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The new generation of megacarriers has
been optimised to save fuel by voyaging
much more slowly than previous container
vessels.
Fuel consumption is related to the cube
of speed. If a vessel travels twice as fast
it will consume eight times as much fuel.
The cube-rule has important implications
for the economics of the shipping industry.
When fuel prices are high, it makes sense
to voyage slowly to cut fuel bills, even
if it means operating more ships to move
the same amount of cargo. When fuel prices
are low, it makes sense to travel faster
and use fewer ships.
During the period of soaring oil prices,
container lines instructed captains to cut
speed in order to conserve fuel.
The new ships ordered were specifically
designed to operate most efficiently at
slower speeds to take advantage of slow
steaming economies. In fact some ships are
so large they cannot operate at higher speeds.
Crucially, slow steaming has now been
designed into the new generation of vessels
entering container service, so it will not
be easily reversed, even though fuel prices
have plunged since 2014.
According to the OECD, most of the voyaging
cost reductions in the new generation of
megaships come from their optimisation for
slow steaming rather than from increased
size.
"Between 55 and 63 per cent (at
least) of the savings per TEU when upgrading
the vessel size from an early 15,000 TEU
design to a modern 19,000 TEU design are
actually attributable to the layout for
lower operation speeds," the OECD estimated.
"Cost savings are decreasing as
ships become bigger," the OECD concluded.
"A large share of the cost savings
was achieved by ship upsizing to 5,000 TEU,
which more than halved the unit costs per
TEU, but the cost savings beyond that capacity
are much smaller."
The consolidation of container volumes
into fewer, larger megaships is creating
challenges for other firms in the freight
business.
Insurers are worried about the costs
if a megaship sinks or develops mechanical
problems. Insurer Allianz has warned the
industry must prepare for losses of more
than $1 billion, or even up to $2 billion
in the event of a collision between two
megaships.
Economies of scale depend on megacarriers
being loaded close to maximum capacity and
spending as much time as possible at sea
rather than in port.
The need to fill megaships is one reason
that the industry is consolidating into
an alliance network.
Shipping lines are also adopting the
hub-and-spoke system employed by airlines
to ensure their ultra-large container vessels
sail nearly full.
Shipping schedules for the megacarriers
have been consolidated into fewer sailings
each week from fewer ports (about six in
North Europe and eight in Asia).
Containers for other destinations must
be transhipped, either on a smaller container
vessel or by road, rail and barge.
Schedule consolidation is not necessarily
favoured by shippers and freight forwarders
who prefer regular and reliable service
(fewer sailings can mean more concentrated
risk).
Port operators, too, have been forced
to invest heavily to attract and handle
the new megacarriers. Port channels must
be dredged to greater depths to handle the
deeper drafts of the megaships. Quaysides
must be raised and strengthened to handle
the increased forces when a megaship is
tied up.
The biggest problem comes from the scramble
to unload a megacarrier quickly so it can
put to sea again. The average turnaround
time for a container ship is now just one
day, and less in Asia.
The arrival of fewer vessels but with
larger numbers of containers is creating
intense peak time pressure on the ports.
Ports need more cranes, more highly skilled
staff to operate them fast, more space in
the yard, and the ability to handle more
trucks, railcars and barges to move the
containers inland.
The OECD estimates megaships are increasing
landside costs by up to US$400 million per
year (one third for extra equipment, one
third for dredging, and one third for port
infrastructure and hinterland costs).
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