Maersk Line’s Role in Globalization
The Maersk Line is the world’s largest container shipping company. Maersk has been a leader in the globalization of trade and the introduction and expansion of containerized shipping for over 60 years. It is hard to imagine the path of globalization without the shipping container. Maersk has also anticipated the future of international trade in goods in plotting its own future.
The dawn of container shipping is considered to be the 1956 voyage of the Ideal-X which sailed from New Jersey to Houston, Texas with a load of 58 containers. Over time a design was settled for shipping containers. A forty-foot-long container, eight feet wide and eight feet tall, became standard for loading on a tractor-truck chassis and for transporting by train as well as on ships.
As international trade volume in goods doubled approximately every ten years through the 1980s, 1990s and 2000s, shipping companies jockeyed for market share, with Maersk leading the field. In 1975 Maersk introduced the Adrian Maersk capable of carrying the equivalent of 600 forty-foot containers. Laura Maersk followed in 1980 with a capacity of 1,050 containers, and the trend toward ever larger capacities continued into the 21st century.
Containers reduced the costs and increased the speed of loading and unloading ships, and increased efficiency in handling. Larger ships required extensive changes at ports to accommodate the large cranes used in loading and unloading and the huge parking lots necessary for the waiting fleet of trucks. Container shipping reduced transport costs low enough that importing from abroad displaced local manufacturing.
Keen to increase market share, in 2003 Maersk ordered ships capable of carrying 5,500 forty-foot containers, a 20 percent increase over the largest ships of the time, for delivery starting in 2006. According to Marc Levinson’s book Outside the Box, ship owners followed with a flurry of activity; when 2007 ended, 118 container vessels with a capacity of 5,000 or more forty-foot containers had been ordered. Expected growth in trade did not occur; as the Great Recession impacted the whole world, container shipping in 2009 fell by twenty-five percent.
Yet the race to build larger, more efficient container ships continued, surpassing 11,500 forty-foot containers in capacity. Larger ships generated huge investments in wider and deeper channels, and bigger cranes for loading/unloading, as well as expansions of the Panama and Suez Canals in 2015.
But larger ships did not translate into higher profitability, faster speed or greater reliability. Add to that, disputes over government subsidies for their home industries, rising labor costs in outsourcing countries, and consumer demands that businesses account for fair labor practices and environmental conditions throughout their supply chains. Between 2010 and 2019, annual growth in international trade in goods increased by only twenty-eight percent, after doubling in the three previous decades. Chinese trade peaked at over 60% of GDP in 2006, falling to just over 35% in 2019. T. Rowe Price expects China to have a more consumer-led economy after COVID-19 “as global trade continued to weaken.”
While world trade in goods slowed, trade in services increased. Levinson uses KFC as an example: a service business that is the largest restaurant chain in China. “Companies in industries whose products are intangible – software, accommodation, real estate, computer services – accounted for a greater share of the largest multinational enterprises.” As Levinson points out in a Washington Post article, “digital downloads and streaming services have made it possible to enjoy films, novels and music without possessing stereo equipment, books and records, while car-sharing and bike-sharing promise to reduce the number of personal vehicles…. Storage of data in ‘cloud’ computer banks accessible over the Internet has held down corporate spending on computer equipment.” Demographics plays a role: an aging population buys less “stuff.”
And what of Maersk Line? In May of 2018 it revealed plans to become an integrated ocean carrier, managing shipment of goods from origin to destination, eventually exiting the commoditized industry it had helped create.