Brad Howard: Shipping slowdowns are happening everywhere.
Lori Ann LaRocco: We are all connected. So if one major port
goes down, it literally impacts the whole sum of all the parts
Brad Howard: the ever given which clogged up the super
important Suez Canal back in March of 2021 was the canary in
the coal mine for recent global trade slowdowns. But before this
calamity disruptions from the covid 19 pandemic hit port after
port with the aftershocks hitting the consumer market.
Nils Haupt: There's a scarcity of capacity of ships there's a
scarcity of empty containers which we have never seen before.
Brad Howard: The container ships that travel between the world's
major ports are a marvel of engineering
Gene Seroka: 90% of world trade moves on water
Brad Howard: In 2019 11 point 1 billion tons of goods were moved
across the world's oceans. And according to the World Shipping
Council, the liner industry moves more than $4 trillion in
goods annually. These vessels depend on people to get them
from A to B and the complex logistics systems that make up
the global trade network. But what happens when things don't
go according to plan?
container ships are a relatively recent innovation. In the late
1950s. The concept of a standardized container being
loaded onto a ship was revolutionary. These containers
could be offloaded onto freight trains or long haul trucks and
goods could be efficiently shipped to where they were
needed all around the globe. container ships went from being
an American innovation to being dominated by international
companies and the ships themselves grew in size
container ships get ranked by 20 foot equivalent units or TEUs
one TEU roughly measures out to the size of a shipping container
about 20 feet long, eight feet wide and eight feet tall. This
helps measure how many containers a ship can hold. The
earliest container ships held only 58 containers, the largest
operating today can hold about 23,964. Now some are asking are
container ships getting too big.
Lori Ann LaRocco: The problem is we have seen with these mega
vessels and the piling and piling of containers, we have
lost hundreds of containers in the past year. And they fallen
into the ocean. Just because they're they're very big. And
you know, if you're on a you're on a big ship, you're stacked to
the brim, you hit a really big wave or this turbulence in the
water so to speak. We have seen accidents in that way. So that's
why a lot of people are kind of questioning do we go with these
mega shifts? Or do we go with something that maybe is 12,000
teus or 12,000 containers versus the 20,000
Brad Howard: there are around 5446 active container ships
worldwide that are fully cellular which can move around
25 million teus a fully cellular container ship is one that is
efficiently organized to haul containers. This means that in
the global shipping industry, there are 1000s of possible
points of failure that can slow down the system.
Nils Haupt: We are of course not very happy with the situation
you could say you can be happy because you're profitable. And
this is the first time since many years since a decade when
the container industry really burned billions of dollars. And
now this is a profitable year for sure. But of course schedule
reliability is pretty much down quality is pretty much down you
know consumers and and our customers are annoyed because
you know there are huge delays, cargo is piling up at the ports
there is no capacity rates are going up. So it is a very very
challenging and difficult situation for everybody in this
industry.
Brad Howard: The containership industry went through a series
of mergers in the last decade that led to the consolidation of
the major containership companies Hapag-Lloyd bought two
firms Maersk another and China's Costco also made several moves
that included a merger and buying another company OOCL for
reported 6.3 billion. The companies that remained after
these mergers also joined a series of alliances to help keep
costs down. Another factor political conditions can change
how the industry operates.
Gene Seroka: Well, this story really dates back three years
ago to the introduction of our trade policy and tariffs under
Section 232 and 301. We've seen a very choppy supply chain ever
since imports were brought in being mindful of new tariff
milestones. So we would have rushes of cargo. And then a
little bit of a lull,
Lori Ann LaRocco: we saw this phenomenon called front loading.
And that was a big catchphrase that we that we heard throughout
2019. And what that essentially is was all the retailers knew
when the deadline was when they were start paying these tariffs.
So what they did was they started bringing in tremendous
volumes of product that they did not need, but they wanted to get
it into the United States before the tariff hit. So what happened
was you had all these containers coming in which actually
crippled the ports because there are not enough people to process
all of those containers.
