The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger (30 page)

Competitors were not far behind. In January 1968, four Japanese ship lines signed leases for container berths in Oakland. In March 1968, the same month that army officers in Vietnam were ordered not to ship cargo back to the States via Sea-Land, Sea-Land announced that it would provide weekly sailings from Japan.

Like almost everything else connected with Malcom McLean, Sea-Land’s entry in Japan stemmed more from instinct than from analysis. “We’ve got these empty ships coming back from Vietnam,” former Sea-Land executive Scott Morrison recalled. “So we have a meeting, and Malcom says, ‘Anybody know anybody at Mitsui?’ “McLean handed around the Japanese trading company’s annual report and announced that he wanted to fly to Tokyo to meet its president. Two weeks later, a huge delegation from Mitsui was touring Sea-Land’s docks at Elizabeth. Malcom McLean wanted nothing to do with joint ventures, but he hired a Mitsui group company to build Sea-Land a terminal in Japan. Another Mitsui company agreed to be Sea-Land’s agent, and a third agreed to handle domestic trucking within Japan. With its ship operating costs fully covered by its military contracts for Vietnam, Sea-Land was guaranteed to make money no matter how little cargo it picked up in Japan.
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The first Japanese containership, owned by Matson partner N.Y.K. Line, completed its maiden voyage to America in September 1968. Six weeks later, having been duly admitted to the transpacific conference, Sea-Land began six sailings a month from Yokohama to the West Coast, its ships laden with televisions and stereos produced by Japanese factories. Other Japanese carriers entered as well. The Japan-West Coast route, which had no commercial container service at all before September 1967, was suddenly crowded with ships needing to be filled. Seven different companies were competing for less than seven thousand tons of eastbound freight each month by the end of 1968, and more were about to join. The lack of business proved to be only temporary. The cargo would soon come, in a flood that no one imagined.
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T
he Coastwise Steamship Company
had been created to serve the paper industry. Since the 1930s, its ships had picked up rolls of newsprint from Crown Zellerbach’s mills at Port Angeles and Camas, in Washington State, and hauled them down the coast to California. The business was reliable—until the Southern Pacific and Union Pacific railroads went after the traffic. They exempted newsprint from their general rate increases in the 1950s, and then they began to lower their rates in order to capture the cargo. To compete, the ship line had to slash its tariff for news-print from $32 to $18 per ton. By 1958, Coastwise Steamship Company was near insolvency, and the Pacific coastal trade in newsprint was dead.
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As with newsprint, so with cotton and oranges, chemicals and lumber. American coastal shipping withered during the 1950s in the face of a competitive onslaught by trains and especially trucks. The number of cargo ships engaged in coastwise trade, aside from tankers, fell from 66 in 1950 to 35 in 1960, and the total tonnage of active coastal ships dropped by one-third. The waterfronts that had once been vital to local economies fell into decay as the ships stopped coming. Docks were abandoned, warehouses bricked up. Over the thirteen years from 1945 to 1957, total investment on construction and modernization at all North American ports outside New York came to a meager $40 million a year.
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Two events tied to containerization brusquely awakened the somnolent port industry. In December 1955 came the Port of New York Authority’s decision to turn 450 acres of New Jersey salt marsh into a futuristic port for containerships, a scheme utterly beyond the capability of any other port in the world. Less publicized, but even more ominous, were the changes in Malcom McLean’s container service. McLean had gone to great trouble to secure rights to serve ports from Boston to Galveston, and the fully containerized ships Pan-Atlantic introduced in 1957 were given expensive onboard cranes so they could call at almost any port. The plan was for Pan-Atlantic’s vessels, like traditional ships, to call at all the important towns along its routes. That plan was scrapped almost immediately, as Pan-Atlantic reshaped its service to focus on four ports—Newark, Jacksonville, Houston, and San Juan, Puerto Rico—and cut back or eliminated other stops.

These two unrelated developments—the rise of New York, the neglect of Tampa and Mobile—revealed the economics that would affect seaports as container shipping grew. For ports, capturing container traffic was going to be expensive, requiring investments out of all proportion to what had come before. For ship lines, the days when vessels meandered along the coast, calling at every port in search of cargo, would soon be over. Every stop would mean tying up an expensive containership that could generate revenue and profit only when it was on the move. Only ports that could be relied upon for large amounts of freight were worth a visit, and all others would be served by truck or barge.

