Should we go down this path?

This is the last instalment in my articles sparked by the McKinsey report about 50,000 TEU vessels being the norm in 50 years. I've explored the practical and technical issues of putting this idea into practice but now I want to focus on whether we should head down this path.



Autonomous Vessels:


It's entirely practical to build an autonomous vessel but I seriously question the logic of doing this. Developing and the deployment of such technology is going to be enormous. The only thing you actually achieve is the elimination of the need to have a crew on the vessel.


When you look at the actual cost of crewing a vessel vs automating it, the crew cost is negligible. So what have you really achieved?


Another side to autonomous vessels is that they can have a pre-programmed passage plan and be monitored remotely. Speaking as a former navigating officer, I sailed on ships way back in the early 2000's that could already do this. Our main function was to monitor the system and watch out for other vessels.


That's where I see the catch. Anyone who has been at sea will tell you the number of fishing vessels (sometimes barely the size of canoes) you spend your time weaving around. They don't appear on radar because they are so small. They are not equipped with AIS or similar technology and often the first sign of them is when they switch on a barely visible lamp and wave it frantically at you. You look for the biggest gap between the lights, head through it and cross your fingers that it doesn't turn out to be the lights on a fishing net spread across the shipping lanes!


So I don't see the problem with automating vessels but I question how you can practically and safely make this work.


50,000 TEU Vessels:


Technically, yes, it is possible to build vessels of this size. The question is, are these commercially viable?


If we look at the industry right now, we are about to enter an era where nothing less than 18,000 TEU vessels are operating on the Asia-Europe services. Shipping lines are going to have to blank sailings or cancel services because they simply do not have the cargo to fill all these vessels.


The industry is changing fast. By the mid 2020's it's likely that we will be left with just 4 or 5 Super Carriers.


Industry consolidation is going to reach epic proportions within a few years. We will likely be left with 4 or 5 "Super Carriers". Namely, Maersk Line, MSC, CMA CGM, COSCO, Hapag Lloyd and, perhaps, Evergreen. Evergreen is on the verge of going either way. If they absorb Yang Ming into the company then they have a chance to remain a Top 5 carrier. If they don't, they won't survive in the long run.


The mid-sized carriers will not be able to compete with these Super Carriers and will either be acquired, adapt their business model to become niche carriers, or simply go bankrupt.


The one small snag that I haven't mentioned until now is Logic. Executive Management at shipping lines is often not based on need, logic or rationale. Someone builds a bigger ship than theirs and in return, the build something slightly bigger......and so the cycle continues.


Take COSCO as a good example. They have their sights set on being number one. Do they need to be? Is it going to pay off commercially? Who knows. What I do know is that their goal is to be the BIGGEST, no matter what it takes!


Terminals:


For the ports, this has the potential to be disastrous. To succeed at being a major Hub Port, you will need to secure at least one of the alliances that will eventually emerge. Failure to do so will result in terminal closure.


For smaller ports, the situation is even worse. In less than 2 years, all vessels on the Asia-Europe trade will be a minimum of 18,000 TEU. Without the investment in larger infrastructure, they won't be able to attract the carriers. Just take a look at COSCO as an example of a line that has a huge vessel order book with deliveries starting in 2018.


To summarise, the long-term prospects look good for the big carriers. Extremely bad for the mid-sized carriers and potentially financially catastrophic for the terminals. Note that COSCO is also currently extremely active in terminal acquisitions right now.


Summary:


Obviously I do not have a crystal ball and can't predict how things will actually play out but I think it's interesting to consider the possibilities and spark conversations about how the industry should move forward.




















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