Gene Seroka: Then as we got into COVID-19 environment, we saw
cargo plummet by nearly 20% in the first five months of last
year. And then the American consumer developed a buying
surge the likes of which we've never seen here in the United
States.
Brad Howard: And during this surge in demand, a critical
canal was paralyzed, creating a cascade of delays in container
delivery.
Lori Ann LaRocco: And so what happens is you have what's
called a Sal effect, so the higher that you go, if you have
a big wind gust, it can physically move the vessel. And
because the ever given what's so large, it's not like when you're
in your car, you turn the wheel and you immediately can go left
or right, it takes a few minutes for a vessel to to react to the
way that you're moving. When the ever given was stuck in the Suez
Canal, shipping companies had to make the hard choice of staying
in line at the Suez, or taking much longer routes to
destinations.
Nils Haupt: The Suez Canal for us was a pretty unique incident
because for more than 20 years, basically, nothing big happened
like that. It was the very first time from our alliance partners,
we decided to have six ships going via the Cape of Good Hope,
just to save the time, the waiting time. But of course,
this is more costly, you burn more fuel, it takes one week
longer. So we decided to stay in the queue. And I think we had
like out of the 300 chips. nine of them were from Hapag-Lloyd
Brad Howard: companies rely on just in time logistics to get
consumers products at low prices. But when something like
the sewage blockage happens, delivery of key items, both for
sale and as raw materials for manufacturing are delayed. When
COVID-19 kicked off, there were warning signs in the trade
market.
Lori Ann LaRocco: So when you look at trade, it really is
almost common sense. Trade takes people. So what we're seeing now
with yantian and what we saw the pandemic, things had a shutdown
and what happened, no one was making product product couldn't
move on to vessels. And then we had this tremendous surge of
volume that were set with that we're still seeing today.
Brad Howard: fewer workers mean slower loading and unloading of
ships. Those on ships have to worry about crew members
becoming infected with COVID-19, which has led to ships being
quarantined numerous times in the last year, the virus concern
could lead to even more automation of container ships,
but ports still rely on people to get containers pointed in the
right direction. As the vaccination rate increases, the
slowdown should decrease, but new variants could cause
unexpected disruptions.
Gene Seroka: What we are watching very closely now is the
recent outbreak of COVID-19. In South China, at some of its
major ports around the Pearl River Delta, about 1/3 of our
vessels that come here to Los Angeles begin in South China's
region they had some COVID infections, which were not
expected. And they basically closed down a very important
part of the of the port, they have a daily throughput
throughput of roughly 40,000 containers. And if you know, a
port like this is down or partly down, you know this has a huge
effect on the container shipping industry is responsible for 2.5%
of the world's global greenhouse gases. That's one major reason
why the industry is striving for sustainability.
Lori Ann LaRocco: There are so many different alternative
energies that they're that they're working on right now.
It's pretty exciting at the amount of innovation that
they're that they're pouring into into this industry. Because
the maritime industry does contribute to a lot of co2.
Gene Seroka: We're also moving in a direction of becoming a
zero emissions port by the year 2030. And zero emissions heavy
duty truck port by the year 2035.
Brad Howard: A company from Norway called Yara hopes the
future of container ships are electric and autonomous. It's
zero emission and crew optional container ship which will be
used for regional cargo movement could be a peek into the future
of the industry.
Jon Sletten: Yara Birkeland is a relatively small container ship
So it has a battery capacity of about 7,000 electrical cars And
the purpose is to transport containers from our fertilizer
plant in Porsgrunn Yara Birkeland will also be
electrical, zero-emission And being developed to be on the
later stage autonomous, without the crew
Gene Seroka: We cannot leave our workforce behind. We have to
bring them along and whether it's re skilling or upskilling
finding additional cargo that requires that great skilled
labor or making sure that we now know that the mechanic who works
on all this equipment will no longer carry a wrench, but maybe
a computer is all part of how we have to advance