Slow Boats from China?

“Economies of scale” is a term that seems to imply that bigger is better because bigger yields more profits, and that faster is better because faster also yields more profits. With these convictions, and giving no consideration to possible moderating factors or future economic conditions, carriers have developed vessels that require special needs throughout the world’s transportation system.

“Special needs” is a term that seems to imply that the status quo … the norm, if you will …must be altered in ways that will accommodate the exceptional. In every case, however, the cost of these changes are borne not by the exceptional but by those whose needs are adequately provided for by the status quo … the norm, if you will.

Until recently, when U.S. consumers were flush with cash and buying sprees were the order of the day, shipping lines couldn’t get foreign-made goods to these shores fast enough. With no thought of tomorrow, container lines engaged in a race to acquire the biggest and the fastest ships because that’s where the profit was … economies of scale, you know. But the cost of those vessels and the “special needs” those giants would require weren’t borne by the carrier. All costs were “trickled down” to the flush consumer. Business is business .. Supply and demand … you know how it goes.

But now that U.S. consumers are no longer “flush” and buying sprees (demand) are a thing of the past, less and less foreign-made goods (supply) are being shipped to our ports. So what roles do mega-ships play in today’s scheme of things? Those former marquee-types are now seen by some as bit players, while others look upon them as “heavies”.

The new vessel sharing agreements between erstwhile rival carriers are being mentioned almost daily in maritime journals, and although this hand-holding comes as a surprise to some, cautious international observers and consultants warned that aggressive construction of mega-ships would inevitably lead to over-capacity and pressing financial conditions for carriers. A time would come, those observers predicted, when giant vessels would take too much time to load and off-load … would take too much time to maneuver into ports and tie up at typically small berths … would disrupt the sailing schedules of waiting mega-ships … and would be forced to deliver cargo miles and miles from intended destinations. But the race was on and there was no turning back. The “corporate fanning of feathers” was all that mattered.

But money matters even more. As though the cost of operating awkward mega-ships wasn’t enough of a burden, rapidly rising fuel prices may prove to be the last straw. Only one stop-gap measure remained in carriers’ efforts to keep mega-ship operation from being an unmitigated disaster, and that step takes away one of the perceived advantages of “economies of scale”. In discussing this last-ditch measure, an official admitted that by cutting his mega-ship’s speed from 25 knots to 20 knots, fuel consumption could be reduced by up to 50%. But wait a minute. Wasn’t the increased speed of a mega-ship supposed to be what provided significant “economies of scale” benefits?

[Are those mothballs we smell?]