Did the Suez Canal pay the price for the giant container shipbuilding?

For many years, ships kept getting bigger and bigger, reaching enormous tonnages. Twenty years ago, most container ship loads did not exceed 5,000 containers, and now we are talking about ships carrying 24,000 containers, and the door is still open for further expansion. The accident of stranding of the ship Ever Given in the Suez Canal in March 2021, and the resulting suspension of navigation in the important canal, which led to queing many ships waiting on both sides of the canal to cross, not far from the issue of increasing ship sizes as one of the main causes of the problem. Regardless of the ongoing investigations to determine the direct causes of the accident, whether it was due to the wind snd weather circumnstances, ship malfunctions, or human error from ship's captain.

Discussions about the asymmetric relationship between the current sizes of mega container ships and the carrying capacity of the shipping infrastructure is not new, but they are coming back on the surface after the Ever Given accident. Everyone talks about the responsibilities of countries and official authorities, such as the Suez Canal Authority in the accident, but no one is talking about the main root cause about what we face today, which is shipowners. All they were thinking about was building bigger and bigger ships, without looking at the impact of what they were doing on shipping and global supply chains in general.

We can talk about the direct causes of the accident as we wish, but we must look at matters more broadly than just analyzing the individual accident. Because this accident may happen again after months or years, and the tragedy and suffering that Egyptians and the whole world endured will be repeated, and things may become much more difficult. For example, if the ship did not respond to attempts to towage and floating efforts, the alternative solution was to lighter the load, which could have taken weeks, while the problem will become worse, and global supply chains would have been affected more and more. Not to mention the extreme danger of its effect on the stability of the ship if it is not done with utmost care. For these reasons, we must try to look beyond the accident and directly at the collective responsibility of shipowners for the problem as they seek to build giant ships.

Why are they building bigger ships?

At the beginning of the new millennium, shipping lines suffered from the high cost of fuel due to the high price of oil at the time, which prompted them to think about increasing ship sizes to take advantage of the principle of economies of scale.

This principle in maritime transportation means that the cost of transporting a container decreases as the size of the vessel increases. Not only that, but the large size of the ship leads to a decrease in its construction cost, labor and operating cost, as well as fuel consumption. For simplicity, imagine that when you build a ship with a larger tonnage, you do not need the same amount of steel used to manufacture two or three ships, and you will not need two or more crews of sailors, or the fuel needed to move more than one ship. It is very logical.

 In addition, the significant drop in interest rates after the financial crisis of 2008 facilitated the borrowing process to build bigger and better ships. Shipowners borrow to build huge ships, shipyards and banks benefit. Everyone wins.

The world kept promoting the increase in ship volumes as a great inventions and wonderful developments in maritime transport. The news was greeted with great happiness and sweet analogies such as a ship taller than the Eiffel Tower or the Empire State skyscraper. Without considering what those ships pose an extreme threat to maritime transport and the global economy. The load of the first container ship was carrying only 14 TEU in 1956, until we have now reached a carriage of 24,000 TEU, such as HMM Algeciras , and things will not end there. There are 25,000 TEU ships on the way, and a 30,000 TEU loads is expected soon!

Ideal X. The first ship to carry containers in 1956

HMM Algeciras

Development of container vessels'carrying capacities over time

Why are they building bigger ships?

Globalization has encouraged increasing the carrying capacities of container ships. Large companies move their supply chains to the Far East, especially China, to save costs and work under reduced conditions without being bound by labor rights and the obligations of Western countries. The companies import the ingredients and components from all over the world and assemble them in another country and then export the final product to the whole world. This is called globalized production. Containers transport components and products between all these countries, and the demand for large vessels increases to make the transportation process cheaper and faster.

But the global economy is in recession, with economic crises, trade wars and a global pandemic, but this has not stopped the wheel of building bigger and bigger ships. Large vessels allowed global companies to improve the performance of their supply chains and increase their profits by relying on reducing their inventory levels. Instead of the additional costs of warehousing, companies rely on periodic transportation of small, consecutive shipments of goods. Container ships transport manufactured goods from China to Europe every day. Huge savings and more gains are based on the continuous non-stop shipping traffic. That is why the companies incurred huge losses during the Ever Given problem, because they were simply waiting for the cargo stuck in the Suez Canal, without which the shelves would be empty of products.

