For the past 10 years, the global top 10 liners made use of policies that enabled them to relatively easily raise funds including vessel finance because of the low interest rates in each country. They input sailed megaships to regular routes and executed the cascading effect together with destructive competitions. The cascading strategy is analogous to a cascade where water from the very top flows to the bottom, and the bottom water flows to the lower bottom. Just like this phenomenon, if liners input mega containers in large routes, the total revenue from rates for each voyage increases proportional to the vessel size compared to the existing rival liners. In addition, sailing costs per TEU including fuel costs, labor costs, and port charges decrease compared to the rival companies, securing a competitive edge.
Additionally, if the vessels that were used in large routes are input again in small routes, they can secure a competitive edge over rival liners that were sailing in those routes due to economies of scale. Because of this, large liners with megaships can have a competitive edge over large and small/medium-sized liners in these routes depending on the size.
If this situation continues and a certain amount of time passes, large liners that input megaships in all routes will have a competitive edge. As a result, liners that are unable to do this will lag behind the competition and will no longer be able to compete, causing destructive competition to occur. This kind of action endangered rival companies that were inputting a fleet of less than 6,000-8,000 TEU vessels and triggered destructive competition. The first scapegoat was probably Hanjin Shipping that input and sailed small-sized ships.
However, for mega containers (20,000 TEU) to smoothly load and unload at a container port where vessels enter and sail, the length and the width of berth, possible rows of loading/unloading with quay-side container cranes, and the number of input equipment are extremely important. For example, a Neo-Panamax vessel (length: 366 m, beam: 49 m, height: 57.91 m, draft: 15.2 m 19-20 rows, 12,500 TEU) was able to load about 20 rows. However, a megamax containership, a large ship that has the capacity of more than 20,000 TEUs, can handle an outreach length of a crane worth more than 24 rows.
In addition, if the container crane increases, other factors should increase proportionally: the capacity of the transfer crane (a yard crane used for performing stacking, loading, and unloading work in the container yard of a container terminal) and the number of input equipment such as yard tractors, yard chassis, reach stackers, and empty container handlers. Of course, if the capacity and number of various equipment used in the container terminal increase, the area of the terminal should increase much more. Besides, the depth of water should be a minimum of 18 m to 20 m in order for containerships to smoothly dock and undock. This is closely related to the draft line of the ship and it is a mandatory condition for safe port entry/departure and mainline operations.
Delays or breakdowns in the supply chain can lead to longer lead times for order, production, and delivery from a company's perspective. This can result in slower cash turnover for exporters and importers, leading to financial pressure on working capital. For ocean carriers, the agent of maritime transportation, the decline in on-time performance can lead to deteriorating cargo services. Delays in vessel operation times, port entry, and mainline operations can reduce the port around time of ships, potentially harming profitability. For terminal operators, due to the limited terminal area, aligning mainline operations, yard activities, and loading/unloading operations for inland transportation within a short period becomes challenging. This difficulty can result in reduced services for ocean carriers, forwarders, and shippers, leading to decreased revenue and profitability. Additionally, companies and workers associated with the port can also experience losses due to these port congestions and demurrage.
For imported containerized cargo to be delivered to the final customers, it must undergo an inland transportation process involving multimodal means such as trucking, railroads, and inland waterways. This intermodal transportation is necessary to ensure smooth and efficient transit. Especially in the case of the United States, being a vast continental country, it is interconnected by an extensive network of railways and highways. Therefore, if cargo brought into container terminals isn't swiftly loaded and unloaded using terminal equipment and transported to major inland hubs or final customer destinations, and instead bottlenecks occur, it can indeed lead to critical delays or even the collapse of the supply chain. 3. Increase of Transported Cargo Volume Passing through the Panama Canal and Vessel Draft Issues Due to continuous chronic port strikes and labor disputes on the U.S. West Coast, the share of the following multimodal transportation route decreased: cargo from Asian countries to the United States that passes through the LA/LB ports on the West Coast and transported with a combination of rail and truck into the U.S. On the other hand, as the usage of the All Water service, which involves transiting through the Panama Canal to reach ports on the U.S. East Coast or South, increases, it is expected that land bridges leading to major hubs within the United States will activate entering ports like New York, New Jersey, Charleston, and Savannah on the East Coast, port on the Southeast, as well as Houston, New Orleans, and Mobile on the South. According to the Pacific Merchant Shipping Association (PMSA), as of January to September 2022, import containerized cargo at the Port of LA decreased by 6.5% year-on-year. On the contrary, ports like New York and New Jersey experienced a 10.4% increase in import containerized cargo year-on-year. These statistics indicate a shift in cargo volume from the West Coast to the East Coast.
