Shippers brace for big-ship trickle down
While liner carriers laud the benefits of increasingly larger container ships for their operational efficiency and bottom lines, shippers are worried about the impacts these behemoth vessels will have on their supply chains.
The bigger container ships – in the range of 10,000 TEUs and larger – will allow large shippers to place more containers at a time on board these ships, but will also require their customers or themselves to absorb those boxes once they’re discharged at the terminals.
“Discharging more equipment at a given time will wreck havoc on our supply chain,” said Marlon Jones, manager of international distribution at International Paper, during the Virginia Maritime Association’s International Trade Symposium in Norfolk, Va. on Thursday.
The concern is that exporters, like International Paper, will need to ship larger container volumes on board these big ships to adjust to the longer transits. “One hiccup with a tremendous amount of product on a ship, and let’s say it gets delayed for seven days, that’s a big deal. We could run customers out of paper.”
U.S. importers, similarly, will have to absorb increased container volumes per voyage once the big ships discharge their freight in port.
“I run a tight schedule with my buyer group,” said Holly Pearce, director of international logistics for Lumber Liquidators. “Two to three days of additional inventory is a lot of wood.”
These same shippers are also concerned about the amount of risk that they will take by placing larger container volumes on bigger ships.
“I have a responsibility not to put our product at risk,” Pearce said. “You put 200 containers on a single ship and if anything happens,” such as a vessel breakdown or weather delay, “that could cripple the supply chain.”
Jones said International Paper is considering opening warehouses in Europe and the Far East to ensure sufficient inventory is available for its customers as carriers shift to bigger ships and longer transits. “It’s an added cost that we will not be able to pass that along to customers,” he said.
The shippers also spoke to how larger vessels and new carrier alliances might affect their ability to diversify their carrier portfolios. Jones said International Paper uses as many as 32 carriers, but around two-thirds of its volume rides on seven to 10 carriers.
Pearce said Lumber Liquidators uses far fewer carriers and that she is urged to shrink the number of carriers used to increase leverage with each carrier. But the flipside to that is potentially putting all her eggs in one alliance basket.
Todd Rives, senior vice president and chief commercial officer of CMA CGM America, agreed that there will be some headaches for shippers once the big ships come in larger numbers to U.S. ports, but that the industry will work through the problems.
“We will be able to find a solution provided all stakeholders work together to find a solution,” Rives said.
We’ll send it to you!
Register now and get the free AS Daily.