Container is the main element to marine global trade which allow goods to be shipped from one side of the world to another. Lately, due to the COVID-19 pandemic a shortage of containers has become a global issue, but only a few months ago United States (US) ports were overwhelmed by empty boxes flooding the terminals driven by strong consumer demand in the US, Europe and Australia for retail imports from Asia during the Xmas holiday season.
In the third quarter of 2020 some 1.5 million containers had a turnaround time of more than 115 days across the US, compared to an annual average of fewer than 80 days, according to a research study published by Container xChange and FraunhoferCML.
Since the New Year, lines went into overdrive and quickly moved empty containers back to Asia, the picture was dramatically reversed particularly at the ports in the west coast of the US, a leading gateway for the trans-Pacific container trade.
Already under pressure from Covid-19 outbreaks, congestion and labour supply issues, the ports also felt the impact of box shortages, according to the Container Availability Index (CAx).
EMPTIES DOWN UNDER
This phenomenon also extended to Australia where ports across New South Wales (NSW) struggled to cope with a huge number of empty boxes filling empty container parks and holding spaces at terminals, according to a report in Shipping Australia.
Port operator NSW Ports imposed control measures to preserve safety as management of empty containers is becoming an issue elsewhere around Australia.
So, what has been driving this imbalance? Back in early 2020 the inactive global containership fleet totalled three million TEUs, but at the start of 2021 driven by a surge in demand that fleet of ships has returned to work. Liner shipping companies had to charter in multi-purpose vessels, given the shortage of container ships.
The rapid surge in demand absorbed the spare containers and shippers and consignees struggled to book space on ships and find equipment, they also had to deal with an immense increase in freight rates. The normal slump in demand for containers during Chinese New Year has not happened and has remained robust.
There are always increases and slumps in demand, but the infrastructure that supports the movement of containers cannot increase capacity to meet a massive surge in short space of time. Ships take time to build and so do ports and terminals require years in advance to build facilities, dredge access channels and order equipment such as ship-to-shore cranes.
This spike appears to a one-off phenomenon.
RETAIL BOOM CAUGHT MARKETS BY SURPRISE
In 2021, on-line consumer retail spending around the world rebounded causing a major trauma to the global supply chain. Carriers have responded to a lack of equipment by relocating empty containers back to the source of the cargo in Asia, and shipping lines are now moving boxes back from Europe, the US and Australia as quickly as they can.
“From the ocean carrier’s perspective, the quicker a container can be back to where it’s required, the better velocity it gets and results to a better return on asset” said Edward Aldridge, Senior Vice-President of global ocean freight at logistics company Agility told South China Morning Post.
Aldridge continued, “Having more [containers] is not the answer, the answer is the velocity of containers. What that means is that the loaded export container from China has to be on a vessel that has fast enough turnaround, turns and gets back to where it is required in the most efficient way.”
Many carriers are sending in additional box ships, on ad hoc sailings, to ports to collect the empty containers and return them to China and other Asian ports. However, they are finding it hard to book berth space, as terminals already congested, and priority is given to carriers who have prebooked berths and also full containers are given precedence over empty containers.
LIGHT ON THE HORIZON
The common consensus is that a slowdown in the pandemic and an ongoing return to more normal life should cause a reduction in the demand for goods. Sam Chambers, editor of shipping news site Splash has been covering the congestion issue closely, commented: “It’s important there are no knee jerk reactions to this strange, seemingly one-off situation. This is not a new normal, this is an unprecedented confluence of events that is unlikely to be repeated anytime soon.”
TURNING POINT IN CHINA
This analysis is confirmed by an upbeat assessment by David Amezquita, Head of Data Insights at Container xChange.
He said that container factories in China are now working at full production and there is an aggressive repositioning of empties back to China by the shipping lines, normality is expected to return during Chinese New Year which will be the turning point of equipment shortage.
“With a growth of 37.5 percent for 40-foot High-Cube containers (HCs) and even 200 percent for 40-foot Dry Containers (DCs) in January compared to December 2020, the CAx finally shows a positive trend for shippers and forwarders who are looking for equipment in Shanghai”, says Amezquita.
“With the vast increase we are seeing in the container availability, Shanghai is on its wayback to normal levels. A similar development is happening across other ports in China. Qingdao, for instance, even reaches index values of 0.5 for standard equipment – which represents a balanced equipment situation,” he added.
For some of the major hubs across Asia like Singapore, Nhava Sheva and Port Klang the CAx shows the same trend. Compared to December 2020, container availability is up 58 percent in Singapore, 35 percent in Nhava Sheva and 54 percent in Port Klang across standard container types in January 2021 mentioned in logisticsmiddleeast.com.
The tumultuous year of 2020 seems to be a black swan event in terms of container equipment shortages. With the crunch in availability now reducing, shippers, carriers and ports will be hoping of a return to some sort of normality during 2021.