OECD cautions transport sector about the impact of mega-ships

OECD cautions transport sector about the impact of mega-ships
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The International Transport Forum (ITF), which is the transport arm of the Organisation for Economic Cooperation and Development (OECD), has warned of the costs of mega-ships to the container industry as a whole in its latest report.

According to the research, entitled “The Impact of Mega-Ships”, cost savings related to mega-ships are “decreasing with size” and annual transport costs for ports could amount to US$0.4bn.

Report authors, Olaf Merk, Bénédicte Busquet and Raimonds Aronietis, noted: “The cost savings of the newest generation of container ships are four to six times smaller than the savings from the previous round of upsizing. Approximately 60% of the cost savings of the most recent container ships are related to more efficient engines and not to scale.”

They added that new orders have resulted in oversupply of container ships, which will reduce the cost savings due to larger ships, as low demand results in fewer savings per transported container.

The researchers have made a “rough and tentative” estimate that annualised transport costs related to mega-ships could amount to US$400m.

From this figure, “roughly a third of the additional costs might be related to equipment, a third to dredging and another third to port infrastructure and port hinterland costs,” the report added.

Among a number of policy recommendations is a view that countries and ports should “consider the costs of accommodating bigger ships in comparison to the overall economic benefits, including port income, savings to local shippers/importers/exporters, and whether such savings will be sufficient to pay for such costs.”

Currently, the writers claim that countries and ports make too many decisions that seem positive on an individual level but are detrimental on a collective level.

The report calls for greater financial transparency in the ports sector so that the public sector avoids picking up bills imposed by shipping lines.

Other suggestions include designing “port dues in such a way that they do not provide incentives for the largest ships” and introducing “mechanisms to recover dredging costs on users, for example via fairway dues and harbour maintenance fees related to ship size.”

The report encourages collaboration between countries, port authorities and regulators to “strengthen the collective bargaining position of the landside supply chain.”

In this regard, a further recommendation is for more coordination between port authorities on future port development, perhaps including port mergers in fragmented port systems if they don’t affect competition.

The report is viewable here.