June – Containerized Shipping and How It’s… | Shepley Wood Products
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June – Containerized Shipping and How It’s Changed Our World

History will remember the 20th Century as the beginning of a much smaller world, with the shrinking of our planet brought on by advances in communication, the Internet, and international shipping. As simple a concept as the shipping container is, it has had an immense effect on our world, effectively linking us easily with all other continents. From the parts of your Toyota, made elsewhere but assembled here in the US, to people half way around the world eating American beef shipped to them by refrigerated container, we are truly linked in ways as never before.

10 years ago Shepley started bringing container loads of treated New Zealand pine in from half way around the world. You know it as BodyGuard. At the same time we shipped a few containers of building materials to a project in Japan. The owner there wanted to duplicate an American golf community, right down to the houses, built just as they would be here in America. In both cases I was absolutely amazed at the efficiency of containerized ocean freight. We get daily practice shipping materials to Nantucket on the Steamship Authority. That is a 30 mile trip and we utilize our equipment and our drivers. To ship the same quantity of material to Japan, on their truck, in their container, with their driver delivering to the jobsite, costs only three times as much as the 30 mile trip to Nantucket. Half way around the world! The same incredible shipping efficiency goes for bringing our Bodyguard containers from New Zealand. Fascinating, yet something we take absolutely for granted.

In the mid 1950’s, a self made trucking magnate named Malcolm McLean, who was born in a small town in North Carolina started to think about solutions to problems he faced. Traffic congestion and growing freight demand sparked an idea for McLean. He had no background in maritime shipping, but no shortage of ambition or energy. Shipping containers had been around for a long time, but there were no standards as to size or even construction type. Everyone who had ever thought about shipping containers seemed to have thought up their own size. Malcolm McLean not only worked out standardizing container sizes, but also thought out every part of the system required to move freight efficiently across the world’s oceans. From ports to ships, to specialized cranes, to storage facilities, to interfacing smoothly with trucks, trains and the operations of shippers themselves, he had a lot to work out. It took three years of committee work just to work out standard container dimensions, and then he pushed for standardization of the many proprietary means of lifting and fastening the containers in place on ships. Every player had their own unique approach and the only way to get true efficiency was to allow containers to be standardized. Starting in the mid 1950’s, by 1969 McLean’s company, SeaLand, was a leader in the container industry. But competition was growing at an incredible pace. His chief US competitor, United States Lines, started upping the ante with newer, much faster, purpose built ships to out pace the converted WW2 tanker and freighter conversions that SeaLand was using. McLean countered with a radical new ship design, 1000 feet long and capable of 33 knots, more than double the speed of his older ships. SeaLand took the bold step of ordering 8 of these monsters, betting their record speed and container capacity would pull business from their competitors. In order to finance the nearly half billion dollar purchase, SeaLand turned to cash rich R. J. Reynolds, who was looking to diversify and Sealand was sold to, and became a division of, R.J. Reynolds. The industry was faced with high capital costs and very small profit margins. While standardizing equipment had made the industry viable, it also increased competition and put immense downward pressure on pricing.

The 1970’s brought a huge boom in ship building, the oil embargo, and a deep Recession. In 1967, 50 American owned ships dominated the container industry. From 1968 through 1975, 406 new container ships entered service, all larger and faster than their predecessors. Although demand increased exponentially, this added ship supply put huge pressure on profits and forced a lot of strategic consolidation among competitors creating huge new entities like Hapag Lloyd, Maersk and Overseas Container Ltd to compete with SeaLand and United States Lines.

In a matter of less than 20 years, the container shipping industry was started from scratch by a trucking entrepreneur and grew to change the world. Ocean freight is the most efficient means of transporting goods per ton/per mile by far. Huge new container ports like Felixstowe, England sprang up literally in the middle of nowhere, all descended from the original container terminal, the Port Newark Elizabeth Marine Terminal in New Jersery. Today Shanghai has the world’s busiest container terminal, but looking down the list, ranked by size, are many places you have never heard of. Today 90% of the world’s non bulk cargo is shipped in containers! China accounts for 25% of these shipments, roughly 3 times what we ship from the US. In 2005, 18 million containers made some 200 million trips. One interesting fact is the number of containers lost overboard each year, an average of 8,000. While you have to go out 5 decimal places to express 8,000 as compared to 200 million, it is still a significant number and a potential hazard to navigation, as not all containers sink.

The next time you pick up a product from somewhere else on the planet, thank Malcolm McLean for pioneering the way it got to you. He made the world smaller and the world economy a lot bigger.