On at least a half-dozen occasions since 2004 we’ve cited the concerns that leading maritime authorities are having about the rush to order mega-ships:
• Mr. Nolan Gimpel of Axiom Consulting, we’ve reported, has warned that these large vessels strain the capacity of terminal operators, railroads and the trucking industry. More ports servicing smaller ships and delivering goods closer to end users has been his theme.
• Mr. Neil Davidson of Drewry Shipping Consultants has continually emphasized the reduced effectiveness and higher costs resulting from the operational and commercial limitations of these mega-ships. His theme has been that carriers will have a more difficult time filling these large vessels, thereby cancelling out the promised economies of scale. He also cites the limited number of ports able to service these vessels because of harbor depths, and the inability of these large vessels to accommodate importers and exporters who prefer more direct, less costly services. “The bigger the ship, the more transshipment and feedering you need, and that costs money,” he has said.
To no one’s surprise, this advice from maritime consultants has had little effect on the rush. But a new and perhaps more authoritative voice is being heard and it’s a voice that won’t be ignored. We’re hearing from Mr. Chang Yung-fa, and Mr. Chang is not only a maritime authority, he is the founder and chairman of Taiwan’s Evergreen Group. In a recent interview Mr. Chang made it clear to journalists that Evergreen Line, the world’s fourth largest container fleet operator, has no intention of joining the rush to purchase mega-ships. Mr. Chang has ruled out orders for vessels larger than the Group’s largest vessels, and instead of investing in ultra-large containerships, he has identified a shortfall of at least 60 smaller ships ranging from 2,000 TEUs to 7,000 TEUs that he hopes to add to his Evergreen fleet in the near future.
To address that shortfall, Mr. Chang revealed that his Group is in discussions with the Chinese government to build a shipyard, a yard he feels will be his potential trump card that will enable the Group to make up for an anticipated decline in market share in the coming months. “Ranking is immaterial,” he said. “What is important is trying to operate a profitable business.”
Mr. Chang has seen many boom-and-bust cycles since he established Evergreen in 1968 and as a result has developed a cautious approach. Preparing for the bad times has been his philosophy, he said. “I’ve been in the business for 40 years, and have weathered a lot of storms.”
“Now is not the time to build because the prices are extremely prohibitive. Operators that follow the crowd are likely to suffer once the recession sets in. When the lull comes, the huge ships will suffer instability.”
That’s what Mr. Gimpel and Mr. Davidson have been saying all along, but now that one of their own is waving a caution flag, container fleet operators will more than likely sit up and take notice.