Container Cast 42: Big Ship Ready

Transcription

1 Mat: This is Container Cast from the Center for International Trade and Transportation at California State University, Long Beach. I m Mat Kaplan, and I ll be talking once again with Tom O Brien. Executive Director of the C-I- T-T and the Associate Director for METRANS, Cal State Long Beach programs. That s the METRANS Transportation Center in partnership with the University of Southern California. Mat: Tom, welcome once again to Container Cast. Tom: It s good to be here Mat. Mat: The triple E s are coming. Tom: The triple E s are coming. Mat: Tell us, what is this about and how big can these ships possibly get? Tom: Well, at some point you think that the law of diminishing returns sets in, where ship becomes too big for the infrastructure to handle, but we re not there yet. We are sort of in this really exciting phase where, fourteen, fifteen thousand TEU behemoths are coming on line and in service. The triple E, as you mention is the class of vessels that Maersk the world s largest container line is bringing on board their energy efficient, environmentally sound and that s where you get your triple E s and they take advantage of economies of scale on the long ocean crossing, that s why they re being deployed. They re a leaner vessel despite their size. Mat: These are in that class of ships called the post panamax, right? Tom: Right, these are vessels that are too big to go through and even expanded Panama Canal. So we ve got post panamax vessels that are actually significantly smaller than the triple E class that are too big to go through the panama canal. So these are large vessels that are for the most part going to be deployed through the Asia/Europe route but we ve already had some of the bigger vessels approaching this size, calling, at our southern California ports. Page 1

2 Mat: So we are going to see more and more of these you mention in the column? Tom: We are going to see more of them because they are much more efficient vessels and because there are parallel events happening in the industry like vessel sharing agreements and new alliances being formed that can make sure these larger vessels are filled. I think you are going to see more of them being put into service in combination with some sort of a hub and spoke system, so you will have feeder service in Asia that s going to bring these goods to these vessels so they can make their trans-pacific or trans-atlantic or tans-indian and Atlantic voyage whatever it's going to be. Full, there are going to call at a fewer number at larger ports and then you're going to have the distribution network take over. Mat: Before we get those alliances which you addressed in the column and it's really very interesting to see what s happening in the industry as they look at these ships coming. I was trying come up with putting the size of something into popular units as sort of a game that we reporters play, so I toyed with more than four football fields including goal zones, but what I like even like better is take a 130 story building lay it on its side and you've got the size of some of these ships that are going to have. It says, you put it in the column, up to 18,000 on a single ship, its mind boggling. Tom: It is mind boggling. For me it's somewhat it came to the first time, I flew into an airport and saw one of the A-380's you get a sense of this size of the transport more relative to the infrastructure that it was designed to handle a much smaller plane. That's what we are seeing on the marine side as well. We're seeing vessels calling at ports that were built for much smaller vessels. They're huge and they look even bigger when you put them next to the dock that was designed for something a lot smaller. Mat: So what is it going to take for harbors, for ports to take these ships in and handle them efficiently, they are real challenges. Tom: They re real challenges. Mat: Just as they are with the A-380, getting the people on and off. Page 2

3 Tom: An A-380 can't land at every airport and a Triple-E vessel can't call at every port. There's an extra row of containers, they're stacked higher, so that means a different crane configuration. That means the demand for more cranes if you want to unload that vessel as efficiently as possible. More potential impact on the wharf, more containers being unloaded creates more demand for space. Maybe higher stacking, more yard equipment, all at peak periods, right. So it's just not the fact that there are more containers, they are being unloaded at ones, right? So that means you've got demand for more vehicles, more trucks to pick up the vessels that are going to be put on the local road network at the same time. It's going to create a demand for peak period labor. So there are downstream effects of bringing in a larger vessel with eighteen thousand, seventeen thousand, and sixteen thousand, whatever it is it's a lot of containers. Mat: I'll say. Let's talk about those alliances because that is wrapped up with this technological change. Tom: Right, the only way that deploying these vessels make sense in a time of economic uncertainty, if you're not sure you can fill them you lose the efficiency benefit, right? We have alliances being formed, we had the G6 a couple years ago, the P3 is the newest and these are more than vessel sharing agreements. These are more of an integration of operations among the major carriers; it's a consolidation of operations. Which is very likely to create some winners and losers on the port side. It's going to force traffic to ports that can handle it, not every port is going to be able to handle the larger vessels, nor likely should it. One of the benefits of economies of scale is being able to sort of to call it a fewer number of ports and then have the distribution network take over from there. It's also going to force some behavioral change on the part of some the smaller ocean carriers. They are going to have to compete with the more efficient vessels. So even if they are running eight thousand, nine thousand TEU ships, those ships are going to have to be able to compete. Mat: Little Ships like that. Tom: Little ships like that, from a cost perspective because the larger carriers are going to be able to, we presume, price their services in a way that are Page 3

4 attractive to shippers. Mat: So this is going to ripple through the industry in so many ways. Tom: It's going to ripple through the industry; it's going to ripple through local economies where decisions are going to be made about infrastructure investments. It's going to ripple through local communities where the trucks are going to be traveling in greater numbers at certain times when the larger ships are deployed. It's going to create some potential jobs or demand for jobs for the labor to be able to handle these at peak periods. It's going to create demands for equipment. And then the question is, how much do you fill that demand, do you buy enough equipment, do you provide enough equipment for that peak period if it's going to remain idle the rest of the time. So it's going to create also a need for much better metrics, planning metrics, creating need for data on the part of all supply chain operators, to sort of get the right mix of investment in equipment and labor to make sure the supply chain is profitable. Mat: I want to go down there and catch one of these when it's berthed locally, one of our ports. So can we make that trip together some time? Tom: We will make that trip together and believe me when they come in, the ports usually let you know about it because it's a point of pride that LA and Long Beach are able to accommodate these vessels and we should be proud of that fact and it's cool, there's a cool factor in all of it. Mat: And let's have this conversation again in, I don't know, three, four years when they hit 40,000 TEU's. Tom: Yeah we should make a bet on that. Mat: Thanks very much Tom. Tom: Thanks Mat. Page 4

5 Mat: You ve just heard ContainerCast. Our guest has been Doctor Thomas O Brien, Executive Director of Research for the Center for International Trade and Transportation or C-I-T-T, at California State University Long Beach. We d love to hear from you. Write to us at ccpe-citt@csulb.edu. ContainerCast is produced by the C.I.T.T., a division of the College of Continuing and Professional Education at California State University, Long Beach, we are also in partnership with the METRANS Transportation Center, where Tom serves as associate director of Cal State Long Beach programs. The C-I-T-T offers an outstanding selection of events, programs, and courses, including the Global Logistics Specialist program. Visit us online at or just Google C-I-T-T Long Beach. We also welcome your calls at Thanks for listening! Page 5