Mal de Mer

S. Artesian

The composition of capital is to be understood in a two-fold sense. On the side of value, it is determined by the proportion in which it is divided into constant capital or value of the means of production, and variable capital or value of labour power, the sum total of wages. On the side of material, as it functions in the process of production, all capital is divided into means of production and living labour power. This latter composition is determined by the relation between the mass of the means of production employed, on the one hand, and the mass of labour necessary for their employment on the other. I call the former the value-composition, the latter the technical composition of capital.

Between the two there is a strict correlation. To express this, I call the value composition of capital, in so far as it is determined by its technical composition and mirrors the changes of the latter, the organic composition of capital. Wherever I refer to the composition of capital, without further qualification, its organic composition is always understood.--
Karl Marx, Capital Volume 1 Chapter 25

1. What goes around, slowly, comes around, more slowly

Every year about this time the United Nations Commission on Trade and Development (UNCTAD) publishes its annual Review of Maritime Transport (RMT), and every year for the last eight years we get to read, with charts, tables, and graphs, the details of the troubles, and the struggles, the shipping industry has encountered in sailing the rough seas more or less of their own making.

We've had "over-investment" in maritime shipping based on projections of "future demand," and the immediate availability of cheap financing.

We've had "over-ordering" of ships based on that over-investment.

We've had overbuilding of the over-ordered ships by over-expanded shipyards.

We've had over-delivery of the overbuilt ships from the over-expanded shipyards.

We've had oversupply of the over-delivered ships.

We've had so much "over" introduced into the networks of international maritime transport that the industry is almost under water.

Shipyards have closed.  New orders have dropped.  Shipping lines have merged, linked into alliances sharing ships, berths, customers, and costs.  China Ocean Shipping and China Shipping Group merged. CMA-CGM has formed an alliance with China Shipping Container Group and United Arab Shipping, and has taken over completely Singapore's Neptune Orient Lines.  Maersk has taken over Hamburg Sud, and formed an alliance with MSC (Mediterranean Shipping), and Hapag Lloyd.

Thirteen shipping lines in China received more money in subsidies in China in 2015 than they earned from operations. In South Korea, Hyundai Heavy Industry, Samsung Heavy Industry, and Daewoo shipbuilding have all undertaken "voluntary" restructuring to satisfy creditors.  Hanjin Shipping declared bankdruptcy.

Despite the recent drop in orders, more shipping capacity is on the ocean, slowly steaming the trans-Pacific route, the Asia-Europe route, the South-South route.

Marx wrote that "circulation sweats money from every pore."  Sure thing.  Until it doesn't.   Then it's "water, water everywhere, but not an ounce to make into money."  The slow down in circulation in the maritime industry is summed up in two words, "slow steaming."

Originally executed as a tactic to reduce oil consumption when the price of crude was above $100 per barrel, slow steaming, slowing the speed of the ship, and even sailing longer routes around the Cape of Good Hope to avoid the usage fees for travel through the Suez Canal, slow steaming is the response to the excess capacity in the industry.  Turn-around times are lengthened, and additional ships are required to handle the same, or reduced, tonnage of freight.

This calculus of operating cost vs.reduced revenues vs. "lay-up" costs for the excess fleet has become the business plan for the entire industry.  Slow steaming is capital in a cold sweat.

2.  How we see it.......

Despite their role in the circulation of capital, ships are fixed capital; that is to say means of production that transmit their value through the production process, incrementally, over more than one cycle, or turnover period of the production and value-accumulation process.

Value expanding value, that's what capital is, or rather becomes.  More precisely, capital is the accumulated, objectified value extracting more value from, and as, the condition of labor. Labor is compelled to reflect this condition by existing as an object for exchange.  As an object, labor-power is assigned a defined space, and a defined allocation of time for which it is compensated, with that allocation being the wage.  The time confined by the wage is what is required for the subsistence of the laborer, that is to say for the reproduction of the ability to labor.

This existence of labor only as means to its own subsistence rather than as a vehicle for advancement beyond the limits of subsistence is labor as the instrument of and for capital.  The wage is provided to labor as object and in exchange the capitalist obtains labor's power to produce beyond subsistence; to produce surplus.  The surplus labor-time is surplus value.  Labor objectified is labor power expropriated as the power of the means of production.

So...(1) the means of production, transportation, circulation are objectified past labor; surplus labor- time expropriated as value, capitalized in the means of production,  and arrayed against the power of labor itself; (2) the means of production, transportation, circulation can only transfer their value through the extraction of additional surplus labor-time; (3)the accumulation of capital is an accumulation of physical dimensions-- weight, size, density, power far greater than the labor power required to animate the machinery (4)the accumulation of capital is simultaneously the change in the components of value, where the value objectified labor outweighs, overwhelms the living labor.  The increment of new value added to the existing values declines. Accumulation grows; accumulation slows down.  More ships, bigger ships, slower ships, ships on the ocean, dragging the bottom, dragging their bottoms.

