Is it possible that the CEOs of the shipping lines and the hundreds of container terminals don’t read the stuff that the likes of Drewry, Cargo Business News, SchedNet, Alphaliner, Seaintel, and the Journal of Commerce have been reporting? Is it possible that the right hands of those CEOs don’t know what their left hands are doing? Those news services are all reporting on the ever-growing problems within the maritime industry – so why do CEOs continue to complicate every aspect of the maritime industry? Makes you wonder.

1. From Drewry on March 4th: “Liner reliability slips with increased blank voyages”

“Fourth quarter liner reliability declined in nearly all trades, falling 5.3 per cent to 63.8 per cent, the lowest on-time rate since the third quarter of 2011 when it plunged to 61.1 per cent, according to Drewry’s Carrier performance Insight report.

“Nor does Drewry Maritime Research expect performance to improve as it sees sailing cancellations as the chief cause while also serving as key tactic liners deploy to counter overcapacity and help bolster general rate increases …

“‘Transpacific reliability fell to 66.9 per cent from 76.5 per cent previously. The clear implication is that blank voyages are detrimental to schedule reliability. Worryingly for shippers, it is becoming a standard tool to adjust capacity, much the same as slow steaming,’ said the Carrier Performance Insight report.

“‘Carriers will revisit the practice in February to counter weak demand, post-Chinese New Year. Some 43,000 TEU of monthly capacity is being pulled from Asia-North Europe and a whopping 92,000 TEU from Asia-West Coast North America, according to Drewry estimates.’” —

2. From JOC on May 7th: “Worsening Tardiness in Europe Ship Arrivals From Asia”

“Asia-to-Europe container shippers with tight supply chains are finding that ships are increasingly arriving late versus published schedules. More than 40 per cent of vessels arriving from Asia at key European ports were more than 24 hours late, while more than 61 per cent of vessel arrivals were more than 12 hours behind schedule, according to the supply chain software company CargoSmart. The findings came from a survey of 709 vessel arrivals by 22 ocean carriers at six major North European ports between March 15 and April 15 …

“Carriers’ schedule reliability worsened in every quarter of 2013, according to Drewry, which said reliability will likely deteriorate further this year as carriers skip more voyages in a drive to cut costs. Average on-time reliability dropped below 64 percent in the fourth quarter, the lowest it has been since it hit 61 per cent in the third quarter of 2011, Drewry said in its Carrier Performance Insight report.

“Seaintel has measured more than 10,000 monthly arrivals, finding that reliability worsened ‘considerably’ over the December-February period, although March showed a slight improvement. It’s unclear what is causing the delays, but one possible reason is the growing size of ships in the Asia-Europe trade and ports’ inability to keep pace …

“Larger vessels are remaining in ports longer and generating more container volumes, placing immense pressure on port equipment and yard moves. The big alliances also mean that containers belonging to many different carriers can arrive on the same ship. In some ports, thousands of inter-terminal truck moves are required to get the containers to their carriers. To improve productivity, the bigger ports are investing in new berths and equipment, but delays in vessel arrivals will continue to have an impact on operations.” —

3. From Cargo Business Newswire on June 3rd: “Drewry: Big ships and higher volumes spark terminal operator collaboration”

“The post-Panamax mega container ships are triggering huge surges in global container terminal activity, according to the latest issue of Container Insight by Drewry Maritime Research. Coupled with the combined volumes of shipping line alliances, analysts say, this new paradigm requires fewer but larger terminals at each port which will likely lead to increased cooperation among terminal operators … The researchers note that these large capacity ships need bigger, more efficient terminals, even if the annual throughput is no greater.

“Alliances are also having a huge impact on terminals. At the Port of Antwerp, for example, MSC alone accounts for a massive throughput of 4.5 million TEUs per year, around half of the port’s container traffic. Soon MSC’s P3 Alliance partners Maersk and CMA CGM will add to Antwerp’s burgeoning traffic, Drewry says, all likely accommodated at one terminal. All this is causing terminal operators to work more closely together, consolidating terminal layouts and ownership.

“Drewry concludes that growth in ship size and alliances will have far reaching consequences for ports and terminals.” —

4. From SchedNet on May 16th: “Scrapping hits new highs, yet fails to keep pace with ship deliveries”

“Containerships bound for scrap are destined to reach a new record high this year yet still new capacity coming from the yards will continue to outweigh that deleted by a long shot, says Alphaliner.

“In the first four months of the year 212,000 TEU was demolished, an increase of 27 per cent compared to the same period last year.

“The peak summer shipping season is, however, expected to offer a short respite, slowing down the pace of scrapping over the next three months. Yet total deletions are still calculated to hit 500,000 TEU this year, up from 463,000 TEU in 2013 driven by the unprecedented number of deletions of ships larger than 4,000 TEU …

“In 2012, the average age of scrapping dropped to 23 years and slipped further to 22 years in 2013. Of the total 70 vessels scrapped so far this year, their average age has slid further to 21 years, with the larger box ship of over 4,000 TEU being scrapped at an even younger age of 20 years …

“Despite the record level of ships scrapped, new containership deliveries have continued to outpace the deletions. Vessel deliveries reached 538,000 TEU in the first four months of 2014, surpassing the scrapping of old ships by a ratio of 2.5 to 1.

“One million TEU of new capacity is due to be delivered between now and year-end and will expand the global containership fleet by 5.6 per cent in 2014.” —

It should be obvious to anyone with an ounce of sense that overcapacity problems can not be solved by simply adding more and more giant vessels to the mix. That’s like trying to extinguish a fire by pouring gasoline on it.

Slow-steaming, early scrapping, sailing cancellations, vessel sharing agreements and alliances have all proved to be futile attempts to justify the acquisition of those “white elephants” Zim’s Tommy Stramer was warning about. It can’t just be the “fanning of corporate feathers” that keeps CEOs throwing good money after bad. And it can’t be stupidity. There’s something else going on.

What we wrote about on June 30th, 2008, in our Vol. XIX, Art. 39 commentary – and which we reprinted just last week in our Vol. XXXIX, Art 39 commentary – is subject matter that even a student in an elementary school could understand.

“Right All Along” is the title of that commentary, and if you care to review it you’ll see that Drewry Shipping Consultants – even back then – had suggested two radical and painful measures as possible cure-alls for the overcapacity problems that were even then plaguing the industry. And the more painful of the two, the Drewry analyst suggested, was “ … to lay up all the ultra large containerships of 10,000-TEU and above”! And that was six years ago.

We even provided a comparative illustration between the operation of such large ships and the more efficient, speedier – and profitable – smaller containerships, and we finished off that commentary by citing the failings and drawbacks of megaships spelled out by Katherine Yung of the Dallas Morning News. A remarkable analysis by a remarkable analyst.

“But this whole stupid megaship idea,” we ended up saying, “has now come full circle. Dreamy-eyed shipowners and analysts have egg on their faces, and deservedly so. Every one of their goliaths will see an early grave, and the ultimate winners after all could very well be the sheep that were being sheared – the highly vulnerable U.S. taxpayers and consumers.

“We are no longer reading about ‘economies of scale’ because the failing ‘economies of nations’ are what dominate today’s headlines. The only way to avoid a worldwide economic catastrophe, ironically, is to turn the unemployed American loser into an employed American winner. A 21st century U.S. Emergency Shipbuilding Program is the way that will be done. Nothing else will turn the tables, and the logic of it all will eventually restore hearing to deaf officials.”