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The
new locks of the Panama Canal will be flooded in the coming weeks as
the expansion project to create a new lane of traffic along the Canal
enters its final phase of completion (watch videos of construction here).
After expansion, the Panama Canal will be able to accommodate
Post-Panamax vessels that carry up to 13,000 TEUs (a unit of measure for
cargo capacity), enabling the Canal to double its current volume.*
The
new shipping lane in Panama will become operational 50 years after the
dawn of containerization. Shipping cargo in standard-sized containers
that do not have to be unloaded at each point of transfer between
trucks, trains and ships, revolutionized the transportation of goods.
International
agreement in 1965 to standardize container sizes opened the gates to
widespread adoption of containers in international trade. On 23 April
1966, the Fairland sailed from Port Elizabeth, New Jersey to Rotterdam
in the Netherlands carrying 236 containers. According to the World
Shipping Council, this was the first international voyage of a container
ship.
Between
1966 and 1983, 122 countries introduced containers at their ports,
resulting in dramatic increases in shipping capacity, port efficiencies,
reduced costs and gains in delivery time through more seamless
intermodal cargo movements between ships, trains and trucks.
In
1972, McKinsey was commissioned to study the effects of
containerization in the UK and Western Europe. By their calculation, in
1965 before containers were deployed at the ports, dock workers could
move 1.7 tons per hour. Five years after containers were introduced,
dock worker productivity had increased to 30 tons per hour.
The
impact on commercial productivity was substantial. New port
efficiencies freed half of the capital previously locked up as inventory
in transit and substantially reduced both insurance costs and product
loss due to damage and theft.
Why is the history of containerization important today?
90%
of goods traded internationally reach their destination by ships.
50,000 vessels carry $13 trillion in goods each year. Integration of
digital technology spawned a new wave of efficiencies enabling
cost-effective, flexible supply chain operations and growth of
intra-firm trade globally.
Container
technology initially boosted trade between developed countries where
its uptake was swift and deep. Today, emerging markets dominate the top
20 exporters of containerized cargo. Seven of the world's top ten
ports are in China.
Whether
by sea, air or land, or all of the above, efficiency in logistics is a
critical factor in decreasing the cost of production and improving the
affordability of everyday essentials, whether electronics, clothes, or
medicines. Transportation costs have an exponential impact on volume of
goods traded.
Better
infrastructure accommodates higher volumes of trade. Higher
transportation costs, on the other hand, can greatly reduce the volume
of trade. A 10% increase in transportation costs can reduce trade by as
much as 20%.
Transportation
costs vary greatly across regions and types of products-reducing them
is critical to a country's competitiveness and a key factor in
development. Many studies show that transportation costs outweigh
tariff barriers and explain bilateral trade patterns better than tariff
preferences. Quite simply, trade liberalizing policies matter a great
deal, but reaping the gains from trade depends on the quality of a
country's infrastructure and related services.
Top 20 Exporters and Importers of Containerized Cargo in 2010
Source: HIS Global Insight, World Trade Service (World Shipping Council website)
*For
the history books, the lead engineer for the Panama Canal expansion is a
woman. Ms. Ilya Espino de Marotta is Executive Vice President of the
expansion project's Engineering and Program Management. She is the only
woman to hold the highest post in the Panama Canal's management in its
100-year history.
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