The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger (33 page)

Time seemed to be on the Asians’ side. The shift from breakbulk shipping to container shipping had greatly reduced the cost of loading or unloading a vessel, but it made no difference at all in the operating cost once the vessel left port. This meant that the benefits from switching to container shipping were greatest on shorter routes, for which the savings in cargo handling and port time came to a very large proportion of the total cost of a voyage. The experts reckoned that there was less money to be saved on long-distance routes involving weeks at sea, such as those from the United States to Japan or Britain to Australia. Some even argued that containerization was infeasible in the Pacific and Australian trades, because expensive ships would be tied up for too long and because returning empty containers across seven thousand miles of ocean would prove impossibly expensive.
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The race to put containerships on the North Atlantic by the winter of 1966 drew attention in Asia. In early 1966, with Sea-Land preparing to deliver containers to a U.S. base on the Japanese island of Okinawa, a council established by the Japanese transport ministry was issuing directives to promote container services. The transport ministry soon came up with a plan to build twenty-two containership berths in Tokyo and in Kobe, near Osaka, while Sea-Land developed docks in Yokohama. The Australian Maritime Services Board quickly scrapped plans to build conventional wharves at Sydney and invited bids for construction of a container terminal in September 1966, although no international ship line had yet expressed interest in providing containership service to Sydney. The first fully containerized ship to serve the Far East, belonging to Matson, sailed from Tokyo to San Francisco in September 1967, and large-scale container shipping arrived the following year. International containerships came to Australia in 1969, and Sydney, Yokohama, and Melbourne quickly vaulted to the top rank among the world’s containerports.
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T
ABLE
5
Largest Containerports by Tonnage, 1969

Other governments were not far behind. Taiwan’s national port program began planning container terminals at five different ports. The Hong Kong Container Committee, appointed by the British colonial government in August 1966, looked at other developments in the western Pacific and issued a warning that December: “[U]nless a container terminal is available in Hong Kong to serve these ships the trading position of the Colony will be affected detrimentally.” And no government anywhere was more aggressive in preparing for the container age than Singapore’s.
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Singapore was a new country in the late 1960s, having been ejected from Malaysia in 1965 amid armed conflict between Malaysia and Indonesia. Its port was more significant as a military base than as a shipping hub. The British had 35,000 soldiers and sailors on the 226-square-mile island, and 25,000 civilians worked at the bases and the naval shipyards. The commercial port comprised a handful of wharves and Singapore Roads, the anchorage offshore where cargo was transferred from one small trading vessel to another. The amount of general cargo actually crossing the docks was about one-fifth of that handled in New York. The Port of Singapore Authority had been created in 1964 to take responsibility for most of Singapore’s docks, but it had little to work with. The initial value of all of its assets, including apartment complexes and office buildings as well as docks and warehouses, was less than $50 million.
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Immediately upon independence, the new government launched a crash effort to build the economy by drawing foreign investment, especially in manufacturing. Amid a general government crackdown on dissent, the Port of Singapore Authority was able to slash the size of longshore gangs from twenty-seven to twenty-three, institute a second shift, and boost by half the amount of cargo handled per man-hour. It put forth a plan in 1965 to build four berths for conventional ships at a site known as the East Lagoon, which had a breakwater but no major docks. Within months, the plan was scrapped. The containerships that were about to cross the Atlantic had captured the interest of port officials. They announced in 1966 that instead of conventional berths, they would build a port for containers.
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Singapore’s strategy was to use containers to become the commercial hub of Southeast Asia. With a $15 million World Bank loan covering nearly half the cost, the port authority began work on a terminal at which long-distance vessels from Japan, North America, and Europe could hand off containers to smaller ships serving regional ports. Construction started in 1967, the same year that the first containers—3,100 of them, mainly empties—were deposited on the island’s docks. When the British announced in 1968 that their bases and naval shipyards would close within three years, the government countered with even more ambitious plans to build ships, develop industry, and expand the port. “It may be necessary to embark on further construction depending on the build-up of shipping and container traffic,” the Port of Singapore Authority advised, even though its first container project was barely under way.
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When large-scale container shipping finally arrived in Pacific ports beyond Japan, in 1970, the question of whether it would be viable on long-distance routes quickly became laughable. The $36 million East Lagoon complex opened in June 1972, three months ahead of schedule, cementing Singapore’s reputation as an island of efficiency. As the only port in the region with docks long enough for 900-foot containerships, Singapore became a major transshipment point, with third-generation ships handing off containers to smaller vessels that shuttled them to Thailand, Malaysia, Indonesia, and the Philippines. With longshore gangs reduced to only fifteen men and with steep charges on boxes left in the new 120-acre container yard for more than three days, the port ran as smoothly as any in the world.
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Singapore’s containerport grew beyond all expectations. In 1971, before the new terminal opened, the Port of Singapore Authority forecast 190,000 containers after a decade in operation. Instead, it handled over a million boxes in 1982 and was the world’s sixth-largest containerport. By 1986, Singapore had more container traffic than all the ports of France combined. In 1996, more containers passed through Singapore than through Japan. In 2005 Singapore became the world’s largest port for general cargo, pulling ahead of Hong Kong, and some 5,000 international companies were using the island-state as a warehousing and distribution hub—testimony to the power of transportation to reshape the flow of trade.
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O
n January 10, 1969
, the maritime world was shaken by an unexpected piece of news. Malcom McLean, the father of container shipping, was selling out. Once again, his timing was impeccable.

