Full Speed Astern!

A FINANCIAL TIMES article in January of 2005 had this warning about hasty construction of oversized container ships. The prophetic piece began with the headline:

“Future Need of Mega Container ships Questioned?”

“Doubts have been raised,” the article began, “about the future need for so-called mega container ships, capable of carrying more than 8,000 TEU.

“The doubts come at a time when industry insiders expect vessel capacity to increase faster than cargo volumes.

“While giant container ships, which came into service in 2004, are expected to ‘revolutionize container trade between Asia and the US and Europe’, some shipping executives and analysts have questioned the apparent economies of scale offered by such vessels.

“The introduction of these large container ships will require shipping lines to reorganize their services to reflect the longer times these vessels will have to spend in port.

“To maintain current schedules, such vessels will have to sail faster to make up for the extra time in port. To achieve this, even with modern, fuel-efficient engines, this is likely to mean extra spending on fuel.”

The article added that ultimately savings will depend on vessels operating with capacity loads.

Even before the above-quoted article was published in January of 2005, an article in the BUSINESS TIMES in an October 2004 issue revealed that:

“Concerns that the highly cyclical shipping business is finally heading for a downturn have trimmed OOIL and CSCL stocks by more than a third from their April peaks.”

In spite of these caution flags being waved by analysts in 2004 and 2005, shipping executives insisted on engaging in a race to upstage each other. “Bigger is better,” they convinced port authorities and terminal operators. “Dredge and upgrade your infrastructure .. or else,” they warned port communities (and U.S. taxpayers). Remember?

They were behaving in much the same way a dozing driver, speeding toward a brick wall, keeps his foot on the accelerator. What happens is never pretty.

In fact the whole mess is getting downright ugly. Maersk, the lead dog, garnered the early headlines in the rush to fill the seas with leviathans. The headlines now speak only of Maersk’s financial losses, layoffs and CEO changes in a feverish attempt to stop the bleeding. Live and learn.