September 24, 2015    5 minute read

The Rise of Containerisation

   September 24, 2015    5 minute read

The Rise of Containerisation

Containerisation has led to the highly efficient transportation of large quantities of goods and has been a key driver in the rise of globalisation. The simple principle that if you increase the surface area of a shape the volume increases at a more than proportional rate has caused a radical change to the global shipping industry. The first container ship has been attributed to Malcolm McLean, an American trucker. In 1955 he sold his company and purchased the Pan Atlantic Tanker Company renaming it Sea-Land Shipping. He modified the ships and terminals to handle specific container boxes and thus the birth of containerise took place. This innovation allowed him to cut costs by almost 97%.

The industry really took hold when the Americans used it as a way to transport vast quantities of troops and weapons in the lead up to the Vietnam war, container shipping has grew exponentially thought the 1970’s and 1980’s. This growth instigated a global boom in trade, leading to the need for terminals, vessels, containers and vans as well as a vast quantity of personal capable of managing the logistics of such a monumental industry.

Containerisation has had truly groundbreaking effects on the global economy. Countries with little development and low growth prospects suddenly become shipping hubs, building vast terminals and employing thousands of workers. It was the birth of the global market place. The advantages have been astonishing.

Transition costs for cargo

They have stimulated international trade by cutting transport costs leading to lower prices and increased variety available to consumers globally. Goods which had been only produced on local markets for thousands of years were now available and purchased on the global market.

Quantity of cargo

This has allowed the shipping industry to significantly cut their costs, gaining through economies of scale. Less labour requirement for unloading goods has allowed for a dramatic cut in valuable resources. For instance, in 1965 dock labour could move 1.7 tonnes per hour onto a cargo ship; five years later they could load 30 tonnes. As well as lowering staff costs, economies of scale also cuts fuel costs and insurance premiums.

Development of new harbor facilities

This has led to far-reaching advantages, stimulating growth in those regions which had never before had any effect on the global economy. Suddenly vast quantities of capital and labour were required for complex ship-building globally.

In 1976 the vessels ranged up to 1500 TEU, today up to 18000. Capacity has multiple by 20 in less than 50 years.

This is most clearly illustrated by the maiden voyage of OOLC Schenzen in 2003 the first of the SX class vessel with a capacity of 8063 TEC, the largest declared capacity in the world at the time. This groundbreaking achievement was to be surpassed just over a year later and looking back now 8000 TEC seems like child’s play compared to the monstrous vessels operating today.

However the industry as a whole is extremely volatile as well as risky. According to the World Shipping Council they face numerous threats including piracy, security and infrastructure issues.

Environmental impact

Their primary concern has been focused on the environmental impact of the various shipping routes. This has forced countries to reassess not just their daily routes but also the efficiency of their ships. The Maersk Triple E Class for instance operate using ‘slow-steaming’ a new technique which allows them to lower fuel consumption by 37% and CO2 emissions by 50%. The three E’s stand for Economies of Scale, Energy Efficient and Environmentally improved. Shipping is the most carbon efficient means of transporting goods and regulations to improve air quality and reduce marine noise have exacerbated this. Additional measures have been implanted by the World Shipping Council such as seasonal speed restrictions in an effort to reduce disruption to the yearly migration of the North Atlantic Right Whale.

Infrastructure

The rise in containerisation restrictions are not technological know-how but actually the ability to fit through the various canals.

The seawise giant

Maersk for instance took delivery of 20 Triple E Class ships between 2013-15, each with capacity for 18000 TEC. Which is too large for the Panama Canal. Soon surpassed by the Seawise Giant the ULCC supertanker which held the greatest deadweight tonnage in the world. It was incapable of passing through even the English Channel. It’s reign did not last long as it was sunk during the Iran-Iraq war and is now used as a floating storage and offloading unit. The industry has now moved from containerisation to jumboisation.

The new vessels are also struggling with the lack of infrastructure at various ports, with only a few capable of handling their huge size and cargo. This will require an overwhelming amount of investment in the coming years to catch up with the ship building craze.

Cargo liability

This concern has led to the Rotterdam Rules which were introduced in 2009 which overturned the legal and political framework for transport of goods across the oceans. It revised the rights and obligations of shippers in door-to-door shipments building on the rules concerning port-to-port routes already in existence. It is the hope that these will remove the legal complexities and lead to further cost reduction.

Changing patterns of shipping

Although the emergence of new ports has been groundbreaking for the local economy it has been at the expense of a large number of inland ports. For instance the disintegration of the shipping to the Port of London instead the rise of the relatively unknown at the time Port of Felixstowe which now deals with 42% of Britain’s containerised trade, ranked the 25th busiest container port in the world.

There are now more than 6000 linear ships operating throughout the world. Looking at how much this industry has grown in the last 50 years, it seems the next 50 years will depend mainly on whether the rest of the world can keep up.

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