Tag Archives: big ships

The Hidden Costs of Containerization

This article stresses the awful situation seafarers find themselves in, as a result of ships being stranded offshore unable to unload or load, and national COVID rules about flying and debarking, which prevent them from getting home when their time at sea ends. It’s a terrible situation, and countries have not done enough to make it better. International organizations such as the ILS don’t really have much influence in the face of the pandemic.

That’s not the only cost of containerization. Just like Amazon packaging, empty containers are overwhelming America’s ports, and large ports elsewhere. Countries that import more than they export are at risk of a buildup of empty containers. The original idea was that they would go back cheaply to exporting countries, kind of like HP empty printer cartridges, to be refilled and sent again, an example of a reverse supply chain.

Enter the Chinese steel industry, and Chinese nationally-backed container manufacturers. Cheap steel in China and a huge demand for containers has conspired to let these firms make new containers for just about the cost of bringing the empties back. One could argue that it’s better to use a new container because it’s less likely to have hidden damage that might affect the cargo, and that might offset the small price difference. Also eliminated is the coordination overhead of managing the shipment of empties, and then matching the empty used container with a shipper that needs it, and getting it to the loading spot.

The article also points out that the very large container ships of today have caused enormous capital investments at ports around the world. Their draft of around 50 feet meant that harbors needed to be deepened, bridges raised (New York); and their length meant that extra-long quay space is required, cutting out space for smaller barges and feeder ships (Rotterdam, Antwerp) which meant that inland transport of goods (and return of empties) could not be as efficient and timely.

The huge capital investments at ports also created winners and losers. Ports that invested reaped the benefits of increased traffic. A port is an economic engine in its neighborhood, providing jobs and business flow. Ports that did not or could not invest can no longer count on ships coming.

It’s interesting that now, in the midst of the congestion panic, a few larger shippers are forsaking the world of the megaships and alliances. They are chartering smaller container vessels themselves, buying their own containers, and seeking ports that don’t have the same level of congestion. IKEA, Amazon, Wal-mart, and others have sufficient cargo flow that they can invest in this bypass to the ocean carrier-dominated shipping scene. This could prove a boon to smaller ports who did not invest before, but who can handle the smaller ships.

It’s an old adage of operations management that a lean system will reduce batch size. In terms of our supply chains, that would mean smaller ships, more frequent sailings, and use of a wide variety of ports. And it would spread the wealth and the environmental issues shipping brings over a wider landscape.

BY AMIR KHAFAGY FEBRUARY 2, 2022

The Hidden Costs of Containerization – The American Prospect

The Megamax-24 container ship

It seems that despite all the fuss last year about the size of container ships and all the studies showing that they should not be built, the trend is continuing.  I’ve maintained all along that the cost savings just can’t be ignored, and big ships will continue, maybe getting even bigger.   Now we see there’s not a reversal yet, despite the academics. These new ships will be in the range of 24000 containers.  Mike Wackett’s article does a good job of examining the tradeoffs and the actual geometry and stacking of the containers that’s contemplated. And see the followup piece below in the same journal the next day.

Another interesting fact in the story is the divergence on what to use for energy. One line is going for LNG power, the other for conventional fuel with stack scrubbers. But clearly the environmental concerns are holding up, and companies are making plans to deal with the new regulations on environmental emissions from ocean carriers.

There’s been some written about the efficacy of scrubbers vs LNG and the economic and engineering tradeoffs aren’t totally clear, but clearly there are merits on both sides of that debate.
The Loadstar

Mike Wackett
via Latest newbuild ULCVs could be even bigger: introducing the Megamax-24 – The Loadstar

This followup piece is interesting in that more people are shipping smaller packages than container-size.  This means that consolidation will be a key function.  that is where 3PLs have a role. The carriers and especially ports need to get in that service business also, and make the process seamless for their end user customers.  It’s a big challenge, requiring a lot of cooperative activity. Not the carriers’ or ports’ strong point.

Of course we could use 20 foot containers instead of 40’s but that would just push the problem down a bit.  Short term it might be viable though.

The Loadstar

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via Bigger ships, smaller shipments… a circle that needs to be squared – The Loadstar

Panama Canal discounts may not produce expected flood of new business – The Loadstar

Price wars in the canal business!  Egypt cuts rates in Suez; now Panama cuts rates on its canal.

The cuts seem to be only on return voyages. Drewry’s doesn’t think much of them.

Source: Panama Canal discounts may not produce expected flood of new business – The Loadstar