“I feel the need, the need for speed.” Every Navy fighter pilot—and those of us who admire them—relates to Maverick’s and Goose’s classic line in Top Gun. When it comes to F-14 Tomcats and most military applications, the logic and effectiveness of speed is paramount. That is why all military personnel and their personal equipment get to where they need to be via air transport. Huge cargo planes are also used to move the first wave of operational equipment and supplies needed for them to begin their mission. However, their large equipment and vehicles, along with the supplies needed to complete their mission, must move by cargo ship. Timing—with sooner rather than later being the preference—drives a well-choreographed multi-layer logistical approach.
Even within the sealift layer, there is a preference for speed. The Fast Sealift Ships of the Military Sealift Command moved 20 percent of the unit equipment and related supplies in the first phase of Operation Desert Shield/Desert Storm. Originally built in the early 1970’s by pioneering container shipping company Sea-Land, the 33-knot speed of the eight SL-7 Class ships became cost-prohibitive for commercial use when fuel prices shot up by a factor of ten. However, ships that were an albatross commercially were turned into useful greyhounds with excellent military utility by the U.S. Navy. In the military sphere, the bottom line is not on cost per ton-mile, but rather on how sealift best supports the effectiveness and safety of America’s warfighters.
The commercial maritime sphere, on the other hand, is driven primarily by cost rather than speed. The focus on reducing the cost of moving anything from one part of the globe to another has resulted in immense benefits to the world. In addition to the economic benefits and broadened choices that the modern maritime cargo conveyance system provides to billions of people, globalization underwritten by maritime trade also preserves national security.
Speed is still a factor in the commercial sphere but the need for speed there has little to do with the need for speed in the military sphere, as the significant cost of higher speed plays a major balancing role. It is axiomatic that the economic cost of transport goes up as speed increases. This is true both within transportation modes and across modes, with the latter having a geometric relationship between speed and cost. Rail and truck are both faster than water, but have linehaul costs that are 4 and 12 times higher, respectively. Excluding the 15 percent of international trade moved by land, 98.62 percent moves by container ship with only 1.38 moving by air transport1. Relative costs drive that allocation—it is orders of magnitude more expensive per ton-mile to move freight by air than by water.
Water is the cheapest mode of transport, but freight shippers do not always take full advantage of this fact when it is linked with an intermodal movement in the quest for speed. Consider containers moving from Shanghai to New York, two of the largest container ports in the world. The fastest routing—via the West Coast and then double-stack train across the country—will get it there eight days before an all-water routing via the Panama Canal. Saving those eight days comes at a difference in cost of $655 per twenty-foot equivalent unit (TEU) for the entire route. The total linehaul cost for the intermodal routing is $973 per TEU compared to just $318 per TEU for the all water routing. Linehaul costs includes all operating, fuel and capital cost of the ship and rail but excludes all other costs. That number is based on cost of 20.33 cents per TEU-mile for a 400 TEU double-stack train compared to 2.61 cents per TEU-mile for a 14000 TEU container ship. In effect, customers are paying approximately $82 per container per day their goods arrive earlier.
In addition to the economic cost difference, the routing options also result in a noteworthy difference in carbon emissions. The double-stack train is driven by three engines generating 12000hp of locomotive power while the container ship has a single 84000hp engine. However, the ship can move 35 times as much cargo with just 7 times the horsepower, resulting in an 80 percent reduction in carbon emissions even before taking into account the scale efficiencies of the larger ship engine.
It is worth underscoring that this eight day difference in shipping times comes at the end of a longer supply chain and should be considered in the context of the total time involved in ordering and producing goods in Asia. When the time at sea, the time and movements within Asia, and the production time is factored in, that eight days typically represents a single-digit percent of the total length of many product supply chains.
When engaging shippers in granular conversations regarding transit time, terms like “predictability” and “consistency” come up and both are often associated with speedier movements. There was a time when slower modes were also less predictable modes, but that has dissipated with an increase in schedule reliability across modes, particularly rail and water. Putting aside the pandemic that disrupted schedules across the shipping industry, container shipping today has schedules that can generally be counted on for their reliability. An eight day longer supply chain does result in higher inventory cost, but at a typical shipper borrowing cost today of 6 percent, a 40-foot container would need to be carrying goods worth $1 million before inventory carrying costs would equal the underlying linehaul cost advantage of all-water service. As that amount is more than ten times the average cargo value in a 40-foot container, inventory carrying cost rarely, if ever, justify the speedier intermodal routing.
