MBA (IB) 2022-25

ITLS Project

Shipping Container
 Container Shipping
• Transporting goods by means of high capacity, ocean-going ships
loaded with containers.

• What is it about the container that is so important? Surely not

the thing itself. A soulless aluminum or steel box held together
with welds and rivets, with a wooden floor and two enormous
doors at one end: the standard container has all the romance of
a tin can.

• The value of this utilitarian object lies not in what it is, but in how
it is used. The container is at the core of a highly automated
system for moving goods from anywhere, to anywhere, with a
minimum of cost and complication on the way.
 How It Started
• US-based businessman Malcom Purcell McLean is sometimes
called the “father of containerization”.

• Mr. Lean who owned Pan-Atlantic Steamship Corporation

wanted to devise a way to stack loaded trailers, minus the
trucks, directly on ships.
 How It Started

Containers Being Loaded on the First Container Ship Ideal X

 How It Started

• After numerous efforts, on April 26, 1956, the Ideal-X left the
Port of Newark, New Jersey, to the Port Houston, Texas.

• It carried 58 35-feet (8 feet wide by 8 feet high) containers, along

with a regular load of 15,000 tons of bulk petroleum. The
containers were loaded in less than eight hours.

• Cost : Loading loose cargo on a medium- size cargo ship cost

$5.83 per ton in 1956, whereas the cost of loading the Ideal- X
came to 15.8 cents per ton

• With numbers like that, the container seemed to have a future.

 Birth of a Container
• In 1949, Keith Tantlinger, chief engineer at Brown Industries in Spokane,
Washington, designed what was probably the first commercially viable
shipping container.

• He designed a set of steel fittings, which were welded to each corner of a

container. Each fitting contained a hole into which a lock he designed,
called a twist-lock, could be dropped. A second container could then be
stacked atop the first, a handle turned, and the two locked together. The
process could be repeated, building a tall stack.
 Birth of a Container
• The crucial refinements - a set of steel corners and a lock – means cranes
can latch directly onto corner fittings, neatly lifting containers on and off
ships, whereas twist-lock could be used to secure a container to a truck
chassis or a railroad car.

• In the early 1960s, Mr. Tantlinger prevailed on Mr. McLean to relinquish

the patents to the corner fittings and twist-lock, permitting them be used
industrywide.
 The Uniqueness
• Malcom McLean was by no means the “inventor” of the shipping
container.

• While many companies had tried putting freight into containers,

those early containers did not fundamentally alter the
economics of shipping and had no wider consequences

• McLean’s fundamental insight, commonplace today but quite

radical in the 1950s, was that the shipping industry’s business
was moving cargo, not sailing ships.

• Containerization, thus, required not just a metal box but an

entire new way of handling freight.
Types of Containers
Types of Containers
 20-40 Saga
• Shipping containers come in two standard sizes - TEU (Twenty-foot
Equivalent Units) and an FEU (Forty-foot Equivalent Units).

• A standard TEU or FEU also goes by the name of a general-purpose

container (20’ or 40’ GP container).

• Though containers of varying sizes are used globally for the

transportation of goods, the TEU and FEU are the most common.

• Shipping containers come in other sizes: forty-foot High Cube (40’

HC), forty-five-foot High Cube (45’ HC), etc.

• The high cube containers have a height of one foot more than the
standard GP containers
 20-40 Saga

Stacked top to bottom: 53 ft, 48 ft, 45 ft, 40 ft, and two end-to-end, 20 ft containers
 20-40 Saga
• A twenty-foot equivalent unit (TEU) is a shipping container
whose internal dimensions measure about 20 feet long, 8 feet
wide, and 8 feet tall

• One TEU container can hold between 9 to 11 pallets, depending

on whether they are standard pallets or EUR-pallets

• A fourty-foot equivalent unit (FEU) is a shipping container

whose internal dimensions measure about 40 feet long, 8 feet
wide, and 8.1 feet tall.

• One 40ft container can hold between 22 to 23 pallets,

depending on whether they are standard pallets or EUR-pallets.
Container Labels
 Making of A Shipping Container

• Shipping containers are made from materials such as steel, aluminium,

fibre-reinforced polymer or a combination of these.

• The main material used for manufacturing shipping containers is COR-

TEN steel - the name COR-TEN refers to “corrosion resistance” and
“tensile strength.”

• It’s commonly called “weathering steel” because it’s designed to

withstand exposure to wind, rain, snow, sunshine, and seawater.

• This makes it a great material for shipping containers, which are

consistently exposed to these atmospheric elements in their 12-15 years
of shipping.
 China’s Big 3
• China took control of container manufacturing in the 1990s,
stealing market share from South Korea. According to U.K-based
maritime research consultancy, Drewry

1. China makes over 95 percent of the world’s dry cargo containers

and 100 per cent of the world’s refrigerated containers

2. Just three Chinese companies—CIMC, Dong Fang, and CXIC—

produce approximately 82 percent of all containers.

3. China International Marine Containers (CIMC) has a market share

of 42 per cent, Dong Fang International Containers command 26
per cent market and CXIC Group has a share of 14 per cent.
 Why can’t others compete?
• A container seems like a relatively simple piece of equipment that could
theoretically be built at a factory. China’s lead can be explained by :

I. Steel price - Drewry estimates that Corten steel represents around 60 per
cent of the total cost of building a container.

II. Lower labor costs

III. China’s state-owned container manufacturers benefit from large

government subsidies and other benefits

IV. Lack of repositioning costs - The liners and the lessors don’t have to spend
huge amounts of money repositioning those containers to areas of
demand. China is where the cargoes are being produced.
 Container Life Cycle
• The lifespan of a container ranges between 10 to 15 years
depending on its level of usage and the conditions it has been
exposed to.

• A well-maintained container not exposed to harsh conditions can

even have a lifespan of up to 20 years, but this is uncommon.

• Still, a container can spend on average 56% of its lifespan either

idle or being repositioned while empty. This represents a non-
revenue generating part involving additional costs (such as
storage and repositioning) that are assumed either by the
shipping or the leasing company. Such a cost is thus part of the
leasing rate and of the full transportation cost.
 Container Life Cycle

Source: Crinks, P. (2000) Container Usage Asset Management in the Global Container
Logistics Chain, International Asset Systems.
Global Fleet Operator Standing

Source: https://alphaliner.axsmarine.com/PublicTop100/
 Containers And
Globalization
• Globalization owes a lot to the humble shipping container.

• Most consumer goods, by a wide margin, come in by ship.

Containerization made it possible to ship goods very long distances
at very low costs. Globalization in the way we know it today just
would not be possible without the container.

• Quite simply, containers transformed how consumer goods move

around the world

• Shipping containers save importers and exporters a huge amount

of time and money, creating the conditions for cheap global trade
to flourish. Without containers, most consumer goods such as
clothing, electronics and food would probably cost much more.
• Containerization is based on a simple premise. By minimising the costs of
sea cargo, goods can be produced economically anywhere in the world
not necessarily in the same country or even continent as the eventual
buyer. By some accounts it costs only $0.05 to ship a T-shirt across the
world.

• Economists Edward Glaeser and Janet Kohlhase wrote in the 2000s that
"it is better to assume that moving goods is essentially costless".

• Given such low transportation costs, it becomes economic to produce

your goods in a country with a relatively low cost of labour, such as
Bangladesh, China, or Vietnam, put them in containers, and ship them to
countries where they can be sold for a good profit. This is the basis of the
modern consumer economy.
The Good, Bad And Ugly
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