Wednesday, March 02, 2011

Biggest Ships Ever

During my last semester as an undergraduate, I took a course in the geography of transport development -- in other words, how the current configuration of transportation networks had developed. To be honest, although I was a geography major, I only took the course because it fit my schedule -- I was just racking up credit hours at that point. (Little was I to know how much that one choice would steer the rest of my life, as getting to know Dr. Starr a bit better was to open the door to everything else I have done in geography.)

During the course, I remembered that as a first-year student on a different campus, I knew a student whose major was transportation, and I could not fathom how that could be an area of study. After a semester with Dr. John Starr, however, I realized that transportation is both a product and a producer of many intersecting geographies.

Of all the developments and technologies we studied -- from canals to the Eisenhower interstates -- one word stands out as most crucial for understanding the ongoing integration of the world space-economy (a.k.a. globalization), and that word is: conTAINerization. I remember my classmate Mike and I competing to see who could best capture Dr. Starr's glee in sounding out the word. RO-RO shipping (roll on - roll off) had revolutionized the transportation by greatly reducing the costs incurred at break-in-bulk points. Once put on a truck, products could move by road, rail, sea, and then rail and road again. Uniformity in containers and investment in the necessary cranes eliminated thousands of jobs for stevedores and others, while greatly decreasing the time required for shipping products.

Combined with strategic decisions being made from Bentonville to Beijing, containerization allowed for the rapid increase in the length of supply chains. As a graduate student teaching economic geography, I drew on an excellent article* about Teenage Mutant Ninja Turtles to illustrate the equally important role of communication and information technologies in enabling extremely long supply chains to reduce costs, even for complex products being created and engineered within short time frames.

Which brings us back to the Danish company Maersk, which is the focus of a very brief article I noticed in the current issue of The Economist. Like many people, I've been seeing the company name for many years, but did not give it much thought until a high-profile piracy incident in 2009. Standard containers now figure very prominently in the coffee trade, as importers and exporters usually try to transact trade by the container, rather than by the bag (a huge difference), and I recall seeing a number of Maersk containers as we made our way from the coffeelands of Matagalpa toward the sea in January of this year.

The amazing thing about this story is that despite the ongoing recession in some countries -- such as the U.S. -- Maersk has been expanding its activities and profits and is expecting enough growth in the near future to sustain TEN new ships, each about 25 percent bigger than the largest ships currently on the water (which are Maersk ships). The new colossi will each hold 18,000 containers. If each container were to be put directly onto a semi-tractor, a single new ship could empty a string of trucks 200 miles long, bumper-to-bumper. The ships will operate between Europe and Asia, in part because a lot of trade is between these regions (empty ships to China; full ships from China) and presumably because they are post-Panamax, which is to say too big to fit through the Panama Canal.

It is perhaps incongruous that such large ships have an environmental benefit. Once loaded and in motion, the marginal costs per mile of transporting containers is relatively low by rail and extremely low by water. Similarly, once loaded, the marginal cost per container of transporting extra containers diminishes with each added one. A ship that combines the latest energy-conserving technologies with enormous size can therefore be seen as a boon to the environment.

The article ends with an interesting observation. Although container ships are currently being built, enough ships have been built in recent years for bulk products such as wheat or coal. What is most interesting is how these bulk ships currently travel: in contrast to container ships laden with consumer goods going out from China to all parts of the globe, bulk ships are steaming toward China laden with the raw materials of the rest of the world, which will go back out to much of that world in a different form ... and in containers!

*Patton, Phil and Mark S. Wexler. 1992. How a ridiculous idea mutated into a marketing star. Smithsonian 23(9).

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