By the late 1950s, the lesson for public officials already was clear. As container shipping expanded, maritime traffic would be drawn to a small number of very large ports. Many established centers of maritime commerce would no longer be needed, and ports would have to compete to be among the survivors. Most important, the scope of the investment that would be required—filling the sea to provide hundreds of acres of solid waterfront land, building enormous cranes and marshaling yards, creating off-dock infrastructure such as roads and bridges—was far beyond the ability of ship lines to finance. If they hoped to capture the jobs and tax revenues that would come with being a major transportation center, government agencies would have to be far more closely involved in financing, building, and running ports than ever before.
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The new economic reality was grasped first by the ports along America’s West Coast. The Pacific ports were backwaters during the 1950s. Domestic maritime commerce was fading, except where there was no alternative, such as Seattle’s trade with Alaska and runs between California ports and Hawaii. America’s international trade was overwhelmingly oriented toward Europe; excluding petroleum and other tanker cargoes, barely 11 percent of imports and exports passed through Pacific ports in 1955. Counting petroleum and chemicals, all the West Coast ports together handled less cargo in a year than New York City alone.
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Above all, the Pacific ports were victims of geography. Although the port cities themselves were large and growing quickly, their hinterlands were very thinly populated. All of California beyond Los Angeles and San Francisco Bay had barely six million inhabitants in 1960, and the eight Rocky Mountain states, stretching a thousand miles to the east, had a combined population smaller than New York City’s. The first important city inland of Seattle was Minneapolis, sixteen hundred miles away. While the West’s industries were expanding rapidly, only Los Angeles-Long Beach had a manufacturing base that could rival the factory centers of the East and Midwest. Whereas Baltimore and Philadelphia could handle the foreign-trade needs of Pittsburgh and Chicago, the West Coast ports had no similar domestic markets, and potential trading partners across the Pacific, such as Korea, China, and the nations of Indochina, were cut off by war or politics. With cargo flows flat, except for oil, the ports had no avenue for growth. Seattle’s docks saw 10 percent less cargo in 1960 than in 1950. Tacoma, mainly a lumber port a few miles south on Puget Sound, had lost one-third of its traffic over the same decade as the timber companies shifted their business to the rails. Tonnage in Portland fell by 17 percent. The only West Coast port that grew during the 1950s was Los Angeles, which invested in new wharves and warehouses in hopes of challenging the regional dominance of San Francisco.
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Containerization offered a chance to escape these geographic constraints. Instructed by the efforts of Matson, whose studies of container service to Hawaii envisioned the Pacific ports becoming hubs for truck pickups and deliveries in Denver and Salt Lake City, civic leaders up and down the West Coast looked afresh at their deteriorating waterfronts. The action began in San Francisco, where the state of California oversaw ninety-six outmoded piers. Many were narrow wooden docks unchanged since the 1920s, and even those that were structurally sound were not designed for large trucks. Consultants recommended a new “superterminal” big enough to handle eight oceangoing ships, to be located at Army Street south of downtown. In 1958, California voters approved $50 million of bonds for the port, a substantial amount for the time.
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Seattle soon followed San Francisco’s lead and hired a consultant to help save its port. All of Seattle’s twenty-one piers predated the end of World War II, and most had been built for sailing ships shortly after 1900. By the late 1950s, only six piers were in parttime use for general cargo, and the port’s tax-advantaged foreign trade zone was so quiet that the Seattle Port Commission, a county agency, considered closing it. A local television documentary about the sorry state of the port turned the political situation around in 1959. Business leaders formed a port committee, and in July 1960 the Port Commission unveiled a $32 million construction plan that included two container terminals. The port was suddenly the center of attention: in November 1960, no fewer than seventeen candidates stood for election to the Port Commission. Voters approved a $10 million bond issue for the first stage of construction.
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Los Angeles, where the new Long Beach and Harbor Freeways had been designed to move trucks out of the port, kept pace. City officials tried aggressively to persuade voters of the port’s economic importance, and they were rewarded with authority to issue revenue bonds—bonds that would be serviced with ship lines’ lease payments—in a 1959 referendum. By 1960, Matson’s two-year-old container service to Hawaii, using facilities Matson had improved at its own expense, moved seven thousand containers across the docks. It was a tiny operation compared with Sea-Land’s base at Newark, but it was enough to make Los Angeles the largest containerport on the West Coast. The municipal port department, with the strong backing of city hall, promptly embarked upon a five-year, $37 million program to build wharves and cranes for containerships.
