economies of the others, promotion of trade between these countries indicates that future volumes of trade will increase with a positive effect on shipping.

See also the Grade 11 lesson on Trade routes for oil, grain, coal, iron ore, containers.

Some Definitions

  • Competitive advantage – This is gained when a country canprovide the same product as its competitors but at a lower price. The country might even be able to provide a product at a higher price but also provide greater value. An example is South African iron ore that has a lower landed price in China than Brazilian iron ore which has to be transported further. The South African ore is also of a higher grade than the Brazilian ore.
  • Absolute advantage – A country has an absolute advantage if it can provide aproduct more cheaply than others. As Chinese labour costs are so low, China has an absolute advantage over many other countries whose products cost more to produce because their labour costs are higher. In considering the absolute advantage, shipping costs need to be included, and therefore, the landed costs of an imported product need to be taken into account.
  • Landed costThe cost of an item (including production costs and shipping costs) when it arrives in a country.