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December 10 - December 10, 2016
The oil crisis, though, ended up devastating the shipping industry.
Ship lines’ end product was basically a commodity. Just like farmers and steelmakers, they would always be hostage to external forces, their prices and profit margins depending mainly on economic growth and on their competitors’ decisions to build new ships.
The ships entering service by 1978 could hold up to 3,500 20-foot containers—more than had entered all U.S. ports combined during an average week in 1968.
Entire technologies, such as on-dock rail, proved to be sinkholes: ports that laid train tracks on the docks, so that cranes could transfer cargo directly from ships to waiting railcars, learned that the time required to move the train forward as the crane loaded each railcar delayed ships and reduced productivity. Many of the on-dock rail lines were abandoned, but the cost of failure was largely borne by the ports.12
By the end of the twentieth century, nearly half the world’s trade in containers would be passing through privately controlled
ports.
The collapse of United States Lines was, at the time, the largest bankruptcy in U.S. history.
“Malcom never got over the U.S. Lines bankruptcy,” a longtime associate said later.
Yet he still was a driven man. In 1991, five years after the failure of U.S. Lines, sheer boredom led him to launch yet another shipping company at the age of seventy-seven.
By 1974, though, fuel prices were a crushing burden, eventually to reach half the total cost of running a ship.
Bargains on new vessels allowed traditional ship lines such as Maersk of Denmark and Evergreen Marine of Taiwan to elbow their way into container shipping.
The cost of shipping a 40-foot box from Europe to New York, $2,000 in the middle of 1979, was below $1,000 by the summer of 1980.
Deregulation changed everything. In two separate laws passed in 1980, Congress freed interstate truckers to carry almost anything almost anywhere at whatever rates they could negotiate.
When American President Lines studied the matter a few years later, it concluded that freight rates from Asia to North America had fallen 40 to 60 percent because of the container.
Supply chains like Barbie’s are a direct result of the changes wrought by the rise of container shipping.
Low transport costs helped make it economically sensible for a factory in China to produce Barbie dolls with Japanese hair, Taiwanese plastics, and American colorants, and ship them off to eager girls all over the world.
Just-in-time, a concept originated by Toyota Motor Company in Japan,
In the United States, two-fifths of the Fortune 500 manufacturers had started just-in-time programs by 1987.
Before the 1980s, logistics was a military term. By 1985, logistics management—the task of scheduling production, storage, transportation, and delivery—had become a routine business function, and not just for manufacturers.
Global supply chains became so routine that in September 2001, when U.S. customs authorities stepped up border inspections following the terrorist attack that destroyed the World Trade Center in New York, auto plants in Michigan began shutting down within three days for lack of imported parts.
In 2004, nonfarm inventories in the United States were about $1 trillion lower than they would have been had they stayed at the level of the 1980s, relative to sales.
As the container made international transportation cheaper and more dependable, it lowered that barrier, decimating manufacturing employment in North America, Western Europe, and Japan, by making it much easier for manufacturers to go overseas in search of low-cost inputs.
Being landlocked, one study calculated, raises a country’s average shipping costs by half.
If Peru were as effective at port management as Australia, the World Bank estimated, that alone would increase its foreign trade by one-quarter.
Maersk’s headquarters were in Denmark, but by 2005 it had gained control of more than five hundred containerships and one-sixth of the world market by absorbing companies as diverse as Britain’s Overseas Containers Ltd., South African Marine, the Dutch shipping giant Nedlloyd, and Malcom McLean’s old company, Sea-Land Service.
If a containership ever reaches Malacca-Max, the maximum size for a vessel able to pass through the straits, it will be a quarter mile long and 190 feet wide, with its bottom some 65 feet below the waterline. If it should sink, it will take nearly $1 billion of cargo with it. Its capacity will be 18,000 TEUs, or 9,000 standard 40-foot containers, enough to fill a 68-mile line of trucks each time it arrives in port.
