Part I: Crash!

On 6th March 2023, the MSC Giovanna — a 178m long container ship — unloaded the last of its cargo at Kulayyah port in Saudi Arabia. It left Kulayyah empty, floating 3 meters higher in the water than usual. If you looked out from the shore, you would have been able to see the new paint job on the hull, applied just over a year ago. From there, it headed to Alang shipbreaking yard in Gujarat, where it now waits a few miles off the coast. Soon what’s left of the crew will disembark, and at high tide the captain will crash the ship into the beach at full speed. Barely paid workers will then proceed to strip the boat using hand tools, separating steel from lead, asbestos, mercury, and PVC, to be sold on to local foundries: even the asbestos is sold.

In the same week, the same shipping company launched the MSC Irina, the largest container ship in the world. It had to sail down the mouth of the Yangtze River partially dismantled, in order to fit. It will be followed by 11 other ultra-large container ships this year, all owned by MSC, that together have a carrying capacity of more than Libya’s entire annual port traffic.

MSC is not alone in this: ship order books are swollen with massive container ships, ordered by the major carriers during the boom times of the so-called ‘supply chain crisis’. Container shipping has historically been an industry hellbent on chasing market share, a constant arms race of producing bigger ships, pushing the envelope of economies of scale to leviathan proportions. But these new ships are now not even necessarily wanted: carriers are currently scrambling to delay orders, postpone shipbuilding, find cheap ‘parking’ to lay up massive vessels and take them out of the system, whilst trashing their older fleet. The MSC Giovanna and the 53 other ships trashed already this year are considered to be the first murmurings of an incoming tsunami of ship scrappings, as the industry trips up over itself to avert what’s being dubbed the ‘overcapacity crisis’. The latest reports indicate at least 395 more container ships are heading to scrap beaches over the next two years.

What’s happening? Over the pandemic, backed-up ports and shortages in containers sent freight rates skyrocketing, leading to record profits for the major carriers. A slot on a ship that might have cost $1500 pre-pandemic soared to $9000. Carriers netted historically high profits, paying out decent dividends to shareholders, whilst ordering more and larger ships in a buying frenzy. For container shipping companies, the supply chain crisis was never a crisis: it was a buffet.

And then, of course, things stabilized. As supply chains around the world began a process of, as Bloomberg put it, ‘healing’, carriers found themselves laden with more and more empty space aboard ships, space that threatened to crash the brave new world of grossly inflated post-pandemic shipping rates. 

In simple terms, the container shipping market forms between those who are looking to have cargo shipped (shippers), and those who have the means to carry that cargo (carriers), with a price (the freight rate) forming between the supply of and demand for container space on a given route. Now the industry is locked in the beginnings of a rate war: on one side, carriers seeking to manufacture scarcity within the core of the world’s circulatory systems, and on the other, shippers who just want their ~$1500 rate back.

Within critical logistics studies, the more-or-less standard Marxian take is that circulation is now an extension of production, a “mutation in the overall structure of capitalism, according to which every aspect of the production process is now subordinated to the logic of circulation” ¹ . In the Grundrisse, Marx notes how the more production comes to rest on exchange value, the more the “physical conditions of exchange — the means of communication and transport — the annihilation of space by time” become central to the production process, a dynamic accelerated by the logistics revolution of the mid-late 20th century. It should then follow that changes to circulatory infrastructure correlate to shifts in production: in this case, growth in vessel capacity follows growth in global consumer demand. Commodities just kind of ~flow~, and the world’s logistical systems diligently rise to the task of helping them do just that.

But if we take seriously the claim that supply chain capitalism submits production to the condition of circulation — a claim we see in the writings of Charmaine Chua, Jasper Bernes, Alberto Toscano, Martin Danyluk, and others — then we must also recognize how the sphere of circulation begins to operate much like a producer in its own right. Rather than existing as a utilitarian appendage to production, circulation — understood here as an oligopolistic business, not an abstract economic process — is in the same game as producers, and like any other producer, seeks to rig the sphere it operates in towards its own benefit. This seems like a fairly obvious thing to point out, but both mainstream economics coverage and critical logistics commentary too readily subsume circulatory infrastructures as simple enablers of commodity flows, rather than an industry driven by the same strange and savage tendencies that characterize value creation in production today.

