The Box - Marc Levinson [135]
This did not happen quickly. As late as 1975, after containership lines had been crossing oceans on regular schedules for nearly a decade, a United Nations agency could declare that “[f]ew shippers have benefited from long-term reductions in liner transport costs.” A decade later, the situation would look very different.2
The first years of international container shipping, up through the early 1970s, brought large reductions in ship lines’ costs. The most important was the saving in loading and unloading vessels, which had been the greatest single expense in precontainer days. Capital costs, although higher than for traditional ships, were not exorbitant, because old vessels refitted with cells to hold containers made up most of the container fleet. Container berths at ports cost ten times as much to build as conventional berths, but they could handle twenty times as much cargo per man-hour, so the cost per ton was lower. The early containerships were cheaper to operate than breakbulk ships on a per-ton basis, because each ship carried more freight. Adding it all up, the United Nations Conference on Trade and Development (UNCTAD) concluded in 1970 that ship lines’ costs of moving freight on containerships were less than half those on conventional ships.3
Shippers shared part of these initial cost reductions from containerization. The complexity of commodity-by-commodity rate structures makes it hard to estimate average rates, but anecdotal evidence suggests strongly that the introduction of international container shipping immediately brought lower rates than were available on breakbulk vessels. The rate decline, however, was probably less than justified by shipowners’ large savings, because the same conferences that set rates for containers also set rates for traditional shipping. Many conference members were carrying containers inefficiently on breakbulk ships until their new containerships were built. They wanted to keep container rates close to breakbulk rates in order to protect their profits, and to slow the growth of containerization until their new vessels arrived.
The result was that the early rates for containers were based not on the cost of container shipping, but on the cost of breakbulk freight. If a container held mixed freight, each item was charged only slightly less than if it were moving in a breakbulk ship. Containers filled with a single product received discounts that were larger, but not generous. At the start of service from Europe to Australia in 1969, for example, a Welsh refrigerator plant could save only 11 percent from breakbulk rates by shipping full containers of its product, and almost nothing by sending small shipments that would travel in mixed containers along with other cargo. Full refrigerated containers of Australian meat went to Britain at a fairly meager 8.65 percent discount from the breakbulk rate.4
From the containership operators’ point of view, offering lower rates for full containers than for mixed containers made perfect sense. A box fully loaded with a single commodity, sealed at the factory and not opened until it arrived at its final destination, was the most economical sort of cargo to handle, whereas mixed freight had to be consolidated by a freight forwarder or a ship line, using expensive longshore labor. In the 1960s, however, manufacturers were not accustomed to doing business by the containerload. Often, they would produce goods as orders came in and send out each order as it was finished. A 1968 study of 235 shipments of manufactured goods between North America and Western Europe found that 40 percent weighed less than one ton and 84 percent less than ten tons. These loads were too small to