All out at sea

by Marc Levinson

Nonstop (Issue III/2019)

In the early 1950s goods still moved across the ocean in breakbulk ships, vessels with several levels of open space beneath the top deck. Most of the cost of transporting goods internationally was incurred in the loading and unloading of ships. This was a complicated business. A typical ship sailing between the United States and Germany usually carried 200,000 separate items, from wooden crates of machinery to barrels of chemicals to rolls of steel, making the process of loading and unloading a highly complicated – and expensive – business.

When a factory or warehouse had goods to export by sea, the freight would be loaded piece by piece onto a truck or rail car, which would deliver it to the waterfront. There, each item was removed from the vehicle, recorded on a sheet of paper, and carried to storage in a warehouse alongside the dock. When the ship was ready to load, the cargo was removed from the warehouse, counted once more, and hauled or dragged to shipside. Dock workers assembled a few boxes and barrels atop a wood board that was lifted by a shipboard winch and lowered into one of the ship’s four or five holds, where another gang of dock workers would find a place to stow each item. Loading and unloading a single ship could easily take a week and require the services of a hundred or more dockers.

The path to containerization was forged by a man who knew nothing at all about ships. Malcom McLean started in business driving a single truck in 1933, and by the early 1950s had built one of America’s most profitable road-hauling companies. Congested highways were making truck traffic slower and less punctual in that pre-expressway age, and McLean thought he might gain a competitive advantage by putting his trucks on board ships and sending them down the coast by water rather than by road. U.S. government regulators would not permit a truck line to own ships, and investigation showed that putting trailers on wheels aboard vessels would lead to an inefficient waste of space. Instead, McLean decided to ship only the trailers, leaving the wheels behind. He sold his truck line and bet his fortune on a business that did not yet exist.

McLean succeeded because he approached containerization quite unlike the ship owners and railroad managers who had tried it before. He understood that reducing the cost of shipping goods required not just a metal box, but an entire new way of handling freight. Every part of the system—ports, ships, cranes, storage facilities, trucks, trains, and the operations of the shippers themselves—would have to change. The key was an international accord on container standards.  In 1967, after years of negotiations, the International Organization for Standardization agreed on a design for a 12.2-meter box with uniform steel fittings at each corner and sufficient internal reinforcement to support several boxes stacked on top. Once this design was approved, ensuring that a standard container would fit on any ship and could be lifted by a crane anywhere in the world, the container shipping business took off like a rocket.

Ships are the costliest part of containerization, but containerization isn’t really about ships. Rather, it is a highly automated system for moving goods with a minimum of cost and complication. A modern container port is more like a factory than like the docks of the pre-container era. In 1956, Malcom McLean’s first ship carried 58 containers. The largest container ships today sail from Asia to Europe with more than 11,000, tended by a crew of around 20. They call at specialized terminals in ports such as Hamburg and Bremen, where only a handful of workers are involved as enormous cranes lift incoming containers from the ship, place them on transporters that take them to a storage yard, and simultaneously load outbound containers in designated locations aboard the vessel. The process is repeated every two minutes, or even every 90 seconds. A constant flow of trucks, trains, and barges moves containers into and out of the terminal, often assisted by automated vehicles without human operators. The waterfront is busy with activity but almost devoid of workers.

For the logistics industry, containerization was a blessing and a curse at the same time.  On the one hand, it catalyzed world trade, but on the other hand, it disrupted the entire transportation sector. Starting in the 1960s, dozens of ship lines fell by the wayside, dock workers lost their jobs by the thousands – and any important port cities, from London to San Francisco, that lacked the space to accommodate thousands of containers near the docks had to reinvent themselves as their ship traffic moved away. Meanwhile, four large companies – Maersk Line, based in Denmark; Mediterranean Shipping of Switzerland; the French company CMA CGM; and China Ocean Shipping Company – dominate the container shipping industry today.

Since the financial crisis of 2008-09, however, sea trade has expanded only at about the same rate as the world economy. After acquiring so many gigantic vessels, the ship lines have far more capacity than they need. The result has been a continual rate war. Shipping a 12.2-meter box from Shanghai to Rotterdam, Europe’s largest port, cost approximately $1,500 in the spring of 2019. This translates to €0.25 to move one pair of athletic shoes 22,000 kilometers. For all practical purposes, ocean shipping is nearly costless.

Though containerization itself has been an economic success story, there are many signs that international trade in the manufactured goods that fill most containers will stagnate in the years ahead. As factory automation makes wages a less import cost factor, manufacturers are moving goods production closer to end users in high-wage countries. And the widespread adoption of electric vehicles over the next few years will probably drastically reduce shipments of auto parts, one of the most important cargos containerships carry.

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