A Blast from the Past

“Way back on August 31st, 2005, The Dallas Morning News printed an analysis by Katherine Yung about the many disadvantages the maritime industry would encounter because of the huge containerships that were being turned out in overseas shipyards.

The know-it-alls in the industry ignored Ms. Yung’s warnings and we got the feeling that the costly consequences of their stubbornness would come back to haunt them. If you don’t recall her misgivings we’ll save you the time and trouble of looking for that article. We summarized it in our Vol. IV, Art. 24 commentary. Our title was “Berth of the Blues”, and here’s what we wrote:

“Katherine Yung of The Dallas Morning News had some very interesting observations about megaships over the weekend. She described the size, the amenities and the operational capabilities of one of the newest to call at the Port of Long Beach, the MSC Texas, and her report requires thoughtful consideration by American consumers. ‘In the next few years, all these ports will be overrun by these ships,’ said Capt. Axel Bartel, of the MSC Texas, as he watched containers being unloaded from his vessel. The MSC Texas is just 36 feet shorter than the 1132-foot-long QM2, the world’s largest cruise ship, and was designed to carry 8,238 TEUs. Bigger is better, so they say, and megaships are being built in order to generate greater profits for the shipowners. The more containers carried, the lower the cost to transport each one. These behemoths operate with the same size crew, 23 seamen, and at the same speed, 25 knots, as their less imposing brethren, but megaships like the MSC Texas also boast creature comforts for the crew, like gourmet chefs, freshwater swimming pools and saunas, weight rooms, ping-pong tables, and even a pharmacy.

“That would all be well if the shipowners were footing the bills. But they’re not. As Ms. Yung reports, there are some drawbacks that are not generally considered:
– Ships of this size consume 20 tons more fuel per day than the next-biggest carriers. [There are about 44,000 gallons of diesel fuel in 20 metric tons, and if, ‘In the next few years, all these ports will be overrun by these ships,’ each wasting more than a million gallons of fuel each year, what kind of an effect will this reckless squandering have upon the cost of fuel at the pumps, do you suppose? Do the math and pity the poor truckers.]
– It takes 15 to 20 minutes to bring a ship of this size to a standstill, which adds almost half an hour to every maneuver.
– These giant ships can only be brought into port during daylight and when the wind falls below 10 knots.
– Only three U.S. ports can handle them – Long Beach, Oakland and Seattle.
– They can’t even fit into the Panama Canal.
– They take four to five days to unload, instead of two or three.
– They require the use of taller, bigger and more expensive cranes than those found in most ports.
– They require longer berths than those found in most ports.
– They force major railroads to make adjustments, such as running longer trains on nonstop routes across the West.
– And if ‘In the next few years, all these ports will be overrun by these ships,’ enormous amounts of funding will be required for dredging, berth expansion, equipment upgrading, bridge and highway replacement projects, and so on and so forth.

“Will the shipowners provide this funding? Of course not. U.S. taxpayers and consumers will. But if more containers per ship lower the cost to transport each container, and generate higher profits for the shipowner as a result, why can’t U.S. consumers share in this cost saving instead of facing steadily increasing costs? [Darn it all! We’re so gullible!]” –

So here we are, more than seven years later, and this is what the November 19th, 2012 issue of Cargo News carried as a lead story:

“Bigger vessels pose a challenge for world’s top berth operator”

“The No. 1 terminal operator explains the challenges terminals face in serving mega vessels and the benefits, if any, reports Ken Gangwani.

“With the advent of CMA CGM’s 16,020 Marco Polo, the world’s largest vessel, and yet bigger vessels of 18,000 TEUs on the horizon, it raises the question who will really benefit from these mega vessels – the lines, the terminals or the shippers?

“Before answering the question, Eric Li, deputy group managing director of Hutchison Port Holdings, the world’s biggest terminal operator, gave an example of the facilities required and the costs involved for terminals to service an 18,000 TEU ship at a recent maritime conference in Hong Kong.

“‘Bigger ships cannot call at every port. They stop at bigger ports and do more transshipment,’ said Li. It takes time and a substantial amount of money to build a hub port to service bigger ships, he said. ‘For example, it took Shanghai 24 months to build a hub port in the middle of nowhere.’

“Li pointed to the vast difference in servicing a 5,000 TEU vessel compared with a vessel more than three times bigger. ‘The length of a berth to service a 5,000 TEU vessel is 300m and in those days the vessels were only 200m long. The 300m length was just enough. Today the berth has to be 400m to 500m long and also before we needed one berth to handle one ship now we need two berths to handle one bigger ship,’ Li said.

“The berths also have to be wider, 59m for the bigger ships compared to the present 40m, he added.

“‘When you build a berth or modify a berth it is not like just building a multi-story building,’ said Li. It requires clearance from the government and environmental groups and you also need to buy new quay cranes.

“‘Each crane will cost you US $ 5 million to $ 8 million and you need at least 18 cranes to service the big ships,’ he added.

“Besides the cost of lengthening and widening the berths one other major cost for the terminal operator is deepening the draught by dredging the channel alongside the quay. Bigger vessels of 18,000 TEU capacity require 16m depth compared with the current 14m.

“‘So quay cranes is not the only issue. If, for example, you want to just modify a berth to service the big ships, the two berths will cost you $ 200 million each, which includes the infrastructure expenses and making them semi-automatic,’ he said.

“So who actually benefits from these big ships? ‘With the bigger ships people say less emissions, advanced fuel-saving engines is good for the environment. Fine,’ said Li. But the benefits are not huge.

“‘For shippers, does it mean cheaper freight rates when they use bigger ships? Not really. The freight lines are not really linked to the size of the ships. So for the shippers it is neutral,’ he said.

“‘For inland terminals, it is a challenge, because the bigger ships discharge a lot of cargo and it is a struggle to discharge and load at the same time from the bigger vessels. Then they go to inland terminals, which experiences a lot of bottlenecks because of Customs procedures.

“‘For terminals, it is a big challenge,’ said Li. ‘People ask what is the benefit to the terminals after making all this investment in building bigger berths, getting more sophisticated cranes and deepening draught? We try to argue that bigger ships will bring more volume. But is this the case? You can have two small buses carrying 200 passengers or one MTR train carrying 200 passengers. As far as the terminal operator is concerned it is the same. With the small vessels we can evenly distribute our resources but with the bigger ships it is a struggle as we have to work faster and deliver not less than 200 moves an hour. So there is a challenge for the terminals and we are not sure of the benefits.

“And for the shipping lines, it is also a challenge, he said. ‘You might say like the MTR train, they carry more passengers, save fuel and make more money. But do the lines charge higher rates because of bigger ships or do they have the same rates but have a cheaper volume cost. No,’ said Li. There is some benefit but there is also a lot of challenge.

“‘So the only people really benefitting from the bigger ships are the champagne producers. Every time a new ship is launched champagne flows,’ Li chuckled.

“So what is the optimum size of a container vessel, delegates wanted to know? Do you see the terminals handling 20,000 0r 22,000 TEU ships in the future?

“It is very hard to say, said Li. ‘But looking to the future there are some shipping lines saying why not 200,000 TEUs. Many lines say if we had bigger ships with economies of scale we would outbid our competitors in cost. If the network is not there then it’s back tho square one and there will be no difference in costs,’ he said.” –

Too bad Mr. Li didn’t pay tribute to the prescient Ms. Yung in his maritime conference speech in Hong Kong! She was ‘way ahead of the maritime industry moguls.