Three years earlier, at the start of 1966, container shipping had been an infant industry. Only two ship lines, Sea-Land Service and Matson Navigation, moved containers in any quantity. Both served only U.S. domestic traffic, using old ships originally built for a very different sort of business. Almost none of the world’s international trade was containerized, and no port outside the United States had the ability to load containers aboard ships except by having longshoremen clamber atop each box and attach hooks at each corner. Most of the world’s manufactured goods and foodstuffs moved as they had for a hundred years, painstakingly loaded piece by piece into the holds of breakbulk ships. A leading maritime executive could still hold the opinion, voiced in 1966, “I do not think the time for the all-container ship is now nor in the next decade.”
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Fast-forward three years and the world had changed. The equivalent of 3,400 20-foot containers of commercial imports or exports passed through U.S. ports each week during 1968, up from zero in 1965.
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Rotterdam, Bremen, Antwerp, Felixstowe, Glasgow, Montreal, Yokohama, Kobe, Saigon, and Cam Ranh Bay all had modern facilities for handling containers. Revenues at McLean’s Sea-Land Service, whose 31 ships made it far and away the largest container operator in the world, had mushroomed from $102 million in 1965 to $227 million in 1968 as Sea-Land expanded to Vietnam, Western Europe, and Japan. Container shipping had turned into a rip-roaring business—and an extremely expensive one. Sea-Land’s debts at the end of 1968 reached $101 million, $22 million of which was payable within the year. During 1969 it was to take possession of six more rebuilt ships costing an additional $39 million, plus $32 million for containers and equipment.
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The financial demands would only grow, for the maritime equivalent of an arms race was under way.

The first generation of containerships, the ones that had plied the East and Gulf coasts and brought the container revolution to Puerto Rico and Hawaii, Alaska and Europe, had consisted almost entirely of older vessels, originally built for other purposes. Most of them were small, about 500 feet long, and very slow, straining to steam at 16 or 17 knots. Many of these early container vessels carried only a couple of hundred containers along with breakbulk freight, refrigerated cargo, even passengers. Only three ships in the entire world were equipped with enough container cells to hold more than 1,000 20-foot containers. The first-generation containerships had cost the ship lines almost nothing; of the 77 U.S.-flag ships equipped to carry containers at the end of 1968, 53 were relics of World War II. Most lines had no ships with container cells in their holds and desperately tried to meet customers’ demands by packing containers into conventional breakbulk ships. Breakbulk ships, however, were hard to service with high-speed container cranes. Each time a container was to be moved, longshoremen would have to climb atop the box, attach hooks at the corners, and then remove the hooks once the container had been lifted. With none of the operating efficiencies of cellular containerships, most carriers were losing money on every container they carried.
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The second generation of containerships was of a totally different order. Sixteen of these newly built ships were at sea by the end of 1969, and another 50 were under construction. These vessels were designed from the start to work smoothly with dockside container cranes. They were large, they were fast, and they came with very high price tags.

The first of these new vessels was
American Lancer
, owned by United States Lines, Sea-Land’s biggest competitor across the North Atlantic. The
Lancer
, which made its maiden voyage between Newark and Rotterdam, London, and Hamburg in May 1968, was far bigger than any containership on the seas. It could carry 1,210 20-foot containers at a speed of 23 knots—half again as fast as the reconstructed ships in Sea-Land’s fleet. In August 1968 U.S. Lines asked the Maritime Administration for a $95 million subsidy to build six more such behemoths. Other American, European, and Japanese companies raced to place their orders. Almost always, a ship was designed with a specific route in mind. Atlantic vessels usually held 1,000–1,200 containers, because too large a ship meant too much port time after a relatively short voyage. Ships meant for the Asia trades were typically larger, carrying 1,300–1,600 20-foot containers, because the relatively long ocean voyages from Europe or America to Japan generated enough additional revenue to cover the added construction cost.
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The expense of building and equipping these second-generation containerships staggered even the largest ship lines. Between 1967 and the end of 1972, a consultant would later calculate, the total cost of containerization around the world would come to near $10 billion—an amount close to $40 billion in 2005 dollars. Individual European ship lines had no prospect of raising financing of this magnitude: the total after-tax profit of all thirty-seven British steamship companies in 1966 came to less than £6 million. With few alternatives, the British formed consortia such as Overseas Containers Ltd., whose members shared the $185 million cost of building six ships, and containers to go with them, between 1967 and 1969. The smaller Belgian, French, and Scandinavian carriers sought strength in numbers as well. If four ship lines joined forces, each building one or two vessels, in combination they might have enough ships to be significant players.
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The American carriers were slightly more prosperous, thanks to government subsidies and military shipments, but they were hardly rolling in money. Sea-Land generated a total of $30 million of profit from 1965 through 1967, almost all of it on domestic routes. The largest American ship line, United States Lines, earned $4 million of profit over those three years. The Americans were not forced into joint ventures, though, because they had an option that the Europeans did not. The American conglomerates that aspired to remake the business world in the late 1960s spotted opportunity in the traditionally low-profit maritime industry, and they wanted to be in on the container boom. Litton Industries, of course, had invested in Sea-Land. Walter Kidde & Co. opened its wallet to buy United States Lines in January 1969. City Investing, another conglomerate, won a bidding war for Moore-McCormack Lines until the ship line reported a big loss for 1968 and the deal fell apart. The “cold, pragmatical thinking” of conglomerates threatened the industry, a maritime executive complained in 1968. “Such conglomerates, the newcomers, assign no value to the romance of the sea or the traditions of the railroads and the highways. They are strictly readers of the bottom lines of financial reports.”
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