What is Maritime Trade?

Nobel laureate economist Paul Krugman once wrote:  A large part of the costs of international trade was taking the cargo off the ship, sorting it out, and dealing with the pilferage that always took place along the way. So, the first big thing that changed was the introduction of the container.

When we think about technology that changed the world, we envisioned ports were longshoremen loading and unloading ships but for the most part have Transportation economics have long emphasized that the global adoption of intermodal transport was a prerequisite for the distribution of production and the establishment of global supply chains that the container revolution and intermodal transport made possible global trade. In the past far away producers could not enter competitively international trade because they had no chance of reaching far away markets. The need to reduce transportation costs embedded in labor, time and handling, containerization established the links from producers and manufacturers to retailers and the ultimate to consumers from any part of the world.

Efficiencies were gained by eliminating the chain link of handlings freight until containers minimize cargo loss, damage and pilferage in addition to speeding delivery; and reducing overall expenditure to shipping process.

Before containerization, the methods for loading and unloading break bulk general had hardly changed since the ancient Phoenicians traded along the coast of the Mediterranean. The loading of individual items packed in barrels, sacks and wooden crates from a land journey to the port and back again on arrival was slow and tedious labor-intensive and costly enterprise.

Technological advances through the use of cranes, tide downs for bundling timber and the introduction of the unit pallet for stacking and transporting bags and sacks generated some efficiency gains, but the handling of cargo was still labor intensive.  After World War II following the spread of the railways, it became apparent that the bottleneck in freight transport was at the exchange point between land and sea transportation modes.

Historically, the origin of the container revolution goes back to April 26, 1956 when the “Ideal- X”, made its maiden voyage from Port Newark to Houston, Texas. This ship was a converted World War II tanker redesigned with a reinforced deck to sustain the load of 58 containers.  In the history of innovation, the breakthrough of containerized shipping did not come from the maritime industry but someone in the trucking industry who was also looking for short cuts and efficiencies to the supply chain. This entrepreneur was named Malcolm McLean, a trucking entrepreneur from North Carolina.

US coastwise shipping was widely seen as an unprofitable business; and McLean's main idea was to join in coastwise shipping with his trucking business at a time when trucking and shipping were not integrated industries.  McLean's vision consisted of a transportation system that moved cargo door to door from the producer to the consumer and that became the central idea.  At the port of Houston, McLean's enterprise later became a Sea-Land Service, and it was already taking orders to ship containerized cargo back to Newark. The 1956 container revolution made McLean's fundamental insight ahead of his time, but the success of the container did not rest simply in the idea of putting cargo into a metal box. Many innovations followed in cranes, ships, ports, trucks, trains and storage facilities. Additional savings were through the building of purpose-built container cranes followed by the building of large specialized containerships.

“On January 9, 1959 the world's specific-built container crane started to operate and was capable of loading one 40,000-pound box every three minutes. The productivity gains from using this container crane were staggering, as it could handle 400 tons per hours, more than 40 times the average productivity of a longshore gang. “The snowballing effect then moved to investment in larger shipping capacity now profitable since containerization radically reduced a ship's average turnaround time in ports.

Given the large investment costs, industry experts revealed that a considerable amount of uncertainty- investment was now needed to complement the success of the container technology. However, industry analysts judged container shipping as a specific technology and did not anticipate the dramatic transformations that this technology was about to bring to the entire domestic and international transportation sector. Innovation and investment in container technology remained for a long time as an American affair but from a transportation technology perspective, containerization resulted in the introduction of Inter-modal freight transport. It follows that the shipment of a container in multiple modes of transportation –ship-rail- truck- resulted in not having to handle the freight when changing modes.  Since containerization caused in a reduction of the total costs of shipping a good from the manufacturer to the distribution center,  its impact was not adequately captured, nonetheless,  until globalization took hold and more efficiencies reduced port to port and freight costs in general that can be summarized as follows:

• Productivity of dock labor went from 1.7 tons/hour to 30 tons/hour
• Ship size increased from 8.4 Gross Registered Tonnage to 19.7 (GRT)
• Insurance costs decreased from $0.24 per ton to $0.04 per ton

According to the Shipping Council, each year roughly 10 billion tons commodities are carried across the oceans.  

In our current global economy, maritime trade is essential. Daily, thousands of ships sail the seas moving large amounts of cargo in a safe and cost effective manner across continents.