Shipping lines are the only clear beneficiary of global vessel and call size growth, with mixed results that arguably tip towards the generally negative for terminal operators and BCOs.
Analysis of the latest port call data in the IHS Markit/Journal of Commerce Port Productivity Database shows that from 1H 2016 to 1H 2018, average vessel sizes (teu nominal capacity per port call) increased by 8%, while average call sizes – the quantity of containers exchanged per port call – rose by 21%, which is good news for shipping lines but creates some significant problems for terminal operators and BCOs.
The data is provided by the largest deepsea container ship operators, who collectively control more than 66% of the world’s cellular fleet. It shows vessel size growth of 5% from 1H 2017 to 1H 2018 but a stagnant call size development over the period.
“This is likely due to over-deployment in 1H 2018, resulting in lower load factors, which was corrected through deployed capacity reductions in May and June of this year,” said Andy Lane, a partner at CTI Consultancy in Singapore.
While all regions experienced a spike in call size in the 1H 2016-to-1H 2018 period, it was most prominent in northern Europe, which experienced a 32% vessel size increase against an increase of only 18% previously. In the Americas, average vessel size jumped by 11%, with call size growing by 27% in Latin America and by 25% in North America.
For shipping lines, the exchange of more boxes per call is a significant benefit in terms of greater port cost efficiency but benefits for the other key supply chain stakeholders are cut less clearly.
Among the world’s largest 30 ports, call size outstripped vessel size by 14 percentage points, with a growth of 20% versus a vessel size growth of 6%.
This provides terminal operators with more revenue per ship serviced but also magnifies cargo surge and puts more strain on yard and landside operations.
This can be very challenging for multiterminal hub ports such as Busan and Hong Kong.
A recent study on Hong Kong Port found that deployment of larger vessels and the larger alliance groupings have sparked a critical leap in the number of inter-terminal transfers (ITTs), translating into higher charges to shipping lines; extra handling time for shipments; and added burden on the port’s roads and resources.
“The industry has evolved, with mega vessels, more cargo alliances, and a surge in transhipment containers. All of this has resulted in a complex operating environment for the Hong Kong port, which consists of five terminal operators,” according to the study by Hang Seng Management College.
The data also show that, among the world’s 30 largest ports are several, including Tianjin in north China and Ho Chi Minh City in Vietnam, at which call sizes grew at a much slower rate than vessel size, resulting in decreased utilisation of berths and other key assets.
While bigger ships reduce per-unit costs, which potentially supports lower freight rates for BCOs, there is a clear trade-off in terms of service quality.
The latest data support claims that quayside productivity is not evolving proportionately to bigger ships with larger call sizes. The 1H 2018 data show a flattening curve of berth productivity when call sizes grow by more than 2,000 containers and a decline when call sizes are larger than 4,000 containers.
With vessels spending relatively more time in ports, and operators refusing to steam faster, this has triggered a greater number of vessels deployed per service and longer cargo transit times.
Additionally, BCOs have needed to adapt their supply chains to fewer port-pair products and reduced departure frequency as a direct result of recent industry consolidation and new alliance structures.
Lane suggested this is not consistent with how supply chains need to develop. “The rise in e-commerce activity means that BCOs would prefer a continuous conveyor carrying smaller shipments. However, we have moved in the opposite direction,” he said.
As to why terminal and port productivity has not risen at the same level as growing call size, Lane said there is no clear correlation between vessel size and gross crane productivity trends, but that individual quay cranes need to complete a far higher quantity of container moves on the ships with larger call sizes.
“Increases in ship capacity have been achieved mainly through width [and height] rather than length development. This poses a challenge to ship stowage co-ordinators to provide an optimal crane split for terminals,” he explained.
“Even with a higher crane split, conventional terminals might not have the required crane density to fully capitalise on this. With yard operations typically [being] the terminal bottleneck, adding new cranes will not deliver shorter port stays.”