That's how we see it.

3. What they see..

The bourgeoisie don't quite see it that way.  Indeed they can't; surplus value, surplus labor-time being invisible, hidden, "disappeared" inside the wage.  The bourgeoisie see cost; they see revenue; they see market share; they see profit, particularly when it's waving "good-bye."   All the conflicts and problems among these visions are supposed to be resolved in and by economies of scale, and the reduction in unit costs. 

That and those, after all, are the historical trends of capital accumulation, and as bad as things get for the bourgeoisie, they're still the ruling class, so they're sticking with what they know, and what they see, right to the end:  economies of scale, the reduction in unit costs.

In "good" times, economies of scale, increased orders of larger ships to transport anticipated volumes, and values, of trade.  In bad times, economies of scale.  In 2015, shipping lines took delivery of 211 new container ships, only half the number of ships delivered in the record year of 2008.  This reduced number of ships had a carrying capacity of  1.68 million TEUs (twenty foot equivalents-- the "benchmark" for container shipments), a carrying capacity 12.4 percent greater than the capacity of the 436 ships delivered in that record year, 2008.

Economies of scale:  Since 2008, the average container ship capacity has grown 132 percent.  In 2016, the average capacity of container ships on order was 8500 TEUs,  twice the average of the existing fleet after the growth since 2008.

The economies of scale= increased capital costs, and the reduction in unit costs:  The capital costs for the larger ships are about 50 percent greater than those of the smaller ships, but the costs
per container, per unit are less.  Construction costs, capital costs, rise less quickly than the additional capacity, so that construction costs for ships with a capacity greater than 13,300 TEUs are 30 percent less per TEU than the costs for smaller ships.

Moreover, the increased capital costs embody reduced operating costs.  For the largest and newest ships with capacity of between 16,000 and 19,000 TEUs, operating costs are estimated to be $50 per "slot" lower than the costs for operating older and smaller liners.

Operating costs are controlled through lowering the vessel speeds, which reduces the maximum horsepower required of engines.   Maximum horsepower ratings for liners of all sizes delivered in 2014 were 20-30 percent below the ratings for liners delivered in 2007.

Fuel consumption is related to vessel speed by a "cube factor;" that is to say, doubling the speed increases fuel consumption eight-fold. Reducing the speed by percentage, cubes the fuel savings.   In 2014, design speeds for liners were 8-12 percent below the design speeds for liners operating in 2007. Reducing the operating speed by 10 percent, reduces fuel consumption by 27 percent.

These efficiencies are magnified by the greater capacity of the new ships.  A ship hauling 5400 containers consumes .027 tons of fuel per container per day.  A ship hauling 18,000 containers requires .017 tons of fuel per container per day.

Short version:  daily per TEU operating costs in 2015 for an 18,000 unit ship were half the costs of a 4000 unit ship in 2008.

In addition crew sizes increase less rapidly, if at all, than ship capacity.  Maersk's EEE class ships, capacity 18,000 TEUs, can operate with the same-sized crew as the E class ships, capacity 15,000 TEUs, requiring 13 crew members, including officers. Indeed, the increasing applications of technology in the maritime industry have shifted the composition of the crews so that today over half those employed are officers.

All of these-- all these economies of scale, economies of design, construction and operation; all this slow steaming and additional capacity; all this sunk capital (pardon the expression); all this massive accumulation both expresses and creates the conditions for the slow-down in turnover of capital.

4. What it is, what it will be

Slow-steaming indeed, and slow-steaming ain't the half of it.  The ratio of TEUs loaded to total fleet capacity, providing an index to the turnover, or turnaround of the fleet; how many circuits of capital that fleet completes in a year has fallen from approximately 12.5 per year in 2012 to 8.5 in 2014 to 8 in 2015.

What this means is that regardless of the decline in unit costs, the system costs of the expanded fleet cannot be "floated."  Profitability declines, and capital has nowhere to turn except further attacks on labor in the entire system disguised as "productivity."

The larger ships, with the greater loads will require increased dredging of channels to handle their passage.  The loads themselves will introduce greater costs into the system as each ship will require more time to be loaded and unloaded, and thus occupy, for greater periods, a container ports most precious asset-- berth space, berth time.   The "unevenness" of development, internal to capital's infrastructure development places exceptional strains on the "inter-modalization" of freight-- the movement from sea to rail to truck-- that has been key to the efficiency of the service.  Port authorities, government and private, will respond to these additional strains by demanding "productivity" agreements from the labor organizations, instituting greater automation, but not just automation, but also elimination of guarantees regarding working hours, overtime agreements, and a permanent labor force.

If we are to oppose such "productivity" demands, and we do, we do so not because we oppose "technology" or automation, but because we oppose the power of, and increasing the power of capital over living labor.  "Productivity" is the subordination of the entire class to capital in that living labor, need, is subordinated to capitalist property.

Please direct all comments to this Red Marx thread

BACK                                                                                                                      NEXT