This is also something we’re seeing in financial strategy reports. Take, for example, an influential recent note to clients from Zoltan Poszar of (recently collapsed) Credit Suisse Bank, titled ‘Money, Commodities, and Bretton Woods III’. He begins by separating ‘nominal’ factors — interest rates, price levels: basically, money – from ‘real’ factors: actual commodities and the infrastructure that moves them. Using the example of additional burdens on oil shipping wrought by Russian sanctions, he goes into granular detail on the parallels between the flow of money and the flow of commodities. Whilst the analysis is thorough, it’s animated by the underlying assumption that the shipping system will do its best, within its means, to smoothly move things from A to B, with as little friction as possible. This assumes a shipping system that is efficient, contained and acting in the interests of getting commodities to where they need to be for the good of the world market, which shipping, emphatically, is not — especially right now.

Moreover, this analysis (that charts commodities alongside the system that moves them) overlooks the way that the act of shipping is, itself, a commodity — a point worth making explicit given how often the inner workings of the shipping industry are subsumed under commodity markets. Traditionally, this commodity is — as Martin Danyluk points out by way of Marx — a change of location ² . But more recently, in lieu of an actual change of location, the reasonable promise of one will also do, manifested through the production of more and more empty spaces for containers on ships. And now, in the era of unprecedentedly oligopolized shipping, simply producing more of that commodity (more efficient changes of location, or more spaces on ships) is not necessarily the most profitable strategy. Like any commodity operating in a financialized market, its growth in value is dependent on producing and sustaining the conditions in which it is overvalued — even if this means crashing recently refurbished container ships into beaches.

Although a common assumption in mainstream coverage of the container industry is that vessel growth follows consumer demand, this is an all too simplistic view of what drives industry behavior. Since the 2008 crash, growth in container ship size has become increasingly decoupled from trade throughput, with fleet capacity growth outstripping demand almost every year between 2010 and 2017 ³ .

A significant driver of this has been liners’ relentless pursuit of economies of scale. It’s easy to see why this would appeal in principle: a container ship that is 213m long and 26m wide can carry 1,200 TEU. Double these dimensions, and it now carries upwards of 20,000 TEU. A doubling of size increases capacity by a factor of seventeen. There is as Hercules Haralambides points out, hardly a better example of the principle of economies of scale than this⁴ .

Seeking economies of scale to reduce the unit cost of shipping has driven the industry toward its gargantuan proportions at an eye-watering pace: in thirty years, the size of the largest container ship in service has roughly quintupled, from 4,900 TEU in 1994 to 24,436 TEU in 2023. A common view on this development is that it lowers transport costs and facilitates long-distance trade. Containerisation may have sent transport costs plummeting back in the 70s, when cargo was loaded and unloaded loose (known as ‘breakbulk’), but can increases in scale keep leading to reduced costs? Rather than taking the smooth interoperability of logistical flows at face value, it’s worth looking below deck to figure out who it’s actually working for, if it’s working at all: cracking the system open reveals that it’s not even good at doing the one thing that everyone says it’s so good at.

In practice, the economies of scale principle come with caveats that ultimately make it a highly questionable strategy. Firstly, it requires fully laden ships, which is very difficult to achieve in practice. Secondly, economies of scale decrease as ship size increases: research suggests there are significant economies of scale up to 4,500 TEU, and after this, the gains become marginal (the latest generation have reached 24,000 TEU). Lastly, if all liners individually pursue this strategy, the resulting overcapacity can create situations where gains are offset by lower freight rates.

If the business case for mega-ships is itself questionable, for ports and shippers it is downright antagonistic. Economies of scale sought by liners through larger ships create diseconomies of scale for ports: assuming the docked ship’s turnaround time stays constant, the cost of handling cargo port side actually increases as ship size increases. Zooming out of specific port conditions, the very network logics preferred by shippers and carriers stand in tension with one another. The protagonist of ‘circulationist’ production has long been the just-in-time model, which fuses circulation into the production process by emphasizing timely delivery of parts to reduce inventory costs. Yet, anyone intuiting that mega-ships don’t exactly evoke agility would be right to suspect that optimizing for a profitable mega-ship fleet and a just-in-time supply chain are far from the same. Indeed, the way to ensure  mega-ships sail (nearly) full is to reduce the number of sailings and destination ports. The reduced frequency of carrier itineraries negatively impacts shippers’ inventory costs, defying the core principle of just-in-time. 

