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Bigger Isn't Better As Mega-Ships Get Too Big and Too Risky 265 writes: Alan Minter writes at Bloomberg that between 1955 and 1975, the average volume of a container ship doubled -- and then doubled again over each of the next two decades. The logic behind building such giants was once unimpeachable: Globalization seemed like an unstoppable force, and those who could exploit economies of scale could reap outsized profits. But it is looking more and more like the economies of scale for mega-ships are not worth the risk. The quarter-mile-long Benjamin Franklin recently became the largest cargo ship ever to dock at a U.S. port and five more mega-vessels are supposed to follow. But today's largest container vessels can cost $200 million and carry many thousands of containers -- potentially creating $1 billion in concentrated, floating risk that can only dock at a handful of the world's biggest ports. Mega-ships make prime targets for cyberattacks and terrorism, suffer from a dearth of qualified personnel to operate them, and are subject to huge insurance premiums. But the biggest costs associated with these floating behemoths are on land -- at the ports that are scrambling to accommodate them. New cranes, taller bridges, environmentally perilous dredging, and even wholesale reconfiguration of container yards are just some of the costly disruptions that might be needed to receive a Benjamin Franklin and service it efficiently. Under such circumstances, you'd think that ship owners would start to steer clear of big boats. But, fearful of falling behind the competition and hoping to put smaller operators out of business, they're actually doing the opposite. Global capacity will increase by 4.5 percent this year. "Sooner or later, even the biggest operators will have to accept that the era of super-sized shipping has begun to list," concludes Minter. "With global growth and trade still sluggish, and the benefits of sailing and docking big boats diminishing with each new generation, ship owners are belatedly realizing that bigger isn't better."
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Bigger Isn't Better As Mega-Ships Get Too Big and Too Risky

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  • NEW IS BAD (Score:3, Interesting)

    by Hatechall ( 541378 ) on Monday June 20, 2016 @11:33PM (#52357087) Homepage
    So don't try to be bigger and better because you will be a target. Got it. Thanks, bullshit media!
    • Re:NEW IS BAD (Score:5, Interesting)

      by _Sharp'r_ ( 649297 ) <> on Monday June 20, 2016 @11:39PM (#52357097) Homepage Journal

      Two Statements:
      Ship owners are realizing bigger ships aren't better than smaller ships.
      Ship owners continue to prefer to buy bigger ships rather than smaller ships.

      Assuming we are talking about the same "ship owners", one of these two statements isn't true. One of them is an empirical statement which demonstrates ship owner revealed actual preferences and the other one is a quote from the piece's author which seems inline with their own expressed opinion about bigger ship=bad. Which one do you think is more likely to be accurate?

      See, it can be fun to analyze even idiotic media pieces...

      The more you personally know about the details of a media story, usually the less accurate you'll think the story is. This also applies to media stories you don't know as much about, just many people don't realize it when it's not slapping them in the face.

      • Re:NEW IS BAD (Score:5, Interesting)

        by ArmoredDragon ( 3450605 ) on Tuesday June 21, 2016 @12:38AM (#52357273)

        I think you misunderstand the motivation of today's newspapers. Basically, news content has such high supply and not enough demand that they're all doing whatever they can to get your attention and have you as a regular reader. There are two schools of thought for doing that:

        1. Sensationalist titles (or their extreme, called clickbait)
        2. Original content just for the sake of original content

        This story is the later. Basically, the author of this piece needed to write about something -- anything -- and so he wrote it. It didn't necessarily have to make sense, or even be news; the only requirement is that it had to be something that nobody else has written about.

        • Re: (Score:2, Insightful)

          by Coisiche ( 2000870 )

          I think you misunderstand the motivation of today's newspapers.

          I'm pretty sure it's to cultivate a readership who will go out and vote the way the newspaper tells them to.

      • Re:NEW IS BAD (Score:5, Informative)

        by complete loony ( 663508 ) <> on Tuesday June 21, 2016 @01:28AM (#52357405)

        Conditions change over time.

        Before 2009, shipping companies placed a ridiculous number of orders for the construction of huge ships. Demand for new ships exceeded the space available to build them, and they didn't want to miss out on the boom in shipping.

        Then the recession happened.

        Shipbuilders forced these companies to honor their contracts, and take delivery of these ships. Though as fewer orders were being placed, the yards did allow the construction of these ships to be delayed to even out their workload.

        Now these ships are still rolling off the production line, but there's less demand for them as the economy has not rebounded to previous levels.

