Cargo containers can be seen in practically every cargo ship across the seas and oceans, as today’s worldwide shipping network is dependent on these huge metal boxes to deliver goods from one country to the next.
Lately, these containers have been highlighted due to their role in a crisis that has mired the global shipping network. How did we become so dependent on these receptacles and what steps are necessary to improve the situation?
How cargo containers shaped our economy
While trade has been part of civilization since time immemorial, the development of cargo containers contributed to numerous shifts in how goods are stored and transferred. When containers used to come in all shapes and sizes, loading and unloading mixed goods was a complicated and costly procedure.
In the 1950s, entrepreneur Malcolm McLean found a way to simplify and streamline the loading and unloading of cargo transports. In 1956, he created the standard cargo container, a 33 foot long steel box, eight feet wide and tall. These standardized boxes were not only more efficient, they also offered superior protection for cargo.
Their use and structure evolved over time as global trade increased. Now, they are a standard 40 feet long, and are used widely not only to ship goods, but also raw materials, breaking up the manufacturing process and making the supply chain more complex. They are so standardized that one can be lifted by any crane in any port or train yard in the world, due to identical devices on each corner.
A “just in time” manufacturing model developed, whereby companies rely heavily on overseas suppliers and manufacturers for low cost labor and materials, resulting in a lengthy production process involving multiple shipping steps.
A shipping-dependent supply chain
In 2020, businesses and factories across the world were forced to close down or shorten production due to pandemic measures. Since growing numbers of laid off workers reduced spending power at the same time, manufacturers and shipping companies predicted that demand would plunge dramatically. But it was not that simple.
With lockdowns, and many individuals being forced to quarantine indoors, there was a sudden trend of online shopping. On top of that, many countries provided monetary aid through government recovery programs. Little money could be spent on services during covid restrictions, so that money went mainly towards goods.
The demand for sustainable and preventive goods, in particular, skyrocketed. With many of these goods coming from China, cargo vessels spread across the globe. Pandemic-related delays, and international ports filled with empty shipping containers left China with a shortage of containers while their factories continued to produce goods.
The cargo ship Ever Given was stranded on muck as it sailed through the narrow Suez Canal. With its sheer size, the ship blocked off shipping routes, causing at least 369 ships to be left waiting on either side of the canal for several days, costing up to $9.6 billion a day ($400 million an hour.)
According to historian Marc Levinson, in an interview to Recode, ship lines normally charge more on services from Asia to North America than vice versa. Because the ship lines find it more profitable to send back empty containers than to wait for them to re-load, American exporters are finding it difficult to secure cargo containers for their goods.
Levinson believes that many companies were too focused on costs of production and transportation when building their supply chain, neglecting to consider the risks that could disrupt them. Companies are more aware of the risks now, and may be looking for different strategies to handle their respective chains.
Greater competition may improve the situation. Levinson pointed out that the container ship lines have formed three major alliances, which decreased the competition in oceanic shipping, and lowered maritime activity for the business world. Levinson suggested that the world’s governments may need to reconsider whether or not these alliances are beneficial.
Amazon, the massive online retailer, arranges not only its own shipping, but also that for many of its competitors, giving them potential insight into their private operations, and thus calling on the attention of antitrust authorities.
Cheaper manufacturing has also led to over-consumption problems. In this regard, the solution lies in our own hands. Buying local, domestic, and necessary, rather than indulging our every whim just because we can afford it, could help shift the world economy to a more traditional, and stable, setting.
Darren Muang contributed to this report