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Global Container Shipping: Bigger Ships, Smaller Crews: A Formula For Disaster?

February 23, 2015
The Hoegh Osaka, stranded off of Southhampton, UK

The Hoegh Osaka, stranded off of Southhampton, UK

Just a month ago, in January, the Hoegh Osaka vehicle carrier was purposely run aground on a sandbank near Southhampton, UK in an effort to prevent it from capsizing after listing (tilting side to side) violently at sea. It was carrying $53 million worth of luxury cars, all destined for the Middle East. The haul included 1,200 Jaguar sports cars and Land Rover 4x4s, 65 BMW Minis, 105 JCB diggers and a single Rolls-Royce Wraith – alone worth an estimated £260,000 (or about $400,000). Although the cars were salvaged in generally good condition the manufacturer scrapped them fearing potential legal action in the event of future road accidents.

A few months prior, in September, 2014 two container vessels collided heading south into the Red Sea just outside the southern gates of the Suez Canal. As shown on video tape, the German-flagged 8,749-TEU (TEUs = Twenty foot Equivalent Units) Hapag-Lloyd container vessel MV Colombo Express suddenly veered left and east ramming into the Singaporean-flagged MV Maersk Tanjong halting traffic in the canal for three hours. Three containers from the Colombo Express were knocked into the sea. One of the containers was recovered but the fate of other two is not clear. It is possible that the Colombo Express’s “finely tuned hydraulic system” which controls the rudder, failed, causing the accident.

Concerning the content of the Maersk-Tanjong, Maersk Line, Michael Storgaard press officer noted “There is no pollution. Unfortunately, perhaps smoked a couple of containers overboard. Both ships are seaworthy, and as it looks now, the most cosmetic damage.” Still, there were no specific reports as to what they might have contained nor if they were recovered although the MV Maersk Tanjong‘s AIS (Automatic Identification System) is categorized as a Cargo Hazard-A ship indicating that at least some of its cargo can  contain toxic and deadly substances. The MV Maersk Tanjong belongs to the Maersk Shipping Company, the world’s largest. The Danish based company owns a fleet of 600 vessels and has offices in 130 companies. With 117,00 employees, Maersk’s 2011 revenues were at $60.2 billion, slightly less than Microsoft’s that year.

The Colombo Express colliding with the Maersk-Tanjong, February, 2015

The Colombo Express colliding with the Maersk-Tanjong, February, 2015

The ship obviously recovered as records show it made port calls in Malta (Feb 7), Tangier (Feb. 11), Algeciras (Feb. 12) and Valencia (Feb 16), Spain and Genoa (Feb. 18). Its last reported position two days ago was (Feb 21) just south of Crete heading towards Port Said, Egypt at the northern entrance to Suez where it is scheduled to arrive tomorrow, February 24.

The MV Maersk Tangong is just one of the growing number of container ships plying the world’s waters which more and more dominate world trade and have revolutionized world trade.  Built in 2007, it is in what is referred to as the “Post Panamax Plus” category container ships that can carry between 6000-8000 TEU’s .  Started in the 1950s by transportation visionary – and cutthroat capitalist – Malcolm McLean, “the container revolution” had led to both great efficiencies in global transportation and massive cost cutting layoffs as a result. Over the course of the next half century, container transport – the easy transfer of 20′ by 8′ by 8′ standard size containers from ships to trucks to trains and back again has reshaped the transfer of commodities and finished products worldwide.

In 2009 Global Container Trade fell for the first time in the history of containerization but it rebounded again the next year, 2010. The fall was due to the global recession triggered by the bursting of the financial bubble in the United States which impacted global economic growth everywhere. By 2012 it was back on its growth path again rebounding with a 14.5% growth and then evening out at somewhere between 4-7% growth the past few years, levels that are expected to be maintained over the short run.

