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Size isn’t everything as ports struggle with container vessel expansion

Corp - Ports 838 Corp - Shipping 905 Mode - Containerized 1384 Mode - Seaborne 1721 Theme - Canals 104 U.S. 5049

Recent events in global shipping have brought into focus the impact of ever-larger container ships on logistics networks. Most recently that’s included the blockage of the Suez Canal, discussed in Panjiva’s research of March 29, container losses at sea and the congestion of U.S. seaports.

Container ships are often built to the maximum specifications allowed by the sea lane they are designed for – giving birth terms like Panamax and Suezmax, indicating the vessel has been designed to the maximum specifications defined by Panama and Suez Canal authorities. 

Container ships are largely classified around Panama Canal specifications, with Panamax vessels holding about 5,000 TEU worth of containers. The 2016 expansion of the Panama canal allowed New Panamax ships to go up to about 14,000 TEU, and by 2017 ships classified as ultra large container ships (ULCS) entered service. The Ever Given, the Ever Golden Class container ship responsible for the recent incident in the Suez Canal falls into this category, carrying a maximum of 20,388 TEU.

Larger ships give carriers economies of scale as well as providing the ability to simplify networks by reducing the number of sailings. Larger container stacks may increase instability in heavy seas – as seen with the recent container losses on the Maersk Essen and ONE Apus. Massive cargoes also may contribute to port congestion. A larger ship takes longer to load and unload, and additional time may be required to safely load some of the largest ships.

The recent Suez Canal blockage also shows larger vessels may face challenges navigating channels designed in a time of smaller vessels. In the case of the Ever Given a mixture of elevated winds, a high cross section, a wide beam, low draft, tidal conditions and the resulting challenges in correct course may have led to the vessel becoming stuck according to the Financial Times

Panjiva’s data gives a perspective into the trends in ship size over time on the basis of large vessels arriving after the pandemic. In 2019, 6.6% of unique vessels per month in the U.S. Seaborne dataset had discharged more than 10,000 TEU of cargo (classified as very large container ships or VLCS), representing 20.5% of imports by volume. In 2020, this increased to 7.9% of ships and 23.1% of seaborne volumes, increasing rapidly after the downturn in shipping created by manufacturing shutdowns during the pandemic. 

More recently, in the first two months of 2021, these numbers increased to 10.1% of ships and 28.2% of volume, increasing by 50.5% and 39.2% year over year respectively. This uptick is likely a reaction by carriers to the capacity issues and congestion they already faced, namely it maximizes the amount of cargo they can transit for each journey. 

VLCS visits pick up after decline during pandemic

Chart shows proportion of U.S. seaborne, by number of vessels and volume, handled by vessels over 10,000 TEU capacity. Source: Panjiva

Not all ports are able to handle these massive vessels, leading to an uneven distribution of the larger vessels by port and hence the burden of dealing with their increased complexity.

The Port of Long Beach saw the highest rate of volume delivered by VLCS at 46.4% in 2020 rising to 62.2% in the first two months of 2021. Neighboring LA was right behind, with  30.4% of volume attributed to VLCS in 2020, but only increasing slightly in January and February to 31.3%. Some of this may be down to differences in scale between the two ports – one difference being 15 gantry cranes in Long Beach vs 82 in Los Angeles that allow LA to handle a greater number of smaller vessels.

All the other west coast ports saw increases in VLCS containerized volume, with Oakland increasing to 34.4% in January and February, Seattle up to 24.7%, and Tacoma up to 14.4%. Part of this increase is likely tied to ships looking to avoid congestion by visiting ports normally trafficked by smaller vessels. Seattle is also unique in that VLCS volumes had been falling from a high of 45.9% in 2018, indicating that there was a shift in vessel patterns before the pandemic.

East coast ports also saw increasing amounts of VLCS traffic, although less than the west coast. As mentioned previously, the Panama Canal restricts ULCS craft from efficiently reaching the east coast, though Neopanamax vessels often break the 10,000 TEU threshold. East coast ports can also be visited by ULCS vessels from Europe, as well as rare crossings from Asia through the Suez canal. 

The port of Newark / New York, the largest east coast port, saw VLCS volumes increase from 29.8% of volumes in 2020 to 34.7% in the first two months of 2021, increasing rapidly from only 6.8% of volume in 2018. Savannah saw a similar rise and Norfolk saw similar increases while shipments into Houston and Charleston expanded less rapidly. Houston is aggressively expanding their operations in hopes of attracting such vessels as noted in Panjiva research of Oct 1.

With the recent Suez Canal blockage, the increasing size of vessels may come under more scrutiny as port operators and shippers look to minimize potential disruptions. That may involve a combination of smaller vessels and infrastructure improvements. 

Long Beach leads, Newark passes LA in share of VLCS visitors

Chart shows proportion of U.S. seaborne, by volume, handled by vessels over 10,000 TEU capacity. Source: Panjiva

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