Larger than life
OSC's Andrew Penfold examines the impact of ever-larger containerships on second tier ports
The container shipping market is continuing to pass through a period of rapid change, which is almost entirely due to a ship size revolution that has been underway for some time.
This ongoing trend is the result of three strands. Firstly, a mismatch between supply and demand has been heightened by the introduction of much larger vessels and weaker than anticipated demand growth following from global economic conditions. This has resulted in severe and prolonged overcapacity.
Secondly, the Asia-Europe container trade cannot absorb all of the largest vessels that have been added to the market. This has led to a period of ‘cascading’ of large vessels on to other trades – usually ahead of underlying demand and port capabilities. And this trend of cascading is expected to continue.
Thirdly, the search to fill the largest vessels has seen increased use of transhipment, which is vital to the economics of utilising the bigger ships.
This process of change is still underway, with the shares of the largest vessels set to increase further and serious evaluation is underway concerning the addition of even larger vessels, beyond the confirmed orders for 20,000 teu units.
The trend in favour of larger vessels is well established and has accelerated since 2004. The share of 12,000 teu+ vessels increased from 1% of the containership fleet at the beginning of 2008 to more than 12% at present, and is still increasing.
The very largest vessels are deployed on trades between East Asia and Europe, but the oversupply of these largest classes of ships has led to re-deployment of current tonnage on these trades to other global routes.
There is likely to be pressure to deploy further larger vessels on these trades, where water depth and other considerations permit such operations. Ports able to meet the requirements of these larger ships represent more competitive options and this will be a key factor in choice of facility.
Details of the orderbooks of the main container shipping lines highlight the number of lines that either have a fleet of ULCSs and/or are currently ordering new vessels of this magnitude. In some cases, there will be a substantial increase to what are already very large fleets, consisting of a high share of the biggest vessels. There are clearly some very noticeable orders being placed and this is only going to continue to exacerbate an existing issue for the container port and shipping industry.
It is worthwhile looking further at one of the key drivers for the big ship orders. The decrease in unit transport costs to be gained with increasing vessel size has been the major driving force in the strategies of containership operators as they all seek to gain improved operating returns.
However, the potential savings decline as vessel sizes increase. There are significant scale economies as ship sizes have increased and although additional gains can be made beyond this stage, very large increases in capacity have to be incorporated in order to make worthwhile further savings.
Comparing the operating cost per teu for a range of containership sizes reveals that there is a general decrease in the operating cost as the size of vessel increases, although it is imperative that the bigger ships are highly utilised to gain these operating economies of scale.
As a result of the increase in the size of vessels being deployed on all trades following the cascading of larger tonnage from the main arterial trades, it is inevitable that the number of ports that are capable of handling the larger size of vessel will decline – not all ports will have the necessary depth of water, length of quay or number and type of gantry cranes to be able to handle vessels of this size.
Add the issue of port concentration with the increased total costs of calling at ports with larger tonnage and the result is container shipping lines having to maximise the efficiencies of their deployed assets by reducing the time spent in port and by reducing the actual number of direct calls (and increasing transhipment). The implications for terminals in highly-competitive markets are clear.
Firstly, they will have to expand; terminal area, length of quay and depth of water are all crucial if ports are to be able to increase the size of vessels they can handle and handle quickly and efficiently. Secondly, they will need more yard space to be able to handle larger consignments.
Thirdly, they will need more gantry cranes and more efficient gantry cranes to be able to increase their productivity, thereby reducing the port stay time. Fourthly, they will need to train their crane drivers and other shore side staff in order to increase their productivity. And lastly, they will need to assure a stable labour climate to ensure a strike-free environment.
The pressure on ports and terminals to keep pace to handle these units will continue, albeit that the number of locations they will call will only be limited to key ports on the Asia-Europe trades. However, the significant port industry pressure will come from the cascading of vessels on to other routes as a result of this new larger tonnage entering Asia-Europe routes. It is a trend that will continue for the foreseeable future and those ports not investing to receive bigger vessels will see potential loss of market share.
Andrew Penfold is director at Ocean Shipping Consultants, part of Royal HaskoningDHV.
Just how big can containerships get?
There are known conceptual assessments of bigger containerships of around 22,000 teu-24,000teu, which will potentially be up to 50m longer.
Current large containerships have breadth consistent with carriage of 22 or 23 stacks abreast on deck. The capacity then becomes a function of vessel length.
However, it is considered that the industry is nearing the upper limit of creating capacity increases through greater length alone. More boxes will be squeezed into the current breadth limit, but it is unlikely that vessel capacity will exceed 22,000 teu without increasing the breadth.
It is unlikely that very small values of L/B will predominate, so the lesser values of length in are unlikely to represent the upper limits which we will be seen on ship length. Equally, ship length comes at a price, so it unlikely that high L/B values will dominate.
So it seems that 450m length overall is a realistic upper limit for vessel length for the foreseeable future – so the design of berths for the very largest anticipated container ships should be predicated on a vessel length of 450m.
The development of 22,000 teu vessels will be by means of increasing length, with 430m-433m being the likely dimension. There are two options for 24,000 teu vessels – either further lengthening with a slightly deeper draft, or a shift to broader vessels on a length of up to 430m. This would entail an additional row of containers.
It is realistic to anticipate that 22,000 teu vessels with a length of around 430m+ and 23 rows wide will be deployed on the Asia-Europe trades. The shift to 24,000TEU+ vessels will be more complex and would involve significant infrastructure and container crane investments.
The following are the dimensions of very large current vessels and the next generation:
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