Thoughts of a 53-foot revolution, when the big US box takes center stage in the container world
 Perhaps an idea whose time has come at last is the expansion of the deployment of the 53-foot container as something more than the shipping anomaly it has become over the years.
We must first acknowledge that it is a box that appears better suited to the North American road and rail infrastructure and more relevantly holds more cargo per lift than the European-scale FEU.
A big advocate of such a major shift to the 53-footer is the founder of Blue Alpha Capital John McCown, who worked with container shipping pioneer Malcom McLean for 20 years.
Mr. McCown is calling for the creation of a dedicated American ocean carrier to his shift 53-foot boxes from China. As he explains it in Singapore's prestigious shipping journal Splash 247, he sees it as an American innovation, which to some extent it is, but there does not appear to be any reason why any shipping company - even China's Cosco - could not exploit the idea even more profitability.
Put simply, there is, throughout the American hinterland a preference for the 53-footer. So much so that importers are happy enough to suffer the expense of transloading FEUs into 53-footers for onward passage commonly from the US west coast.
Eliminating transloading, would reduce the cargo handling cost, thus offsetting the increased crewing cost occasioned by the requirements of introducing a US-flagged ocean carrier into Mr. McCown's scheme of things.
"With cargo in 53-footer already," he said, "the expense and time to unload three 40-foot containers and put the contents into two 53-foot containers for efficient domestic moves goes away. Taken together the cost savings from these differences in processes are many times the incremental US flag crewing cost."
Such costly and awkward interbox transfers, involving badly positioned FEUs and TEUs in transloading yards and warehouses, inevitably finds it difficult to find an efficient pathway for re-circulation of the orphaned FEU.
So why not, Mr. McCown reasons, have the 53-footer play a starring role from start to finish? He has an all-American dream imagining a US flagged ocean carrier and US trucks running a door-to-door service. He even cites JB Hunt as an ideal candidate to be the star of this D2D drama.
The customers Mr. McCown has in mind are American big box retailers, which is fair enough. But more mysterious is his fixation on an all-American show.
A US-flagged ocean carrier, as he rightly points out, would have to absorb costs imposed by US regulations. While these can be offset by savings garnered from the elimination of transloading costs, these savings add to sheer profit for a foreign flagged ocean carrier, freed from the necessity to sign on pricey a American crew. All that matters is that the ships and its overland conveyance focus on the 53-footer.
Incoming laden 53-footers would simply be trucked and trained directly from the docks as one would does with FEUs and TEUs, which each box carrying considerably more cargo.
“A container shipping service that delivers greater value to customers should be a top of mind in analysis and planning," said Mr. McCowan. "I have a service in mind that does just that by taking steps out of the process."
He concedes it won’t work well in all trade lanes, "but it would work exceptionally well in the China-US west coast lane that moves one-quarter of US container imports,” Mr. McCown said.
His ideal service involves five mega ships in a weekly express US flag service moving only 53-foot containers in the China-US west coast lane. The relatively modest additional cost of a US crew will be more than offset by cost advantages flowing from using the equipment size that fits best with the US transport system, he said.
Mr. McCown explained that the crewing cost differential of a US flag vessel is US$13,689 per day. With the largest vessels in the China-USWC lane (19,273 TEU) and using 90 per cent utilisation eastbound and 30 per cent westbound, that crewing cost differential works out to $20.72 per loaded TEU. Compared to a recent Drewry spot rate in that lane of $5,587 per TEU, that cost is equivalent to 0.37 per cent of carrier revenue.
There is an all too human tendency to assume that good times of rich harvests are a permanent feature of life. Doomsters also tend to think that whatever the course in which we find ourselves is the course we are likely to follow. But the future - good or bad - changes unpredictably like the weather.
Anyone who takes even a cursory glance at the industries history, can see the roller coaster we have been on, with industrial fashions, just-in-time, slow steaming, decarbonisation, rushing in and out each taking the place of each other every few years.
The current vogue, which forms the foundation of Mr. McCown's belief, is that this season of sky high rates, massive port congestion, supply chain disputation, and today's Covid-driven transfer of consumer spending from services to goods through ecommerce channels, is likely to be a forevermore phenomenon.
It suits those who say it is, and since so many people are saying it, the notion takes on a life of its own as such oft-repeated notions do.
True, container shipping is reporting exceptional results with record profits. In the third quarter of 2021, it had total net income of US$48.1 billion for a profit to revenue margin of 42.7 per cent.
Indications are that the sector’s future financial performance will be well ahead of results it has reported in the past, he said. These remarkable profits will be a catalyst for potential new entrants to look into entering the industry.
"Indeed, there has never been a time where such inquiry was so warranted by the facts," Mr. McCown said.
One can agree that the macro facts provide a strong tailwind, and company that focused on how to differentiate itself.
This is not to disagree with Mr. McCown. It is perfectly credible that the age of the 53-footer may well be upon us. But one caveat might well be that his notion is too confining and dangerously so. A company adopting this narrow strategy might well be advised to widen its scope beyond the US west coast.
As mentioned earlier, foreign flagged vessels a better positioned to take advantage of what might well are called the "53-foot Revolution" because they can provide the same service more cheaply than a US-flagged rival, not being encumbered with the costs Old Glory imposes.
With the Panama expansion, 13,000-TEUers can transit today, making the Gulf and US east coasts at least as promising as the west coast.
And while California is a good market, it has very little to fill backhaul containers. Not so US east coast ports, which boast of a balanced large and growing import and export volumes. Think of how those 53-footers could offer more cube more cheaply than those short stubby FEUs.
We may well be on the cusp of the 53-foot Revolution.
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