Larger steamship vessels warrant opportunity; place pressure on seaports and inland infrastructureBy Karen E. Thuermer, AJOTWhen news broke in 2002 that an order had been placed for a ship capable of hauling 8,500 teus—the first post-Panamax-size ship ever, the reverberation could be felt at every major seaport around the world and within the executive offices of the steamship companies themselves. Since then orders have hit the headlines for even larger ships. In January 2005, China Ocean Shipping Corporation (COSCO) broke the proverbial barrier by placing an order with Hyundai Heavy Industries for four 10,000 teu containerships. Delivery is slated for 2007 and 2008. Each will measure 349 meters in length (1,145 feet), 45.6 meters (149 feet) in width, and 27.2 meters (89 feet) in depth. They will also be fitted with a 12-cylinder 94,000 horsepower engine to enable a service speed of 25.8 knots. “The 10,000 teu containerships ordered by COSCO are the next step towards the 12,500 TEU limit,” says David Tozer, Lloyd’s Register’s Business Manager - Containerships. “Beyond 12,500 teus we expect that containership and container terminal design will have to undergo significant change. For containerships, this might include the addition of a second screw, with the added capital investment that this entails.” Lloyd’s Register maintains that the industry will see the first 12,500 teu ships ordered before the end of this decade. Barrier for PortsThe 10,000 teu mark has been considered by many to be the psychological barrier that, if surpassed, would create a potential oversupply of capacity and major problems for seaports in their ability to handle such large ships. But driving the need for larger containerships is the overwhelming tonnage of cargo coming out of Asia, particularly China, and steamship lines’ desire to create economies of scale with their vessels. The Transpacific Stabilization Agreement (TSA), which comprises 11 major container shipping lines, reported in March that ships are 100% full on their all-water East Coast services from Asia through the Panama Canal, and 90-95% full on voyages via the US West Coast. Forward bookings indicated that utilization would likely increase in April, indicating a need for more capacity on the routes. “We simply don’t see a downside at this point,” says TSA Executive Director Albert A. Pierce. “Carriers are looking at their forward bookings, they’re reporting cargo being bumped to later sailings at Asian ports ˆ not exactly a market that indicates dramatic excess capacity and falling freight rates.” Already cargo demand has grown by more than 20% in the first two months of this year compared with the same months last year. That is about double cargo growth forecast for the whole of this year and outstrips capacity growth of about 15%. “As the lines were saying last year amid some skepticism, we don’t believe the shift in manufacturing to China, Southeast Asia and elsewhere in the region has run its course,” he says. The problem of filling ships does not exist on the westbound leg from Asia to North America. But eastbound, the situation is different with too many ships chasing commodities such as scrap metal, wastepaper, cotton, and chilled vegetables. Some analysts are forecasting a downward pressure on steamship rates for 2006-07 due to over capacity. TSA dismisses these forecasts, claiming they tend to be overly reliant on modeling and computer formulas, and use rated vessel capacity data from shipyard sources, not effective capacity after factoring in operating constraints. “If anything, rising costs associated with inland rail, trucking, the Panama Canal, equipment repositioning and maintenance, information system, environmental and other costs will be pushing rates upward in the coming year,” Pierce states. In fact, in April, container shipping lines in the Westbound Transpacific Rate Agreement (WTSA) agreed on the need to raise freight rates for chilled “vegetables all kinds” (VAK). Effe