The United States needs a national port strategy. One of conclusions that would likely come out of such a strategy would be a preference for more use of all-water and mostly-water routings. This not only makes sense from an economic and environmental standpoint, but also it helps to alleviate capacity constraints that many ports are approaching by improvingefficiency of the overall system. The predictable capacity caps at U.S. ports need to be addressed with added container terminal capacity.
Besides the economic benefits, available reserve container terminal capacity is vital for national security reasons. The ports on the West Coast were the most impacted by congestion during the pandemic. Large volumes of containers moving eastward cross-country via double-stack trains contributed significantly to that congestion, completely using all reserve capacity. It is those ports that would be needed the most for military sealift in the event of an invasion of Taiwan by China or other major crisis in the Western Pacific. Not having adequate reserve capacity to handle emergency needs puts national security at risk. Transitioning containers from intermodal, cross-country routings to all-water routings would therefore enhance national security.
Shippers of containers generally embrace the goal of reducing carbon emissions but then brace to hear what it will cost to achieve a pronounced reduction. However, switching from intermodal routings to all-water routings for cargo moving from Asia to the East Coast is truly a sought-after unicorn: a change that would generate a pronounced reduction in carbon emissions while also reducing costs.
A 67 percent reduction in underlying costs from $973 per TEU to $318 per TEU and an 80 percent reduction in carbon emissions looks like a win-win even with the modest increase in overall transit time. The benefit of an action reducing port congestion and therefore enhancing national security also counts in favor of all-water routing. That is an opportunity that needs to be explored by any American shipper.
John D. McCownis a Non-Resident Senior Fellow at the Center for Maritime Strategy. Mr. McCown has four decades of experience related to the shipping industry. His research, analysis and writings for the Center for Maritime Strategy focus on the intersection of merchant shipping and maritime commerce with national security
The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed.
Center for Maritime Strategy
“I feel the need, the need for speed.” Every Navy fighter pilot—and those of us who admire them—relates to Maverick’s and Goose’s classic line in Top Gun. When it comes to F-14 Tomcats and most military applications, the logic and effectiveness of speed is paramount. That is why all military personnel and their personal equipment get to where they need to be via air transport. Huge cargo planes are also used to move the first wave of operational equipment and supplies needed for them to begin their mission. However, their large equipment and vehicles, along with the supplies needed to complete their mission, must move by cargo ship. Timing—with sooner rather than later being the preference—drives a well-choreographed multi-layer logistical approach.
Even within the sealift layer, there is a preference for speed. The Fast Sealift Ships of the Military Sealift Command moved 20 percent of the unit equipment and related supplies in the first phase of Operation Desert Shield/Desert Storm. Originally built in the early 1970’s by pioneering container shipping company Sea-Land, the 33-knot speed of the eight SL-7 Class ships became cost-prohibitive for commercial use when fuel prices shot up by a factor of ten. However, ships that were an albatross commercially were turned into useful greyhounds with excellent military utility by the U.S. Navy. In the military sphere, the bottom line is not on cost per ton-mile, but rather on how sealift best supports the effectiveness and safety of America’s warfighters.
The commercial maritime sphere, on the other hand, is driven primarily by cost rather than speed. The focus on reducing the cost of moving anything from one part of the globe to another has resulted in immense benefits to the world. In addition to the economic benefits and broadened choices that the modern maritime cargo conveyance system provides to billions of people, globalization underwritten by maritime trade also preserves national security.
Speed is still a factor in the commercial sphere but the need for speed there has little to do with the need for speed in the military sphere, as the significant cost of higher speed plays a major balancing role. It is axiomatic that the economic cost of transport goes up as speed increases. This is true both within transportation modes and across modes, with the latter having a geometric relationship between speed and cost. Rail and truck are both faster than water, but have linehaul costs that are 4 and 12 times higher, respectively. Excluding the 15 percent of international trade moved by land, 98.62 percent moves by container ship with only 1.38 moving by air transport1. Relative costs drive that allocation—it is orders of magnitude more expensive per ton-mile to move freight by air than by water.