        So both statements could be considered to be true, provided you clarify when the statement was made.

        • Now these ships are still rolling off the production line, but there's less demand for them as the economy has not rebounded to previous levels.

          Low, low interest rates may also be a contributing factor. Ship owners may be thinking "we can wait until the economy improves since the payments are reasonable."

        • Good point! One thing that seems to be missing from most economics is the concept of time lag. Considering how vitally important delays are in control theory, this is surprising - unless conceivably most economists don't know anything about control theory. Which might not matter to them since they are not trying to be right, just to get paid - and most of them work, directly or indirectly, for governments, banks and other financial organizations.

          • by afidel ( 530433 )

            Economists just throw in a fudge factor that is likely to loosely model such details, risk adjusted cost of capital. At my previous job whenever we were evaluating a property for purchase we ran multiple models that included good, average, and bad economic conditions over the term of the loan and at the conclusion of the initial loan and used those numbers to figure out the risk adjusted average return.

            • I was thinking more about the models (if you can call them that) from Economics 101 that show how the market automagically responds and adjusts to all changes. If there is a shortage of nurses, computer engineers, or drone operators, demand causes compensation to rise, which in turn stimulates more young people to study for those occupations. Between four and ten years later, when they are finally ready to seek jobs, everything is entirely different. Among other things, there is often a huge oversupply beca

        • So both statements could be considered to be true, provided you clarify when the statement was made.

          And if any competent person had written the article, that would have been made clear in the first sentence or two.

          I would have basically structured it that way: "Back before the recession ... blah blah blah ... economies of scale yadda yadda ... big ships [...] Now yadda yadda ... excess capacity ... blah blah blah ... small ships".

      • Re:NEW IS BAD (Score:5, Informative)

        by phantomfive ( 622387 ) on Tuesday June 21, 2016 @03:10AM (#52357635) Journal
        Yeap, here's the quote from the article:

        With overwhelming cost advantages, especially on fuel, and cheap finance readily available, the upsizing decision appears to have been a straightforward one for shipping lines.

        The ones who are worried are the insurers mainly, it seems. But I'm sure they're just adapting by increasing premiums.

        • Fuel ?!? (Score:3, Insightful)

          by DrYak ( 748999 )

          especially on fue

          I know I'm repeating myself from the thread about Oasis-class ocean liner, but... How come this kind of mega-ship is powered by burning fuel ?!

          Explorer-class container ships (e.g.: the mentioned CMA CGM Benjamin Franklin) are bigger and heavier than Nimitz class Aircraft carriers (e.g.: USS Georges H.W. Bush), and the later are powered by nuclear reactors.
          I can understand that, in the case of tourism vessels, nuclear propulsion might sound as potential target for pirate/terrorists (though that hasn't preven

          • Same reason we're trying to save fuel. No one wants to see a nuclear reactor operated by what essentially is a 3rd world under-qualified slave in the shipping industry. Terrorists are the least of your concerns in the shipping and cruise-liner industry.

            • There was only one nuke-powered merchant vessel and she is now laid up in Baltimore and the reactor fuel is removed. NFW would anyone want $2/hr graduates of the Manila School For Engineers and Fry Cooks running a nuke plant!
            • The crew on these ships get paid pretty well. Also, worth noting, the crew on these ships is extremely small, around 15-25 people regardless of ship size.

          • Re:Fuel ?!? (Score:4, Interesting)

            by MachineShedFred ( 621896 ) on Tuesday June 21, 2016 @11:51AM (#52359569) Journal

            Naval nuclear reactors are fairly serious business, to the point that when the US Navy started using them, Admiral Rickover would interview and give personal approval to every single officer serving on a ship with a reactor for 30 years. He wanted to make sure that every single person in charge had their head out of their ass and could manage any potential crisis that could come up. This is one of the factors that has led to the US Navy having exactly zero incidents of radioactive discharge from the over 200 reactors they've operated over history.

            There is just no way you'd get that safety record from any operation that couldn't exercise that kind of control.

          • Explorer-class container ships (e.g.: the mentioned CMA CGM Benjamin Franklin) are bigger and heavier than Nimitz class Aircraft carriers (e.g.: USS Georges H.W. Bush), and the later are powered by nuclear reactors.

            Nautically speaking, aircraft carriers are tiny. For a long time, this was because there's strategic advantage to being able to short-cut through the Panama or Suez Canals, although they've begun to outgrow Panama. There's strategic advantage to being Fast, and that means Power. Wave-making power goes something like fourth power of velocity, and a nuclear reactor really helps in the go-fast department.

