A shortage of shipping containers makes world trade difficult – quartz

Shipping containers are the lifeblood of world trade: almost every product and every part that circulates through the world economy travels in its corrugated iron shell over seas, railways and highways. But recently, these important containers are in short supply where they are most needed.

Indian exporters to North America and Europe complain that waiting times to find a container can be up to three weeks. British exporters say the shortage has delayed deliveries to East Asia by up to two months. In the meantime, container prices have almost doubled.

The shortage of shipping containers is another symptom of the havoc the pandemic has wreaked on international supply chains. This increases freight costs, which in turn leads to higher prices for consumer goods. “This is important in the short term as supply problems will have a direct impact on inflation,” said Suresh Acharya, a professor at the University of Maryland Business School who studies supply chains.

Why is there a shortage of shipping containers?

The problem is not that there aren’t enough shipping containers in the world; it’s that the containers are in the wrong places. “The history of the past 16 months is a growing container imbalance,” said Willy Shih, professor at Harvard Business School. “What you see is a messy collection of containers in places where they shouldn’t be.”

The pandemic is the main cause of their disorder. When the first Covid-19 outbreak forced China and many of its neighbors to national lockdowns in late 2019, the region’s massive manufacturing sector was shut down. Cargo ships already on their way out of Asia dumped hundreds of thousands of containers full of goods in ports across America – but due to pandemic restrictions, they were unable to load these containers with new products to send back to Asia. Instead, the containers piled up in ports and inland train stations.

At the end of 2020, retail was back in full swing. Unable to spend their money on personal services, consumers put their disposable income into buying manufactured goods. Global supply chains came back to life. But now overwhelmed ports – like California’s huge port of Los Angeles / Long Beach – were struggling to load and unload containers quickly enough to keep up with the throng of ships waiting offshore. Many ships that are already behind schedule due to congestion in the ports have chosen to leave their empty containers behind instead of waiting days to load them back on board. As the containers continued to pile up in the large import centers, their supply at the large export hubs shrank.

To make matters worse, in March a 20,000-container cargo ship named “Ever Given” laid down sideways in the Suez Canal. The six-day closure further clogged the container circulation and exacerbated the shortage. Brian Sondey – the CEO of Triton, a company that buys shipping containers from manufacturers and leases them to shipping companies – said on a conference call in April that the channel blockade was “the icing on the cake” of a terrible year for supply chains.

Container production reaches all-time high

It seems unlikely that the industry can end the scarcity simply by making more containers.

There are three Chinese manufacturers who supply about 80% of the world’s shipping containers: CIMC, DFIC and CXIC. They have already increased their production to record levels, but that’s not enough to make the scarcity great. “Although the factories ramped up container production late last year and early this year, stocks of new containers remain very low,” said John O’Callaghan, operations manager at Triton, during the company’s April conference call.

Some in the industry have accused container makers of keeping supply low in order to drive up prices. “Chinese manufacturers control production levels and container prices,” Tim Page, CEO of container leasing company CAI, told Freight Waves. “And ultimately, when a shipping company has to transport freight from China or somewhere in Asia to Europe or the USA and needs containers for it and doesn’t have these containers, that’s a recipe for rising container costs.”

The reluctance of manufacturers to ramp up production is rational, according to Acharya. “Although there is certainly a need for more containers now, the post-pandemic steady state will be more similar to pre-pandemic times,” he said, “so building more containers can lead to a flood of containers later.”

How long will the shortage of containers last?

After all, the shipping industry believes the container shortage will resolve itself. “It is expected that the situation will improve, bottlenecks will be reduced, buying behavior is expected to normalize and additional ships and containers will come onto the market in 2021, which means that the current shortage of ships and containers is temporary.” Lars Mikael Jensen, an executive at cargo giant Maersk, told Ship Technology.

How long that will take is a guess. Sondey, the CEO of Triton, predicted in the conference call in April that the shortage will drag on until 2022: “I have not seen any of our customers express their confidence that they can relieve their operations in this current strong phase … Me think the bet is “likely [that the shortage will be resolved] sometime late this year or early next year, when the trading world may return to normal. “

But any prediction of how the shortage will end should be treated with caution, according to Harvard Professor Shih. He points to recent unexpected events that have exacerbated trade problems, such as the blockade of the Suez Canal or the coronavirus outbreak that forced China to close its huge port, Yantian. “These things keep happening because there isn’t enough leeway in the global supply chain,” he said. “In my opinion [the shortage] will be better next year, if nothing more happens – but that hasn’t been a good assumption lately. “

About Christine Geisler

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