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How shipping works

When the 400-metre long, 220,000-ton container ship Ever Green got stuck in the Suez Canal in March, shipping was thrust into the limelight.

 

Up until that point, the majority of people weren't paying attention to ships or containers because our supply hadn't being disrupted in a long time. All of a sudden supply, demand and shortage were discussed and people started to realise that one ship blocking one lane had a massive impact in all of us. So how exactly shipping works? And why are we so impacted by ocean freight? 

Screen Shot 2022-11-30 at 3.43.52 pmPhoto Source: Ian Taylor

Say hello to containers
First things first: when were container ships invented? The first idea of a container ship was created in the mid-1950s by a truck driver called Malcolm McLean. He stacked 58 metal boxes on an ageing tanker ship going from Newark on the US east coast to Houston, Texas. Before McLean's invention, most shipped items were packed in barrels, sacks, baskets, crates or pallets the loaded and unloaded separately, partly on the backs of wharfies. It was a slow, labour-intensive and backbreaking business. But the introduction of the shipping container brought sweeping changes to an international trade by slashing transportation costs.

The standard-size container allowed huge economies of scale because ships, port facilities, trucks and trains in every country could be purpose-built to take any container in the world. As a result, containerisation has been an important factor in the advance of the globalisation. Cheaper, more efficient shipping has underpinned the development of sophisticated global supply chains and the "just-in-time" management strategies embraced by manufacturers, retailers and others. Nowadays, around 90 percent of the world's traded goods are transported by sea on a variety of ships. 

Shipping and its impact on our daily lives
More than 42 percent of goods in a Sydney household arrive in containers through Port Botany, according to research commissioned by NSW Ports. Each year the Port Melbourne, which is the biggest container port in Australia, handles nearly 3 million standard containers. Container shipping is now fundamental to our society, says Marika Calfans, the CEO of NSW Ports. "It's integral at a personal level, a family level and at a business and economic level," she says. 

Australia is especially dependent on international shipping. During the past three decades, our economy has become deeply integrated into global commerce, so much so that one in five of our workers is now involved in trade-related activities. We rank fifty-fifth in the world for population but a 2019 Department of Foreign Affairs and Trade report said Australia was the world's twenty-third-largest exporter and twenty-first largest importer (although some of that trade is in services rather than the goods transported by sea and air).

How is shipping changing? 
The keyword here for the near future is: scale! Container ships are getting bigger. The economies of scale offered by even bigger vessels is appealing to shipping firms because the larger the boat, the lower the unit cost. Bigger vessels may also help shipping companies reduce their carbon footprints. As with most industries, shipping is under pressure to help combat climate change. The oil burnt to move so many huge cargo vessels around the world is the major source of the carbon emissions that cause global warming. International shipping accounted for around 2.5 percent of global CO2 emissions in 2019 - more than double what Australia produces. 

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