Thursday, October 9, 2014
BIG SHIPS, PORTS, OCEAN CARRIERS
When 2014 is in the history books, one thing that will have become abundantly clear is that the container industry faces a big, big ship problem.
The industry has known long before this year that ships were getting big. Indeed, they’ve been growing in size since the first vessel was launched in the late 1950s. The industry likewise has known that, with carriers’ growing bias toward ships capable of carrying 18,000 20-foot-equivalent containers and more, ship size growth is no longer linear but is accelerating.
This year, however, the port bottlenecks that flow directly from the profusion of big ships truly hit home. Cargo delays felt from Asia to Latin America, linked in most cases to big ships calling ports ill-equipped to handle them.
What is scarier is the industry has barely begun to comprehend the problem, let alone respond. Carriers and terminals aren’t taking the necessary, collaborative steps to ensure the big ships can be turned around quickly at port and remain on schedule for subsequent port calls.
The evidence of this building crisis is all over the news. Container ship transits through the Suez Canal are declining, but tonnage is up, underscoring the trend toward larger ships. Big ships are delayed more frequently than smaller ships, as shipping portal CargoSmart has been reporting all year.
Most recently, that data reveals more severe delays for larger ships versus smaller ones at the ports of Shenzhen and Hong Kong. “As more carriers deploy mega-vessels to enjoy the economies of scale, we foresee that port congestion will increase when the ports have limited space to accommodate the large vessels,” CargoSmart said.
The reasons for the delays are known. Big ships require more berth space, and if they’re already arriving late, the planned-for berth window may no longer be available, lengthening the delay. (CargoSmart said 10,000-TEU ships saw an average arrival delay of 19 hours at Shenzhen and 23 hours at Hong Kong during the past 12 months.)
Once at the berth, the ships require more cranes, which may not be available, and it takes a crane more time to load or offload a container from a big ship. The traveling distance of a container from the ground into its slot on the ship can be 47 percent longer on an 18,000-TEU ship than a 5,000-TEU ship, according to one Asian terminal.
There is only one ultimate solution: to get ships in and out of port faster. On schedule, ships hit berthing windows and don’t impact other ships, and they give carriers the scheduling buffers needed to maximize slow-steaming and thus keep fuel bills low.
But accomplishing this means productivity at the berth must improve — that is, more containers must be loaded and unloaded within a given interval of time.
That, in turn, requires carriers and terminals to collaborate as partners, creating visibility and sharing. The difficult truth is that this isn’t happening. Productivity on ships drops as the ships get bigger. (JOC Port Productivity data show a declining trend on ships of 15,000 TEUs and more, and a flat trend for ships of 10,000-TEU capacity and above.)
Of even greater concern, carriers and terminals are largely stuck in a vendor-provider, often confrontational mindset that inhibits the deeper partnership needed to boost productivity levels.
“The increase in quay crane deployment has not been on par with the increase in vessel capacity and moves per port, resulting in more port days being required,” said Andy Lane, a former Maersk Line executive and now a partner at Container Transport International Consultancy. “This additional port time will either eat into sea buffers, jeopardizing schedule integrity and reliability, or resulting in additional vessels being required within a rotation, increasing costs and transit times.”
The industry must evolve to a new model for carrier-terminal interactions. The focus must be on creating baselines and measuring performance, analyzing data gathered from on-site observations, determining root causes of problems and jointly developing, testing and implementing solutions to improve productivity. It means joint working groups, meetings, follow up, and possibly contractual incentives to deliver.
But little of that is happening, and part of the reason can be laid at the doorstep of the carriers, which face the loss of cost-saving opportunities and hurting their customers because of delays. “Where the lines have failed is turning up one day as partners, and then the next as hard-core procurement officers,” Lane said. “With the potential mutual value at stake, it is difficult to comprehend what the obstacles to progress might be, but so long as these obstacles stay in place, lines will not see sustainable productivity improvements, terminals will be underutilized and shippers will still suffer congestion.”