Do shippers want larger ships?
Friday, 28 December 2007
Friday, 28 December 2007
Shipping lines are gaining greater economies of scale with the introduction of ever larger container vessels. This helps keep rates down: but at what price to the shipper?
The Shippers' Voice is keen to know whether big is best.
All but the largest of ports are unable to handle the new breed of mega-ships with between 8,000 and 12,000 containers. The result is more containers squeezing into fewer hub ports and then a reliance on hinterland or feeder services.
What is the up-side of larger ships? It is cheaper to transport each container from the economy of scale that can be gained. Equally there is less CO2 and other emissions per container shipment which must benefit the environment and improve the carbon footprint of supply chains for the ocean voyage at least. The use of smaller feeder ships can get the freight closer to the destination or pick it up closer to its origin and reduce the distance of the inland leg of a door-to-door journey. The use of smaller ports by the feeder vessels might also bypass heavily congested road and rail infrastructure that connects the hub ports to the hinterland.
Countering these benefits are the potential costs of increased port dues and handling charges associated with transhipment to feeder ships and barges (which also need handling at the destination port), plus the additional costs of the feeder ship itself. Bringing larger volumes of containers to a port all at once may also create congestion problems: congestion of the port and terminals, the barge, short-sea, rail and road interchanges in or around the ports and on the connecting road, rail and inland waterway infrastructure. Whether feedering the containers by sea or moving them on the congested hinterland infrastructure, the risks of delay and extra transit time all adds further to a shipper’s costs.
Congestion is a growing problem. In Northern Europe, for example, certain hub ports in the UK have been reported to be so congested that vessels have withdrawn direct calls to them. The Grand Alliance which currently operates vessels up to 9000 TEUs has withdrawn a number of vessels from the port of Southampton due to handling delays since September. The cargo is being off-loaded at Antwerp for transhipment back to UK ports. The Far Eastern Freight Conference (FEFC), which put on a UK port congestion surcharge recently, has warned that other Northern European ports are also becoming highly congested and the situation will only get worse in the coming months and year ahead.
The picture is a familiar one around the world. So do the larger ships create more problems than they solve? The Shippers' Voice is keen to know what you think. You can make your comments below or, if you are a shipper there are a few short questions on your poll page: simply log in with your username and password and click on the link to the Polls to see the questions and submit your answers (completion of the poll should only take 2 minutes of your time).
The Shippers' Voice is keen to know whether big is best.
All but the largest of ports are unable to handle the new breed of mega-ships with between 8,000 and 12,000 containers. The result is more containers squeezing into fewer hub ports and then a reliance on hinterland or feeder services.
What is the up-side of larger ships? It is cheaper to transport each container from the economy of scale that can be gained. Equally there is less CO2 and other emissions per container shipment which must benefit the environment and improve the carbon footprint of supply chains for the ocean voyage at least. The use of smaller feeder ships can get the freight closer to the destination or pick it up closer to its origin and reduce the distance of the inland leg of a door-to-door journey. The use of smaller ports by the feeder vessels might also bypass heavily congested road and rail infrastructure that connects the hub ports to the hinterland.
Countering these benefits are the potential costs of increased port dues and handling charges associated with transhipment to feeder ships and barges (which also need handling at the destination port), plus the additional costs of the feeder ship itself. Bringing larger volumes of containers to a port all at once may also create congestion problems: congestion of the port and terminals, the barge, short-sea, rail and road interchanges in or around the ports and on the connecting road, rail and inland waterway infrastructure. Whether feedering the containers by sea or moving them on the congested hinterland infrastructure, the risks of delay and extra transit time all adds further to a shipper’s costs.
Congestion is a growing problem. In Northern Europe, for example, certain hub ports in the UK have been reported to be so congested that vessels have withdrawn direct calls to them. The Grand Alliance which currently operates vessels up to 9000 TEUs has withdrawn a number of vessels from the port of Southampton due to handling delays since September. The cargo is being off-loaded at Antwerp for transhipment back to UK ports. The Far Eastern Freight Conference (FEFC), which put on a UK port congestion surcharge recently, has warned that other Northern European ports are also becoming highly congested and the situation will only get worse in the coming months and year ahead.
