27 November 2017 - 6 minute read

While modern transponder data can indeed provide a near real-time picture of supply and demand, it has long been possible to monitor changes in the maritime economy through a number of sources.

The shipping journal Lloyd's List has long offered a comprehensive overview of commercial maritime traffic between ports, with data stretching back as far as 1692.

Another source of information is historical ship logs - records that reveal further details about the exact routes that vessels traversed, as well as prevailing winds and other weather patterns.

In order to complement these and many other datasets, Winton researchers have harvested Panama and Suez Canal reports to round out a full representation of international maritime commerce from the 19th century and beyond.

Yet although this results in a much richer account, it remains far from easy to read the seas. 

Crests and troughs

Such are the vagaries of shipping that even the best entrepreneurs can make profound errors of judgment. Consider Malcolm McLean, the inventor of container shipping, a technology that reshaped the maritime economy and with it the world. 

Real value of world exports (1900=100). Source: Our World in Data.

Despite McLean’s far-reaching innovation, he would go on to fail spectacularly – not once, but twice - in his attempts to profit from industry shifts.

McLean’s first misadventure came in the wake of the 1967 closure of the Suez Canal. The disruption forced ships to instead travel around Africa, putting a premium on speed.

But by the time the canal reopened, oil prices had risen, making the new rapid vessels uneconomic. McLean’s line, Sea-Land, had overinvested, delivering its parent company a $150 million loss.

In response to these higher oil prices, carriers switched to slower, less fuel-intensive ships. Expecting the oil price to surge to $50 per barrel, McLean bought into this new trend, purchasing United States Lines in 1977.  For that company, he developed a line of vast, plodding container ships that could circumnavigate the globe.

Once again, however, the oil market turned on McLean. The price of crude slumped, wiping out his $500 million investment in the new line of ships. Not long after, in 1986, McLean’s company was driven into insolvency, resulting in one of the largest bankruptcies in American history at the time.

Engineering the seas

Taming the seas has been a goal of mankind since at least the 5th century BC - when Persian King Xerxes I dropped manacles into the modern-day Dardanelles and lashed the water after storms wrecked bridges that had been built by his army.

While often just as futile, grand feats of maritime engineering have occasionally driven far-reaching changes to international trade.

The opening of the Suez Canal in 1869 was one such moment.

Before the waterway reconfigured transport links, sailors were forced to take the long trip round the southern tip of Africa to move goods between England and India.

The massive infrastructure investment of the Suez halved the effective distance, and the canal would go on to profoundly change international trade.

The demise of the commercial sailing ship was perhaps the most significant. It had previously been too expensive to use steamships to ferry goods round Africa, on account of a lack of coaling stations. Once Suez was up and running, that was no longer the case. And several technological developments had made steamships more efficient, from screw propellers and engine improvements to steel hulls and communication by telegraph.

The consequences were stunning: freight rates declined rapidly and prices converged globally. Trading boomed in response.

Economic History