Think about this. Let’s say you owned a store, and one of your suppliers told you that you had to expand because he – your supplier – would be buying newer and larger vehicles to deliver your goods. “Economies of scale” was the reason he gave for taking this step, and because this new “capacity” allowed him to deliver more goods and increase his profits, he said, you had to spend more money and expand your store in order to handle the extra goods he would be delivering to you.

“Wait a minute”, you’d protest. “Why should I spend my good money so that you can rake in extra profits? Shouldn’t you, the one making the increased profits, be the one to foot the bill for the expansion you’re demanding?” Those would be proper questions to ask, and it would also be proper to tell that supplier to go fry ice. Get lost. See a shrink.

That’s a silly scenario because business just isn’t conducted in that way. Silly? Stupid, would be a better way to describe that kind of a setup, and here’s a question we’d like to ask. In spite of the fact that “business just isn’t conducted in that way”, why do the world’s largest goods operations – container ports and terminals – cave in to the demands of container ship owners to spend billions of dollars on dredging, berth expansion, equipment upgrading, bridge and highway replacement projects, and so on and so forth, especially since unemployment has reduced the buying power of the taxpayers/consumers who are expected to foot the bills?

Think about that for a while, then read this, from the L B Post:“Big Ships, Bringing Big Changes”

“The Port of Long Beach’s Acting Deputy Executive Director, Dr. Noel Hacegaba, has published a white paper, ‘Big Ships, Big Challenges,’ on the competitive impact that a new generation of mega container cargo ships is having on U.S. port authorities.

“‘The deployment of these mega ships presents physical, financial and operational challenges that must be met by port authorities across the country,’ Hacegaba writes.

“‘Even for ports that will not see the mega vessels call at their ports any time soon, the arrival of the larger ships is creating a cascading effect in which the ships being replaced by mega vessels are being deployed in the smaller trade lanes. Thus, the strain of larger vessels has the potential to affect all ports, big and small.’

“Dr. Hacegaba notes that the average size of container ships has grown considerably in recent years, and the trend is likely to continue for years to come.

“‘Although 18,000 TEU vessels are the largest in service currently, ships that carry more than 10,000 TEUs are still considered large and have limited options with regards to trade lanes and to ports that can accommodate them,’ he writes. Hacegaba said the industry is turning to the larger ships because they reduce operating costs for shipping operators, and they help meet regulatory requirements to decrease potentially harmful emissions.

“According to Dr. Hacegaba’s report, ports around the country are spending $ 46 billion in capital improvements. The Port of Long Beach’s $ 4.5 billion investment is well ahead of the competition. Shipping companies are ordering larger ships to meet demand, while cutting the operational costs they would otherwise incur by sending cargo on multiple trips. As a result, ports of all sizes are struggling to ready themselves to handle the larger vessels. Hacegaba states that regardless of a port’s size, they face a demand to handle a larger class of vessels. In the coming years it is projected that smaller vessels will be put out of services to make way for larger ones. But the largest ships will go to the biggest ports, while today’s larger ships will switch to smaller ports.

“For the vessel operators, the major investments in larger ships is straining their resources. So ocean carrier alliances and consolidations are also being forged as a result. While this is not new to the maritime industry, Hacegaba points out that they are ‘providing financial uncertainty for port authorities.’ The newly aligned or consolidated vessel operators may move to different ports. A smaller port may spend millions on fixing its infrastructure, and then lose a major tenant. But what’s the alternative. Dr. Hacegaba said that smaller ports don’t upgrade infrastructure, (and) because of their struggle for funding, may face losing business as small-sized fleets are phased out.

“Dr. Hacegaba said the maritime industry is ever evolving as technologies improve. Port authorities play a primary role in educating both the industry and the public in potential changes, he said. Ports must be built to handle larger ships and be prepared when shipping alliances do not go in their favor. As the maritime industry and how goods are moved change, so must ports if they are to be ready to handle the next generation of larger ships…” —

Dr. Hacegaba is a shill. The last thing on his mind is the plight of the U.S. taxpayer. Here’s what we wrote back on Nov. 11, 2005 in Vol. V, Art. 18 (Or Else!):

1. “U.S. taxpayers have contributed enormous sums for the construction of our container ports, but they’ve been awarded no stock ownership.
2. Management teams can hardly be described as competent, efficient, knowledgeable , or productive. They don’t have to be because they are accountable to no one.
3. Terminals and end users, of course, have no say regarding pricing and servicing.
4. Carriers have designed and built dozens of mega-ships and have given an ultimatum to U.S. taxpayer/end users. “Accommodate us or we’ll take our goods elsewhere. Expand. Dredge. Tear down and rebuild your bridges and highways. Bear the entire financial burden yourselves so that we can realize our ‘economies-of-scale-type’ profits … or else.”
5. Arbitrary surcharges and fees are imposed and passed through to submissive end users.
6. Up to this point, the submissive end user, the uninformed customer, the customer who ‘is always right’, has not reacted. The ‘tipping point’ has yet to be reached.

“When the sleeping giant awakens, however, repercussions will be felt far and wide.

“The sleeping giant, the U.S. consumer, will bring all trading to a screeching halt when it rises up and says, ‘Thanks, but no thanks. Send your behemoths elsewhere. Sell your wares to another country. Find 250 million customers in another part of the globe, if you can. Either you service us with vessels our existing terminals and infrastructure are set up to accommodate … or else.”