Insatiable Shipping Companies Set the Table for the Suez Canal Ship Debacle

A lot of ink has been spilled to explain exactly what happened in the Suez Canal, where a massive container ship got wedged across the narrow channel, idling ships or forcing lengthy detours around South Africa’s Cape of Good Hope.

Early speculation on social media laid blame on the captain and crew, mechanical failures, or mysterious forces of nature. Was it the fault of a drunken navigator, as was claimed in the 1989 grounding of the Exxon Valdez, which spilled oil across Prince William Sound? Was there a failure of the steering gear that controls the ship’s rudder, or a did a loss of propulsion make it impossible to control the steel behemoth?

High winds were present on the day the bulbous bow of the Ever Given, bound for Rotterdam, made landfall just a few miles into the canal. Was the crew, as one Financial Times article suggested, perhaps overcorrecting for this crosswind while a hydrological phenomenon called the “bank effect” built up water pressure on one side of the vessel, shoving it sideways without warning?

Accident investigators will access the vessel’s voyage data recorder, listen to audio recordings of every command, and consider every choice made by the officers and crew. They will undoubtedly write a report that will disappoint conspiracy theorists and allay the fears of ocean carriers and beneficial cargo owners (BCO’s), or the entities that own the cargo inside the container.

Their final report will make for interesting reading, partially for what it will say and largely for what it will not. It’s unlikely to lay any blame on the material factors in a changing global container shipping industry that set the table for this public spectacle.

BIGGER AND BIGGER SHIPS

While modern shipping containers come in a variety of standardized sizes and types, the standard unit of measurement of the capacity of a container ship is the twenty-foot equivalent unit (TEU) which is 20 feet long, eight feet wide, and eight feet six inches tall.

Twenty years ago, a vessel with the capacity of 6,500 TEU’s was considered quite large. Technological improvements in hull design allowed a 1,000-foot-long steel hull to flex and bend as it moved through the dynamic environment of the open ocean.

But with few exceptions, those ships that so impressed the maritime industry have been driven onto the beaches to be dismantled and scrapped in parts of the world we choose not to look at. Today’s container ships have four times that capacity.

That same 20 or so years ago, there were dozens of different independent ocean carriers, or “steamship lines,” plying the world’s oceans. Today there are far fewer; independent lines consolidated and gobbled up their rivals.

American President Lines is a classic example. In 1997 the U.S. flag carrier was acquired by Singapore-based Neptune Orient Lines and shifted its global headquarters there from Oakland, California. In 2016 both carriers were acquired by CMA-CGM and today their ships sail as part of the Ocean Alliance. The same story could be told about almost every ocean carrier.

Three alliances of the world’s largest ocean carriers (2M, THE Alliance, and Ocean Alliance) now dominate the industry, carrying more than 80 percent of the world’s cargo, while a few smaller carriers try to carve out enough of a niche market to stay afloat.

Ship owners, too, have run away from their obligations to the seafaring countries whose flags they formerly flew. Instead, they scour the planet for the least restrictive regulatory regimes, cheapest labor, and least stringent safety and environmental regulations. These ships fly a “flag of convenience” on their sterns; they are registered in a country with no genuine link to the ship, its crew, or the cargo it carries. Most Ocean Alliance vessels, for instance, fly the flag of Malta.

Ships spend most of their time in international waters, beyond the reach of law. If it wasn’t for the International Transport Workers Federation, few people ashore would ever know about the mistreatment of crews—unpaid wages, long hours of work and isolation, abandonment, and the crew change crisis, in which seafarers are forced to work long after their individual contracts end, without the option to return home.

RACE TO THE ROCKY BOTTOM

The same market forces that drove consolidation in ocean shipping have also created ever larger ships. The once cozy relationship between the steamship lines and the shippers whose goods they carried have mostly vaporized, much like those not-so-old ships.

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Today’s ocean carriers and BCO's compete on a truly globalized shipping market. Slots for containers aboard a modern ship have been reduced to a simple commodity. Spot rates (the price to book shipment for a single container) are indexed in a manner similar to a stock market.

As ships grow larger and carry more cargo, they still have about the same crew complement. A ship has only one captain, one chief engineer, and one seafarer at the helm at a time; 25 or so crew members—and sometimes even fewer—navigate these seafaring skyscrapers around the planet.

Though the ships burn significantly more fuel, efficiencies in hull design have driven the fuel cost per container down inversely with the size of the ship. These economies of scale have allowed carriers to reduce the prices they charge to carry individual containers, making their vessels more attractive to price-conscious BCO's, in a race to the rocky bottom—or perhaps to the rocky shore.

This phenomenon has fueled competition between carriers, encouraging them to build and finance the construction of the largest possible container ships. Those carriers that don’t have massive capital reserves or can’t afford the heavy burden of debt required to build competitive ships are going bankrupt. South Korea’s Hanjin Shipping filed for bankruptcy in 2016, after the Korean government announced it could no longer afford to restructure the company’s debt. Hanjin’s customers were quickly swallowed up as ocean carriers consolidated further and ships grew larger still.

As a result, the Ever Given is 1,312 feet long, 192 feet wide, and has a capacity of 20,124 TEU. The largest container ships on the ocean today are over 24,000 TEU. The industry swells ever larger, as carriers shift the burdens associated with their economies of scale onto public ports and public transportation infrastructure.

Meanwhile, the earth’s waterways have remained roughly the same size.

MISSING FROM THE PICTURE

As investigators pore over the immediate physical causes of the accident, experts will calculate the exact volume of water displaced by the ship and use their hydrological models to determine how that water would have behaved in the shallow channel.

There will be calculations showing the force of the water pushing against the rudder which turned the ship; the rudder angle measurements from the voyage data recorder will be scrutinized for the tiniest discrepancy.

They will measure and model the force of the wind and its effect on the side of the ship, with containers stacked in columns of 10 above the ship’s deck which is itself towering above the water and floating 47 feet deep beneath the water’s surface.

The most miniscule details of each factor will be thoroughly analyzed and reported, to be considered later in the calculations of naval architects who are busy designing ships that are larger still. There will, no doubt, be a technological fix to whatever problem gets the blame.

Thousands of ships a day use the Suez Canal. The episode of the Ever Given will be viewed in the industry as a fluke, a one-off situation with no real implications for the world or the distribution of resources within it.

Absent from all this analysis will be consideration of the social and economic factors that drove the maritime industry to operate this way. It will be taken for granted that an industry which actively avoids regulation and knows no voluntary limitations aims to grow infinitely.

Viewed through this lens, what we see in the recent events in the Suez Canal is the collision of capitalism with the natural world—the demands of markets constrained only by the hard limits of the laws of physics.

Justin Hirsch is a registered Class A Longshoreman in the Port of Seattle and a member of the International Longshore and Warehouse Union Local 19.