Bigger Headaches

How often did we hear from shipowners and consultants that “bigger is better”? That “economies of scale” are to be sought – that the “need it now” demands are to be given top priority in maritime shipping operations?

According to The New York Times, the container ship trade grew eightfold between 1985 and 2007. During those years the size of container ships grew at just about the same pace. 1,500 TEU to 2,500 TEU vessels were commonplace 25 years ago, but as the industry grew in size so did the ships and so did the egos.

In attempts to stay ahead of rival carriers shipowners kept raising the bar, and well before volumes could justify it, larger and larger vessels were ordered by those afflicted with a “one-upmanship syndrome”. The “corporate fanning of feathers” it was being called, and within the last half-dozen years shipowners hastened to order about 500 such leviathans.

They should have listened to Tommy Stramer, ZIM’s now-deceased CEO. He warned that if for some unforeseen reason schedules could not be maintained, “new ships of 8,000-TEUs-plus will be just another white elephant in the industry”.

He was right. This worldwide economic downturn, this unforeseen recession, has upset everyone’s schedule. Those most responsible for the industry’s unconscionable overcapacity, however, are pretending that everything is OK, even though hundreds and hundreds of vessels have been forcibly idled, and even though another 300 or so mega-ships are due to be completed and delivered within a matter of months.

The industry is losing billions of dollars because of miscalculation, but everything is OK. Accountability? Forget it. Those responsible will never admit their lack of foresight. And besides, the solution to the setback is obvious. All that’s required during this unexpected downturn is to:

– Lay up the excess capacity;
– Send hundreds of older vessels to scrapyards in order to make way for these newbuilds;
– And steam slowly in order to reduce drag and friction, and increase fuel efficiency.

They call that rationalizing. It’s also called baloney. If those carriers had used some common sense, they would have purchased smaller, much less costly ships, and they wouldn’t be required to:

– Lay up perfectly good vessels;
– Scrap perfectly good vessels;
– And steam at slower speeds.

And because they wouldn’t have wasted billions of dollars building useless leviathans, they’d now be realizing true “economies of scale” and showing black – not red – on their bottom lines.