Point 1: The industry is consolidating and might be price fixing.
The author makes a leap from "ships got bigger" to "the industry consolidated" without establishing a real link. Are large ships the reason for consolidation? I think a more likely reason is one that the author herself mentions; the economic downturn of 2008 diminished demand and the survivors consolidated. Maybe that gave them extra power, and maybe that power needs to be reined in - but I'm not convinced that ship size was the reason there.
Point 2: Port congestion
How many times in the last 100 years has port infrastructure needed an upgrade to accomodate larger and better ships? Surely we can expect a permanent cycle of Advancement is made>>Port cant handle it>>Port upgrades>>Advancement is made. Is that really a problem?
Point 3: Too much capacity
By continually flooding the market with capacity, ocean carriers drove down
their own shipping rates.
How is this not a direct contradiction of point 1? Are dominant cartels abusing their power to gouge consumers? Or are desperate cartels selling space cheap just to avoid half-empty ships?
The article also does not mention the advantages of larger ships, which are substantial. Fewer, larger ships represent less total ocean noise pollution, less total fuel consumed, and straightforward efficiencies of scale.
Point 1: Concur with your assessment that the article didn't make the connection clear, but there is a connection. A large part of the issue is that as ships grew larger, the CAPEx required to compete drove many smaller shippers to sell their businesses to one of the tier-1 shippers. Survival of the fittest. Sure, there is still business for small shippers for short sea or inland shipping, but the barrier to entry for large trade is currently prohibitive.
Point 2: Port upgrades to handle magaships is a major problem. Shippers keep building extreme size vessels, requiring local governments to dredge and increase roadway infrastructure to handle the added throughput, and ports to extend docks and buy new/bigger cranes.
Point 3: Rates per container-mile plummet as capacity grows. Prices are driven down due to what remains of competition. That's a good thing for trade/consumers. If these few, large shippers start price-fixing, that will be extremely problematic. The bigger issue with overcapacity (from my perspective anyway) is waste. Larger ships often operate partially full. That means lighter drafts and hence lower fuel consumption, but it still means your moving thousands of tons of steel around the world for no reason. What's needed is a way to scale ships to match the cargo capacity as global trade demand fluctuates.
Megaships do not scale. Aircraft do not scale. Trains and barges, however, do scale.
> Shippers keep building extreme size vessels, requiring local governments to dredge and increase roadway infrastructure to handle the added throughput
I would think consumer demand requires larger throughput, and that requires larger infra.
If ships doubled in size but demand didn’t go up ports would handle half the number of ships each time period, and roads would get non the busier.
You are correct. The problem (that I neglected to articulate) is that global demand for shipped goods continues to increase (1). The traditional megaships philosophy says "let's match that increase by pushing the increased goods through the same set of channels (ports) we've been using - we'll just expand the ports". It's very strenuous on a road way infrastructure, both road/bridge builders, trucker traffic, and local commuter traffic that all share the same space. At some point, that approach will become cost/time prohibitive and will break. You can only dredge so much, add more roads that stand up to the increased traffic, and fit more vehicles on those roads. Trains help ease congestion in the near term (2), but trains also have a limited capacity.
The modern approach that recognizes the challenges of diseconomies of scale would use a distrubuted/scalable system to create new ports, perhaps closer to underserved locations on shallower draft coast lines.
Still an infrastructure investment (either way), but at least the latter approach can continue to scale for a much longer time to come.
I guess we'll see what happens over the next 40-50 years. Will the growth continue or will Moore's law of megaships break down?
> Point 2: Port upgrades to handle magaships is a major problem. Shippers keep building extreme size vessels, requiring local governments to dredge and increase roadway infrastructure to handle the added throughput, and ports to extend docks and buy new/bigger cranes.
