Thousands of investors in insolvent shipping container leasing firm P&R have gathered in Munich, Germany, to discuss what compensation they can hope for in one of the nation's biggest fraud scandals in recent history.
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Once the world's biggest leasing company for shipping containers, P&R sold containers to investors and a sister firm in Switzerland rented them out to shipping companies. P&R later bought back the containers from investors employing a business model that's fairly common.
The trouble with the leasing company was, though, that it sold a lot more containers than it actually owned.
Massive irregularities were only discovered in its books earlier this year when P&R filed for insolvency in Germany.
Selling what you don't own
According to the insolvency administrator, Michael Jaffe, the company, which is based near Munich, had sold some 1.6 million containers to around 54,000 investors for a total of €3.5 billion ($4.12 billion) — but it only had a stock of 600,000 containers.
"The discrepancies in the books started more than 10 years ago and need to be cleared up now," Jaffe said.
The whole world in boxes
It's a simple steel box, but it revolutionized trade and made globalization possible. Today, around 95 percent of goods transported around the world see the inside of a shipping container at some point.
At the end of the 1930s, an American named Malcolm McLean was getting annoyed from constantly having to load, unload, repackage and store his bales of cotton. But then the resourceful logistics specialist had an idea: Pack his cotton into steel containers so it could be easily loaded on trucks and ships. But from his original spark of invention until actual implementation, around 20 years went by.
Image: bremenports/BLG
Modest beginning
By the mid-50s, McLean (pictured) had sold his truck fleet and taken over a small shipping company. He retrofitted a conventional tanker, using it to transport the first containers between Newark and Houston in April 1956. This marked the beginning of container shipping. At first, containers were primarily used along the East and Gulf Coasts of the US, though they were eventually adopted overseas.
Image: Maersk Sealand
Big package rather than many smaller ones
Crates for transporting goods already existed. The novelty of McLean's idea was the size of the box. In 1961, the International Organization for Standardization (ISO) established worldwide norms for containers. There may be all kinds of sizes today, but the standard for transporting goods is the 20-foot container, known as the "Twenty-foot Equivalent Unit," or TEU. Ships are also measured in TEUs.
Image: Imago
An idea as simple as it is ingenious
With this globally standardized packing unit, goods may be transported from sender to recipient unopened. This significantly reduces transport costs. If a team of 18 men once needed eight hours to move 80 tons, containers allowed nine people working in a row to load 2,000 tons in the same amount of time.
Image: HHLA
Not all containers are created equal
Twenty TEU - that's 6.058 meters (19.875 feet) x 2.438 meters x 2.591 meters. A container this size can hold as many as 10,000 pairs of jeans or 20,000 wristwatches. There are options for refrigerated containers for foodstuffs (pictured), tank containers or ventilated containers. The average lifespan of a typical steel container is up to 13 years. Currently, most containers are produced in China.
Image: picture-alliance/dpa/J. Ressing
The road to Europe
Sixty years ago, the first containers landed in Germany. It was May 5, 1966, when the retrofitted ship "Fairland" from McLean's shipping company arrived in Bremen's seaport with 110 containers on board. At the time, none of it was taken seriously. Most people spoke of a "flash in the pan" and an "American loony." Today, container shipping is the status quo.
A lot changed with the introduction of containers. First, customers had to learn how to load them up properly. "Barrels rolled around inside the containers because they weren't tied down," the shipping agent Peter Jansen remembers. Sometimes people even packed together volatile goods that triggered chemical reactions.
Image: picture-alliance/dpa/W.Schilling
Ports face new challenges
Of course, the ports had to adjust their infrastructure to the new requirements. In the beginning, containers would often go missing because there was no system in place regulating where to put what, Jansen says. Later, container bridges were built that facilitated loading and unloading. In addition, special container ships were constructed that presented new demands on the ports.
Image: HHLA
Global trade explodes
With the container's breakthrough, more and more goods were being traded. There are more than 41,000 large commercial vessels registered globally, of which more than 5,000 are container ships. The transport around 129 million standard containers (TEUs) around the world each year.
Big, bigger, massive
Ever since the advent of containers, container ships have only gotten bigger. They're mainly built in South Korea, China and Japan. Meanwhile, Korean shipyards are producing mega-carriers with capacities of over 20,000 TEUs. Whether it's possible to build even larger ships is questionable. The cost savings per container on such massive boats is marginal, but the economic risk rises considerably.
Even the ports are getting bigger
Trade to and from Asia is playing a particularly large role. In fact, there's not a single European or American port among the world's 10 largest container ports. Bremen's international port, where long ago the first container to reach Germany arrived, is hardly of any international significance anymore. It has fallen way behind Hamburg.
The motto? Make it simple
The initial resistance of shipowners, port operators, railway companies and unions was great. They were concerned for their jobs and thought operating new cranes, trucks and containers would be too difficult. But McLean had demonstrated the cost-benefit ratio beyond a doubt. In 2001, he died at the age of 87. (This last picture is of a container from McLean's shipping company Sea Land.)
Their first big meeting — one out of three — started Wednesday in Munich's Olympiahalle multi-purpose arena where up to 9,000 wronged investors were expected to ask nagging questions about how much compensation they might get in the end for being tricked into betting their money on the wrong horse.
Many investors in P&R said they were furious about the fraud, adding they had meant to top up their pensions with the expected yields on their capital.
Others voiced criticism of Germany's financial watchdog, BaFin, slamming it for not being able to discover the fraudulent scheme for about a decade.