It’s no secret, containerships are getting bigger. Unfortunately, port and inland transportation infrastructure in the U.S. simply hasn’t kept pace with the progressively larger vessels.
One of the feature stories this month (“The big ship squeeze,” pages 28-30) examines the extent to which consumers may be subsidizing the cost of increasingly large containerships calling at ports in the United States.
From the perspective of carriers and shippers, the economics of so-called “mega-vessels”—those with capacity for more than 10,000 TEUs—are fairly simple: as vessels get bigger, fewer are needed to carry the same amount of goods, and as the number of vessels in service declines, less fuel is needed to operate them, especially if they are the newer, more fuel-efficient models being deployed today. Carriers save millions of dollars on fuel consumption, traditionally one of the highest post-vessel production costs for liner companies, and although carriers don’t like it, shippers are saving money because overcapacity and soft demand have sent rates plummeting on the major east-west trade routes.
When it comes to the actual consumers of those goods, however, they might not see any direct benefit from the increased efficiency of these mega-vessels. But their tax dollars fund a portion of port infrastructure expenditures, like dredging projects, and the majority of inland transportation improvements, like highway and bridge upkeep. And they do feel the effects of vessel-related port congestion in the form of depressed store inventories and potentially higher prices as retailers attempt to offset their own costs.
This was certainly the case earlier in the year, when a nasty labor contract standoff between dockworkers at U.S. West Coast ports and terminal operator employers caused massive congestion issues that snarled supply chains across the country. Even before the conclusion of negotiations between the International Longshore and Warehouse Union and Pacific Maritime Association, however, many industry experts warned port congestion was a preexisting condition caused at least in part by the ever-increasing size of containerships.
Many East Coast ports—Miami, Jacksonville, Savannah, Charleston, and Norfolk to name a few—have begun dredging projects to increase harbor depths, while the Port of New York and New Jersey is raising the height of the Bayonne Bridge so that taller ships can pass underneath and reach container facilities on Staten Island, and in Elizabeth and Newark.
But this begs the question, just how many of these vessels are actually calling at U.S. ports on a regular basis?
The accompanying chart, built with data from BlueWater Reporting’s Port and Service Dashboard applications, compares maximum vessel capacity for direct region-to-region container services calling at the ports of Long Beach, Los Angeles and New York/New Jersey. Of the 19 total direct liner services calling at the Port of Long Beach on a weekly basis, 11 have a maximum vessel size of less than 7,000 TEUs; three have a maximum vessel size of between 7,000 TEUs and 10,000 TEUs and five have a maximum vessel size of 10,000 TEUs or more. By comparison, 24 services call at the Port of Los Angeles each week, 16 of which have a maximum vessel size of less than 7,000 TEUs; five have a maximum vessel size of between 7,000 TEUs and 10,000 TEUs; and three have a maximum vessel size of 10,000 TEUs or more. Combined, Alphaliner ranked the Los Angeles/Long Beach port complex as the tenth busiest container port in the world by 2014 volumes. The Port of New York and New Jersey, the busiest port on the East Coast and No. 23 worldwide, doesn’t have a single service calling there that deploys 10,000-TEU or larger vessels despite having 42 total direct liner services, 10 of which have a maximum vessel size of between 7,000 TEUs and 10,000 TEUs.
As noted previously in this column (See American Shipper’s April 2014 issue, “You think those ships are big?” p. 29), the largest containerships today are deployed in the Asia-Europe trade, meaning they never have to call at U.S. ports, and present average and maximum vessel size of services calling U.S. ports still hasn’t even reached the level ports in Asia and Europe were already handling five years ago. As more and more mega-vessels are deployed in the Asia-Europe trade, however, vessels previously serving that trade will continue to cascade down into “lesser” trades like the transpacific and transatlantic, meaning vessels calling the United States will only get bigger as newbuilds are delivered and deployed in Asia-Europe. Meanwhile, it seems consumers will continue to foot the bill for some of the necessary port improvement projects, even if they don’t actually reap any of the benefits directly.
Meyer is web editor of American Shipper and a research analyst with BlueWater Reporting. He can be reached by email at bmeyer@shippers.com.
This column was published in the December 2015 issue of American Shipper.