Thinking inside the box

By Toby Poston
BBC News business reporter

Ideal-X was the world's first container ship

In an era when business is being transformed by largely intangible inventions like the internet, email and mobile communications, there is perhaps no obvious reason to get excited about the fiftieth anniversary of a large metal box.

Such containers are now an everyday sight, hauled by trucks, trains and ships all over the world.

But without them, it is very unlikely that we would all be buying Japanese TVs, Costa Rican bananas, Chinese underwear or New Zealand lamb.

In fact, globalisation would probably not exist and the World Trade Organization would have a lot less to talk about.

More time at sea

This quiet and gradual logistics revolution began in the US on 26 April 1956, when a crane lifted 58 aluminium containers on to a converted war-surplus oil tanker at a dock in Newark, New Jersey.

Transport boss Malcom McLean had watched teams of dock workers unloading goods from trucks and transferring them to ships and came up with a more efficient way of doing things.

He refitted two oil tankers and designed truck containers that could be stacked on or below their decks

Malcom McLean invented container shipping

Small shipping containers had been around for many years, but they had just been seen as another item of cargo.

McLean's innovation was to see a whole transport systems built around containerised cargo, which could be moved seamlessly between trains, trucks and ships.

"Before the container came along a typical ship might spend a week tied up at dock," says Marc Levinson, the author of a new book, The Box, which explores the history of the shipping container and its impact on the global economy.

"A typical cargo ship in the 1950s might have 200,000 individual items to be loaded.

"It was a hugely labour intensive business and hugely costly. What the container did was get rid of all that."

New ports

As port operators saw the advantages of containerisation - reduced handling costs, quicker throughput of vessels and lower levels of pilfering of cargos - they started adapting their facilities.

It costs less to ship a container between China and Felixstowe than it does to then send it on the road to Scotland Philip Damas Drewry Shipping Consultants

The cost comparisons were startling.

Loading loose cargo onto an average ship in 1956 cost $5.86 per US ton.

Container ports could load vessels for just under 16 cents.

Many dock workers went on strike at the threat to their jobs, which, together with their slowness in upgrading their facilities, only helped to push business away from traditional major port cities like New York and London to newer sites like New Jersey and Felixstowe on the UK's east coast.

"Felixstowe was just a little town that hadn't had much of a port at all before but it had lots of room for containers," says Mr Levinson.

"But it had a container crane, which meant that a lot of port activity that had previously been in London and Liverpool moved to Felixstowe."

Key enabler

The arrival of containerisation did more than just change where and how ships docked. It helped globalise the world economy.

Manufacturers no longer had to crowd near to ports or customers in order to reduce their transport costs.

They could source cheaper components or even outsource production overseas as lower transport costs helped extend supply chains.

CONTAINER SHIPPING Number of containers worldwide - 22 million Number of container ships worldwide - 7,936 2005 container traffic - 116 million TEUs Value of container shipping in 2005 - $6.5 trillion TEU= 20-foot equivalent unit, the standard measurement for containers Sources: Drewry, CI Online

Similarly, developing nations were able to become suppliers to wealthier countries on the other side of the world.

"Containerisation is why a person in Northern Europe who wants to eat strawberries on Christmas day can find them in their supermarket," says John Fossey, a director at industry publication Containerisation International.

"It has been a key enabler of the rapid industrialisation and globalisation we are seeing in the world today."

Indeed, container shipping lines now run so efficiently that it doesn't really matter where you are sourcing products from.

If you look at the transport cost per individual item, it costs about $10 to send a tv set from China to the UK, or 10 cents to deliver a bottle of wine from Australia to America.

"It costs less to ship a container between China and Felixstowe than it does to then send it on the road to Scotland," says Philip Damas, research director at shipping consultancy Drewry.

The rapid growth in world trade has now made ports sexy.

Recent months have seen a bidding war for UK-based P&O, the world's third biggest ports operator.

A container ship can now be loaded in a matter of hours

Another operator, Associated British Ports, is being courted by a consortium led by investment bank Goldman Sachs.

Much of the excitement in the sector is being stirred up by the huge rise in trade into and out of India and China, which will push up overall world trade levels by an estimated 7% this year.

Worldwide container traffic grew by 14% in 2004 and about 11% last year, and the infrastructure is beginning to creak under the strain.

"If the market continues to grow at this rate it will lead to congestion in marine terminals, shipping lanes and road and rail networks," says Mr Fossey.

It is just a shame that Mr McLean isn't around anymore to come up with another brilliant solution.