An important development in maritime logistics this year will be the deployment of the more than 60 ultra-large container vessels scheduled to slide down the ways at shipyards around the world. The smashing of all those champagne bottles has implications for freight rates, carrier profitability, port competition, public infrastructure investment and terminal operations.
Recent figures from DynaLiner show that most major liner operators have seen revenue per TEU decline over the past three years as a result of excess capacity and its downward pressure on freight rates. While operators can potentially reduce slot costs by placing ultra-large box ships into service, they will also be challenged to consistently achieve the high load factors that make the use of such vessels economically worthwhile. The entry into service of ULCVs increases capacity by large increments, making it harder to balance supply and demand on a given trade lane.
Many ports are already struggling with space constraints, landside congestion, terminal productivity challenges, modernization imperatives, and vessel access problems. Ports want the business of the ULCVs, but the super-sized gantries, dredging, larger berths and other improvements required to accommodate them can necessitate massive investment and a perpetual scramble to stay ahead of the curve as ship size continues to ratchet up. Larger ships often experience costly delays in getting alongside and loading/discharging cargo. For their operators, ships of 10,000 TEUs and larger offer economies of scale at sea but, unfortunately, not in port.
The liner-service industry performs a vital function for the global economy in carrying goods across the oceans at remarkably low cost, but the sector’s profitability remains unimpressive, at best. When all of the variables involved are considered, whether the advent of ever-larger container ships will prove to optimize the system, reduce overall costs, and enhance carrier profitability remains to be seen.
Jon S. Helmick, Director, Maritime Logistics & Security Program, U.S. Merchant Marine Academy