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Container shipping: The next 50 yearsSteve SaxonMatt StoneTravel, Transport & Logistics October 2017 BCover: © GBlakeley/Getty Images ContentsContainer shipping: The next 50 years 2 In 1967, containers were disrupting the shipping business, so the players had to rethink everything. Now it’s digital, big data, and the Internet of Things. Is it time to rethink everything again?The view from 1967 2Four themesMarket growth: ‘Peak container’ is nowhere in sight 5Scale: The 50,000-TEU ship? But probably no bigger 13Industry structure: Four big players by 2067? 17Productivity: A completely digitized, autonomous industry 23The view from 2067: A smart, customer-focused container industry 271234 2Container shipping: The next 50 yearsContainer shipping: The next 50 yearsIn 1967, containers were disrupting the shipping business, so the players had to rethink everything. Now it’s digital, big data, and the Internet of Things. Is it time to rethink everything again?In 1967, the British Transport Docks Board (BTDB) commissioned McKinsey & Company to assess the impact of a recent development from the United States: container boxes.a The first purpose- built ships for them were being launched, and a few US lines were carrying these novelties on their regular service.Fifty years on, how does the reality of today’s industry compare with the future envisioned in this report to the BTDB? As with any set of predictions, there are hits and misses (Exhibit 1). In this article, we ref lect on the past half-century of developments in container shipping, discuss major themes underpinning the industry then and now, and look ahead to what the next 50 years may bring.1The view from 1967 Over the two decades after the end of World War II, the world economy was in vigorous health. Global real GDP growth had averaged 4.8 percent a year since 1950, and world trade had recovered from its postwar low (10 percent of GDP), to reach 22 percent of GDP. The stagnation of the 1970s hadn’t set in, and the explosive globalization that began in the 1990s wasn’t even on the horizon. Yet not all was well with the shipping industry. Sir Arthur Kirby, the BTDB’s chairman, was forthright in his discontent, telling an audience at the Institute of Transport in 1965, “Had we set out to devise the most difficult way to work our ports, we could not have succeeded better than the existing state of affairs.” In particular, he criticized irregular conditions of employment, uncoordinated and fragmented approaches to handling cargo, the ad hoc nature of transport to and from ports, and “the inertia of long-established custom.”2 Sir Arthur asked McKinsey to examine long-term trends likely to affect the ports sector, and in response the firm produced two reports, in 1966 and 1967. The 1966 report’s cover letter sounded the alarm from its opening lines: LSG 4-5 1L5645 111111111111111111!1[ 11�11111111111111 ll56Li5� C .... » C •British Transport Docks Board a This article has been published by permission of the BTDB’s successor organizations: Associated British Ports (ABP) and the UK Department for Transportation. 3Container shipping: The next 50 yearsExhibit 1CDP 2017Container shipping: The next 50 yearsExhibit 1 of 9Here’s what we said in 1966–67 about the container-shipping industry.Source: Containerization—its trends, significance, and implications, report for the British Transport Docks Board, McKinsey & Company, July 1966HitsMisses“Containerized cargo is effectively becoming homogenous, like other bulk cargoes, and is subject to the same economies of scale.... Economics [sic] of scale will result in this concentrated cargo being handled by a small number of large organizations.... Efficient use of expensive containers will require extensive route networks under unified control to allow load balancing.”“Ship operators on most trade routes may have virtual monopolies to gain benefits of scale and therefore should be treated as international utilities.”“Trade with the Far East and Australia from both Europe and North America may be concentrated at a single distribution point in the Pacific.”“It therefore appears that only five ships ... would be required to handle the entire UK general cargo trade with North America ... and approximately 25 could handle all European/North American general cargo trade.”“Now that standardized containers have been introduced in the shipping industry, the rush to ‘get on the bandwagon’ will probably lead to substantial overexpansion.”“If container ships follow the tanker trend, ships of more than 10,000-container capacity could be available.”“Feeder services will tend to replace direct calls when the large container ships come into service.”“Rotterdam is an example of a European port which is in a good