The impact of 50,000 TEU vessels on the container supply chain

In this research, it will be assessed what the economic supply chain impact will be when 50,000 TEU vessels would sail around. The scope of the chain is limited to shipping lines, terminal operators, port authorities and consignees. Currently, the largest container vessels (OOCL Hong Kong, 21,413 TEU) already put large pressure on the chain because of the big peak volumes. Despite this, shipping lines are still ordering larger vessels. McKinsey (2015) predicts that vessels will even reach 50,000 TEU levels in 2066, based on economic forecasts and their vision on the shipping industry. Until now, most research has focused on the quantification of scale economies for shipping lines. Whereas, the impact on the rest of the chain is mostly qualitatively assessed. This research attempts to fill this gap by building a framework that enables the quantification of the rest of the chain. A case study has been performed on the route LL1, which is currently applied by the OOCL Hong Kong. This route runs from China to Northern Europe and a total of 9 ports are called. It will be assessed what adjustments are required for each party within the scope in terms of infrastructure when the OOCL Hong Kong would be replaced by a 50,000 TEU vessel. Based on those adjustments, daily cost increase/savings are calculated per chain party and put together to see the net result. Calculations are based on the following main assumptions. (1) 50,000 TEU vessels will already sail around now, (2) expected demand will already be present in 2018, and (3) it is technically possible to construct a 50,000 TEU vessel. Data is retrieved from official port websites, terminal websites and maritime/logistic journals. The results are as following. Shipping lines realize savings in capital, operating and bunker costs. The cost savings per TEU are respectively 16%, 55% and 25%. In total, shipping lines save 6.01 million dollars per day by applying 70 vessels of 50,000 TEU instead of 164 vessels of 21,413 TEU. Terminal costs increase due to investments in yards, cranes and quays with respectively 129%, 199% and 30% per day. Port authorities face a daily dredging costs increase of 19.59 million dollars per day due to expansions in ports, the Suez-Canal and the Malacca Strait. Besides, consignees will probably not reap any benefits and only face negative consequences in terms of delays and schedule reliability. A net cost increase of 14.4 million dollar a day will be the result. To conclude, only shipping lines realize cost savings, if utilization rates are sufficient, and especially dredging costs are very significant in the total cost/benefit overview. Daily chain costs will increase when vessel sizes grow to 50,000 TEU, which is not viable from an economic perspective.