The Pitfalls of Prophecy
By Jock O’Connell
There exists a February 2005 San Pedro Bay container forecast that remarks on the “continuing growth in average ship size from approximately 3,700 TEUs in 2004 to 5,800 TEUs by 2020.”
This September, the Port of Los Angeles reported 88 vessel visits averaging 8,679 TEUs per ship. Should CMA CGM revisit its earlier intention to deploy a half-dozen 18,000 TEU ships of the MS Benjamin Franklin class to Asia-North America routes by 2020, it’s conceivable average ship size could swell to nearly twice the size the 2005 report expected.
Long-range forecasting (that is, anything beyond 3-5 years) is rife with risks. I suspect those producing such forecasts derive perverse comfort from John Maynard Keynes’ famous admonition that, in the long run, we’re all dead. For what Keynes reminds us is that neither the forecasters nor their clients are likely to be around to see if that 20-year forecast proved accurate in the end.
To be fair, the 2005 San Pedro Bay report did foresee 10,000 TEU ships arriving at the ports by 2015 and even considered the prospects of vessels as capacious as 18,000 TEUs eventually turning up at the Southern California ports. What the forecast failed to anticipate, however, was the alacrity with which major shipping lines would test the boundaries of marine engineering (not to mention the nerve of their bankers).
To be fairer still, the 2005 forecast reflected the dominant thinking within the maritime industry at the time. During a visit I made to Panama three years ago to tour the construction of the expanded route through the isthmus, I asked Panama Canal Authority officials why they had settled on the dimensions of the new set of locks. They told me that, before drawing up the blueprints a decade earlier, they had canvassed the shipping industry on the question of size. The consensus opinion was that vessels capable of carrying 10,000 TEUs were probably as large as would use the canal for the foreseeable future. Fortunately, the Panamanians wisely decided to dig deeper and wider.
I appreciate that economists have never been held in the highest regard. One favorite canard aimed our way is that the purpose of economic forecasting is to make astrology look sensible. My own dear mother was immensely troubled when I told her I’d won a scholarship to the London School of Economics. Oh lord, she said, don’t let the neighbors know.
Yet forecasts are an inescapable requirement in virtually every endeavor, all the more so when vast resources are being marshalled for major infrastructure projects — like transitioning the San Pedro Bay ports to zero-emission cargo handling equipment.
In past issues of this newsletter and on the op-ed pages of several newspapers, we have raised serious concerns about the feasibility of plans to further reduce air emissions from the San Pedro Bay ports that have in the past decade slashed emissions by as much as 96%. In last month’s issue, this commentary brought up the likelihood that the enormous cost of cutting emissions to zero would prompt shippers to accelerate the diversion of discretionary cargos away from California’s maritime gateways.
What we have not discussed is the assumption, baked into the latest Clean Air Action Plan from the Ports of Los Angeles and Long Beach, that container volumes will continue to grow through the next couple of decades. The truth is that long-term forecasts are inherently unstable, balanced as they are on a range of assumptions about the relationship between economic expansion and the volume of international merchandise trade, demographic changes, shifts in trade policies, new manufacturing technologies, climate change, etc. Even the most carefully calibrated forecasts degrade over time and should properly come with the kind of “Best Used By” labels commonly found on packaged foods.
Perhaps the most instructive, if humbling, exercise planners should undertake before embracing any forecast that looks out, say, 20 years or more is to go back in time the same number of years and itemize every major development that (a) could not have reasonably been anticipated but that (b) had materially changed the way we live, work, and conduct trade.
Who, in 1997 for example, could have foreseen that China’s GDP would increase ten-fold by today? And while cell phones existed, none of them would be particularly smart until the introduction in 2007 of the iPhone. In 1997, Amazon was still largely a seller of books and had yet to help usher in a new era of e-commerce and its disruptive impact on both retailing and transportation logistics. And then there were those ships being made ever larger.
Twenty years ago, the largest container vessel afloat was the Susan Maersk, an 8,000 TEU behemoth. Last month, CMA CGM and MSC placed orders for no fewer than 22,000 TEU ships. While those ships are destined for Asia-Europe routes, their introduction into shipping line fleets will ultimately result in more 14,000-18,000 TEU ships being cascaded to the Asia-North America trade. Needless to say, no one in 2005 expected the very steep trajectory by which container ship sizes have soared.
To end on an optimistic note, I should point out that this is not the first time in history when large ships have threatened to overwhelm seaports. Some two thousand years ago, a massive wooden vessel made its way from Egypt to the Roman port of Ostia carrying blocks of granite intended for a monument in Rome. So large was the ship that it drew crowds from the city. One observer, Pliny the Elder, later described the scene in his Naturalis Historia: “Qua nave nihil admirabilius visum in mari certum est…Longitudo spatium obtinuit magna ex parte Ostiensis portus latere laevo.”
It is certain that nothing more wonderful than this ship has ever been seen on the sea…its length took up a large part of the left side of the harbor of Ostia.
The commentary, views, and opinions expressed by Jock O’Connell are his own and do not reflect the views or positions of the Pacific Merchant Shipping Association. PMSA does not endorse, support, or make any representations regarding the content provided by any third party commentator.