Executive Briefings

Megaship Mania: Who Will Benefit?

It takes the giant Emma Maersk, which carries the equivalent of nearly 15,000 twenty-foot containers (TEUs), about three and a half miles to come to a dead stop. But there's no stopping the Triple-E, Maersk Line's even larger class of containership, from entering the liner trades over the next three years.

Not that Maersk, or other ocean carriers with plans to deploy similar vessels, wants to put a halt to the building of these record-breakers. The company has ordered 20 of the ships, with the first five scheduled for delivery in the second half of this year. They will see service in the Asia-Europe trade. But Maersk has decided not to pick up its option for an additional 10 Triple-Es. And despite carriers' claims that the biggest ships will lead to much better operating efficiencies and a lower cost per container slot, shippers are worried about the impact they will have on service.

The Triple Es will be the biggest vessels of any kind on the water. As Maersk likes to point out, each of the new ships could accommodate a football field, a basketball court and a hockey rink. Their specifications are truly impressive: more than 1,300 feet long, 193 feet wide and 239 feet tall. (Noah's ark was said to be only around 450 feet long. Imagine how many more species you could cram into a Maersk containership.) And while the Triple-E will be only slightly wider and longer than the carrier's previous E-class ships (of which the Emma Maersk was one), it will be able to carry an additional 2,500 containers.

Even shippers see an advantage to the newbuilds. "Larger ships use less fuel per container, [expel] fewer emissions and are positive to the overall cost structure," said Richard Smith, vice president of global transportation with Sears Holdings Corp. "But will shippers share the cost advantage? That's an open question."

Smith spoke on a panel at the Journal of Commerce's annual Trans-Pacific Maritime Conference in Long Beach, Calif. He applauded carriers' determination to stay in business, in part through the deployment of new vessel technology, but he wondered what the impact will be on the customer.

Start with the question of how carriers are going to fill all those container slots. Granted, the new arrivals will be replacing older and smaller vessels (if you consider a 10,000-TEU ship to be "small"), but most of the displaced tonnage will end up in other trades, primarily the trans-Pacific. The net impact will be more capacity that must be filled. Will carriers have to stop at additional ports in order to load enough cargo to justify the trip? Will they prolong voyages that were already slowed down in order to save on fuel? And just how long will it take to unload these floating cities when they finally do hit port?

Landside issues are equally troubling. How many ports have the acreage to accommodate the thousands of containers that will be flowing across their docks with every ship call? Major containerports are switching from wheeled to stacked operations in order to boost efficiency, but do they have room for all those boxes? Can they locate, lift and move them out of the port fast enough? What about dockside cranes, which must be strengthened and stretched to work the extra-wide vessels? "Port productivity is pretty standard, with regard to the number of containers that can be processed per hour," noted Smith.

Both on dock and beyond port boundaries, intermodal railyards must be able to shift all those containers onto and off stack trains in a timely manner. Neighborhoods that adjoin port property already complain about the noise and pollution generated by trucks, trains and ships on arrival and sailing days. How much more congestion will result when all of that activity is triggered by a single ship?

Then there's the matter of longshore labor. U.S. dockworkers are historically less productive than their counterparts in places such as Hong Kong, Singapore and Rotterdam. Will they step up the pace when the new ships come calling, with all those additional boxes to be handled? Gene Seroka, president of the Americas with APL Limited, said West Coast ports have already succeeded in boosting labor productivity to some degree. "We've seen some efficiencies within our own company, while industry continues to engage with labor," he said.

Smith further wondered what impact the megaships will have on existing slot-sharing arrangements within multi-carrier alliances. Already he's unhappy about contracting for service with one carrier, only to find that his containers were moved by one of that provider's alliance partners, possibly even coming into a different terminal. Or say that Sears strategically arranges for half its containers to be moved by one carrier, and half by another - then learns that all of the boxes under contract were loaded onto the same vessel. Expect that practice to become even more common with the deployment of bigger ships. In the event, Smith said, "we lose the leverage we have with the carrier we're contracting with."

Seroka defended the megaships, along with the space-sharing alliances, as essential tools for industry survival. "Significant industry losses have forced carriers to drastically reduce costs," he said.

He insisted that productivity issues raised by the big new ships are being addressed. APL is modifying its cranes in line with their wider dimensions. At the same time, it's investing in new inland container-terminal capacity, to relieve bottlenecks caused by the transfer of boxes between truck and train deep in the interior.

As for the carrier alliances, they will mean greater flexibility for shippers, with more port-pairing options, Seroka said. "It doesn't mean more calls, but the availability of primary, secondary and tertiary service for wider and more expansive service areas."

I see a parallel with the development of the Airbus A380, an aircraft that can carry more than 850 passengers in some configurations. I, for one, have no desire to be one of them. Would I feel that same way if I were the owner of a container that's one of 9,000 stowed within a single ship?

Already shippers are complaining about canceled sailings and slowed-down ships. Maybe carriers will figure out how to deploy these megavessels in a manner that will yield the necessary economies of scale without compromising further on service quality. But a lot of their customers, it seems, have yet to be convinced.