Also the Panama Canal can hold up to 14,000 TEU containerships as the Canal was extended in 2016. In the past, cargo moved in multimodal transportation by passing through the LA/LB ports and to major cities/hubs in the land via trucking or DST (Double Stack Train). Now with the help of the Panama Canal, cargo can move to the East Coast and the South Coast to key cities by multimodal transportation linked with the ALL WATER service. Therefore, due to the scale of economic benefits, the operation of a 14,000 TEU container ships are expected to secure a relatively advantageous position in the competition with the ports in the West Coast by reducing transportation costs. However, the Panama Canal toll increase measures by the Panamanian authorities, aiming to leverage the growth in cargo passing through the Panama Canal for revenue enhancement, could potentially influence the decision-making of shippers.
Ports serve as both the forefront infrastructure of the logistics supply chain and the starting point for interconnecting various transportation modes such as trucks, railways, aviation, and inland waterways. Particularly, there are plans to modernize, upgrade, and automate the aging facilities of the LA/LB ports. However, concerns have been raised regarding job losses and wage reductions due to the automation of ports by the port unions. During the current strike, there have been unprecedented demands for substantial wage increases as well. This appears to be a strategy employed by the labor unions, as they demand a substantial share of the profits generated by global major carriers that call at the U.S. West Coast. By proactively demanding high wage increases during negotiations, they aim to delay the automation of port facilities and secure a favorable position in the negotiations.
Recently, along with the decline in maritime freight rates, there has been a recovery in the supply chain, leading to a moderation of inflation within the United States. The Global Supply Chain Pressure Index (GSCPI) announced by the U.S. Federal Reserve shows a significant drop to -1.2 in June, down from the all-time high of 4.31 in December 2021 when the peak of the COVID-19 pandemic was reached. Due to the recovery of the supply chain and the decrease in freight rates, shipping companies are experiencing a substantial decline in profitability this year, and they are implementing measures to intentionally reduce shipping capacity. Recently, in the maritime industry, 10 ships bound for Busan New Port to the Americas were canceled. This indicates a decrease in demand for rerouting to the U.S. East Coast when congestion in the U.S. West Coast is severe. It also demonstrates the efforts being made to maintain the volume of cargo throughput at least in the LA/LB ports.
The logistical turmoil caused by the strikes in the U.S. West Coast LA/LB ports can lead to a cascade of issues across multimodal transportation, including maritime shipping, trucking, and rail transportation. This can result in delays and disruptions in the supply chain. From the perspective of importing shippers, these disruptions not only cause delays in deliveries between companies within the country but also affect inventory management, depreciation of goods, and losses for related companies along the supply chain. This situation can potentially lead to a multitude of problems, both legally and from a marketing standpoint. Fortunately, a positive aspect is that as the COVID-19 pandemic comes to an end and the bullwhip effect in terms of companies' product purchasing and inventory levels diminishes, there is a decrease in the likelihood of supply chain disruption or collapse. The U.S. domestic economy is entering a phase where inflation is stabilizing, and the impact of high interest rates on investments in assets and goods is being curbed. This trend suggests a reduction in the potential for disruptions or collapses within the supply chain.
Furthermore, with the rapid increase in global container shipping capacity, starting from 2025, the dissolution of one of the alliances, the 2M Alliance (MAERSK+MSC), will contribute to intensified competition within the shipping industry. This competition will be between comprehensive logistics-focused carrier groups like MSK, CMA-CGM, EVERGREEN, and shipping-focused carrier groups like MSC, ONE, HMM, YML. As a result, concerns arise about a potential downturn due to the intensified competitive landscape in the shipping industry, and this downturn in container shipping conditions could directly impact the cargo throughput at the LA/LB ports.
Moreover, it is expected that the significance of U.S. West Coast ports will decrease, and the importance of ports in the U.S. Southeast will increase. This suggests that congestion issues in the LA/LB ports might alleviate over time. However, it's important to note that localized logistical disruptions due to strikes in the LA/LB ports could recur at any time. The situation can also affect the Canadian West Coast ports, creating a ripple effect where similar port union strikes could repetitively emerge.
While strikes by maritime unions in South Korea have rarely paralyzed logistics, the potential impact of solidarity strikes by freight unions or in coordination with other transportation sectors, such as railway unions, is a concern. Particularly, strikes affecting Busan New Port, the major port for processing the highest volume of import and export containers, could lead to significant disruptions in trade for shipping companies. Furthermore, beyond labor strikes, events like earthquakes, floods, natural disasters, conflicts, or the recurrence of events like the COVID-19 pandemic could lead to logistic disruptions or even the collapse of global supply chains. The possibility of such disruptions remains a notable consideration in managing supply chain risks. # Reference  Alphaliner 2023
 Journal of Commerce (JOC)
 Korea Shipping Gazette (www.ksg.co.kr)
 Pacific Merchant Shipping Association (PMSA) homepage
 LA port homepage
 Port of LA Annual Container Statistics
 Wikipedia https://en.wikipedia.org
 KOTRA data: US Container Shipping Status and 2023 Global Outlook
 Descartes Systems Group
 Mail Business News (2022.12.11)
 Cargo News (www.cargonews.co.kr)
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