            Commercial traffic is dominated by efficiency. They keep speeds down in the range where resistance is do

      • I think your analysis is wrong - as well as being needlessly scathing. "Ship owners" as a group is clearly not a well-defined organised group, all operating in lock-step; so there is no contradiction between the two statements - it is just that more and more ship owners are changing their minds on what is the economically most viable development for the future. It makes a lot of sense to me, and I'm sure you agree. You are just trying to score a few, cheap points by pointing your finger and inventing an iss

      • Two Statements:
        Ship owners are realizing bigger ships aren't better than smaller ships.
        Ship owners continue to prefer to buy bigger ships rather than smaller ships.

        Assuming we are talking about the same "ship owners", one of these two statements isn't true.

        Uhm... no. That's not a logic conclusion, but the logical fallacy of Affirming a disjunct []

        Of course it would show a lack of common sense if they continue to buy bigger ships, even after finding out that smaller ships might be better in a long term perspective, but the two statements are not mutually exclusive. In fact, it's very common to favor short-term-good (but long-term bad) options over long-term good options. A reason for this might be having to deal with predatory pricing.

      • People are irrational and do things against their own interests. Why do you think this would not be true for CEOs of shipping businesses? They're in the situation between the two chairs "bigger ships are cheaper" and "bigger ships are more risky". And depending on whether something happens, they will either ignore the risk and go cheap or take the risk seriously and buy smaller ships.

      • by Bengie ( 1121981 )
        Not quite true. I realize soda isn't good for me, yet I get drinking it. Businesses are ran by humans where fear can overrule logic.
      • Two Statements:
        Ship owners are realizing bigger ships aren't better than smaller ships.
        Ship owners continue to prefer to buy bigger ships rather than smaller ships.

        Journalists and media are doing this purposely. They're creating cognitive dissonance in their audiences, to keep them confused. If you watch for it, you can find conflicting statements, both presented as fact, in many many MSM news stories. I've only recently picked up on this trend. Often, it will be the headline that says one thing and the body of the story says the opposite.

        Here's an example, from MSN []:

        Chicago recorded its 300th homicide this weekend and tallied six others over a 60-hour period that sa

  • by bloodhawk ( 813939 ) on Monday June 20, 2016 @11:39PM (#52357095)
    I don't see anything in the links that really is specific to mega cargo ships except for the need to improve docks (tends to be a once off cost though). The decline in shipping affects ALL ships big and small and if anything the economies of scale will likely mean the smaller ships will be driven out of business first as the larger ships have reduced costs per container. the cyberattack and terrorism stuff is just a bullshit, any cargo ship carries potentially hundreds of millions in cargo and any are equally good targets, if anything the extra security and better trained crews on these make them somewhat safer.
    • Re: (Score:2, Interesting)

      by JoeMerchant ( 803320 )

      Airplanes peaked with the 747 - there are still some routes for jumbo jets, but most air travel is handled by much smaller - easier to route and fill jets.

      Some of why the mega-ships are still profiting is externalization of their costs, port towns fall all over themselves to accommodate them picking up a big piece of the tab while operators reap the profits. Infrastructure even beyond the port needs to be expanded to handle the traffic, and cargo gets "single point routed" between the big ports like FedEx

      • Planes have very real limitations around strength, weight, engine sizes and fuel efficiency in addition to runway length as well as the needs to load and unload passengers in relatively short time frames. Much of the cargo going by ship can take weeks or even months to arrive and whether it goes by small or large ship it is STILL going to the same dock so the infrastructure required is generally only within the port itself as whether it is 10,000 1 container boats or 1 10,000 container boat those containers
      • by TheSync ( 5291 )

        Airplanes peaked with the 747

        Wikipedia says [] "There are 319 firm orders by 19 customers for the passenger version of the Airbus A380-800 [the world's largest passenger airliner], of which 190 have been delivered to 13 of those customers as of May 2016"

      • Check the specifications of a 777 [] and a 747 []. You can fit about the same number of passengers on both - but the 777 has a longer range AND uses less fuel. What did in the 747 was the replacement 777. The 777 is often called a mid-size widebody, but with up to 550 passenger capability and 2500 km more range whilst consuming 25% less fuel - it's a no brainer. Move the same number of people, access more airport pairings, and do so while saving fuel.

