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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"

by kogus 4y ago

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 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.

deleted 4y ago
[deleted]
mojomark 4y ago
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.
- Someone 4y ago
  > 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.
  - mojomark 4y ago
    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/LL1130450/The-Container-Outlook https://lloydslist.maritimeintelligence.informa.com/LL113045... 2. https://www.foxbusiness.com/features/freight-trains-decongest-port-of-long-beach https://www.foxbusiness.com/features/freight-trains-deconges...
- throw0101a 4y ago
  > 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-ae7d00eba699 https://play.acast.com/s/oddlots/59403ba8-7fd0-48fc-9326-ae7...

by kogus 4y ago

deleted 4y ago

[deleted]

mojomark 4y ago

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.

Someone 4y ago
> 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.
- mojomark 4y ago
  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/LL1130450/The-Container-Outlook https://lloydslist.maritimeintelligence.informa.com/LL113045... 2. https://www.foxbusiness.com/features/freight-trains-decongest-port-of-long-beach https://www.foxbusiness.com/features/freight-trains-deconges...
throw0101a 4y ago
> 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-ae7d00eba699 https://play.acast.com/s/oddlots/59403ba8-7fd0-48fc-9326-ae7...