Sometimes Bigger Is Not Better
And now for something completely different: today I've dug into the economics and physics of ultra-large container ships and it's fascinating.
In the Suez Canal, the Ever Given container ship has run aground and is currently blocking all ship traffic in the waterway.
There is growing concern that it might take days or even weeks to free the ship and that it could begin to have a significant impact on international trade. Approximately 10 percent of all global trade flows through the Suez Canal.
I am, however, fascinated by another element of this story: namely, the piece of equipment faintly visible on the right side of the above photo at the edge of the ship.
Here’s a closer look:
Keep in mind: excavators are enormous machines. In this photo, it looks like a Tonka truck next to an 18-wheeler. All of this made me curious: is it unusual for a container ship to be as large as the Ever Given, and is that the reason for this accident?
It turns out that the Ever Given is one of the biggest container ships in the world at a length of 1,312 feet 2 inches. By comparison, the building below (the Empire State Building) is, if you include the spire, 1,454 ft tall. So in effect, the Ever Given is basically the Empire State Building, with the spire cut off, put on its side, and made seaworthy.
Thanks to the graphics folks at UK’s “Telegraph,” here’s a visual comparison:
The Ever Given isn’t just long. It’s also as wide as a jumbo jet and as tall as a 12-story building. It can carry 20,000 containers. Some larger ships can hold as many as 23,000 containers, which is double the size from just a decade ago.
This graphic from the Financial Times gives you a sense of the growth in container ship size over the past several decades (TEUs are basically shipping containers).
The growth in ship size is a by-product of the fact that container ships are the backbone of the global economy. According to the United Nations Conference on Trade and Development (UNCTAD), maritime transport represents 80 percent of international trade by volume and 70 percent by value. It is also the most efficient, cheapest, and environmentally-friendly way to transport goods. The bigger the ship, the more you can transport and the cheaper it will be since more containers per ship allow companies to spread operating costs across more shipments.
In other words, if it costs $100 to ship 100 containers, that’s $1 per shipment, per customer, but if you can transport 200 containers at the same price (give or take the added expense in fuel costs), then it significantly reduces shipping costs. What further makes the economics of bigger ships work is that container ships are incredibly energy-efficient, so there is no significant increase in fuel costs as the ships get larger. Due to automation, there is also not a significant jump in labor costs. Some of these mega-ships have crews as small as 20 people. The Ever Given had a mere 25 crew members.
But there’s a rub to making ships ever bigger: everything else has to be bigger too. And I don’t just mean waterways like the Suez Canal (for the record, the Ever Given is longer than the canal is wide). These behemoths need bigger berths and even larger cranes to load and unload containers. The ports where they dock need even more yard space to account for the increased number of containers. Here’s a look at the container yard at the Sydney port in Australia.
Since only the biggest ports have such facilities, these megaships can only stop at specific locations. That risks leaving not just ports but entire cities on the outside looking in as container ships grow exponentially in size. It also means longer shipping times to take into account ground transportation from the ports that can host a ship of the Ever Given’s size. That could ameliorate the environmental and efficiency benefits of maritime shipping.
In fact, according to this fascinating interview I came across at Freightwaves.com (a data company devoted to the freight market), the cost savings associated with large container ships is actually being reduced by the cost increases at increasingly strained ports.
According to Simon Heaney, whose job title is, I kid you not, “senior manager of container research” at the shipping consultancy Drewry “large ships cause a major problem for land-side logistics. The issue is that fewer but bigger, ships bunch up what otherwise might have been a steady flow of cargo. We see this effect when there are various disruptions to shipping — for instance, a hurricane might cause a port to shut down for a few days. Ships will alter speed and course to avoid the cyclone and that might cause several ships to arrive at the same time. That causes terminal congestion and a blowout in trucking turnaround times for trucks waiting to get into the container terminal. Using bigger but fewer ships bunches the loads, creating sharp peaks in activity that are hard to manage and lead to potential terminal congestion, especially if there are scheduling delays.”
Moreover, reliance on ultra-large ships crowds smaller ships out of the market, which has the paradoxical effect of making shipping less efficient. Ports end up seeing fewer vessels because they are so reliant on large vessels - and ships spend longer time being unloaded in docks.
During the pandemic, shipping companies, which spent huge sums on ultra-large ships, lost billions of dollars because decreased global trade meant many container ships were sailing half-empty or not at all. Giant ships provide obvious economies of scale, but they also remove flexibility from shipping companies as market forces change. Heaney concludes that “the arms race” in building ever-larger container ships “has thus far been negative overall due to the impact on freight rates and stress they have placed on networks. They have upside in terms of slot cost savings and lower emissions per TEU, but in general I think they have thus far failed to deliver the hoped-for benefits and have denied carriers some of the flexibility required in a dynamic market.”
So what about the elephant in the room: is the size of the Ever Given the reason for the Suez Canal accident? It’s not yet clear. According to Evergreen Marine, which operates the Ever Given, the ship is “suspected to have met with a sudden gust of strong wind, which caused the ship’s body to veer from its course and accidentally run aground.” This fascinating piece by Brendan Greeley in the Financial Times tries to unpack what that means and why Ever Given’s size could have made a difference.
There is, explains Greeley, something in maritime navigation called a “bank effect,” when a ship passes close to a bank (or in this case, the side of the Suez Canal). “The water,” writes Greeley, “speeds up, the pressure drops, the stern pulls into the bank and, particularly in shallow water, the bow gets pushed away.” The bow is the front, the stern is the back, and don’t be embarrassed if you didn’t know that. I had to look it up.
When that happens, the stern goes one way, the bow the other, and that’s how you end up with this:
But here’s where size plays a role: the effect is heightened when a ship displaces more water. So the bigger the ship, the more significant the bank effect. This video offers a second-by-second breakdown of what happened to the Ever Given. The ship veers to the left, perhaps over-compensating for the heavy winds, and then the bank effect kicks in … and Houston, we have a problem (watch to the end of this video because the part where the tug boats come in to try and move the ship is kind of hilarious).
So it's far from clear that the ship's enormous size is responsible for the accident, but it stands to reason that it made things worse by enhancing the bank effect.
If you want to geek out, a 2020 report done by the Transportation Safety Board of Canada, after an accident at the Port of Vancouver, concluded that container ships are getting so large and unwieldy that it raised long-term questions as to whether the terminal could safely berth such vessels.
All of this is a long way of saying that just because you can build a bigger boat, it doesn't mean you necessarily should.
Musical Interlude
Since I literally spent all day researching this piece (and guiding my kids through remote learning as their school is closed this week) I’ll send around what I’m writing and reading tomorrow. In the meantime … some songs about ships!
Here’s the Grateful Dead performing “Ship of Fools”
It’s not my favorite song but I didn’t see how I couldn’t include Gordon Lightfoot’s “The Wreck of The Edmund Fizgerald”
Here’s Crosby, Stills, and Nash doing “Southern Cross” ( I know I could have gone with “Wooden Ships”)
Finally, Concrete Blonde performing Nick Cave’s “The Ship Song” (yes, I prefer it to the original)