In absolute volume, the growth over 35 years from 1980 has been nothing short of explosive; in 1980 global seaborne container trade hauled 102 million tons of goods throughout the world. By 2013, the date of the latest statistics the figure had ballooned to 1,524,000,000 million tons (1.524 billion) or had grown by a factor of almost 15 over that period. As of 2009, more than 90% of non-bulk cargo worldwide was moved by containers stacked on cargo ships with 26% of all container transshipments carried out in China.

It should be of no surprise that the amount of trade carried by container ships as quadrupled since 1970. In 2011, 360 commercial ports in the United States alone took in international goods worth $1.73 trillion or 80 times the value of all U.S. trade in 1960. True the percentage of container ships on the world’s oceans is a small percentage of the overall cargo ships – some 6000 containers of the 100,000 but these 6000 have tremendous carrying capacity and the percentage of goods they carry continues to grow.

Rose George, in her fine little volume Ninety Percent of Everything (Picador: 2013), compares the time and effort it used to take to unload a typical 1954 cargo ship – the SS Warrior – with that of a modern-day container ship. The SS Warrior was carrying 194,582 pieces of different sizes and shapes, a total cargo weighing 5000 tons or 10 million pounds. She points out that the Maersk container ship Kendal, can unload several thousand standard container boxes – far more than the SS Warrior carried in the old days in less than 24 hours. The result is a dramatic reduction, nay, collapse in the cost of transportation fees. As George notes, before containers, transport costs were up to 25% of the value of what was being shipped. But with containers the costs are reduced to next to nothing.

The actual size of container ships continues to grow, almost exponentially, as well. Although there were examples of something like container ships earlier, maritime historians generally credit the sailing of the Ideal-X from the Port of Newark, New Jersey to Port Houston, Texas on April 26, 1956 as the first of the lot and the beginning of an evolution in container cargo ships that would continue until present. On that day the Ideal-X left New Jersey with a load of 15,000 tons of bulk petroleum carried in 58 35-feet (8 feet wide by 8 feet high) containers. At the time, the 35 foot unit represented the standard truck size in the United States. This ship was the brainchild of Malcom McLean, a self-made trucking who “saw the tremendous potential of containerization, particularly in terms of reducing loading and unloading costs” by eliminating or greatly minimizing labor costs. He figured that in 1956, it was costing $5.83 a ton to load a medium-sized cargo ship conventionally. “Comparatively, loading the Ideal-X was costing less than $.16 a ton.”

In short order, the size of container ships quadrupled to vessels that could carry as many as 226 containers, the T-2s, converted World War 2 cargo ships; these in turn were quickly upgraded to carry 500-800 TEU (20′ equivalent units = containers that are 20′ long, by 8′ high by 8′ wide) – the standard until 1970. In the 1980s, the T-2s were replaced by the Panama and then Panama Max class container cargos which could haul up to 4500 TEUs. By the turn of the millennium, the Post Panama Plus class container ships were hauling up to 8000 TEU’s. But container capacity continued to grow. In 2013 the Triple E class containers were hauling 18000 containers and most recently the COSCO has ordered six new 20,000+ TEU’s to be completed sometime in 2015.

And that ain’t the end of it. Far from it. There are plans on the drawing boards, the Malacca Max class that could carry from 27,000-30,000 standard sized containers although they are not expected to be completed within the decade. This is the largest size ship capable of fitting through the 25 meter (82 ft) deep Strait of Malacca between the eastern edges of the Indian Ocean and the western approaches of the Pacific. Because the Sunda Strait between Sumatra and Java is even shallower, yet even larger “post MalaccaMax” ships would require either a deepening of the Strait of Malacca (not exactly a simple task) or they will need to go even further east to find deeper waters.

