INTRODUCTION TO ECONOMICS
Lesson 14
THE CONTAINER REVOLUTION
The “Container Revolution” is the term used to refer to the dramatic changes that have occurred since the 1960s by the introduction and use of containers to transport dry goods throughout the world. A container, in this context, is a standardised 20 or 40 foot, strongly constructed, reinforced and sealable box, capable of transporting most forms of dry goods and which can be padded, refrigerated or heated as desired. It has become a symbol of the globalisation of world trade on sea and land. The standard size container of 20 by 8 by 8 and a half feet has become today a unit of measurement, namely the Twenty foot Equivalent Unit or TEU. A 40 foot container is 2 TEUs.
HISTORY
Prior to the introduction of containers, most dry
good or general cargo was transported at sea by dry cargo [or what are
sometimes termed break bulk] ships.
Cargo was carried in holds, mostly on pallets and packed in
boxes, crates, bales, sacks, drums or whatever.
In some instances, such as with cars, no packaging was used and
the goods were transported as is. The
ships were equipped with their own cranes to enable loading and
unloading to occur. Such loading and unloading was tedious and time consuming and
required significant labour. Once
ashore the goods had to be sorted and loaded again on to truck or rail
to complete their journey. Costs
were high and damage and pilferage endemic.
Credit for the introduction of containers is
generally given to the American, Malcolm McLean, originally a trucker
from North Carolina. He
first tried the idea on trains without much success.
In 1955 he purchased a small tanker ship company and modified 2
of its ships to carry especially strengthened trailers, which ships
began operating between NY and Houston in 1956.
The Matson Line also began experimenting with the concept on the
US west coast and in 1958 built the world’s first specifically
designed container ship, which sailed from San Francisco to Honolulu in
1958. The idea of
containers itself was not new. British
and American rail companies had experimented with it previously in the
20s and 30s but its implementation until then had proven uneconomic.
By the 1960s McLean’s shipping company had
proved a success and been renamed Sea-Land.
By the end of the decade it was operating trans-Atlantic
services. The major
shipping companies began to band together and adopt the idea.
Early container ships designed during the 60s concentrated on
speed since fuel was cheap. [Speedier ships tended to use more fuel.] In the 70s the price of oil increased significantly and the
shippers began to look instead to carrying capacity in order to decrease
unit costs. The number of
containers shipped overall soared as did the size of the container ships
themselves.
Between 1972 and 1999 the number of containers
shipped annually worldwide grew from 6.3 million to 163.7 million.
In 2000 the number shipped exceeded 220 million and analysts
predict that by the end of the current decade the number will be between
400 and 525 million.
At the same time the carrying capacity of the ships increased, if anything even more dramatically; from 2000 TEUs in 1972 to 4800 TEUs in the early 1990s. The latter were referred to as Panmax class ships; they were the largest still able to squeeze through the Panama Canal. In 1996 this barrier was passed with 5000 TEU vessels being built, which bypassed the canal and travelled instead via Cape Horn. They are referred to as post-Panmax vessels. Presently so called Suezmax vessels [up to 12,000 TEUs] are being constructed and it is likely that that barrier too will be soon passed.with such ships travelling instead via the Cape of Good Hope. Already in the planning are the Malaccamax class [18,000 TEUs]. This refers to a third navigational barrier or bottleneck; the Straight of Malacca between Indonesia and Malaysia.
A CONTAINER SHIP
Container
ships are generally easily recognizable by their design; the
superstructure is aft [or threequarters aft in the bigger ships], short
in length and tall, atop which sits the bridge from which a view ahead
is available over the containers usually stacked in rows upon the deck.
There is an absence of masts and cargo gear.
P&O Nedlloyd Kobe, built in 1998 is an example. She is a liner running Southhampton, Hamburg, Rotterdam, Le Havre, Suez, Singapore, Kobe, Nagoya, Shimizu and Tokyo. She makes the run from Europe to the Far East in 19 days. Her gross tonnage is 80,942 and capacity 6690 TEU. She is 300m long, has a beam of 42m, a height of 24m and a draught of 14m. She makes 24 knots and has a crew of 21. Her typical stay in any port is less than 24 hours
WHY CONTAINERISATION
Containerisation did not occur simply because the
container was invented and taken up. Its introduction had been tried
before. Rather it was a
combination of needs and circumstances that made its introduction in the
50s propitious.
