The harder they fall

Container ships are getting bigger and bigger, and I am getting more and more uneasy about the safety of the men and women who sail on them. The economic viability of these ships, too, is looking increasingly chancy.

Many smart men and women in the offices of a dozen or so of the biggest operators have pushed these ultra-large container ships- ULCSs. All of them would have done their due diligence before committing billions of dollars to these giants, projecting tonnages, trade and freight demand well into the future. All these men and women were seeking efficiencies and economies of scale. Container ships carrying (so far) anywhere up to 24,000 TEUs or so at a time is their answer. 

I understand the argument. However, to me, what they are doing is, in a way, just gambling. They are betting that they will- especially since all the big guys have almost cartelised into two major alliances-squeeze the smaller players out of the long haul trades. Their wager is that freight rates will rise thereafter, when they have an inherent competitive advantage. With their ships a third larger than the biggest ones of a few years ago, they will be sitting pretty. The present downturn is a blip, they feel. The wheel will turn soon. 

Deep pockets or not, the gamble has proved very costly for ULCS owners so far. The advent of these giant ships has increased supply dramatically at a time when demand growth is stagnant at worst or very poor at best. So you have a situation where-when the break even freight rate of a Shanghai to Rotterdam 20 foot box is $1,300- you will be lucky to get $400, close to half of last years average. These are record lows. Unsurprising, since an estimated half a million container capacity has been added in this year’s first quarter alone, according to Braemar ACM.

Despite fuel costs having decreased dramatically over the last year, nearly everybody running these gigantic ships is losing money. I doubt they will be making too much of it for the next few years. We will find out how deep those pockets really are.

But this has not stopped the gamblers. Maersk has recently announced the ordering of as many as eleven of its famous Triple-E vessels at a total cost of 1.8 billion USD. Other big players have taken a few deliveries this year; will they order more? I don’t know, but the stakes will be raised with every new delivery. And there may be no winners.

There are also operational issues at ports. The regular clogging of gateway ports in the West – headline news last year- is a growing concern. It appears that even leading ports cannot – despite having been ramped up to service ULCSs- cope too well with the sheer volume of containers that are required to be handled during peak times.  Some are pointing to the fact that huge container alliances means that greater volumes of cargo is required to be handled. That situation is not likely to improve soon. Pressure on terminals, road and rail connections and the like is likely to remain high.  

Ports are gambling, too. How much are they willing to spend on infrastructure, higher and higher cranes (which experts are already saying may be unsafe, given sway and swing) and dredgers to accommodate the projected ULCS fleet? What if they invest millions each and the gamble fails?

But that is only money. I am more worried about the safety of the crews that sail on these ships. As the breakup and sinking of the large bulk carriers and OBOs showed us a couple of decades ago, shipping has a poor record of  building large ships that are fit for purpose, and an even poorer record of reacting quickly when defects in shipbuilding are found. In any case, we always react after the event, and we have no system of handling defects systematically or universally.

Computer models and tank tests are not real life. Commercial pressures on classification societies and shipyards contribute to less sturdy and safe ships, as does the chronic underdeclaration of weights in the container trade. The containership MOL Comfort’s breaking up and sinking is a recent case in point. And so are the cracks on the hull of the brand new very large ore carrier Vale Beijing.

So I question the construction of these ULCSs. I also question- in an age when crews’ professional standards and motivation is falling, when weather is worsening at sea and when crew fatigue is endemic- whether less than two dozen men and women will have the ability and bandwidth to handle all that the sea will throw at them.
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