Dredging in the US is problematic. Bloomberg's Odd Lots podcast had an episode on this recently:
> The long grounding of the cargo ship The Ever Forward has shone a spotlight on the limited dredging equipment that exists in the U.S. The most powerful equipment here has significantly less capacity than what exists in Europe, or in the Suez Canal. What's more, the U.S. can't use foreign equipment due to a law known as the Foreign Dredging Act of 1906, which requires that any dredging done in the country, be done with U.S. labor on U.S.-owned ships. And while this has come to the fore due to the Ever Forward, the significance could be far wider. On this episode of the podcast we speak with Howard Gutman and Andrew Durant, both of whom are working to overturn the law. They argue that the restrictions on dredging equipment have significant negative ramifications for the environment, port capacity, and therefore the economy overall.
The complaint about the ships all going to Long Beach/LA and not to other ports is a little bogus. Various shipping lines would be happy to send a ship to 2 or more US ports to spread out their deliveries and pickups.
Except the US Jones Act specifically forbids this. So Container ships can only call at a single port, which naturally means the biggest one.
To split hairs, your comment is not true for all containerships, just for ships that are not U.S.-owned.
I don't think it is a bogus argument, but am happy to be proven wrong. If other ports were able to accomodate the ships you're referring to, why wouldn't they simply make those other ports their single U.S. port of call and avoid the ship traffic delays?
> To split hairs, your comment is not true for all containerships, just for ships that are not U.S.-owned.
The Jones Act requires ships transporting goods between two US ports to be US-owned, and US-built, and US-crewed -- which, I'm pretty certain, excludes all container ships. Certainly all of the big ones.
Well, there are a handful (1), but I do agree it's not enough to move the needle much. The point of this particular Jones Act comment is that if you had distributed/scalable transport vessels (like trains), vice monolithic transport vessels, then you open the container vessel construction market to say U.S. tier 3 shipyards (these yards build smaller vessels compared to a tier 1 yard that could build a containership - maybe not a megacontainership, I'm not sure). You could readily supply container vessels, just as a smaller manufacturer can build train cars.
what does "only call at a single port" mean? could they not call at a another port instead of LA? why is that not happening?
and do you mean to spread out load by dropping half the load in one port, and another half in another port? other than not overloading the port with containers, that doesn't really reduce congestion with number of ships trying to get into the port. so it doesn't seem like much of a benefit.
but i also don't see how the jones act would prevent that, they would not be picking up cargo from one US port to deliver to another US port.
or is the act written so badly that you can't even touch two ports even if you are only picking up or only delivering? (i suspect that is the case, but the first question remains. why not use another port instead of LA?)
Companies have enjoyed eating low-hanging fruit of building ever-larger cargo ships to reap the reqards of Economies of Scale, whild wholly ignoring the realitues of Diseconomies of Scale, which is what we're seeing now.
Not one to point out a problem without a proposed solution... there is a solution in extensible transport with distributed propulsion. The technology is ready. It has the potential to solve all of the author's stated issues, and if done correctly, will alleviate the 2% of global greenhouse gas emissions in the shipping industry.
> there is a solution in extensible transport with distributed propulsion. The technology is ready. It has the potential to solve all of the author's stated issues, and if done correctly, will alleviate the 2% of global greenhouse gas emissions in the shipping industry.
Well, more specifically, sea trains. Even more specifically, autonomous submersible sea trains. Sea trains ideally connected seemlessly intermodally to clean* land trains and trucks.
*by "clean" I mean anything substantially cleaner than diesel combustion engines
My local farm supplier had a similar lament. He competes with a COOP. Used to order fertilizer by the truckload, but the COOP ordered it by the train-car. So he had to as well, to get the better volume price.
Then the COOP got bigger, ordered a trainload. So he had to. Then they went up to a barge. Then a barge train.
It's the future. We cannot say "Let's all pay less for everything!" and "Lets keep using inefficient transport!" without being hypocritical.
This was predicted back in the early 2010s when the top shippers were trying to figure out market growth options. They said themselves that building the next generation of super cargo ships was risky and that it depended on the "treadmill" continuing and everything working out "just so". You can find business/trade articles about this with some searches.
I have a lot of problems with this article.
