THE CURIOUS CASE OF SHIPPING CONTAINERS
By Rahil Shah
The Covid 19 pandemic provided with great generosity a crushing blow to most industries across the world. One of the most important industry hit by the pandemic was the shipping industry, a backbone for a plethora of industries worldwide. A disruption to the shipping industry shall result in a knock on effect leading to disruptions felt across several sectors.
One of the shipping industries most essential components which must not come as a surprise to the more perspicacious reader is that of shipping containers. The year 2020 seemed to be plagued by global shortages owing to the pandemic induced lockdowns in various countries. However, the news of emerging treatments and vaccines provided some respite to already weary manufacturers and consumers alike. This however wasn’t indeed the case as the year 2021 was also plagued with global shortages but, this time it wasn’t the lockdowns. Instead the credit for this global shortage is enjoyed by a short supply in shipping containers.
How did we get here?
As the pandemic moved out of its Asian epicenter lockdowns were imposed in most Asian countries leading to most manufacturing plants grinding to a halt. The temporary closing of factories implied that a lot of containers were stopped at the ports. To stabilize costs and the erosion of ocean rates, carriers reduced the number of vessels out at sea. Not only did this put the brakes on import and export, it also meant empty containers were not picked up. This was especially significant for Asian traders, who couldn’t retrieve empty containers from North America.
A unique situation now brewed, Asia which was the first to be hit by the pandemic was also the first to recover. This implied the opening of factories that were temporarily shut down due to the pandemic as well as the subsequent resumption of manufacturing.
As China resumed manufacturing, other nations particularly in Europe and North America were dealing with restrictions and a shortage in workforce. A consequence of this was the containers that were sent out to Europe and North America did not return quickly enough.
Massive workforce disruptions in North America due to restrictions resulted in an acute shortage of staff not only at the ports but also inland cargo depots across the country. Without adequate staff, shipping containers began to pile up. The understaffed ports meant there wasn’t enough time to clear empty containers and turn them around.
The cherry on this cake was the blockage of the Suez Canal which lead to further shortages of containers. Several containers piled up at U.S. Ports which has a 40% imbalance implying that out of every 100 containers that arrive at U.S. Ports, 40 are exported and 60 continue to accumulate. It is ironically uneconomical for shipping companies to send back empty containers to China and most ships are in a dire rush to turnaround that they are forced to leave the containers behind.
Where are we heading?
This piling up of containers on North American and European ports has lead to a shortage of containers for manufacturers in China. It is interesting to not that Chinese companies, CIMC, DFIC and CXIC produce 80% of the world’s containers!
Although most of the worlds shipping containers are manufactured in China, the container manufacturers are not ramping up production to meet the increasing demand.
The average prices of shipping containers are on a gradual rise since the onset of the pandemic, from $2000 in 2029 to an eye watering $4500 per 40ft container.
rising prices of containers as assessed by Drewry
The unique situations produced due to the pandemic have resulted in a paradoxical conundrum for manufacturers, where the world’s supply chains face a surplus of empty shipping containers as well as a shortage induced by a shortage of the very same shipping containers.