Since 2006, consistent growth has become an established trend in the shipping industry. In 1988 the first post Panamax appeared “President Truman” (275 m in length, 39 m in breadth, and 12,5 m in draft), in 2006 a significant ship as “Largest-ever container ship” appeared, Emma Maersk (397 m in length, 56 m in breadth, and 15 m in draft). The following figure displays the evolution of gigantism in ships that compose the containerized fleet between 2006 and 2022 (f); clearly, the ships of up to 11,999 TEU show stagnation or decline while those of over 12,000 or 15,000 TEU come to dominate the scene. Figure 1b allows appreciating larger ships’ pre-eminence through ships’ construction orders to be delivered during 2020 and 2021.
The data which informs Fig. 1b indicates that 25% of the construction orders, in the number of ships, correspond to ships of over 12,000 TEU (composed by 15% of the ordered fleet which is vessels of over 15,000 TEU, and 10% for those in the 12,000–14,999 range). Such 25% of units compose 67% of the global ordered fleet in terms of nominal capacity. The sum of all ships over 12.000 TEU amounts for 67% of the total ordered fleet (47%, 15,000+ and 20%, 12,000-14,999). Under such conditions, by the beginning of 2022, 16% of the whole fleet will be 15,000+ and 15% of the 12,000+.
The following charts showcase other tendencies in the global industry related to ships’ gigantisms, such as decoupling, which stems from the combination of the volatility of sea trade with the overcapacity in the shipping industry presented in Figs. 2, 3a, and b. As regards the first of the mentioned phenomena, Fig. 2 allows seeing that the evolution of the fleet’s growth (by capacity) was like that of the global and Latin American throughput. Such a trend was broken in 2009 with a great crisis. Since that time, the gap is growing between expanding the fleet’s nominal capacity and the actual movement at ports. In other words, the supply is increasing more than the demand is. Figure 2 showcases a “decoupling index,” a ratio of the change in trade rate to the change in the rate of Container ship capacity over a while. Decoupling index in year n = chain index of trade-in year n / chain index of Container ship capacity in year n. A Decoupling index of < 1 suggests that trade grows at a slower rate than container ship capacity. The decoupling index’s methodology is based on Wang (2011), who constructed decoupling indicators to analyze the changing relationship between economic development and energy consumption. Between 2000 to 2010, the decoupling index’s overall trend is < 1—this evidence decouples the maritime business.
Decoupling results from the combination of the fleet’s overexpansion (Fig. 3b) and the significant volatility of sea trade (Fig. 3a). In Fig. 3b, adding the areas between the capacity and trade curves (measured in TEU-miles) shows the surveyed period’s accumulated overcapacity. The combination of both in decoupling is verified that between 2010 and 2019, the fleet measured in nominal capacity grew at a 5.5% CAGR, but maritime trade did so at 3.8%. Regarding the evolution from 2006 to 2019, those figures were at 7.1% and 5.8%, respectively.
Finally, the current industry’s much relevant condition turns out to be its high degree of concentration, brought on through mergers and acquisitions and the formation of alliances, as the fourth graph shows. Many authors have stated that gigantism aids the process of industrial concentration. Concentration accelerated from 2009 and particularly in a contemporary fashion with decoupling, volatility, and overcapacity. Since 2012, there is a rapid increase of the shares held by alliances within the fleet’s total nominal capacity. In Figure 4 it can be seen that ...The 30 leading companies’ capacity not participating in an alliance decreases, as does that of the remaining 70 companies in the yearly top 100. There is also a marked increase in the Herfindahl – Hirschman Index (world level), already approaching that of the moderately concentrated industry, according to the guidelines of the United States Federal Trade Commission’s Bureau of Competition.
In summary, the increase in fully cellular containerships has been one of the shipping industry’s main characteristics since 2006. The pace of growth has also been notorious. Containerships have grown faster than could be expected a few years ago when almost no one expected for a vessel of nearly 24,000 TEU to find itself sailing at present. Different researchers, including those the authors of this essay, have sought to understand how vessels’ evolution would occur with the hope for previous planning that would allow the regions to adapt to the new trends to sustain competitiveness.
Consequently, it is essential to understand the vessels’ real causes, bigger and bigger coming to different markets worldwide. While increased vessel size allows for deriving economies of scale, vessels, markets, and corporate strategies have undergone significant changes in the recent past (Sánchez and Wilmsmeier 2017).
The evolution in ship sizes is indicating that pursuing economies of scale continue to form an important goal of broader corporate strategies in shipping jointly with M&A and commercial and operative agreements: “The economic rationality for mergers and acquisitions is rooted in the objective to size, growth, economies of scale, market share and market power. Co-operation between carriers serves to secure economies of scale, to achieve critical mass in the scale of operation and to spread the high level of risk associated with investments in ships” (Notteboom et al. 2009, pp. 3,4).