Point 1: The industry is consolidating and might be price fixing.
The author makes a leap from "ships got bigger" to "the industry consolidated" without establishing a real link. Are large ships the reason for consolidation? I think a more likely reason is one that the author herself mentions; the economic downturn of 2008 diminished demand and the survivors consolidated. Maybe that gave them extra power, and maybe that power needs to be reined in - but I'm not convinced that ship size was the reason there.
Point 2: Port congestion How many times in the last 100 years has port infrastructure needed an upgrade to accomodate larger and better ships? Surely we can expect a permanent cycle of Advancement is made>>Port cant handle it>>Port upgrades>>Advancement is made. Is that really a problem?
Point 3: Too much capacity
How is this not a direct contradiction of point 1? Are dominant cartels abusing their power to gouge consumers? Or are desperate cartels selling space cheap just to avoid half-empty ships?The article also does not mention the advantages of larger ships, which are substantial. Fewer, larger ships represent less total ocean noise pollution, less total fuel consumed, and straightforward efficiencies of scale.
Point 1: Concur with your assessment that the article didn't make the connection clear, but there is a connection. A large part of the issue is that as ships grew larger, the CAPEx required to compete drove many smaller shippers to sell their businesses to one of the tier-1 shippers. Survival of the fittest. Sure, there is still business for small shippers for short sea or inland shipping, but the barrier to entry for large trade is currently prohibitive.
Point 2: Port upgrades to handle magaships is a major problem. Shippers keep building extreme size vessels, requiring local governments to dredge and increase roadway infrastructure to handle the added throughput, and ports to extend docks and buy new/bigger cranes.
Point 3: Rates per container-mile plummet as capacity grows. Prices are driven down due to what remains of competition. That's a good thing for trade/consumers. If these few, large shippers start price-fixing, that will be extremely problematic. The bigger issue with overcapacity (from my perspective anyway) is waste. Larger ships often operate partially full. That means lighter drafts and hence lower fuel consumption, but it still means your moving thousands of tons of steel around the world for no reason. What's needed is a way to scale ships to match the cargo capacity as global trade demand fluctuates.
Megaships do not scale. Aircraft do not scale. Trains and barges, however, do scale.
> Shippers keep building extreme size vessels, requiring local governments to dredge and increase roadway infrastructure to handle the added throughput
I would think consumer demand requires larger throughput, and that requires larger infra.
If ships doubled in size but demand didn’t go up ports would handle half the number of ships each time period, and roads would get non the busier.
You are correct. The problem (that I neglected to articulate) is that global demand for shipped goods continues to increase (1). The traditional megaships philosophy says "let's match that increase by pushing the increased goods through the same set of channels (ports) we've been using - we'll just expand the ports". It's very strenuous on a road way infrastructure, both road/bridge builders, trucker traffic, and local commuter traffic that all share the same space. At some point, that approach will become cost/time prohibitive and will break. You can only dredge so much, add more roads that stand up to the increased traffic, and fit more vehicles on those roads. Trains help ease congestion in the near term (2), but trains also have a limited capacity.
The modern approach that recognizes the challenges of diseconomies of scale would use a distrubuted/scalable system to create new ports, perhaps closer to underserved locations on shallower draft coast lines.
Still an infrastructure investment (either way), but at least the latter approach can continue to scale for a much longer time to come.
I guess we'll see what happens over the next 40-50 years. Will the growth continue or will Moore's law of megaships break down?
1. https://lloydslist.maritimeintelligence.informa.com/LL113045...
2. https://www.foxbusiness.com/features/freight-trains-deconges...
> Point 2: Port upgrades to handle magaships is a major problem. Shippers keep building extreme size vessels, requiring local governments to dredge and increase roadway infrastructure to handle the added throughput, and ports to extend docks and buy new/bigger cranes.
