The year 2014 will see the debut of the Triple E, first of a series of at least 20 containerships to be operated by Denmark's Maersk Line, each with a capacity of 18,000 twenty-foot equivalent units (TEUs). Few could have imagined this behemoth at the dawn of containerization in the mid-1950s. (Malcom McLean's Ideal X carried only 58 boxes.) In the ensuing decades, containerships grew steadily in size, as operators sought to squeeze the most out of their investments. When ships became too wide to fit through the Panama Canal, builders doubled down. Between 2008 and 2015, average ship size will have risen from 6,000 TEUs to more than 11,000 TEUs, according to Lars Jensen, chief executive officer and partner with SeaIntel Maritime Analysis. Maersk's Triple Es will dwarf them all.

As one might expect, Maersk is making a big deal about the new ships. To dramatize their size, it likes to point out that a basketball court, football stadium and ice-hockey arena could all fit comfortably below deck. At more than 1,312 feet from bow to stern, the Triple E is 430 feet longer than the Titanic. And while it falls a few feet short of the biggest supertankers ever built, it represents the largest vessel of any type on the water today, according to the line.

Maersk is pushing the Triple E as the ultimate in operating efficiency. On a per-container basis, it's expected to produce 20 percent less carbon dioxide than the record-smashing, 11,000-TEU Emma Maersk. And it will burn 35 percent less fuel per box than the 13,100-TEU giants now on order by rival shipping lines. In fact, the name of the new ship class is drawn from three "Es" - economy of scale, energy efficiency and environmental responsibility.

The line's major pitch, however, is directed at its customers. Speaking at the Journal of Commerce's annual Trans-Pacific Maritime Conference in Long Beach, Calif., senior director of trade and marketing Tim O'Connell said the Triple E is an essential step toward achieving desirable economies of scale. "Getting bigger is not new to us," he said, comparing container shipping to the grocery and airline industries. "It's what customers demand of us."

I'm not sure that the airline analogy was the best one to make. Who wants to be one of 850 passengers on that Airbus A380? But O'Connell insisted that the Triple E would allow Maersk to offer shippers "a low-cost product." Given the wild swings in freight rates that we've seen in recent years, that sounds like an attractive prospect.

Yet there are some major drawbacks to the latest generation of mega-vessels. Joining O'Connell on a panel at TPM, Jensen questioned whether the world's container trades can absorb them. The Asia-Europe route is the only place that where the biggest ships can be efficiently used. For the long term, Jensen predicted a 36-percent increase in capacity in the trade - a pool of supply that would require demand growth of 13.4 percent a year in order to sustain it.

What's more, the entry into service of ships like the Triple E is bound to trigger a "cascading" effect, whereby larger vessels are bumped from the major linehaul routes and replace smaller ones in other trades. Those in the trans-Pacific will range between 7,500 and 10,000 TEUs, Jensen said, yet demand in that trade is expected to grow just 2 to 3 percent this year, and no more than 5 percent in 2013. "If large vessels are going to grow by 30 percent," he said, "[demand] is going to be very insufficient to fill those ships."

Even the smaller trades are looking at capacity increases averaging 11 percent in 2012 - far in excess of demand. "That tells me there's a significant threat of overcapacity in virtually any trade in the world," said Jensen.

Carrier Economics 101 tells us that excess capacity translates into discounting by carriers who are desperate to fill their ships. Those are the same carriers who then beg shippers to accept big rate increases, which they argue are necessary to the industry's survival. And the ships keep getting bigger ...

The whole point of the megaships is that they make possible low rates that nevertheless result in a healthy return for carriers. But there are plenty of cost-efficient giants plying the trades today - and carriers lost a combined $5bn last year. The numbers don't seem to add up.

O'Connell himself acknowledged that there are drawbacks to the big new ships. Start with the fact that there are precious few trades that will be able to accommodate them. Most of the world's ports lack the depth of water, length and configuration of berths, on-dock yard space and inland infrastructure to work the ships efficiently, if at all. We won't be seeing a Triple E calling a U.S. port anytime soon.

Arguments about the impact on shippers cut both ways. Yes, the per-slot prices might be lower. But fewer, bigger vessels mean fewer linehaul sailings, along with the need for an extensive network of feederships calling additional points. So now a port-to-port move might have to include the cost of transferring containers from one ship to another, not to mention that of operating smaller, less efficient vessels.

Bottom line, shippers will have fewer service options from which to choose. And if the megaships do fill up - as they well might during peak periods - a container left on the docks will have even greater consequences for the consignee than it does now.

None of these arguments will stop the Triple E from going into service. Other carriers are bound to follow Maersk's example, with ships of equal or even greater size. (Who wants to be the first to break the 20,000-TEU barrier?) So why are the lines insisting on following this path, when experience shows it to be so fraught with problems? Jensen suggested that it's all about positioning themselves for the coming wave of industry consolidation. Ironically, it's the big ships themselves that are at least partly to blame, with their tendency to turn liner service into a rate-driven commodity. Jensen expects the current crop of around 20 large global players to shrink to as few as seven by the mid 2020s. The carriers with the biggest and newest ships hope they'll be among the handful of survivors.

For a capital-intensive industry like container shipping, it's a risky and expensive game to be playing. At what point does big become too big? We might already have reached it.

- Robert J. Bowman, SupplyChainBrain

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