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  • The restart of manufacturing in China followed the early spring slump in global shipping that left millions of 40-foot containers stranded or out of position in countries that import from Asia.

  • Container availability has been further impacted by soaring demand because of the approaching holiday season, ongoing demand for Personal Protective Equipment (PPE), a reduction in global air freight capacity, changing ecommerce trade-flows, and anticipated demand for refrigerated containers for COVID-19 vaccine logistics.

  • Manufacturers say they are no longer able to fill orders for new containers, even though the price of a new 40-foot box has climbed from $1,600 to $2,500 over the past year. 

  • Carriers have responded to the equipment shortage, port disruptions and other turmoil by imposing surcharges that have cause friction with shipping customers.

  • In China, the ports most severely affected are Shenzhen, Xiamen, Shanghai and Ningbo. Verification has become particularly important as some carriers have imposed restrictions on the release of empty containers to shippers loading for departure at Chinese ports.

Months after the outbreak of the COVID-19 pandemic, China and other Asian exporters are struggling to meet demand for their goods because millions of empty shipping containers have yet to cycle back from the markets that buy their products.

The restart of manufacturing production in China in the spring was followed soon after by a resumption of strong demand for Chinese and Asian goods in the U.S., Europe, Australia and other export markets. But the restart followed a dead period in global shipping that left millions of 40-foot containers stranded or out of position in countries that import from Asia.

The scramble for containers has contributed to a spike in ocean rates, particularly along Transpacific lanes. It began when shipping lines reduced capacity by cancelling or “blanking” scheduled sailings. Carriers have added back many of the blanked sailings, but their vessels are departing Chinese ports with open slots because there aren’t enough containers to meet demand from shippers. In some cases, ocean carriers have been unable to fulfill bookings because of the shortage of containers in Asia.

Agility’s Take on China Equipment Imbalance

In China, the container imbalance is actually a container shortage. All shippers and ports are confronting a shortage of containers, but the ports most severely affected are Shenzhen, Xiamen, Shanghai and Ningbo.

Agility is working very closely with individual carriers and Chinese ports to identify alternatives and to verify the availability of containers for shipping customers so that they don’t have goods stacking up at production facilities or portside. Verification has become particularly important as some carriers have imposed restrictions on the release of empty containers to shippers loading for departure at Chinese ports.

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Nico Hecker, director of container logistics at ocean carrier Hapag-Llloyd, recently described the situation as a “black-swan moment” and said demand for 40-foot containers was the highest ever experienced.

What’s behind the imbalance

There are a number of factors affecting container availability.

  • Container demand is soaring because of the approaching holiday season and because many retailers are only now restocking or adding “safety” stock to normal inventories to buffer themselves from possible supply disruptions that could be triggered by a second wave of the virus.

  • The reduction in global air freight capacity, along with soaring demand for Personal Protective Equipment (PPE), have added volume and stress to ocean lanes.

  • Containers have been piling up in the United States, Australia and the UK because carriers are reluctant to absorb terminal charges they face when sending empties back to China. But now carriers are facing conflicting allegations: Some accuse carriers of slowing the return of containers by prioritizing space for paying loads – with the volume of those being insufficient to replenish container stock in China. At the same time, the U.S. maritime regulator is looking into whether carriers are unpacking inbound containers quickly and putting them back aboard departing ships before they can be loaded with U.S. farm products and other Asia-bound exports.

  • The problem is not confined to the China and the United States. Vietnam and Thailand also are experiencing container shortages. In the case of Vietnam, the situation is most severe at Ho Chi Minh City. Port congestion in Australia has contributed as peak shipping season approaches there.

  • Containers in Africa and South America often return to Asia indirectly — going first to Europe or the United States before heading back. Many of the containers in Africa and South America are smaller, 20-foot boxes. But the three-way traffic has been slow to resume.

  • Some containers were taken out of the normal cycle in the spring and early summer by U.S. importers using them for storage of goods – such as spring clothing lines – for which there was no demand or available storage space.

  • Months of port congestion on the U.S. West Coast and elsewhere has contributed to slow turnaround, along with importers who have ignored the normal 3-5 day turnaround times. Until now, many container owners have been reluctant to impose penalties on large importers that fail to return their boxes on time.

  • Operational disruptions and cost-cutting across the supply chain is affecting handling and is likely to drive up container-damage incidents and claims, insurer Allianz warns.

Carriers have responded to the equipment shortage, port disruptions and other turmoil by imposing surcharges that have cause friction with shipping customers. “The dearth is boosting the purchase price of new containers and lease rates by 50%, snarling port traffic, adding surcharges and slowing deliveries heading into the holidays,” says Transport Topics.

How many containers are there?

Container XChange, which forecasts container availability, puts the number of containers in use around the world at 35 million. Those containers make 170 million full trips each year, including 55 million trips made empty when the boxes are being returned to export origins or shifted to areas of greater demand.

American Shipper says about half the world’s containers are owned by shipping lines. The other half are owned by companies such as Triton, CAI and Textainer that lease the 40-foot boxes. Manufacturers say they are no longer able to fill orders for new containers, even though the price of a new 40-foot box has climbed from $1,600 to $2,500 over the past year.

Some carriers and shippers have tried to make up for a shortage by converting refrigerated containers – “reefers” – into containers for dry goods like clothing or electronics. That could soon be a problem because the anticipated arrival of COVID-19 vaccines has spurred a surge in demand for refrigerated containers, which can be positioned in developing countries and converted into cold storage for vaccines that must be maintained at low temperatures.

The Effect of the E-Commerce Boom

The boom in e-commerce is changing shipping patterns and trade flows. At least 25% of container volume from Asia to the United States now involves goods going to e-commerce distribution centers. Fewer goods are going into inventory or direct to retail outlets. The shift has put a premium on tighter delivery schedules, greater visibility, warehousing, parcel handling and last-mile services.

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Agility’s Take

In China, the container imbalance is actually a container shortage. All shippers and ports are confronting a shortage of containers, but the ports most severely affected are Shenzhen, Xiamen, Shanghai and Ningbo. The shortage is a primary factor in ocean freight rate increases.

Agility is working very closely with individual carriers and Chinese ports to identify alternatives and to verify the availability of containers for shipping customers so that they don’t have goods stacking up at production facilities or portside. Verification has become particularly important as some carriers have imposed restrictions on the release of empty containers to shippers loading for departure at Chinese ports.

Shippers are struggling to cope with a variety of new charges imposed by carriers and, in some cases, are under the impression that additional charges will guarantee the availability of containers, which is not true. Shippers need to work closely with forwarders and Chinese trucking companies to locate and secure available containers in time to move their cargo.

Container lessor Textainer says the imbalance will persist through February. We believe it might last into March or April.  Shippers looking ahead at 2021 need to pay special attention to container guarantees, equipment availability on specific trade lanes, and possible penalties or extra charges for failure to meet agreed-upon turnaround times.