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The most dramatic change, though, occurred in Oakland, on the east side of San Francisco Bay. Through the start of the 1960s, Oakland was a sleepy agricultural port one-third the size of Long Beach, Seattle, or Portland, and far smaller than San Francisco. Its water-front was lined with industries—a dog food plant, a dry ice plant, a brake shoe factory—that had long since ceased to be important port users. Oakland had almost no incoming traffic; typically, European ships would arrive at San Francisco, unload, and then sail across to Oakland to take on canned fruit, almonds, and walnuts for the voyage home. The Oakland Port Commission, a city agency, had issued its first revenue bonds in 1957 to repair a few old docks, but it had no grander plans. Then came an unexpected development. Officials in San Francisco, where Matson had based its container service to Hawaii, ignored Matson’s request for a separate container terminal, because the city’s port director thought container shipping a passing fad. When Matson installed the world’s first land-based container crane in 1959, it was built not in San Francisco, the West’s greatest maritime center, but in Alameda, a small city within plain view of the Oakland docks.
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Matson’s operation focused the attention of Oakland port officials on container shipping. In early 1961, they learned of American-Hawaiian Steamship’s application for government subsidies to build a fleet of large containerships. The vessels would run through the Panama Canal, mainly carrying fruit and vegetables from California canneries to East Coast markets. This was a natural cargo for Oakland to capture. Port director Dudley Frost and chief engineer Ben Nutter prepared two binders of facts and figures, added leather covers stamped “American-Hawaiian Steamship Company,” and flew east in April 1961. Meetings with government and industry officials in Washington changed their plans. “Somebody said, ‘Oh, forget those guys. They’re no good. Go and see Sea-Land,”‘ Nutter recalled. “I said, ‘Sea who?’ “The cover on one of the binders was quickly replaced by one stamped “Sea-Land,” and Frost and Nutter made their way to Port Newark. A Sea-Land executive stopped their presentation to inform them that it had already decided to run containerships from Newark to California. If they could offer a suitable site at a reasonable price, Sea-Land would establish its northern terminus at Oakland.
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Oakland had never hosted a containership, but it immediately began to promote itself as a future containerport. Nutter dreamed up a lease very different from the norm of so many cents per ton: Sea-Land would pay a minimum fee high enough to cover the cost of building its terminal and would pay more as its tonnage rose, but beyond a certain point there would be no additional charge. That “mini-max” provision gave Sea-Land an incentive to pump cargo through Oakland, because once its tonnage exceeded the upper limit, its average port cost per ton would plummet. Oakland spent $600,000 to upgrade two berths, and the federal government agreed to deepen the harbor from 30 to 35 feet to permit larger containerships in the future. In September 1962, Sea-Land’s
Elizabethport
, the largest freighter in the world, steamed through the Panama Canal to call at Long Beach and Oakland.
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The West Coast ports already had more than doubled their annual investment over the span of two years, and the competitive battle had barely begun. Oakland, with two railroad yards right next to the port, appeared to have the edge. Los Angeles countered with another bond issue in 1962, this time for $14 million. Then the adjacent port of Long Beach reemerged. Long Beach had struggled through the 1950s after the pumping of oil from beneath the harbor caused the harbor floor to subside and docks to collapse. When the mess was finally cleaned up, the city-owned port found itself with a deeper harbor than Los Angeles. It snagged Sea-Land’s southern California terminus in 1962 and dedicated its oil revenues to constructing a 310-acre landfill. The twin ports were soon waging a rate war that left Los Angeles, which had no oil and needed to turn a profit, at a disadvantage. Los Angeles and San Francisco asked the Federal Maritime Commission, the regulator, to block Sea-Land’s deals at Long Beach and Oakland on the ground that they involved unfair subsidies, to no avail. Up the coast, Seattle, where two container terminals were under construction, announced a $30 million program to build more in August 1962, even though the seasonal Alaska Steamship operation was the only container business in the port. The ports were suddenly full of activity. The flow of nonmilitary cargo, flat for a decade, rose by one-third between 1962 and 1965.
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