Shipping: Contained

Conflict in the Middle East that temporarily placed constraints in operating through the Straits of Hormuz is a timely reminder that shipping is the lubricant of the global economy. Practically invisible when shipping lanes operate normally, just a short interruption can have a major destabilising impact on trade and economic activity.

In considering the role shipping plays in navigating global trade, it is timely to be reminded that it is given to few individuals to change the world so completely as Malcolm McClean. Next month – April 2026 – marks the 70^th anniversary of McClean’s simple but revolutionary idea: the standardized shipping container. In a very real sense globalisation, as we know it, is the love-child of the steel container.  

Although McClean was an American trucking entrepreneur, his idea was to transform the transport of goods across the globe; in short, load goods into a standard size container that could be mechanically loaded onto nodal forms of transport (ships, trains, aircraft). McClean’s maiden voyage set off carrying 58 loaded containers between two US ports in April 1956.

This eponymous steel box on its maiden outing effectively ended the stranglehold of dockworkers, introduced automated and mechanised logistics, and saw the advent of deep-water ports such as Tilbury and Felixstowe in the UK, which sounded the death knell of traditional hand-loaded docks such as London and Liverpool.

Despite current obsessions with AI, cloud storage and digital everything, 80-90% of global trade by volume travels by sea as it has done since before the advent of the Phoenicians who established the first maritime seafaring lanes from 1500-300BC. Even by value 60-75% of everything that moves across the globe still does so by ship¹.

In the same way as McClean remains an unsung hero of international trade, the global shipping fleet remains something of a mystery, operating seamlessly and transporting everything from white goods to bulk goods. Global trade is in effect, made possible via a vast specialized network of vessels comprising container, dry bulk, LNG and oil tankers, car carriers and roll-on-roll-off merchant ships. The container fleet, the backbone of moved goods, numbers around 6,500², the largest of which can these days carry over 24,000 standard size containers measured as twenty-feet equivalent units (TEU) – some increase on the maiden 58!

The fleet ranging from ‘ultra large’ container vessels that can sail with 24,000 containers to ‘feeder’ vessels carrying just 1,000 or so, complements a market that can sail vast distances, or provide more local ‘hub and spoke’ networks. Although dominated by a few major players, there is also a vibrant charter market that matches vessel availability with fixed shipping contracts. Perhaps surprisingly Europe dominates the container fleet market, with four of the five largest operators based on the continent (MSC – Switzerland; Maersk – Denmark; CMA – France and Hapag Lloyd – Germany). These five operators control around 35% of the market³, but behind the top five sits a large, fragmented number of owner operators, the majority based in Asia (China, Korea and Taiwan), such that the 20 bottom operators control under 10% of the market by value. The average age of the fleet is reducing at around 13.9 years, although significant numbers of older, dirtier vessels remain.

The shipping value chain is similarly broad, deep and fragmented and includes ports (an attractive play on infrastructure), ship manufacturers (mostly Asian), mechanised logistical support, financing, broking and Insurance. Brokers that match clients with operators present an unusual, non-correlated play on financial services, which in the UK is led by Clarkson. A global leader in shipping consultancy and services. In understanding just how complex shipping is, Clarkson tracks 150,000 ship movements, 2m vessel positions daily and £12.7bn in trade volumes⁴. A similar play in the same space is Braemar a specialist provider of shipbroking, marine energy services, corporate finance, research and analytics. Marine insurance is similarly specialist and attractive providing not just hull and machinery cover, but increasingly war risk, piracy, kidnap and terrorism cover. Europe also dominates the insurance market with Lloyds of London exercising dominance in insurance broking and provided by the likes of Gard, Allianz, AXA, Chubb, Beazley, Zurich and Tokio Marine.

Shipping accounts for around 3% of global GHG emissions⁵, and as with aviation is among the hardest sectors to decarbonise. Given the strategic dominance of shipping in lubricating economic activity, 3% might be argued as being relatively modest (aviation also constitutes around 3% of GHG emissions, but is broadly passenger and leisure driven). A nascent agreement led by the IMO (International Maritime Organisation) to set emission targets for the sector under a Net Zero Framework, broke down under US opposition. Although supported by 62 members (including China, Brazil, the EU, UK and India), talks ultimately failed to progress a solution. Notwithstanding this setback, shipping owners have set out several initiatives to reduce their climate impact from slow steaming, wind power (the return of sail in all but name) and cleaner engines driven by cleaner fuels. Proactive scrapping of older vessels that are more sulphurous is also cleaning up the global fleet. Other sustainable challenges the responsible investor would need to be aware of include air pollution, marine pollution from spills, ballast water, oil and toxic chemicals, other hazardous waste issues, crew welfare and the risk of modern slavery, piracy and terrorism threats and stranded asset risk as regulations apply more pressure for cleaner more climate-neutral vessels. Finally, asset disposal, has proved controversial with ships broken up by hand without even minimum health and safety protocols, in areas such as the Chittagong; responsible disposal has become key for all operator owners.

Shipping remains a somewhat invisible but critical part of how the global economy functions, which in turn is supported by an attractive value chain of niche and specialist market makers. With around 10-12bn tonnes of trade by volume sent by sea each year, we only really understand the importance of McClean’s eponymous invention, when its vital arteries become unexpectedly blocked.

Notes

¹ International Maritime Organisation www.imo.org 

² 6500-7,300 is the generally given inventory of container ships in service, but the number changes regularly

³ www.globalmaritimehub.com 

⁴  www.clarksons.com 

⁵ IMO Ibid