Globalisation
and Containerisation
The
birth of the container
Background
Technology
has always brought about changes in transport and shipping is no exception. It
was the Industrial Revolution in the late 1800’s that brought us steel and the
steam engine that enabled the birth of the steamship. The creation of the
general cargo liner and its scheduled voyages brought secure and regular
services globally.
This
lasted well into the 1950’s when again technology changed the face of
international shipping. The general cargo liner provided a custom transport
service at a price. It was labour intensive and very slow with many disruptions
of delivery from producer to consumer. Delays in the port because of port
congestion did not help.
Deregulation
After the
Second World war nations tightly controlled their economies using trade and
tariff tools to boost income and setting transport prices nationally and
regionally. The result was that transport and shipping costs were high and
production and manufacturing of goods and services was relatively local.
British cars were produced in the UK with British finance for a British market.
Export of cars was relatively low.
It became
clear in the 1960’s that this approach was restrictive and not boosting
nationally economies as planned.
So,
deregulation of trade and tariff barriers allowing market forces to take effect
under GATT (The General Agreement on Tariffs and Trade) and WTO (The World
Trade Organization) control came into being.
It also
enabled services such as finance and transport to operate globally. Thus, a
bank could offer financial services in another country and freight rates were opened
to market forces.
The result
was globalisation. Manufacturing and production now were free to locate
wherever the cost regime was favourable to their enterprise. Nissan opened car
production in the UK. Honda opened the first Japanese owned car assembly plant
in the USA in 1982 and shocked competitors with its ability to organise the
timely delivery of engines[1]. The notion of physical location of manufacturing
with nationality was broken. -Today we are unaware of the location of many
parts of production.
China, now
a member of GATT and WTO, could offer low-cost production across a wide range
of goods and services and we know the outcome. Western Europe and the USA lost a
major part of their manufacturing industries.
Car making
is one of the most complex activities with many levels of inputs with supplies
crossing national boundaries many times. Many parts are plastic originating in
the movement of crude oil and its refining into plastic resin and then into
bumpers, steering wheels, and audio consoles, all manufactured in different
location and dependent on a global logistics chain to ensure the parts arrive “just
in time” for assembly.
As a result,
containers carried less of finished consumer products and more of the parts and
materials for production.
Unitisation
Assembling
production items into larger units reduced handling and transport costs.
Whether it be bottles, boxes or chests, bottles of orange juice, boxes of wine
and chests of tea it changed the method of handling both on land and for
maritime transport. However, the focus was on the producer and the transport
firm and shippers had to deal with a variety of units and handling methods to
transport the goods.
It was
only later when the discipline of logistics came into being that a systems
approach to production, transport and delivery of goods placed the transport
requirements within a global logistics chain. The concern was not only about
ship arrival in port but whether the goods train or lorries could meet their
deadline to deliver the goods to the ship on time.
This
brought about the need for a standardised unit load across all forms of
transport. Herald the start of a process of specialisation in the shipping
industry.
Specialisation
Technology
can be seen as a response to a market need and so it is in the shipping
industry. To lower operating costs, improve cargo handling methods, exploit the
economies of scale in large scale volume unit ships and meet the specialised
demands for the carriage of some goods spawned a whole new range of shipping
services. Stopford[2]
argues that specialised ships are an identified niche market covering five
categories of shipping through lowered operating costs that undercut other
ships such as bulk carriers. It can be argued that specialisation covers a wider
spread in the shipping market. Oil tankers, container ships and dry bulk
carriers are also specialised ships based on the cargo they carry or the
standard unit of carriage. So, specialisation has been a recurring feature of
shipping development over many decades so that today the notion of break bulk
cargo and the general cargo ship is no longer an important feature in the
shipping market. Containerisation is one such specialisation that has radically
changed seaborne transport.
