Boxships may be reaching size limit

Boxships may be reaching size limit

SAN FRANCISCO -- The race to build ever-larger container ships may be reaching its practical limit as vessel designs top out at 12,000 TEUs, according to a shipping industry consultant.

When container ships get too big, they have operational and commercial limitations that reduce their effectiveness, said Neil Davidson, director of Drewry Shipping Consultants Ltd. in London.

Shipping lines last year began to introduce 8,000-TEU vessels into the Asia-Europe trade, and Orient Overseas Container Line's Hamburg became the first mega-ship to call in the U.S. By the end of the year, four services with 8,000-TEU ships will be calling on the West Coast.

Carriers have ordered more than 140 vessels of 8,000-9,500-TEU capacity to be delivered through 2007.

Technically, there is no limit to how large container ships can be built, although ships of more than 12,000 TEUs require a second engine, making them quite costly to build and operate. "The real limit on ship size is commercial," Davidson told Navis World 2004 in San Francisco.

As vessels grow larger, carriers have a more difficult time filling them, negating the economies of scale mega-ships are supposed to produce. Harbor depths and other restrictions also limit the number of ports the jumbo ships can call.

"The bigger the ship, the more transshipment and feedering you need, and that costs money," Davidson said.

Fewer direct services runs contrary to the type of ocean transportation shippers demand, because many importers and exporters prefer direct and frequent services between port pairs. Freight rates are still a bargain, so shippers would prefer reliable, direct service to another $50 cut in rates that the big ships might produce, he said.

Mega-ships also strain the capacity of inland infrastructure, terminal operators and rail and truck carriers to service the vessels, said Nolan Gimpel, principal at Axiom consulting and a former executive at APL Ltd. and the Port of Oakland.

As terminals run out of space, ports may have to investigate more creative ways of expanding their operations, such as establishing inland depots served by rail shuttles, he said.

With ports under pressure to reduce air pollution and traffic congestion caused by trucks, they will not, as they did in the past, automatically build bigger terminals and dredge their harbors deeper each time carriers introduce a new generation of ships. "Eventually ports will say, `We can't do it any more,'" Davidson said.

As ports prepare for a doubling of cargo volumes over the next 10 to 15 years, vessels of 5,000 to 8,000 TEUs will be the workhorses of the industry and vessels of 8,000 to 9,500 TEUs will be common, but not dominant on the east-west trade lanes. Vessels of 12,000 TEUs will be limited to serving a few selective port pairs, Davidson said.