Giants of the Sea

WORLD / Wall Street Journal Exclusive

Giants of the Sea

By DANIEL MACHALABA and BRUCE STANLEY (WSJ)
Updated: 2006-10-10 12:47

http://online.wsj.com/public/article/SB116044743245587716-J_w8ugovtC5Ha8Rnl
ex8KqpxHRk_20061016.html?mod=regionallinks

When the container ship Hugo pulled into Long Beach, Calif., last month
after a trans-Pacific crossing, its docking was about as easy as parallel
parking a Greyhound bus in a phone booth.

Bigger than the Titanic and nearly as long as the Queen Mary 2, the
1,095-foot-long Hugo required two harbor pilots and three tugboats to
guide it through a narrow shipping channel to the dock. Crew members had
to fold down a radar mast to clear the 157-foot-high Gerald Desmond
Bridge -- and made it with only five feet to spare. Then the ship made a
90-degree turn, its stern narrowly avoiding a concrete structure known as
the "can opener."

Big as it is, the Hugo is just one in a new generation of container ships
so massive that they dwarf ships made just a decade ago. Often longer
than three football fields and wider than the Panama Canal, the $100
million ships are jammed with Asian-made merchandise that will fill
shopping lists and stores throughout the U.S. before the holiday rush.
Like Santa's supersize sleigh, the Hugo was loaded with toys, electronic
goods and clothes. The ship's maximum load of 8,200 20-foot-long cargo
containers could fill a train stretching more than 23 miles.

Spurred by the flood of goods from Asia, growing by about 10% a year,
container-ship lines have put about 90 of these huge ships to work plying
the high seas, estimates Paul Bingham, a principal at the global trade
and transportation practice at consulting firm Global Insight Inc. About
150 additional ships with room for at least 8,000 20-foot-long cargo
containers are being built or on order through 2010, creating $16 billion
to $18 billion in work for shipyards throughout the world.

The shipbuilding spree "is the biggest boom ever seen in container
shipping," says Neil Davidson, research director at Drewry Shipping
Consultants Ltd. in London.

"We're pushing the limits with these ships," says John Strong, a vice
president of Jacobsen Pilot Service Inc., whose pilots have been steering
ships in and out of the Long Beach port since 1922. "There's no room for
error."

But the floating giants are helping to ease some of the stress on the
global transportation system that has worsened as trade volumes increase.
In Los Angeles and Long Beach, the two busiest U.S. container ports, the
peak season that began in August and runs through the end of this month
has been smooth despite record shipment levels. Both ports were snarled
by backups and delays three times in the past decade, but the situation
has improved because of more big ships, new cranes, thousands of extra
dockworkers and keeping the ports open at night and on weekends. When the
Hugo arrived in Long Beach, two other massive container ships already
were parked there and a third was leaving.

All of the megaships work routes between Asia and the West Coast or Asia
and Europe, where cargo volumes are the strongest and ports most likely
to be able to accommodate them. By spreading crew and fuel costs over
more than twice as many containers as ships built 10 years ago, the new
giants can shrink the cost of moving containers over the ocean by as much
as 30%, says Eivind Kolding, chief executive of the container business of
A.P. Moller-Maersk Group of Copenhagen.

The shipping lines say that freight rates have fallen about 10% over the
past year, but some customers complain that the lines aren't passing
along much of their savings. Willy Lin, managing director of Milo's
Knitwear International Ltd., a Hong Kong garment producer, says he has
seen little net reduction in his freight rates since the big ships began
sailing, due partly to a complex system of surcharges that shipping lines
impose for fuel and other costs. It costs $1,800 to $1,900 to ship a
40-foot cargo container to Long Beach from Shanghai.

While not yet as large as supertankers built in the 1970s and 1980s to
haul crude oil from abroad to the U.S., the biggest container ships can
store thousands of containers in their hulls and nearly as many above
deck. Ship operators often pile cargo six or seven stories tall. "The
temptation is to pile it like a hay wagon," says Charles Cushing, a
marine architect in New York.

Still, most of the megaships are built with a streamlined keel that
allows them to reach nearly 30 miles an hour (compared with 40 mph for an
aircraft carrier) and cross the Pacific Ocean in 12 days.

Ports are scrambling to handle the gargantuan ships. SSA Terminals, which
loads and unloads ships in Long Beach, has used as many as six or seven
cranes -- double the normal number -- on the megaships.

But there is so much cargo that crane operators can work at one hatch for
an entire eight-hour shift, says John DiBernardo, an SSA vice president.
To keep up with the growing ships, Long Beach Container Terminal has
welded steel beams into the legs of its cranes to increase their height.

The Long Beach port plans to spend $800 million to replace the Gerald
Desmond Bridge with a taller version. On Oct. 22, Panamanian voters are
expected to approve a $5.5 billion plan to lengthen, widen and deepen the
canal enough so it can accommodate most big container ships.

"Ports have to enlarge to stay in the game," says Wilson Lacy, maritime
director at the Oakland, Calif., port, which is investing $1.6 billion in
expanded terminals, deeper channels and new equipment for large ships.
Many older ports in the U.S. and Europe are hemmed in by urban sprawl and
have little room to grow.

Meanwhile, shipping lines are trying to outdo each other with ever-bigger
vessels. In August, Maersk launched its 1,300-foot-long Emma Maersk,
calling it the largest container ship ever built. A month later, CMA CGM,
based in Marseille, France, and the Hugo's owner, announced a $1.2
billion order for eight new ships that can each carry 11,400 20-foot-long
containers -- about 4% more than the Emma Maersk's official capacity.

How big container ships will be years from now "is as big as your
imagination," Mr. Cushing says.

Until port infrastructures catch up, expect many more tight squeezes.
John Ochs, managing director of Maersk's APM Terminals container-terminal
operation in Los Angeles, recalls driving across a bridge on his way to
work one recent morning as a giant ship was docking below.

"I saw this monster sliding under me," he says. "I said: 'I hope they
have Vaseline.' "

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