This trinity of carrier, shipper, and port remains highly simplified, but it helps unpack conflations of production and circulation, and the idea that the latter exists to facilitate the former. The liner industry, driven by its own incentives, is stuck in a vicious cycle: overcapacity lowers freight rates, which leads to cost-cutting, the pursuit of cost-cutting leads to expansion, and expansion leads back to overcapacity. Mega-ships result from impulses endogenous to the industry itself rather than exclusively from increases in cargo demand.

Another way that shipping companies reduce overall capacity is by running ships slower. Longer journey times stalls the system, putting on brakes that amount to less overall available spaces on container ships each month. In the years after 2008 this practice became widespread, to deal with a slump in demand. This is also another strategy that carriers are adopting wholesale now, to take capacity out of the system in order to prop up prices – whilst providing a PR-friendly performance of ‘going green’ by using less fuel. One of the many differences between 2008 and now is, as we’ve stressed, ship sizes: container ships built today are on average twice as large as in 2008. Larger ships going slower means a much less agile and flexible system, once again underscoring how shipping has evolved into something messy that at the bottom line just doesn’t fulfil its purported promise of things moved quickly and efficiently. What’s interesting here is how slowing down — something that might come straight out of a degrowth manifesto — has become business strategy for one of the most oligopolistic, polluting and exploitative industries in the world, a tactic to maintain inflated prices. It is not speed that has under girded the record profits of the shipping industry in recent years, but slowness: first through the bottlenecks wrought by pandemic-related supply chain breakdown, and now through the wholesale adoption of slowness as a price-fixing mechanism.

Again, this runs counter to how logistical systems are often framed, in both mainstream business coverage and its critical counterpart. In a classic critical piece on the logistics revolution, in which “capital turned to logistics”, Jasper Bernes suggests that “logistics is a simple accelerator of commodity flows”, with the caveat that it can’t be understood solely as a quantitative increase in speed (decreasing the turnover time of capital), but also as the qualitative pursuit of “agility.” What he’s talking about here, broadly, is Just-in-Time manufacturing, but the era of JIT has been fizzling out; the pandemic was the nail in the coffin. Against environmental and economic collapse, Bernes predicts that “logistics will become more and more the science of risk management and crisis mitigation”. This may still hold true for buyer-side logistics, but the shipping industry itself seems far more interested in sustaining conditions of calculated crisis than mitigating them, by arbitrarily gaming supply to buoy up prices. Once again, this only makes sense when we stop taking logistics at face value as the mechanism that moves commodities — the circulatory appendage to processes of production — and instead approach the act of shipping as a commodity. One that, like any other, is susceptible to crises of overaccumulation.

We have so far tried to argue that the view of the sphere of circulation as the taken-for-granted conduit designed to facilitate, smooth, and accelerate the flow of commodities underestimates the force with which this sector is able to assert itself in ways that don’t necessarily align with shippers or ports. In this section, we go one step further, to argue that if the sphere of circulation is to be recognized as functioning also as a sphere of production (of container space), then it will eventually become subject to the same logics of overaccumulation and require its own set of spatial ‘fixes’. 

In writing on capital’s spatial fix as originally put forward by David Harvey, circulation and transportation are seen to have emerged as a set of infrastructures that allowed for capital ‘fixes’ through spatial extension — enablers of new places for capital to reproduce. But what if logistics – in this case container ships and their carrying capacity — are in need of their own fix when they go into overproduction? This extension of the spatial fix — or the logistical fix as Martin Danyluk calls it ⁵ — as something that logistics not only enables but also needs for itself is an attempt identify empirically the claim that production has become subordinate to the condition of circulation (cf. Bernes), or as Jason Monios argues via Deleuze and Guattari, that ‘the points are subordinated to the trajectory’⁶ . In what follows, we give two examples of what this fix looks like in practice: the cascading spillover effect of the mega-ship phenomenon across sea routes all over the world, and attempts to adapt regional production to local particularities of circulation.