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Keywords: supply chain, supply chain management, Triple-E, international trade, global logistics, transportation management, trans-Pacific trade, Asia-Europe trade, logistics & supply chain, supply chain services, retail supply chain

Not that Maersk, or other ocean carriers with plans to deploy similar vessels, wants to put a halt to the building of these record-breakers. The company has ordered 20 of the ships, with the first five scheduled for delivery in the second half of this year. They will see service in the Asia-Europe trade. But Maersk has decided not to pick up its option for an additional 10 Triple-Es. And despite carriers' claims that the biggest ships will lead to much better operating efficiencies and a lower cost per container slot, shippers are worried about the impact they will have on service.

The Triple Es will be the biggest vessels of any kind on the water. As Maersk likes to point out, each of the new ships could accommodate a football field, a basketball court and a hockey rink. Their specifications are truly impressive: more than 1,300 feet long, 193 feet wide and 239 feet tall. (Noah's ark was said to be only around 450 feet long. Imagine how many more species you could cram into a Maersk containership.) And while the Triple-E will be only slightly wider and longer than the carrier's previous E-class ships (of which the Emma Maersk was one), it will be able to carry an additional 2,500 containers.

Even shippers see an advantage to the newbuilds. "Larger ships use less fuel per container, [expel] fewer emissions and are positive to the overall cost structure," said Richard Smith, vice president of global transportation with Sears Holdings Corp. "But will shippers share the cost advantage? That's an open question."

Smith spoke on a panel at the Journal of Commerce's annual Trans-Pacific Maritime Conference in Long Beach, Calif. He applauded carriers' determination to stay in business, in part through the deployment of new vessel technology, but he wondered what the impact will be on the customer.

Start with the question of how carriers are going to fill all those container slots. Granted, the new arrivals will be replacing older and smaller vessels (if you consider a 10,000-TEU ship to be "small"), but most of the displaced tonnage will end up in other trades, primarily the trans-Pacific. The net impact will be more capacity that must be filled. Will carriers have to stop at additional ports in order to load enough cargo to justify the trip? Will they prolong voyages that were already slowed down in order to save on fuel? And just how long will it take to unload these floating cities when they finally do hit port?

Landside issues are equally troubling. How many ports have the acreage to accommodate the thousands of containers that will be flowing across their docks with every ship call? Major containerports are switching from wheeled to stacked operations in order to boost efficiency, but do they have room for all those boxes? Can they locate, lift and move them out of the port fast enough? What about dockside cranes, which must be strengthened and stretched to work the extra-wide vessels? "Port productivity is pretty standard, with regard to the number of containers that can be processed per hour," noted Smith.

Both on dock and beyond port boundaries, intermodal railyards must be able to shift all those containers onto and off stack trains in a timely manner. Neighborhoods that adjoin port property already complain about the noise and pollution generated by trucks, trains and ships on arrival and sailing days. How much more congestion will result when all of that activity is triggered by a single ship?

Then there's the matter of longshore labor. U.S. dockworkers are historically less productive than their counterparts in places such as Hong Kong, Singapore and Rotterdam. Will they step up the pace when the new ships come calling, with all those additional boxes to be handled? Gene Seroka, president of the Americas with APL Limited, said West Coast ports have already succeeded in boosting labor productivity to some degree. "We've seen some efficiencies within our own company, while industry continues to engage with labor," he said.

Smith further wondered what impact the megaships will have on existing slot-sharing arrangements within multi-carrier alliances. Already he's unhappy about contracting for service with one carrier, only to find that his containers were moved by one of that provider's alliance partners, possibly even coming into a different terminal. Or say that Sears strategically arranges for half its containers to be moved by one carrier, and half by another - then learns that all of the boxes under contract were loaded onto the same vessel. Expect that practice to become even more common with the deployment of bigger ships. In the event, Smith said, "we lose the leverage we have with the carrier we're contracting with."

Seroka defended the megaships, along with the space-sharing alliances, as essential tools for industry survival. "Significant industry losses have forced carriers to drastically reduce costs," he said.

He insisted that productivity issues raised by the big new ships are being addressed. APL is modifying its cranes in line with their wider dimensions. At the same time, it's investing in new inland container-terminal capacity, to relieve bottlenecks caused by the transfer of boxes between truck and train deep in the interior.

As for the carrier alliances, they will mean greater flexibility for shippers, with more port-pairing options, Seroka said. "It doesn't mean more calls, but the availability of primary, secondary and tertiary service for wider and more expansive service areas."

I see a parallel with the development of the Airbus A380, an aircraft that can carry more than 850 passengers in some configurations. I, for one, have no desire to be one of them. Would I feel that same way if I were the owner of a container that's one of 9,000 stowed within a single ship?

Already shippers are complaining about canceled sailings and slowed-down ships. Maybe carriers will figure out how to deploy these megavessels in a manner that will yield the necessary economies of scale without compromising further on service quality. But a lot of their customers, it seems, have yet to be convinced.

Comment on This Article


Keywords: supply chain, supply chain management, Triple-E, international trade, global logistics, transportation management, trans-Pacific trade, Asia-Europe trade, logistics & supply chain, supply chain services, retail supply chain