The picture is a familiar one around the world. So do the larger ships create more problems than they solve? The Shippers' Voice is keen to know what you think. You can make your comments below or, if you are a shipper there are a few short questions on your poll page: simply log in with your username and password and click on the link to the Polls to see the questions and submit your answers (completion of the poll should only take 2 minutes of your time).
Labels: bigger ships, congestion, liner shipping
# posted by Shippers' Voice @ 09:56
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In its latest report on the super-post-panamax ship market, DVB Bank, suggested that on the basis of capital costs the large super-post-panamax ships offered no real per slot costs advantages over 8,000TEU class vessels contracted two years ago because newbuild prices had gone up considerably. Vessels of 10,000TEU plus, for instance, now regularly command prices in excess of USD150 million and mainly lie in the USD160/170 million range. They have modest operating costs of USD7,000/8,000 per day but the increase in future throughput expected in the years ahead would test the ability of ports and inland infrastructure to cope. This in turncould seriously affect the efficiency of such large vessels and ‘prove financially taxing.’
The report added: ‘Expansion of terminals in the west is not easily accomplished. It is therefore likely that efforts to keep vessels moving at sea will result in fewer load port calls’. According to DVB, there are 155 super-post-Panamax ships on order.
The report added: ‘Expansion of terminals in the west is not easily accomplished. It is therefore likely that efforts to keep vessels moving at sea will result in fewer load port calls’. According to DVB, there are 155 super-post-Panamax ships on order.
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posted by 
: 16 January 2008 22:54
: 16 January 2008 22:54
When Chairman of the Institute of Export's Anglia Branch, some 12/15 years ago, we had a presentation by CMA-CGM. The speaker was pleased to tell us that we were the first group of Shippers to be told of their (then) brand new generation of container-ships, which would carry up to 4,000 TEUs.
At the end of the presentation, we had the usual Q & A session. As Chairman, I had first 'bite' … I asked the audience (over 60 people, I recall) what they'd prefer as Shippers: a single 4,000 TEU ship sailing once a week, or 2 x 2,000 TEU vessels, giving a twice weekly sailing option? Unsurprisingly, all but 2 of those present opted for the twice-weekly opportunity of getting their cargo on a vessel. It has always surprised me that a Shipper's needs almost always seem to be secondary to those of the Lines, when it is we who pay the freight.
Times, however, moved on, and the economies of scale won the day. However, as you rightly suggest, a race has begun that no-one can really win: the recent poor weather at Felixstowe has meant the port has been closed more frequently, resulting in vessels off-loading on the continent and using feeders that result in a Just Too Late delivery for the importer.
At the end of the presentation, we had the usual Q & A session. As Chairman, I had first 'bite' … I asked the audience (over 60 people, I recall) what they'd prefer as Shippers: a single 4,000 TEU ship sailing once a week, or 2 x 2,000 TEU vessels, giving a twice weekly sailing option? Unsurprisingly, all but 2 of those present opted for the twice-weekly opportunity of getting their cargo on a vessel. It has always surprised me that a Shipper's needs almost always seem to be secondary to those of the Lines, when it is we who pay the freight.
Times, however, moved on, and the economies of scale won the day. However, as you rightly suggest, a race has begun that no-one can really win: the recent poor weather at Felixstowe has meant the port has been closed more frequently, resulting in vessels off-loading on the continent and using feeders that result in a Just Too Late delivery for the importer.
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posted by : 04 February 2008 18:11
: 04 February 2008 18:11
I don’t think it is as simple as just the size of the ship; it is more a case of whether the infrastructure is capable of handling the ships and the larger volumes of freight and containers. The port must take responsibility if it accepts these 'mega-ships' in the first place.
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posted by : 06 February 2008 10:55
: 06 February 2008 10:55
I am convinced that the carriers see the future in ever larger ships, but I also believe this strategy comes with risks. When vessel utilisation decreases, there is a risk – when one looks at the total supply chain, hidden costs from such larger ships may be uncovered. Smaller ships can also make sense.
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posted by : 06 February 2008 10:58
: 06 February 2008 10:58
It is worth noting that transhipment services can be cheaper and quicker than direct calls. I think this is because the mother ship (+8000 TEUs) has fewer port calls and thus less handling costs, quicker transit. If the feeder is efficient and not delayed it may be very competitive against direct calls by smaller ocean-going vessels.
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posted by : 08 February 2008 10:11
: 08 February 2008 10:11 Post your comment
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