The Great Cascade

Research by César Ducruet and Justin Berli shows that of 1000 ports connected by container ships, only 67 (6.7%) welcome mega-ships⁷ . You could be forgiven for thinking that the mega-ship phenomenon affects only a small number of ports (which are some of the principal loci of containerized trade anyway), but in practice, the introduction of larger ships at the upper tail of the size distribution reverberates across the entire network through a ‘cascade effect’.

The formerly largest ships, now outsized and deemed less efficient, move down to secondary trade routes, in turn displacing the ships operating on those routes, and so on. This means that ports entirely removed from the prospect of ever accommodating a mega-ship nevertheless have to heed this trend in the form of larger ships trickling down to their routes, regardless of whether this corresponds to any actual increase in cargo demand. Cascading ships require ports to make infrastructural adjustments, on liner’s terms: should they be successful in making these infrastructural adjustments to a larger ship (despite there being no accompanying demand), the result is a port still deemed to be underperforming due to the higher relative shipment costs of carrying the same amount of cargo on a larger ship. This port will then again be required to compete against other ports by finding ways to increase trade throughput. The cascade effect generates conditions of underperformance, which must then be ‘fixed’ through increased throughput.

When Production Follows Circulation

Perhaps the clearest way we see production becoming subordinate to the sphere of circulation is through recommendations offered by consultancy reports targeting so-called ‘emerging’ markets in the Global South. In countries that import mainly manufactured goods but export mainly raw materials or bulk commodities, containers routinely arrive in the country full, but leave empty. To remain considered a desirable port of call, reports recommend they adapt their export products accordingly, reshaping production to fit the regional mold of circulation. Incidentally, this import/export imbalance is also the case for largely postindustrial countries such as US and Europe, whose main container exports — in volumetric terms — are said to be ‘shit and air’: containers full of trash to be taken to overseas landfill sites, or simply empty space (needless to say that the recommendations angled towards Global South countries are not repeated here).

A 2018 report from the International Transport Forum about the impact of mega-ships on the port of Buenos Aires concludes that “focusing on high value added export products might be a way to avoid the current empty backhaul containers […] which represents almost half of all outgoing containers at the moment.” Similarly, a 2018 report by PricewaterhouseCoopers notes that it would be a “significant advantage” to African ports if “exports could be processed or beneficiated to a state where they can be exported as containerized freight”. The report also recommends that countries consider “tariff adjustments which seek to benefit exporters of beneficiated and manufactured goods” — purely to ensure there is something to fill the outgoing containers. Here, it’s circulation that sets the tune for production, not the other way round.

Container shipping is weird, in that it doesn’t really do the thing that literally everyone says it does. When examined up close, its operating principles are markedly different from what dominant imaginaries of containerized just-in-time circulation suggest. Current turbulence across the industry illuminates just how much things have changed since 2008. Through oligopolisation and a megaship arms race that helps pretty much no one, the core of the world’s transport system has become unwieldy — maladaptive to actually moving things, and no longer capable of sustaining its own terms of speculation. Spectacular disruptions (like the Ever Given, wedged in the Suez Canal) may temporarily illuminate the brittleness of the world’s supply chains, but the more deep-seated issues underlying how container shipping acts according to its own business incentives — and asserts this over others — can be found in the cracks along the smooth lines of business-as-usual logistics, if one just knows where to look. 

One way that we’ve been thinking about logistics recently is as a project of time management, at planetary scale. Logistics seems to no longer be the annihilation of space by time, but the management of time (or contingency, or money) through the perceived capacity to manipulate space — bigger ships, more containers, and bigger ports to accommodate them. But as it becomes harder and harder to sustain the promise of things moved quickly, the whole thing begins to collapse. One question that lies at the forefront of much recent attention to supply chains and commodity flows is, ‘can the current map of financial flows survive a remapping of the world’s shipping system?’. A more pragmatic question might be whether the shipping system can survive its own financially-minded, oligopolistic death drive — or even, in its current bloated state, if it should. Virilio famously said that the invention of the ship is the invention of the shipwreck. To return to where we started, now it seems as though the mass shipwreck is the inauguration of shipping’s weird new era.