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By Root 985 0

crisis of container shipping was made worse by the carriers’ own choices. The hundreds of containerships built in the first half of the 1970s had been designed for the world of the late 1960s. High speed was important because of the closure of the Suez Canal in the 1967 Arab-Israeli war, which forced ship traffic between Europe and Asia and Australia to take a much longer route around the tip of Africa. High fuel consumption—the inevitable result of high speed—did not much matter, because oil was cheap. The world of the mid-1970s was totally different. The price of fuel quadrupled. On the North Atlantic, fuel went from one-fourth of operating costs in 1972 to half in 1975. On the Europe-Far East route, the unexpectedly fast reopening of the Suez Canal in June 1975 eliminated the reason for having fuel-guzzling high-speed ships to sail around Africa. Many carriers were stuck with the wrong vessels for the times.33

Prominent among them was the Sea-Land division of R. J. Reynolds Industries. Malcom McLean, acting, per usual, on intuition rather than cautious analysis, had overridden objections from Sea-Land’s board to move ahead with the SL-7 in 1968, and Reynolds had agreed to build eight of the ships when it bought the ship line in 1969. The costliest merchant ships ever built were also the thirstiest, each burning five hundred tons of fuel per day. At full speed, they consumed three times as much fuel per container as competitors’ vessels. When the price of bunker fuel jumped from $22 per ton to $70 within a matter of months, the SL-7s became a crushing burden. Although R. J. Reynolds boasted to its shareholders that the SL-7s “provide the fastest container shipping service in the world,” the ships consistently missed their ambitious schedules and could not make money.34

A settling of scores was inevitable. McLean, unhappy with Reynolds’s bureaucratic ways, began selling his stock in 1975 and left the board in 1977. Reynolds, frustrated with its inability to control the extraordinary volatility of the steamship business, reorganized Sea-Land to put the ship line under tighter corporate control. The changes did not help. In 1980, Reynolds finally took a $150 million loss on the SL-7s, which had been in service for less than eight years, and dumped them on the U.S. navy for rebuilding as fast supply ships. Four years later, it got out of the shipping business altogether and spun off Sea-Land as an independent company. As R. J. Reynolds’s new management explained to investment analysts, “investors who might be interested in owning RJR stock were not the type who ordinarily would be interested in a capital-intensive, cyclical transportation company.”35

Quite so. For R. J. Reynolds, and for the other corporations that had chased fast growth by buying into container shipping in the late 1960s, their investments brought little but disappointment. Sea-Land and its competitors were not at all like Polaroid or Xerox, companies whose proprietary technology and constant stream of innovations provided inordinately high profits for decades. Ship lines’ end product was basically a commodity. Just like farmers and steelmakers, they would always be hostage to external forces, their prices and profit margins depending mainly on economic growth and on their competitors’ decisions to build new ships. The go-go years were over. By 1976, less than a decade after container shipping became an international business, the Financial Times could declare that “the revolutionary impact of containerization, the biggest advance in freight movement for generations, has largely worked itself out.”36

Except that the Financial Times got it wrong. The revolutionary impact of containerization, as it turned out, was yet to come.

* The quantity of breakbulk shipping was measured either by weight or by “measurement tons,” a standard method for converting volume into tonnage, and these conventions were initially applied to container cargo. The capacity of containerships and cranes, however, was determined by the quantity of containers rather than their weight,