As the size of these container ships reaches even more mammoth sizes, they begin to accede size limits permitting them to go through the Panama Canal and St. Lawrence Seaway. They are just too big. As the size of containers has grown so have associated problems. Ports and inland transportation system are forced to constantly upgrade their facilities at great expense to accommodate the larger container ships. There turn out to be operational limits to deploy ships larger than 8000 TEU. The ports of call cannot handle ships any bigger, not having the infrastructure necessary for loading and unloading. Also, such large container ships require very large amounts of cargo for both outgoing and return trips to be commercially feasible. In today’s world, container ships in the range from 5,500 to 8000 TEU have proven to be the most viable in terms of the ports they can access and markets served.

Nicaragua - Proposed Canal Route

Nicaragua – Proposed Canal Route

It is this continually growing size of container ships which has led to the contact for building a “second Panama Canal” this one through Nicaragua to handle “post-Panamex” ships of up to 250,000 tons, as compared to the approximately 65,000 tons that the Panama Canal can accommodate. Although the project is controversial in Nicaragua for environmental and economic reasons, in 2010, the process to build the canal has begun. On September 26, 2012, the Nicaraguan government and the newly formed Hong Kong Nicaragua Canal Development Gropup signed a “memorandum of understanding” that committed the HKND Group to financing and building the Nicaragua Canal and Development Project. Less than a year later, on June 15, 2013, Nicaraguan President Daniel Ortega and HKND Group chair, Wang Jing signed a concession agreement giving HKND the rights to construct and manage the canal and associated projects for 50 years. A year later, on July 7, 2014, the route of the canal was approved despite bo Construction formally begun on December 29, 2014.

On the other hand, container ship capacity growth varies inversely with crew size necessary to maintain the ships. As ships increased in container and bulk capacity, crew size shrank and dramatically so, a typical corporate cost cutting method. An “average” 5,500 to 8000 TEU container ship has a crew of only 20 – 30. Smaller container ships – but those larger than cargo vessels might have a crew size as small as 8. Compare that with the old cargo ships where the crew size might be as many as 50 – 100. As crew size shrank the number of “bulkers’ (container ships and bulk carries) involved in shipwrecks soared, especially in the 1990s. A shipowner’s commission seeking to study crew efficiency concluded that “crew performance” aboard bulk carriers was the lowest of all groups studied. Efficiency rates improved some among crews where fewer languages were spoken, countered by the tendency of shipowners to mix crews linguistically to dampen worker solidarity, an old corporate tactic.

While ship crews have long been sprinkled with sailors from different ethnic backgrounds, the ethnic mix has shifted dramatically. The number of British and American seafarers has plummeted. In 1961 Great Britain had some 142,462 working seafarers; a half century later the figure had dropped to a mere 24,000. That same year the United States owned 1268 ships while today it is less than 100. Only 1% of trade at US ports arrive on American-flagged ships and the US fleet has dropped by 82% since 1951.

In another cost cutting measure – the frantic global search for cheap labor, while it is generally core, rich countries that own ships (Japan, Germany, Greece, China) they are manned (very few females) by Filipino, Bangladeshi, Chinese, Indonesian labor in the main paid between 10-20% of what the old British and American seafarers make. Not only that. As the number of seafarers decreases their workload increases. There are many accidents, making seafaring, never an easy job, one of the most dangerous in the world.The Philippines has emerged as a major source of seafarers. In 1974 the county set up their first maritime academy. Today there are ninety of them, turning out 40,000 seafarers annually. In 2011 they sent home some $4.3 billion in remittances. These Filipino and other Asian seafarers are a part of an increasingly apartheid like labor system, where the captains and officers on ships are almost always European, the crews Asian with little chance for advancement.
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5 Comments leave one →
  1. Phill M permalink
    January 4, 2017 10:09 am

    Just want to say thank you for a very interesting read. I stumbled on here looking for information about the Suez Canal collision in 2014.

  2. January 9, 2017 2:38 am

    Spelling: He was Malcom (not Malcolm) McLean

  3. saruna2014 permalink
    January 28, 2017 7:34 pm

    Very informative but sobering article if you are worried about corporate ascedancy and human rights – not just about shipping?.

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