Rates still slipping as peak season recedes and port strike threat subsides
Freight rates are continuing their downward correction following the premature peak season and front-loading of ...
Vessel cascading has been an ever-present feature of container shipping since liner executives first understood the benefits of economies of scale and began the box ship capacity arms race.
But over the next few years, there are likely to be only a few arenas where it will take place, according to Drewry Maritime Advisors’ director of ports, Neil Davidson.
Mr Davidson also suggested that, with an outstanding orderbook of some 130 vessels of over 10,000 teu still to be delivered, the main areas that cascading could take place would be the North American Pacific coast.
There the maximum vessel size is expected to grow from 14,500 teu to 18,000 teu, and the west Mediterranean, where it is forecast to grow from 14,000-16,000 teu to the 18,000-22,000 teu range.
Other trades where smaller vessels continue to be deployed – for example, the Australian trades this year saw its first 8,600 teu vessel call – would continue to be constrained by port dimensions, he said.
However, he suggested that the most recent increases in vessel size – the largest ships growing from the 18,000 teu Maersk Triple-E, to the 23,5000 teu vessels currently under construction – could well be the last box ship size increases for a considerable period.
“Our analysis is based on the orderbook, and although there are some units of 23,500 teu under construction, in terms of length and beam, they are not dimensionally larger.
“In fact, the impact of ULCVs on the wider supply chain suggests that the maximum vessel size may have be to large,” he added.
He was referring the widespread belief that one of the causes of the recurrent port congestion over the past few years has been the introduction of ULCVs and the sheer number of containers they can unload in a single call. This has put huge pressure on hinterland supply chains.
Mr Davidson added: “There are also clear commercial reasons for not going bigger – service frequency has had to be reduced to fill those ships, and there has been an impact on market share, and carriers have needed to enter into alliances to maintain market share and fill those ships.” And he believes this this could have a deep impact on how shipping alliances are formed in the future.
“In the long-term, the most interesting thing is that, if we have reached the ceiling of maximum vessel size, and if container volumes in the market continue to grow, operators that currently need alliance partners to help fill their vessels may well find themselves able to fill them on their own and we may begin to see the break-up of alliances,” he said.
Comment on this article
Gary Ferrulli
December 12, 2018 at 3:13 pmA question for others – if there are 300,000 teus of cargo coming to a given port in a week, any port – what difference does it make if it is delivered on 30 x 10,000 teu ships vs 20 x 15,000 teus ships vs 15 x 20,000 teu ships? it is still 300,000 teus in a week. Same number of crane lifts, same number of trucks and chassis required, same number of gate moves. No doubt the 10,000 teu ships will be fully discharged faster than the 15,000 or 20,000 teus ships – but there are 30 of them vs 20 or 15 of the others.
And 30 ships in a week, 4.3 per day, doesn’t spread out the volumes that much over each day. Is it the ship size, or the capabilities of the infrastructure that creates the congestion? If it were 30,000 teus and 3 x 10,000 vs 2 x 15,000, one could see on a given day the congestion might be greater. Put another way, if there are 300,000 teus coming into a port in a week, that is 42,500 teus a day that have to be handled, the ship size doesn’t change that dimension.
Mike Wackett
December 17, 2018 at 10:32 amI think that most terminal managers will tell you that they would prefer more smaller ships to fewer larger vessels.
The big ULCVs cause landside pinch points and reduce berthing flexibility i.e. an 800m berth is blocked out by 2 400m ULCVs.
I can recall at TPM a couple of years back that LA/LB terminals were extremely concerned at the prospect of cascading ships to the transpac trade. There were issues with the lack of chassis as well as the number of shifts needed to complete the bigger ships e.g. going into a third ‘weak’ shift.
However, the ships have got bigger and they have coped – even with the recent big rush of cargo.
Come on you terminal operators – let us know your views, anonymous or not!
Gary Ferrulli
December 17, 2018 at 3:40 pmI think you are right on what they would prefer and why – the infrastructure hasn’t caught up with the ships. And in the case of TP, especially the West Coast, the labor moves at the same pace as 25 years ago regardless of equipment and technology.
But reality is that ships won’t get smaller, volumes won’t decrease except in times of serious economic downturns, so get the infrastructure and labor inline with the realities. Look at crane productivity in China, UAE, Japan and Rotterdam vs the US West Coast. The US East Coast and Gulf is even better than the West Coast. It isnt the ships, it is infrastructure exacerbated by labor.