Getting cargo to where it wants to go keeps the world spinning in virtuous circles of prosperity
 While the faults of seaports of the world are many, they still deliver increasing prosperity to all, and while the rich get richer, so do the poor.
But because of an overreaction to a flu bug, an already shambolic system of feuding tribes has service providers profits rise in inverse proportion to service quality provided. This has aroused suspicion of foul play.
But there is no Svengali plot here. While other factors have contributed, today's worldwide supply chain disruption can be blamed on overreaction to a flu bug that mostly kills the very old and very sick, that is, people one expects to die about the time they do.
In a world when the slightest scare triggers the greatest alarm, we fail to see that with or without Covid, the death rate among the elderly will rise because the war babies and baby boomers that dominated life in the 1960s and '70s have come to dominate death rates and will do for a decade to come.
To understand the disruption to the international supply chain, it is useful to understand how the supply chain came to be. After World War II, most cargo vessels were Liberty or Victory ships, deliberately kept small to ensure less loss when torpedoed. In the absence of containers, these ships dominated trade lanes into the 1970s.
In today's terms, they were no bigger 300-500 TEU, which shot up to 4,000 TEU in the 1990s as containerisation took hold in the industry.
Back in the 1970s, it was reckoned that 50 cents of every dollar was spent on shipping. Changes to that fact alone changed everything. Back then only the affluent could buy imports. So it only paid to ship high-end goods. But as ship sizes grew and crew sizes shrunk by half through automation, shipping costs fell.
That meant, low-end goods could be shipped to less affluent customers. And that meant many more customers. And if it became worthwhile to ship low-end goods, it became worthwhile to make them, and make more of them more cheaply in foreign factories where labour was abundant and cheap.
So we move from a period in the 1970s when the consumer goods trade was a rich man's trade and largely confined to the Atlantic. By this time the Japanese were producing cars, cameras and copiers for export, by making much the same as their German rivals, but 10 - 20 per cent cheaper.
While the Japanese had been building tankers to go around the Cape of Good Hope when the Suez Canal was closed by Arab-Israeli wars from 1967-75, containerisation had grown, but not much on the Pacific.
The only purpose-built containerships designed to be loaded with gantry cranes that worked horizontally as well as vertically were services to Montreal and New York from UK-north continent. On the Pacific, there was little more than Malcom McLean's Sea-Land supplying materiel for the Pentagon to the War in Vietnam, and picking up what he could on the way back.
Fast forward to today, when the sealanes are crowded with ships clogging anchorages whose cargo congest docks, railyards, truck depots and terminals.
The most important trades by value and volume are the east-west routes, namely Asia-Europe and eastbound transpacific. There are secondary north-south trades and intra-Asia trades. There has been much talk of the Northern Sea Route, though lately not so much, over Russia though that depends of global warming becoming more substantial than it has become.
That leaves Africa and South America and to a lesser extent Australia and New Zealand. The fate of the antipodeans Down Under, militarily dependent on the West but economically dependent on China, is hard to determine today, but something to keep an eye on in months to come.
Because Africa has so few navigable rivers, the development of internal export resources without capital investment in railways and road has been near impossible. The Tsetse fly that cripples vertebrates, has drastically reduced the growth of cattle herds and draft animals to get produce to market. That's why people carrying goods on their heads in Africa is still a visual cliche of the region.
So while there has been progress, particularly the deployment of air freight by East African horticulturalists to exploit lively European markets. South Africa manages to limp on with its citrus fruit crops by in an ever more dangerous political environment. Nigeria has oil which sustains the state treasury and rest of West Africa has cocoa from which chocolate is made. It isn't much, but it is enough get the economy moving in an upward direction.
South America, typically enough, lives a life in world shipping on its own within its own sphere with higher volume of beef and bananas in the containerised segment.
South America has a big share of reefer trade, accounting for 30 per cent of global cool/cold chain exports by volume. The main exports from its west coast are bananas, grapes, fresh and frozen fish, tropical fruit, crustaceans and mollusks. The east coast recorded the highest reefer export. Export volumes were the same for the two, but values from the east coast were 40 per cent higher, mainly because of the meat from Brazil, Argentina, Paraguay and Uruguay.
The container's impact in the north-south trades is that that what was once moved in reefer bulk ships was by 2010 moved in reefer containers. No longer was it only practicable to ship to big producers because it was the only way to ship, but new smaller customers could be found in niche markets farther afield. Large reefer bulk ships that once dominated the trade have since faded away.
Having little to do with the Covid scare, two developments stand out the last decade; 1) the around the world service using the Suez Canal, 2) the use of the Panama Canal to divert cargo from the American west coast to east coast ports far closer to where the cargo wants to go.
The 2016 Panama Canal expansion, put California's traditional role as Asia's gateway to America at risk. That's because a well-paid American trucker must drive a single container from LA to Philly, while 20 lowly-paid Ukrainian or Filipino sailors on a 10,000-TEU ship move 250 containers to Savannah, Georgia, a couple of days from Philadelphia by rail.
As for the around the world service, westbound from Asia, it today is short of full development, but it well on its way. Traditionally, Asia-Europe shipping, or the Asia-North Europe trade, serves the "blue banana, an urbanised zone of 111 million from northwest England to northern Italy. This is where Asia Europe cargo wants to go, in the same way Asia-US transpacific cargo wants to go east of the Mississippi by volume.
The Asia-Europe route is counter-intuitive, taking ships through the Med, around the Iberian Peninsula to dock on English Channel's half dozen northern range ports from Le Havre to Hamburg.
As ship size grew and efficent container terminals operated at various points along the Asia-Europe trade lane, boxes could be dropped off and relayed westward across the Atlantic. For a small amount of cargo this had been a practice largely confined to exports of west of Singapore. Most every port east of there used the transpacific route to reach America.
In those early days, US east coast ports were shallow and unable to dock big ships. But once Savannah blew away its plague of litigious environmentalists after 13 years of court battles, dredging began. And that battle won for Savannah meant victory for all its rival east coast ports with federal grants to boot - much to Savannah's chagrin.
That meant bigger ships could pick up boxes at Red Sea, Indian Ocean and Med ports, and became a trade in itself called "wayporting," that is, the dropping off of boxes to be picked up by bigger ships that could at last dock at freshly dredged east coast American ports.
This development has been met with the revival of the of the long dormant landbridge concept, of railing boxes from the US east coast all the way to California, but perhaps more importantly over shorter distances from one place to another facilitating sales throughout - given the good effects of economies of scale.
While the jury is still out on whether a Virginia-based trancontinental landbridge can be made to pay - just as the highly subsidised intercontinental China-EU rail can be profitable - both are dependent on bringing economies of scale to bear. If such can be achieved, then much can be done if history is any guide. |
