Home' Ships and Shipping : October 2009 Contents As the size of container vessels has risen, the challenge of
developing ports and terminals to cater to these ships has become
crucial. To be competitive and attractive, container ports need to
have deep draught, be able to host larger vessels efficiently and
facilitate their handling in minimum turnaround time.
To meet this challenge, many container ports have invested
heavily in new cranes to provide outreach to handle super-sized
ships and back-up equipment to maintain a smooth flow between
the container yard and the quayside. Leading container ports have
installed super post-Panamax quay cranes with outreach of up to
22 boxes and twin-lifting capabilities.
Many container ports have invested or plan to invest heavily in
deepening their channels, expanding their capacity, and
improving their processes and systems to handle bigger vessels
Underlining the breakneck speed in the development of
containerised cargo transportation, vessels that could
accommodate 20-foot equivalent units (TEUs) once used for long
haul carriage are now employed for short-sea services. The
cascading effect can be seen in major trade lanes around the world.
Where 2,000TEU ships were considered the kings of their day
barely two decades ago, they are now being deployed merely as
feeder vessels and servicing coastal trade.
Long-haul deployments are increasingly being undertaken by
much larger vessels and even bigger vessels are being built in the
quest for economies of scale. Maersk has a container fleet featuring
several vessels with 11,000TEU capacity, and analysts have suggested
that it would be technically possible for further vessel upsizing in the
long run. The table below highlights the tremendous growth of
container ship size over the last two decades.
At the height of the container trade prior to the global
economic meltdown, giant container operators could not get
enough of building bigger and bigger ships. Goaded by
record-breaking freight rates and historically high profits, and
blinded by the promise of economies of scale, they commissioned
yards to build boxships that tested the technical limits of
shipbuilding. Container port operators danced along to the
frenetic beat of the shipping industry, splashing enormous
amounts of capital to expand their ports to handle these big ships.
The global economic blowout ended the frenzy in dramatic
fashion. Demand for products and materials carried by containers
hit the ground as consumers and industries cut back on purchases
and production. The container shipping trade went from pushing
for record-breaking feats to dealing with an extreme operating
environment that has brought many players in the trade to their
knees. In almost a blink of the eye, container ports went from
proudly announcing massive expansion plans catering to bigger
vessels to anxiously worrying about huge extra capacity, idle
cranes and empty berths.
The current global economic malaise and the relentless pursuit
of bigger capacity prior to the crisis should raise serious questions
as to how much bigger containerships are likely to become and
what the optimum size of such vessels will be. Some analysts
believe that economies of scale and increasing trade volumes could
further push ship capacity upwards once demand for container
services picks up and as shipping and port technologies improve.
Others argue that ship capacity is already nearing the
operationally and technically viable optimal level, and that there is
no need for more showboating amid the decimation of the
The crisis in shipping and world economy notwithstanding,
one wonders if there is a sound economic, technological and
operational basis in believing that container ships of bigger size
than the world's current biggest, the 11,000TEU 'Emma Maersk',
would ever be built. The implications for port development would
be immense, should these mega-ships come to be, and the
guarantee of profits for the owner uncertain. The near-collapse in
the demand for container shipping services, amid the current
global economic downturn and the capacity glut in the container
trade, calls for an even more keen inspection on whether bigger
box ships should be commissioned and deployed.
It would be easy to assume that building large containerships
would lead to economies of scale, but the economic benefit of vessel
upsizing could be outweighed by additional costs such as dredging,
extra feedering costs, landside congestion, and handling equipment.
Shippers' preference for services involving more port calls to
collect more cargo, and, for shorter transits and greater
frequency, will play a telling factor in influencing the decision
to construct bigger ships. And the question of how to fill
11,000TEU vessels or their potentially bigger successors -- voyage
in and voyage out -- will also pose some serious questions to the
shipping industry on the economic viability and sustainability
of building larger vessels.
Shipping routes may change with the advent of bigger vessels as
shipping lines may alter operating patterns and make fewer calls at
hub ports. High oil prices and the operational costs of ships, plus
rising insurance costs, may eat into the savings derived from
carrying more containers in less voyages.
Post-global economic crisis dynamics may see economic
activities once outsourced by multinational companies to faraway
places come closer to their home countries. This could result in
enormous changes in container trade that may not require the
services of the kind of enormous boxships in service today. This
trend may also alter the landscape of container port operations and
the attendant logistics required to service container shipping.
In addition to this possibility, larger feeder vessels may be used
to serve container ports. Changes in trading patterns may also lead
to the consolidation of high volume services and rationalisation
of port calls.
Less is more
All these will combine to pose a stiff challenge to container
operators and port operators to align their business philosophy
and operations to respond to the dynamics of container shipping
in the most optimal manner. More than ever, the approach of
"rightsizing" in all facets of business is gaining currency over the
old supply-drive approach, as businesses reel from the crippling
economic downturn. The need to invest cleverly cannot be more
apparent than in container shipping, a facilitator of world trade
that requires huge capital expenditure.
No doubt once the world economy gets back on an even keel
the demand for container shipping services will rebound, and big
ships will get back into fashion. Players in the trade with extra
capacity in their fleet will be the first to reap the benefits of the
upturn in demand for their ships.
However, container operators must take stock of the current
situation and learn the hard lessons of past excesses. They must plan
wisely to optimise on available capacity of their fleet just to remain
viable in this viciously competitive and highly uncertain business.
Record-breaking feats of building, owning and operating the
largest boxships and the largest cranes to serve them must take a
backseat to the more modest goal of surviving the onslaught of the
vicious storm swirling through the container trade.
We might just have arrived at a situation where we have to
conclude that the world's biggest container ships have already
been built. The real challenge is not to top that scale but to utilise
available capacity in a smart, nuanced manner that could serve the
business interests of boxship owners effectively and to meet the
needs of world trade efficiently, without tilting the balance in the
container trade and without triggering another round of frenzied
development of infrastructure to cater to existing tonnage.
Capacity of the largest
ship in the world (TEU)
Source: Drewry Shipping Consultants, Lloyd's Register -- Fairplay
October 2009 SHIPS AND SHIPPING
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