        Rather than peaked at the 747, it was replaced with an eve

    • Re:smells like BS (Score:4, Interesting)

      by godrik ( 1287354 ) on Tuesday June 21, 2016 @12:02AM (#52357187)

      haven't RTFA (this is slashdot after all) but there are always diminishing returns. What do you gain by having a ship twice bigger?
      -the price of the ship might not be twice more. but eventually, it will be
      -the crew might not need to be twice as many, but on billion dollar worth of shipment, I guess the salary of the crew is not too significant.
      -gain in fuel efficiency, but I guess we are running out of that.
      -need to manage less ships simultaneously at HQ, but I am guessing that providing the scale of these ships, there are not that many of them for a company.

      Now in term of cost.
      -insurance is likely proportional to the value of the cargo and of the ship.
      -loading/unloading the cargo, probably scales with the amount of cargo, one time overhead are probably already recouped at these sizes and they might become more cumbersome to load/unload.
      -bigger ships probably mean fewer ships, so you get less point-to-point flexibility.
      -fewer ships also means you start to have increased latency as you traded latency for bandwidth

      Not sure which of these are real. But it looks like a fun problem to think about.

      What did I miss ?

      • by cdrudge ( 68377 )

        I think that you'd find that most of what you wrote is incorrect. Generally speaking, the cost per TEU to build the ship decreases the larger the ship. Insurance doesn't go up (insuring cargo is the responsibility of the shipper or buyer, not the ship owner). Fuel consumption per TEU continue to fall (although not as steeply as with previous increases in size). Operating crew size doesn't change that much between a giant ship and a really really giant ship.

        The biggest issue, currently, is that there's a sur

      • You missed terrists.

      • Hull speed [] and the Froude number []. A longer, larger vessel is faster for a given amount of energy - it can move more efficiently through the water at full displacement. Cutting a few days off a trans-Pacific route offers many benefits including stocking flexibility, lowered financing of inventory, fresher produce, etc.
    • by ceoyoyo ( 59147 )

      When there's less shipping required smaller ships have an advantage because they can take less cargo more often, and they can be more flexible about where they take it. The biggest ships may also not fit through the Suez or Panama canals, so have to take the long way around.

      Shippers compete based not only on how much it costs to get your sea can of widgets somewhere, but also how long it takes.

  • not news (Score:2, Informative)

    by Anonymous Coward

    german economy newspaper FAZ covered this already in march: []

  • Too risky for who? If the economics, including the cost of insurance, didn't favor bigger ships, they wouldn't get built.

  • What a load of shit. (Score:5, Interesting)

    by Harlequin80 ( 1671040 ) on Tuesday June 21, 2016 @02:11AM (#52357505)

    For a start cargo insurance isn't carried by a single entity, it is naturally spread around all the people who are shipping items. So a larger ship does not have a material effect on insurance as you still just insure your containers. Also, with ocean shipping, time taken is not as important as with air travel, so true hub and spoke systems can work exceptionally well. You use massive ships to carry between hubs and smaller ships to run to smaller ports. If it adds a week to the shipping no one really cares.

    As for crew. The Benjamin Franklin requires 24 crew. That is hardly hundreds of hands that is going to have a material impact on the cost of shipping. The MSC which is slightly larger has a max crew capacity of 35 but are operated standard by a crew of 13, again not breaking any economics.

    Oh but lets throw in "cyber terror attack"!!!! That will get them. Oh piss off. The thing is slow and in the middle of nowhere most of the time. If you could some how take control of the throttle and the rudder, and somehow prevent the crew from cutting fuel lines, dumping fuel or fouling the props you MIGHT be able to crash it into a dock. Which while it would make a spectacular mess aint exactly the scariest thing I've ever heard of.

  • I dont understand. It seems the only risk is the author doesn't like whats happening.
  • No, I'm not just adding to the heavenly choir of self-appointed negativists, that seem to flood into the wake of this article. Has somebody pissed in everybody's favourite drink today? As far as I can see, there is nothing factually wrong about this article; we all know about economy of scale, and we all ought to be able to understand the risks associated with having huge concentrations of valuable cargo floating around in the oceans with virtually no protection, as far as I know. Pirates have been targetin

    • What problem? Hijacking of ships happens but is very rare. In some areas the ships do have escorts or an armed crew. There is a much higher risk of ships sinking then being hijacked. Local production is very inefficient and causes more environmental problems. How are container ships environmentally a problem opposed to other types of shipping? One larger ship is much more environmentally sound than 10 smaller ships. The same concept applies to long trains. Bigger is more efficient. More efficient means it i
  • After all, these ships are too big to fail.
  • that's the real problem with this supply chain...
  • by sandbagger ( 654585 ) on Tuesday June 21, 2016 @07:30AM (#52358137)

    I realize that this is Slashdot and the centre of gravity for discussion is technology but I really think that storms at sea, fire, mislabeled volatile cargo and other more mundane issues are more likely to affect ships great and small than cyber attacks.