Dredging in the US is problematic. Bloomberg's Odd Lots podcast had an episode on this recently:
> The long grounding of the cargo ship The Ever Forward has shone a spotlight on the limited dredging equipment that exists in the U.S. The most powerful equipment here has significantly less capacity than what exists in Europe, or in the Suez Canal. What's more, the U.S. can't use foreign equipment due to a law known as the Foreign Dredging Act of 1906, which requires that any dredging done in the country, be done with U.S. labor on U.S.-owned ships. And while this has come to the fore due to the Ever Forward, the significance could be far wider. On this episode of the podcast we speak with Howard Gutman and Andrew Durant, both of whom are working to overturn the law. They argue that the restrictions on dredging equipment have significant negative ramifications for the environment, port capacity, and therefore the economy overall.
* https://play.acast.com/s/oddlots/59403ba8-7fd0-48fc-9326-ae7...
The complaint about the ships all going to Long Beach/LA and not to other ports is a little bogus. Various shipping lines would be happy to send a ship to 2 or more US ports to spread out their deliveries and pickups.
Except the US Jones Act specifically forbids this. So Container ships can only call at a single port, which naturally means the biggest one.
To split hairs, your comment is not true for all containerships, just for ships that are not U.S.-owned.
I don't think it is a bogus argument, but am happy to be proven wrong. If other ports were able to accomodate the ships you're referring to, why wouldn't they simply make those other ports their single U.S. port of call and avoid the ship traffic delays?
> To split hairs, your comment is not true for all containerships, just for ships that are not U.S.-owned.
The Jones Act requires ships transporting goods between two US ports to be US-owned, and US-built, and US-crewed -- which, I'm pretty certain, excludes all container ships. Certainly all of the big ones.
Well, there are a handful (1), but I do agree it's not enough to move the needle much. The point of this particular Jones Act comment is that if you had distributed/scalable transport vessels (like trains), vice monolithic transport vessels, then you open the container vessel construction market to say U.S. tier 3 shipyards (these yards build smaller vessels compared to a tier 1 yard that could build a containership - maybe not a megacontainership, I'm not sure). You could readily supply container vessels, just as a smaller manufacturer can build train cars.
1. https://www.statista.com/statistics/646259/us-flag-oceangoin....
what does "only call at a single port" mean? could they not call at a another port instead of LA? why is that not happening?
and do you mean to spread out load by dropping half the load in one port, and another half in another port? other than not overloading the port with containers, that doesn't really reduce congestion with number of ships trying to get into the port. so it doesn't seem like much of a benefit.
but i also don't see how the jones act would prevent that, they would not be picking up cargo from one US port to deliver to another US port.
or is the act written so badly that you can't even touch two ports even if you are only picking up or only delivering? (i suspect that is the case, but the first question remains. why not use another port instead of LA?)
Companies have enjoyed eating low-hanging fruit of building ever-larger cargo ships to reap the reqards of Economies of Scale, whild wholly ignoring the realitues of Diseconomies of Scale, which is what we're seeing now.
Not one to point out a problem without a proposed solution... there is a solution in extensible transport with distributed propulsion. The technology is ready. It has the potential to solve all of the author's stated issues, and if done correctly, will alleviate the 2% of global greenhouse gas emissions in the shipping industry.
Well, more specifically, sea trains. Even more specifically, autonomous submersible sea trains. Sea trains ideally connected seemlessly intermodally to clean* land trains and trucks.
*by "clean" I mean anything substantially cleaner than diesel combustion engines
My local farm supplier had a similar lament. He competes with a COOP. Used to order fertilizer by the truckload, but the COOP ordered it by the train-car. So he had to as well, to get the better volume price.
Then the COOP got bigger, ordered a trainload. So he had to. Then they went up to a barge. Then a barge train.
It's the future. We cannot say "Let's all pay less for everything!" and "Lets keep using inefficient transport!" without being hypocritical.
This was predicted back in the early 2010s when the top shippers were trying to figure out market growth options. They said themselves that building the next generation of super cargo ships was risky and that it depended on the "treadmill" continuing and everything working out "just so". You can find business/trade articles about this with some searches.
So it appears this is the result.