The birth of the shipping
container
[3]The origins of the use of containers
to ship goods can be traced back to the late 18th century in England
when an enterprising man designed wooden boxes to haul coal by horses from the
coal mine to canal barges for further shipment.[4] Since that time there has
been many attempts both on land and at sea to use unitisation to reduce
handling costs of cargo. However, it was not until 1955 when an American trucking
company owner Malcom McLean built the first intermodal container as a steel box
with corner twist lock fittings that standardised ship transport became a
reality. He converted a 2nd world war T2 tanker to carry containers
on deck whilst also carrying oil.
From this
small experiment in shipping technology exploded the birth of global
containerisation.
[5]The first container ship carried 58 containers in 1956 whereas today the largest container ships carry around 20,000 TEU’s. The exploitation of the economies to be gained in scaling up the size of ships and reducing the unit cost of transporting
containers started a competition between shipping companies. It started with Maersk and the E class Emma Maersk built in 2006. The biggest ship ever built in its class with a gross tonnage of 171,000 GT, a capacity of 14000 TEU driven by a giant diesel engine producing 81MW. McKinsey in its report of the future of containers suggest the peak of container ship capacity has not been reached and 50,000 TEU ships may come in the future.
[6]The competition responded and the
size of vessels increased to over 20,000 TEU. In 2021 the largest container
ship in the world is the Ever Ace from Evergreen shipping of Taiwan with a
capacity of 23,992 TEU. With a length of 400 metres, a beam of 62 metres and a
draft of 13.4m it is a giant ship.
A
consequence of this competition was a series of mergers that reduced the number
of container shipping companies. Today the five largest companies control over
60 percent of the world’s container trade.[7]
The weak link
A global
supply chain is only as good as its ability to function effectively. Larger
container ships demanded new and larger port facilities. Large land areas adjacent
to the quayside utilising fully automated handling equipment both at the quay
side and in the storage area radically changed the demand for dock labour. Less
manual work with fewer dockers with skills to operate container cranes and
stackers became the norm. Many traditional ports and dock areas were unable to
meet the criteria required for container operations. As Professor Bird noted in
his book “the march to the sea” was the inevitable result of larger vessels
with deeper drafts.[8]
These
larger ships also demanded improved seamanship to manoeuvre such high unwieldy
ships at low speed. Many port pilots needed further training to meet these new
demands.
The COVID effect
Nobody
could anticipate the effect of this global virus on the global supply chain,
but it has left its mark.
Firstly,
the outbreak of the virus in China shut much of the production in that country
and reduced the demand for container ships. As the virus spread, so isolation
and quarantine of individuals around the world and especially in Europe and the
USA changed the pattern of consumer spending. No longer able to travel their
surplus money was used on consumer products and home projects. So now there was
a massive demand for materials and services that could not be fully met. A
classic example was the production of computer chips that reduced manufacturing
capacity for smartphones, computers, car parts and consequently delays and
price rises resulted. Once production came on stream again, the supply of
containers could not meet the demand and the freight rates for a container more
than quadrupled[9]
and container ships were fully employed. Now, the ports could not handle the
massive increase in traffic and as of September 2021 there is the biggest
congestion of container ships in American and European ports producing further
delays in delivery.
The question
now is whether all the goods will arrive as planned!
[1] Levinson,
Marc: Outside the box: How globalisation changed from moving stuff to spreading
ideas:
[2]
Stopford, Martin (Maritime Economics,3rd. edition) page 470
[3] Courtesy
of MobilBox UK (https://www.mobilbox.co.uk/history-shipping-container/1472)
[4] Ripley,
David (1993). The little Eaton Gangway and Derby canal (2nd ed.) Oakwood
Press. ISBN 0-85361-431-8
[6]
Courtesy of the Taiwan English News August 8th 2021
[7]
McKinsey & Company: Container Shipping: The next 50 years, 2017
[8]
Bird,J.H: Seaports and seaport terminals: 1971
[9]
The Economist; September 18th-24th 2021: page 61
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