From TPM: Shippers Question Big Ships' Reliability

From TPM: Shippers Question Big Ships' Reliability

LONG BEACH, Calif. — Ocean shippers worry that the advent of ultra-large container ships on the trans-Pacific trade will extend transit times of their imports and lead to more problems in the pickup of containers at port terminals.

“As we start moving larger vessels into the U.S., will it delay transits due to more port calls at the points of origin and destination?” Richard Smith, vice president of global transportation for Sears Holdings, asked. “We are becoming more conscious of transit times. When can we get the cargo? How reliable is that transit?”

Smith expressed his reservations about the latest generation of big ships at The Journal of Commerce’s TPM Conference in Long Beach on March 4.

He approved of the material results of the big ships, including their cost savings on fuel and lower carbon emissions, but he worries about reliability of delivery. “As carrier alliances get extended, carriers lose control over their cargo,” he said. “Cargo moves on vessels belonging to a carrier we did not contract with, and it came into a different terminal.”

Gene Seroka, president for the Americas at APL, said carriers are working with their destination terminals to improve productivity so they can handle the mega-ships. APL, for example, is investing in cranes with greater reach at its Los Angeles terminal.

Alliances enable carriers to achieve savings on the operation of the big ships, he said. “Consortia enable carriers to operate bigger ships at reduced costs,” Seroka said. “On the East Coast, as we develop services with the G6 alliance, we try to make sure services complement each other, so you won’t have the same port-to-port calls one after another, and so customers have greater offerings of service points.”

There is no doubt bigger ships are coming, said Peter Tang-Jensen, senior vice president of Houston-based global classification society ABS. He said the biggest ships — the first of Maersk’s 18,000-TEU Triple Es will enter the market this year — haven’t reached their limit and there’s room for ships of even larger capacity. Ultimately, he said, it won’t be the vessel designer that sets the limit on the size of container ships, but rather the cargo-handling capability and other infrastructure considerations at ports.

Complete coverage of trans-Pacific maritime trade

The average size of vessels in the container fleet also will increase as more ultra-large container ships start to take a bigger share of the fleet.

There will be a net overcapacity of at least 6 percent in the eastbound Pacific this year, but if carriers take the proper actions at the right times to match capacity with demand, they may be able to avoid a ruinous rate war for the second year in a row, according to an industry analyst.

The global container ship orderbook consists of 120 vessels capable of carrying 10,000 20-foot equivalent units or more totaling 1.6 million TEUs, by far the largest category of vessel on order, according to Alphaliner. That 1.6 million TEUs represents 80 percent of the 2.1 million TEUs of capacity on the world’s oceans today. The research analyst expects mega-ships to make up 18 percent of the global container fleet by the end of 2015, up from 6 percent at the end of 2010.

As ships get bigger, Tang-Jensen said, the industry will take on an increased focus on improvement of cargo-carrying efficiencies and on ship-terminal interaction. Finally, he said the focus will remain on improving fuel and environmental ship performance.

Sears’ Smith said he was all for better environmental performance and more efficient fuel usage. “So the big ships will cost less per container, but are we going to share in that cost savings?” he asked. “I hope we are. But if it sustains the industry, it’s ultimately advantageous.”

Contact Peter Leach at pleach@joc.com and follow him at www.twitter.com/petertleach.