Water is the cheapest mode of transport, but freight shippers do not always take full advantage of this fact when it is linked with an intermodal movement in the quest for speed. Consider containers moving from Shanghai to New York, two of the largest container ports in the world. The fastest routing—via the West Coast and then double-stack train across the country—will get it there eight days before an all-water routing via the Panama Canal. Saving those eight days comes at a difference in cost of $655 per twenty-foot equivalent unit (TEU) for the entire route. The total linehaul cost for the intermodal routing is $973 per TEU compared to just $318 per TEU for the all water routing. Linehaul costs includes all operating, fuel and capital cost of the ship and rail but excludes all other costs. That number is based on cost of 20.33 cents per TEU-mile for a 400 TEU double-stack train compared to 2.61 cents per TEU-mile for a 14000 TEU container ship. In effect, customers are paying approximately $82 per container per day their goods arrive earlier.
In addition to the economic cost difference, the routing options also result in a noteworthy difference in carbon emissions. The double-stack train is driven by three engines generating 12000hp of locomotive power while the container ship has a single 84000hp engine. However, the ship can move 35 times as much cargo with just 7 times the horsepower, resulting in an 80 percent reduction in carbon emissions even before taking into account the scale efficiencies of the larger ship engine.
It is worth underscoring that this eight day difference in shipping times comes at the end of a longer supply chain and should be considered in the context of the total time involved in ordering and producing goods in Asia. When the time at sea, the time and movements within Asia, and the production time is factored in, that eight days typically represents a single-digit percent of the total length of many product supply chains.
When engaging shippers in granular conversations regarding transit time, terms like “predictability” and “consistency” come up and both are often associated with speedier movements. There was a time when slower modes were also less predictable modes, but that has dissipated with an increase in schedule reliability across modes, particularly rail and water. Putting aside the pandemic that disrupted schedules across the shipping industry, container shipping today has schedules that can generally be counted on for their reliability. An eight day longer supply chain does result in higher inventory cost, but at a typical shipper borrowing cost today of 6 percent, a 40-foot container would need to be carrying goods worth $1 million before inventory carrying costs would equal the underlying linehaul cost advantage of all-water service. As that amount is more than ten times the average cargo value in a 40-foot container, inventory carrying cost rarely, if ever, justify the speedier intermodal routing.
The United States needs a national port strategy. One of conclusions that would likely come out of such a strategy would be a preference for more use of all-water and mostly-water routings. This not only makes sense from an economic and environmental standpoint, but also it helps to alleviate capacity constraints that many ports are approaching by improvingefficiency of the overall system. The predictable capacity caps at U.S. ports need to be addressed with added container terminal capacity.
Besides the economic benefits, available reserve container terminal capacity is vital for national security reasons. The ports on the West Coast were the most impacted by congestion during the pandemic. Large volumes of containers moving eastward cross-country via double-stack trains contributed significantly to that congestion, completely using all reserve capacity. It is those ports that would be needed the most for military sealift in the event of an invasion of Taiwan by China or other major crisis in the Western Pacific. Not having adequate reserve capacity to handle emergency needs puts national security at risk. Transitioning containers from intermodal, cross-country routings to all-water routings would therefore enhance national security.
Shippers of containers generally embrace the goal of reducing carbon emissions but then brace to hear what it will cost to achieve a pronounced reduction. However, switching from intermodal routings to all-water routings for cargo moving from Asia to the East Coast is truly a sought-after unicorn: a change that would generate a pronounced reduction in carbon emissions while also reducing costs.
A 67 percent reduction in underlying costs from $973 per TEU to $318 per TEU and an 80 percent reduction in carbon emissions looks like a win-win even with the modest increase in overall transit time. The benefit of an action reducing port congestion and therefore enhancing national security also counts in favor of all-water routing. That is an opportunity that needs to be explored by any American shipper.
John D. McCown is a Non-Resident Senior Fellow at the Center for Maritime Strategy. Mr. McCown has four decades of experience related to the shipping industry. His research, analysis and writings for the Center for Maritime Strategy focus on the intersection of merchant shipping and maritime commerce with national security
The views expressed in this piece are the sole opinions of the author and do not necessarily reflect those of the Center for Maritime Strategy or other institutions listed.