The impact of giant ships on maritime transport

As a result of the expansion in volumes, a similar development of infrastructure was required. Panama developed its channel to allow larger ships to pass through, but it did not reach the current loads carried by the Ultra Large Container Ships (ULCS) due to the specificity of the Panama Canal and its complex engineering nature based on a system of locks. The Suez Canal invested in the continuous deepening of the shipping lane to reach a depth of 24 meters, then it partially constructed a parallel canal to save time for ships and facilitate their passage. Ports and container terminals also had to invest in deepening and increasing the length of berths and storage areas and buying larger and better cranes to accommodate these giant ships. Bigger ships need bigger ports. However, more than half of the world's ports cannot accommodate such ships. How do these ships work if they cannot visit all ports?

To understand the problem we must first understand how container shipping lines work. It simply provides a service of transporting containers to and from international ports with regular and fixed routes, with almost fixed dates and transit times for voyages. To round off, it's pretty much the same as how airlines operate. There are hub ports that allow the reception of these large ships. Ships unload their loads from containers destined for ports near the hub port, then smaller Feeder Vessels transport these containers later to other ports that are not equipped to receive giant ships. This is called transshipment. Countries are in a race to develop hub ports to benefit from that trade. Ports benefit from handling fees and port fees for ships. The more container handling you achieve, the more profitable the port will be.

The CSCL Indian Ocean Incident. The alarm bell that no one heard.

What does this have to do with the Ever Given accident? The bigger and longer the ship and the greater its tonnage, the more difficult it will be to rescue it in the event of grounding. It needs bigger and stronger tugs to tow it, and matters become very complicated and unprecedented in the case of cross-grounding, as happened on the banks of the Suez Canal. The canal did not have such large tugs, which made the mission more difficult. But what is the likelihood of this happening?

Marine accidents are normal and happen every day, and may not be felt by non-followers or people who are not in the shipping and logistics field. But the difference in the Ever Given disaster is the paralysis that afflicted the world, as the navigation in the Suez canal stopped completely. Accidents happen, but they do not block the navigational lane a one of the most important waterways in the world every day. Undoubtedly, this is unprecedented. But the important question remains, are there previous similar incidents?

On February 3, 2016, during the voyage of the giant ship CSCL Indian Ocean heading to the port of Hamburg, the ship suffered from a steering problems. Based on the suggestion of the navigation pilots, the 19100 TEU ship - which was one of the largest container ships at the time - was towed to the northern edge of the shipping lane to avoid closing the river and allowing other ships to pass, which resulted in the ship being grounded and unable to move. Sounds familiar, right?

The ship's fuel was unloaded as part of lightering efforts. Twelve tugs were used to tow her, but all attempts were unsuccessful. The only way out was to wait for the tide, and the ship finally floated up after a week of attempts. Interestingly, the Dutch company Smit was responsible for rescuing that ship as well as it was for Ever Given. Everything we thought about during the Ever Given tragedy was contemplated at the time. The ship was not responding to the attempts, which makes the only solution is to reduce the load of containers, and it is very difficult with the size of the giant ship. It was agreed to rent floating cranes from Rotterdam for this task, and this solution was delayed as much as possible because it was the most difficult.

  Container ship CSCL Indian Ocean while agrond in Elbe river

Germany announced the deepening of the navigational lane of the Elbe to avoid a repeat of the accident again. And business returned back to normal with some questions about the danger of the increase in sizes and lengths of ships , and the ability of the infrastructure to continue in the endless race with the giant ships' building. Some have raised an important question, "What if such an accident happened at the entrance to a port or a navigation channel and the navigation was stopped at length? Especially when we do not have easy solutions to such a situation with these sizes?" But the question remained unanswered or everyone prefferred not to answer. Ther was no discussion by those interested in maritime transport, governments and international organizations until what was ex[ected actually happened and the whole world was affected and waiting and blockage of the Suez Canal to be resolved. Everyone argues about what should and should not be done to solve the crisis of blocking the important lane for international trade. Where was everyone when the previous accident happened in Hamburg? Why do some hold Suez Canal responsible for the greed of shipowners and their pursuit of giant ships? We need to look beyond the responsibility of the single accident, whether it was weather conditions, mechanical malfunctions of the ship or even human errors, and discuss the most important reason that is no one really mentions, which is where we are heading with the ship building and what if this accident happens again? There must be a solution that guarantees the safety of maritime transport and the continuation of global supply chains without interruption.

Mohamed Salah El Din

Senior Lecturer, Logistics Management

Former Operations Manager, Shipping agency