Fully Loaded

The last line of the previous commentary reads as follows:

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

The article being reviewed stated that these words originated with “industry insiders”, and that observation, therefore, speaks volumes. It was revealed just a few days earlier that container ships have been operating at somewhere between 75% and 85% capacity, and lest this bit of information pass unnoticed, let’s look back a few weeks ago at what maritime authorities were trying to bring to our attention. That 75% – 85% capacity figure has a great deal of significance because, depending on the source, the break-even figure for container ships falls somewhere in that range. At Navis World 2004 when Neil Davidson of Drewry Shipping Consultants called attention to the operational and commercial limitations that reduce the effectiveness of mega-ships, he pointed out that carriers will have a more difficult time filling these large vessels, thereby cancelling out the economies of scale these ships are supposed to produce. Mr. Davidson had done his homework. It’s simple math so let’s look at a hypothetical situation.

• An 8,100 TEU mega-ship requires somewhere around 6,480 TEU (80% capacity) before it could even consider getting underway. This ship, of course, would absolutely not sail until additional cargo was taken aboard. It would be cheaper to put the vessel in mothballs.
• Two 3,240 TEU container ships, however, would be fully loaded (6,480 TEU) and en route in that same time frame, and would be 100% profitable for the ship owner.
• Or three smaller 2,160 TEU container ships could be fully loaded (6,480 TEU) and en route in that same time frame, and bringing 100% profit to the ship owner. Bear in mind that in these latter two cases product would be arriving at destinations much earlier.

Other important aspects will weigh heavily in this scenario .
• The smaller vessels are not restricted to just a handful of U.S. ports.
• No expensive dredging projects are necessary to accommodate them.
• No excessive freighting will be required in order to deliver goods to distant consumers.

There are other “industry insiders” who will also have a say in the matter. Shipping Agents have a lot at stake and will have good reasons to shy away from these restrictive and inflexible mega-ships.
• Time is always a major factor. Smaller ships, fully loaded and underway days in advance of mega-ship departures, assure quicker delivery of goods.
• Lost time will force competing agents to choose the quickest, least costly vessels.
• When mega-ships offload at “king-ports”, the cost of additional freighting to ultimate destinations will reduce an agent’s profits and increase costs to the consumer.
• Consumers will rely upon the agent using the quickest and least costly means of transit.

When money talks, people listen.