As it has been said before, keywords of the enlargement process are economies of scale, markets reconfiguration, and corporate strategies. However, an emerging question is whether the simple principle of economies of scale is still a valid argument, or if current tendencies need a broader and more complex discussion to understand the continued increase of vessels even in stagnating and sometimes declining markets (Sánchez and Wilmsmeier 2017). Hence, other elements are essential to be considered drivers at the same level of seeking economies of scale and the corporate strategies in shipping, which are later discussed in this paper (see Fig. 6). This includes the expansion of arteries, globalization of production and consumption, and environmental factors. In this sense, for Latin America and the Caribbean, the Panama Canal expansion started in 2006.
Simultaneously, fully cellular containerships’ continued growth has fuelled a pattern of ship redeployment, where the new biggest are directed to the main world trade routes (mainly Asia-Europe). This “cascading” process of the “old biggest” has allowed the appearance of large containerships on secondary trade routes, among which Latin America stands out, and even tertiaries.
Seeking economies of scale has led the shipping industry to create larger companies through mergers and/or strategic alliances (Sánchez and Wilmsmeier 2017; Huang and Yoshida 2013) and has consequently made elevated entry barriers: “When scale of alliance becomes bigger, the oligopolistic or monopolistic characteristics would emerge rapidly such as higher barriers of market entry, huge capital investment and pressure on freight rates because every alliance provides exact same service” (Huang and Yoshida 2013, p 4). Agarwal and Ergun (2010) build on the argument of economies of scale, but also refer to the fact that “the capacity on a ship is perishable, as once the ship leaves the port the capacity becomes unusable until it reaches a loading port again” (Agarwal and Ergun 2010, p 4). Nevertheless, other authors have highlighted concerns about the rationale behind the binomial ‘large vessels-economies of scale’: “the immediate result of the mega-ship buildings is an over-tonnaging of the world’s major liner routes” (Lim 1998, p 1).
Another positively taken driver is the environmental one; in the United Nations’ 2030 Agenda for Sustainable development, the maritime business assumes the protagonist. Energy consumption per container is already problematic. New technologies appear, too, some of which are concerned with ships and port facilities. This subject is discussed in the next chapter.
In addition to the drivers identified before, it should be considered that historically exists a high degree of uncertainty, which relates to the diversity of interacting factors in the industry (such as social, political, and fundamentally economic aspects). In the present day, the high degree of interdependence originated from globalization might cause a specific event, limited to a single actor and/or market, to trigger a massive impact situation (including economic, political, and/or social crises) until the process reaches a new balance. The referred interdependence is exemplified by the current pandemic, which has a substantial impact on maritime shipping. However, coronavirus is not the first historical event to reconfigure the balance in maritime shipping. Many previous events have been exogenous to maritime shipping, which suddenly forced substantial changes in schedules, commercial practices, or even the configuration of vessels itself. The two breakages of the Suez Canal, the first in 1956 with the closure of transits, and the second in 1967, which lead to the emergence of supertankers, are two commonly known occurrences. The construction of the Panamax vessel in 1972, which was a landmark for the size of container ships; the first and second oil crises of 1973 and 1979, among other incidents, also appear on a prospective non-exhaustive list of relevant historical facts. Among other authors, Cipoletta and y Sánchez (2009) and Stopford (2009) prove the impact of economic events related to sea shipping, while Gomez Paz (2013) provides a historical series of events that affected sea shipping.
Who could anticipate the announcement of the 18.000 TEU Triple E Maersk Mc-Kinney Møller ship, which became operational in 2013? It was difficult to predict that after the financial crisis of 2008–2009, a vessel larger than the Emma Maersk of approximately 14.000 TEU, which became operational in the year 2006 and went on to be one of the largest vessels until 2013, would be launched. During those years, the prediction of larger vessels had different visions; there were influencing factors: the low tendency in trade and an increase in ship orders (UNCTAD 2009), implications at ports (Penfold 2008), and transport infrastructures such as the New Panama Canal, with a layout that would not allow at first to pass the Emma Maersk through; all these factors slowed down the tendency. However, the hub ports such as Rotterdam and Le Havre adapted their layouts to the new challenges presented by larger ships, and other factors were at hands such as the shipping liner concentration (SYS 2009), economies of scale (Dohlie 2009), decrease in ship construction prices (Barry Rogliano Sales 2010-2020), concerns and a tendency for more sustainable vessels (Dohlie 2010). These factors encouraged the trend of growth in larger container ships.
Considering these visions, Gomez Paz (2013) based on a prospective method based on a semi-quantitative Delphi methodology (experts consensus) and a quantitative model (dynamic model, “predictive game”), predicted future scenarios and revealed that the size of vessels was limited mainly by the depth of canals and the dredging in ports and that other factors such as the new CO2 restriction measures, the price of oil, certain economic magnitudes, costs by a unit of transport and the concentration of shipping lines, drove the trend towards larger vessels, breaking the equilibrium between supply and demand. The survey results showed that by the year 2032, ships would be sailing with a capacity of between 20,000 and 26,500 TEU (minimum and maximum scenarios, respectively).
West Coast of South America expects the arrival of 400-m-long (Portal Portuario 2020). A study by Sánchez and Perrotti (2012) already estimated the arrival of large ships in Latin America, observing that the large ships that sailed on the main routes needed for progressively fewer years to reach the coasts of South America. The survey already estimated a 13,500 TEU ship’s arrival before 2020, verified by their appearance as early as 2017.