The Box - Marc Levinson [117]
Chapter 11
Boom and Bust
On 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.”1
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.* 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.2
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.3
The second generation of containerships was of a