Suez Canal snarl-up highlights the risks of cost-cutting in the name of efficiency

On Monday afternoon, six days after it suddenly veered off course and blocked the Suez Canal, the 400-metre Ever Given container ship was finally afloat, allowing two-way traffic between the Mediterranean and the Red Sea to resume. The damage to global trade would soon be repaired.

The worst-case scenario was avoided. On the weekend, there were reports the monster vessel might have to be relieved of its fuel, water ballast and containers to lift its hull, a process that could have taken weeks. That would have been a nightmare for everyone from the shipping industry to manufacturers, since 12 per cent of global trade passes through the canal.

In the end, digging and dredging machines and an armada of tugboats did the trick – much to the disappointment of the meme makers who had delighted in the folly of the Ever Given’s bottle-cork status.

More serious observers were concerned with the incident’s implications for world trade. There was general and predictable agreement that global supply chains were more fragile than they appeared and that the just-in-time process – the delivery of manufacturing components immediately before they are used, saving warehouse costs – might have to be rethought. There is no just-in-time if the ship is hours, let alone a week, late.

But the Ever Given debacle also highlights the risks of extreme cost-cutting in the name of efficiency – code for maximizing profits and shareholder returns. Container ships have exploded in size in recent decades, while their crew numbers have gone in the opposite direction. Big ships create big problems. Will the plugged-Suez incident convince the global logistics business that it has pushed the envelope too far? The next megaship fiasco might have a far bigger impact on trade and the environment.

For decades, the cult of bigness has dominated the transportation industry. Among passenger-jet makers, the superjumbo Airbus A380 – capable of carrying more than 800 passengers – proved to be an enlargement too far. The plane was hard to fill and too big for many airports, so airlines largely shunned the flying fatso. The pandemic grounded most of them, and production is ending.

But ships are still getting bigger.

The first purpose-built container ships arrived in the 1950s. They would go on to revolutionize global trade by dramatically reducing loading and unloading times and speeding deliveries to customers, such as automakers and big-box retailers, at ever-lower costs. Once in port, the standard 20-foot and 40-foot shipping containers also fit neatly onto trucks. Some shipping companies, such as Denmark’s Maersk, became global logistics behemoths.

Inevitably, companies embraced economies of scale and ordered ever-bigger vessels. Container ship capacity is measured in TEUs – 20-foot (container) equivalent units. In the 1960s, an average ship had a cargo capacity of about 1,500 TEUs. By 2005, it was 10,000 TEUs, making the earlier versions look like paddle boats. The Ever Given, built in Japan and launched in 2018, is one of the biggest ships afloat and has a capacity just north of 20,000 TEUs. Incredibly, bigger ships are coming; one of them is the recently launched HMM Algeciras, built by South Korea’s Daewoo Shipbuilding.

The Ever Given’s size is hard to fathom. It is as long as the Empire State Building is tall and has a deadweight tonnage of almost 200,000 tonnes, a reference to how much weight it can carry. It is more than 60 metres longer than the new generation of Ford-class, nuclear-powered U.S. aircraft carriers. It does not manoeuvre or stop with agility, as the pilot of the ship learned the hard way in the narrow Suez Canal.

At the same time, the efficiency and automation drive saw crew numbers shrink. The biggest container ships have crews of 20 to 25, a half to a quarter the size of those of much smaller, older cargo ships. The pay is low and the hours are long, and sailors often complain of stress and fatigue. Cabin space and common areas, such as lounges and gymnasiums, have shrunk or disappeared to make room for more freight. And the pandemic has only intensified sailors’ woes: The International Maritime Organization estimated about 200,000 sailors were effectively trapped on their ships by March, unable to be repatriated and past the expiry of their contracts.

We don’t know why the Ever Given swerved, embedding its bow and stern in the canal’s banks. A gust of fierce wind may have blown it off course. There may haven been a mechanical fault. Or human error, possibly the result of fatigue, may have played a role. An investigation is under way.

But cost-cutting does appear to have played a role in the incident. The obsession with size for the sake of efficiency handed the Suez Canal a beached whale of a ship that could not be refloated easily.

Will monster ships go the way of the A380? Perhaps not. Container ships are unlikely to shrink, and fully automated drone ships are the next frontier in the effort to cut crew costs to zero. Imagine a ship the size of the Ever Given with no one aboard as hackers sabotage its navigation and propulsion systems. That would be a crisis – and not just for global trade.