  • Ridiculous article (Score:5, Interesting)

    by argStyopa ( 232550 ) on Tuesday June 21, 2016 @08:22AM (#52358271) Journal

    Really, the article simply illustrates the woefully ignorant state of reportage by "professional" news sources. No wonder the interwebs are kicking their ass.

    The economies of scale are simply inarguable. The daily fuel consumption of a relatively ancient 8000-teu vessel is HIGHER than todays 18k+ teu ships like the Ben Franklin. IIRC it's about $25000/day.

    And the fact that the US is scrambling to meet their infrastructure needs is more a comment on the decrepit state of US port and infrastructure that hasn't been materially upgraded since the 1970s. The rest of the world's major ports CAN handle them. (And handle them a shit-ton more efficiently thanks to US unions' lock on the shiphandling bottleneck.)

    Ocean carrier profits are flat and worse, but that's nothing intrinsic to the size of the ships, there are just too many ships out there - and this was the result of ridiculous crude prices in the mid 2000s that prompted carriers all more or less simultaneously to make the long-term investment in new vessels. And considering a 10,000 teu ship would cost $150 million, they might as well build a 20,000 teu ship for $200, no?
    The market currently reflects this gross surplus of capacity, that's all. As these carriers' new big ships all start to come online, what they'll do is retire the crappy, inefficient, polluting smaller older ships and replace say a 5 vessel string with 2-3 new ones. This means the same bandwidth, but less-frequent sailings.

    Yes, the industry is due for a round of consolidation, but there's a certain point where the smaller carriers - the Yang Mings, the Zims, etc - aren't operating for profit anyway, they're being sustained by their state as a strategic/commercial resource. The largest carriers are (over the last 16 months) slaughtering each other on the TPEB and Asia/Europe routes, but that's each other and is likely to sort itself out long before pricing ultimately is transmitted through the value chain to the retail level.

    It's too bad that Bloomberg couldn't have been bothered to find a professional reporter that understood the market.

  • Crime = terrorism (Score:4, Insightful)

    by HalAtWork ( 926717 ) on Tuesday June 21, 2016 @08:41AM (#52358327)

    Is "terrorism" the new word for "crime", and "terrorist" for "criminal"? We're going to need new dictionaries because I don't see how stealing cargo from a ship is poloitoical coercion or a method of resisting government

  • As it becomes more risky, the insurance premia will increase and the cost advantage gained by economy of scale will be off set. Since these tera ships can dock only on some specific ports, the ports will charge more, where else can the ships go? The countries will not let other ports to upgrade and reduce competition. Eventually market will take care of itself.

    Carting is an economic activity mentioned by Adam Smith himself in the Wealth of nations. Making carting inefficient, overloading it with costs wil

  • "suffer from a dearth of qualified personnel to operate them"

    I guarantee you that the bigger ships require the same sort of people as the smaller ships, just far far less of them relative to how much cargo is carried.

  • Ships are getting bigger and bigger not because of "globalization", it is all down to physics and fuel costs.

    Imagine a ship with length L. The hold volume ~ L^3, the drag area of the hull goes with L^2. Double the ship size, holding everything else constant, you move twice as much cargo volume for the same fuel.

    Things get even better if you go for really, really big ships going at slow speed. Fuel burn goes with velocity cubed V^3, so for a given ship, if you half the velocity, your fuel burn per unit volume of cargo is reduced to 1/8th of that at the original velocity.

    Physics and fuel economics is pushing the industry to use massive, slow container ships. Another cost benefit is that having fewer, bigger ships means paying less crew for the entire fleet.

    These savings will have to be balanced with the insurance and security costs associated with a single vessel containing such a massive quantity of valuable goods, but "globalization" isn't the prime motivator.

  • Given that the guy's surname is Minter, I'm kinda disappointed that the article title isn't "Attack of the Mutant Mega-Ships".

  • ".... With the current trend toward larger vessels and longer voyages, the risk to mariners is increasing and the ability to avoid rogue waves takes on an even greater importance. I get the impression that certain classes of vessels have overemphasized construction economies at the expense of crew safety. In conducting the research for this book, I was shocked at , somewhere in the world. Ironically, with the environmental sensitivity that exists today in most parts of the world, if an oil tanker spills a f

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