H Ship Large

Why cargo ships keep getting bigger

March 30, 2023
And what does that mean for manufacturers' supply-chain strategies?

By Michael Lev for MxD

The pandemic shipping boom is over. The cost of sending a single cargo container by boat from China to Los Angeles has plummeted in a year from $15,600 to $1,238. Cargo liners are canceling voyages. Inventories at US retailers are still too high.

Yet what’s that behemoth on the distant horizon? It’s the world’s largest cargo ship, the brand-new MSC Tessa, calling at Ningbo, China, on its maiden voyage to Northern Europe. Mediterranean Shipping Co. took delivery of the Tessa on March 9, one in a series of ultra-large container ships being built for MSC. Fourteen mega vessels will be delivered to customers from Chinese shipyards in 2023. They cost $150 million each. Talk about adding to your inventory.

It’s challenging to describe these monster ships. Bigger than an aircraft carrier. Taller than the Empire State Building. Nothing seems to capture the awe of witnessing a 1,300-foot-long vessel that transports the equivalent of 24,000 20-foot-long shipping containers. They go to sea like giant Lego puzzles, stacked below deck and above with row upon row of metal boxes, potentially reaching 12 containers high.

There are more than 50 ultra large cargo ships sailing that have a capacity of 21,000 TEUs, or 20-foot equivalent containers. More are coming, but the industry may be reaching the upper limit of the actual size of the boats.

Mega vessels are tough to maneuver (the Ever Given, which blocked the Suez Canal in 2021, is 20,124 TEUs). At some point they become too large for existing port infrastructure. They burn a lot of fuel. Only a few ultra-large ships have sailed to the US; they avoid Pacific crossings because of the rough weather. A storm can hurl hundreds of containers into the sea. “That’s why the [ultra large] vessels come near the coast, so they don’t face big waves. It’s a matter of stability,” maritime economics lecturer Stavros Karamperidis told the BBC.

The big boats also aren’t the best fit for US destinations because the typical delivery cycle involves arriving from Asia at a specific port, unloading all cargo, reloading, and returning to Asia ASAP. To some extent shipping companies value speed over size. That’s why boats like the MSC Tessa are put on Northern European runs, where they typically stop and unload partial cargo at several ports such as Rotterdam, Antwerp and Felixstowe.

The MSC Tessa, at 24,116 TEUs, is already being challenged for its “world’s largest” claim, but contenders are of the same basic design and size. The OOCL Spain is the first of six 24,188 TEU vessels ordered by that company. Rather than claim a disputed title, OOCL says the Spain is “among the very largest container ships.”

Carriers bringing ultra-large ships into service don’t seem to sweat the idea of adding to capacity during a downturn. MSC had delayed taking delivery of the Tessa, but CEO Soren Toft told CNBC he’s moderately optimistic global trade will rebound in the second half of the year. “We still see the US in very positive shape,” Toft said. “It’s a net-energy exporter. I believe they’ve been able to slowly reduce inflation, and the job market is very strong. There’s basically full employment. So we still see the US as very strong and very positive.”

Big boats seem extravagant but make business sense. Larger ships have greater capacity, which lowers the cost per container.

“The current strategy appears to be one wherein MSC will defend their customer base through an aggressive pricing and capacity position,” supply chain expert Alan Baer of OL USA told CNBC. “Losing and regaining a customer can be a costly and drawn-out process.”

This article first appeared in Issue 31 of ChainMail.