About 5 years ago 30 managers from Samsung Heavy Industries Ltd. convened at the company’s shipyard on an island off Korea’s south coast in order to chart a new business strategy for the firm. The group settled upon an idea that was sure to pay dividends for the company, and would just as surely bring about drastic changes throughout the shipping industry. As container ships had been steadily increasing in size because of economies of scale, the group reasoned, why not offer shipping lines giant-sized vessels in order to make it possible for the lines to cut costs even further? “So we launched a ‘jumbo container’ project,” recalls James Yeon, Samsung’s chief market planner.
Is the strategy working? You bet it is. OOCL lost no time in ordering eight of those newly designed 8,000 TEU + giants, and four more lines quickly followed suit. Samsung had it all figured out. Shipping cargo on a vessel that can carry 8,000 containers is 25% to 30% cheaper than on a ship that carries just 4,000, and the shipowners knew it and lost no time in getting on the bandwagon. “You’ve got to have big ships to keep up with the market,” said Kwon Suk Hoon, a general manager at Korea’s Hanjin Shipping Co.
As predicted, when the super freighters made their appearance, their presence changed the face of shipping. Many ports are now required to upgrade facilities and ensure that their harbors are deep enough, docks long enough, and cranes tall enough to handle them. As it stands right now, though, most of the world’s ports are being by-passed by these megaships and must incur additional transportation costs in order to convey offloaded container cargo by road or rail to the intended victims, or rather, consumers.
Let’s sit back and take a careful look at things. At that meeting 5 years ago, were any of our U.S. port authorities invited? Was Secretary Mineta advised of this Asian strategy? What about those at the U.S. Office of Budget and Management? As we recall, they have a great deal to say about how much funding is to be directed to dredging projects in U.S. ports. Of course, we can forget about the taxpayers. They never have a say anyway.
When the strategy was laid out by Samsung’s managers, 5 years ago, why didn’t they and the shipowners assume the responsibility and the cost of dredging the U.S. ports? Since they are the beneficiaries of the extra “25% to 30%”, why should U.S. consumers and taxpayers bear the burden of the investment? The burden of the investment includes not just the dredging, it also includes the cost of the previously-mentioned upgrading and the added cost for delivery to distant end-users. And don’t forget about the amount of time wasted by these megaships in “drift boxes” outside the congested LA/Long Beach port complex. We’ve been told that the shipowners ostensibly incur costs as high as $ 50,000 a day for these delays. But don’t believe it. That’s just another expense that trickles down to U.S. consumers. After all, wasn’t it the U.S. consumer who decided to build these huge ships so that overseas maritime interests could fill their coffers and bring about a breakdown in our supply chain? It wasn’t? We’re the fall-guys? Sonofagun!