Marc Levinson

Tag: Containerization

  • What’s at Stake in the Longshore Negotiations

    The International Longshoremen’s Association, whose members operate the container terminals along the Atlantic and Gulf coasts, threatens to strike on January 15 unless employers back away from introducing more automation on the docks. The union can’t simply hold back the tide: it needs to ensure that the cost of using ports that have ILA contracts doesn’t divert cargo to Pacific ports, where the International Longshore and Warehouse Union — a union perpetually at odds with the ILA — holds sway. But whatever concessions ILA president Harold Daggett wins, he may have already accomplished something more important in the long run, turning his notoriously fractious union into a more unified one.

    So far as I’m aware, no thorough history of the ILA has ever been written. Here’s a capsule version. The union originated in the Great Lakes in the late 1800s, but it has been centered on New York since the early 1900s. For most of that time, it has been rent by internal quarrels. In 1937, its West Coast locals, deeming the ILA insufficiently class-conscious, split off to form the ILWU. Headquarters had only sporadic control over locals at other ports, including Brooklyn, where the predominantly Italian-American leadership openly ignored dictates from the Irish-Americans in Manhattan. Through the 1960s, the ILA battled constantly with other unions, most notably the Teamsters, for control of vessel loading and unloading (usually with success) and of warehousing and truck loading on the waterfront (usually unsuccessfully). The ILA’s ties to organized crime made it a perpetual subject of investigation, leading the American Federation of Labor to try unsuccessfully to replace it with a new union in 1953. ILA locals in other ports often treated directives from headquarters as optional. As the journalist Murray Kempton once jibed, the ILA was “the only anarchist union.”

    Through all of this, individual dockers had to go begging for work each morning, hoping that their connections to a pier boss, sometimes lubricated with kickbacks, would get them a day’s pay. This began to change during the 1960s, as container ships began calling at new terminals in New Jersey. In 1965, the ILA agreed to accept containerization in return for the pledge of a guaranteed income for dockers who lost work due to the new technology, almost all of whom were in Manhattan and Brooklyn. The result was a much smaller but far better paid workforce.

    The funding for the guaranteed income came from a tax on each container entering the Port of New York. This tax encouraged the shift of traffic to the South, where Savannah, Houston, Hampton Roads, and Charleston became major container ports. All these ports are in states where contracts cannot require workers to join a union and where political support for unions is weak. To protect the union’s position, some local ILA officers in those places have made side deals with port employers that the parent union has had little choice but to accept.

    Daggett’s attack on automation seems to have overcome these centrifugal forces, winning support among ILA locals from Maine to Texas. This is no minor accomplishment. A successful negotiation would likely bolster the position of the central leadership to an extent the union has never known. That could well make the ILA an even tougher bargaining partner for the shipping industry in the years ahead.

  • Locked In

    Standardizing the shipping container in the mid-1960s was a pivotal step in globalization. Up until that point, containers came in a multitude of designs, so one ship line’s containers might not fit aboard other carriers’ vessels. A crane equipped to lift one type of box from a wharf or a rail car might not be able to handle another. Only after years of arduous negotiations did the International Organization for Standardization (ISO) agree on standards for container size, structure, locking devices, and other features. Once the standards were set, container shipping boomed, helping transform the world economy.

    ISO designated the 40-foot box as the “standard” full-size shipping container in 1964. At the time, 40 feet was the maximum length allowed for truck trailers in most U.S. states. But over the years, state governments have gradually permitted longer loads, especially on Interstate Highways. A considerable share of U.S. domestic freight now moves in 53-foot containers. These boxes rarely cross the seas. Instead, in a little-known example of supply-chain inefficiency, warehouses near some U.S. ports specialize in unpacking 40-foot containers of imports and stuffing the cargo into 53-footers for land transport across the country. The freight in three 40-footers can fit into two 53-foot boxes, reducing trucking costs.

    The BNSF Railway has now gone a step farther, announcing that it will build a yard to transload freight between 40-foot containers and 53-foot containers. As planned, containers that now go by truck from Southern California docks to warehouses will move inland by rail instead, a shift that can only help air quality. Once a train of import containers arrives at the new yard, electric yard trucks will transport the containers to a warehouse, where the goods will be transferred into 53-foot containers, which will be moved back to the rail yard for shipment to points east. The process will be reversed for exports, with the contents of 53-foot containers being stuffed into 40-foot boxes to fit aboard container ships.