WW2 saw a great increase in transportation.
The Liberty ship was invented to cope with the needs of the time.
Typical construction time was 7 weeks although one was built in 5
days. Thousands were built
during the war.
Following the war there was a pent up demand for
consumer goods and for reconstruction.
Japan in particular required transportation to import the large
volume of raw materials that it lacked and to export the goods it
produced. The subsequent wars in Korea and Indo-China added to the
demand
Ships themselves were plentiful and cheap and the owners competed for the work. They looked for ways to become more efficient, cut costs and reduce losses. Non-standard, small sized packaging meant high labour costs, slow port turnaround times, lack of integration between land and sea transport and made it difficult to reduce damage and prevent theft. The truck- or trailer-sized container addressed all these problems. At the same time the post war boom in transport provided the incentive and confidence to invest the huge sums required for containers, ships and shore facilities and to take on or buy off the unions and other vested interests.
RESULTS & CONSEQUENCES
The Container Revolution has affected virtually
everyone. First and
foremost it has decreased the cost of transport of goods dramatically.
Typically today, transport costs involved in their production
comprise less than 1% of the price of most consumer goods.
This has permitted greater regional and global division of labour
or specialization and has meant that more and more local industries are
exposed to competition. In
the course of their completion goods can be moved from country to
country several times to the ultimate benefit of the consumer.
Containerisation has also affected the layout of
most major port cities and changed the culture and lifestyle of whole
areas. Traditional occupations such as sailor and waterside worker have
been transformed, often at great individual cost.
Port areas close to the centre of major cities have been unable
to be accessed in many instances by the larger container ships or to
provide the huge areas required for shore facilities and storage.
As port areas they have become redundant and have become
available for redevelopment into parks, for housing and so forth.
The port areas themselves have been relocated, often to
greenfield areas.
The need and employment for sailors and waterside
workers has greatly diminished. Compare
the typical 44 crew of a Liberty ship with the 21 of the Nedlloyd Kobe.
Many waterside workers have lost their livelihood.
One study has contrasted the experience of San Francisco and New
York and suggested that the comparatively better out come for San
Francisco was the result of the more pragmatic approach of the famous US
west coast union leader, Melbourne-born Harry Bridges, who concentrated
on obtaining compensation for displaced workers whilst facilitating the
introduction of innovations, compared to the Mafia influenced,
government regulated unions of the east coast which sought more to
defend outmoded and inefficient work practices.
Not all the consequences have been beneficial. Containers washed overboard or from sunken ships floating just beneath the surface now pose a major hazard to yachts and small ships, akin to mobile uncharted reefs.
PORT PHILLIP
Presently there is a concerted push to proceed,
at significant cost, to deepen the access channels in Port Phillip Bay
in order to accommodate the larger, deeper-draught, super container
ships projected in the next decade or so.
Melbourne is the largest container port in the country handling
40% of the trade.
Whilst such a move might benefit the existing
container handling duopoly of P&O and Patricks, the relevant
bureaucracy, and those likely to be involved in the work, the overall
economic benefits seem dubious at best
Apart from the huge costs of the deepening,
present shore facilities along the Footscray Road are inadequate and
even with costly expansion and renovation are unlikely to become totally
satisfactory. The economics
of the new big ships are such that, given Australia’s geographic
position, they are unlikely to come anyway.
It is anticipated that they will instead service only a few key,
so called hub ports. These
include Rotterdam, Wilhelmshafen, Singapore, H K, Pusan, Yokohama and L
A. From the hubs smaller
vessels will service other ports in the area.
The need however to attempt, by port fees, some recovery of the
huge funds expended in the deepening will be likely to deter such
smaller vessels from coming.
If expansion were to occur a preferable choice would be Westernport probably at Stony Point. Little or no deepening would be required and costs would be small compared to Port Phillip. Moreover, there exists ample greenfield land for development and expansion and it lies close and easily accessible to the eastern industrial suburbs of Melbourne. It is possible too that if such development were to occur it might attract competitors to the present duopoly.
David Sharp
November 2005