    I don’t doubt that BNSF, which says it will spend $1.5 billion on this project, has run the numbers carefully. But transferring freight between bigger and smaller containers seems to defeat the very purpose of containerization, to reduce the handling of goods.

    This is an example of what economists call “lock-in,” which occurs when a technology remains in use because the cost of change is high. In this case, 53-foot boxes generally aren’t allowed on roads outside North America, so the 40-foot container is still in demand. Most of the 5,500 or so container ships on the seas were designed for them, and carrying 53-footers as well hasn’t proven financially viable. While some 45-foot and 48-foot boxes are transported by sea, after nearly six decades of international container shipping, the 40-foot container remains the standard, and there is no practical way to make a change.

  • Rise and Fall

    What do Baltimore, Keelung, Jeddah, Belfast, and Melbourne have in common? Yes, of course, all are ocean ports. But only the most obsessive maritime historians are likely to note their other connection: at some time over the past half-century, each has ranked among the world’s 20 largest container ports, only to tumble down the rankings as international trade has mushroomed and trade patterns have changed.

    Lloyd’s List, the venerable Bible of ocean shipping, interviewed me recently for an interesting piece examining how container ports have evolved over the years. This sort of information used to be compiled in an annual volume called Containerisation International, which has long since been absorbed by Lloyd’s. Linton Nightingale, an editor at Lloyd’s, drew on the Containerisation International archives to assemble a picture of the port industry over time.

    The data for 1973, the year of Containerisation International ‘s first almanac, seem almost quaint. The biggest container port in the world, New York/New Jersey, handled 1.6 million twenty-foot equivalent units (TEUs) over the course of that year — roughly as many as passed through Shanghai, now the largest port, every 12 days in 2021. The twentieth-biggest container port in 1973, Belfast, saw 237,000 TEUs move through. In 2021, the one hundredth-largest port, Jinzhou, China, handled six times as many.

    The 1973 rankings, of course, were dominated by the United States, where the modern container shipping industry had begun 17 years earlier. Only four Asian ports, three of them in Japan, ranked in the top 20. As late as 1995, no port in mainland China was on that list. Today, in sharp contrast, six of the eight largest container ports are in China, and that doesn’t count ninth-ranked Hong Kong, whose container business has contracted since it ceded the title of largest port in 2005. “Volumes handled at Chinese container facilities represent more than 40% of total trade handled by the 100 ports in Lloyd’s List’s latest rankings,” Mr. Nightingale observes.

    But the current focus on supply-chain risk is likely to bring significant changes in trade patterns, especially for manufactured goods. I expect that the list of the busiest container ports will look quite different a decade from now.

  • Trade Secrets

    A couple of years ago, an exec at a major freight forwarder asked me to guess how many shipments each employee handled on an average day. Naively, I guessed 60 or 70. I was wrong by several orders of magnitude. With each shipment requiring numerous steps, from booking a truck pick-up at the factory to certifying that pallets had been treated to kill pests, dealing with three shipments was considered a good day’s work.

    Keeping track of goods moving through supply chains is a headache for every company involved in international trade. Lots of money and brainpower are going into improving information flows; the May 24 announcement that the Port of Long Beach is teaming with Amazon Web Services to provide “aggregate data for companies across industries and sectors to track cargo in real time from origin to destination” is only one of many examples. On May 27, the Biden Administration named a new “supply chain envoy,” Retired General Stephen R. Lyons, to help the logistics industry sort things out. Yet so far, these efforts have done little to make supply chains run more smoothly.

    There are many reasons for this hold-up. Not everyone is keen on big solutions; some manufacturers and retailers have their own supply-chain management systems and expect suppliers and logistics providers to furnish data their way, not vice versa. Many ports, ship lines, freight forwarders, and other parties are developing proprietary information systems that may not mesh with others’ systems. And behind the scenes, there’s a struggle for control of data about individual shippers that might prove valuable in the future.

    Improving supply-chain visibility will be an arduous process. Consider the most basic query a shipper might pose through an information system: when will our goods will arrive in port? Two ocean carriers that share space on the same vessel may have different answers to that question, because they have different definitions of “arrive.” That’s not a problem technology alone can solve.