The Global Shipping Industry Faces a New Problem: Once Hard to Find Containers, Now Too Many to Fit

It is reported that the global shipping industry is facing the opposite of the previous "hard to find a container" problem: more empty containers can not be put. The economic slowdown and the decline in demand due to excess inventory have led to a backlog of empty containers at ports, and there is not enough warehouse space to accommodate all the containers.

Container xChange, a container leasing and trading platform, reports that the industry's order-to-inventory ratio has fallen sharply, meaning that inventory is high but demand is slowing, which has had a ripple effect at different stages of container logistics. One of the most prominent issues is the lack of warehouse space, which will have a significant impact on container repositioning and shipping in 2023.

There is not enough warehouse space to accommodate all the containers, said Christian Roeloff, co-founder and CEO of Container xChange. Warehouses will be under even more pressure in the coming months as container inventory is released further into the market. This is a key challenge for some companies, while at the same time a competitive advantage for others, especially in China, where empty containers are being repositioned.

Andrea Monti, CEO of Sogese, which has container warehouses in different locations in Europe, spoke at the Digital Container Summit in October: Our warehouse in Milan is so crowded and the number of containers is increasing that we are returning some requests for warehouse service agreements. We are in a situation where some of our local warehouses are unable to accept new customers.

With Christmas approaching and the peak cargo season technically not and happening this year, retailers are wary of the high inventory levels at hand.

Monti said: retailers have enough inventory. Once they run out of inventory in North America and Europe, they will order again and demand for capacity will pick up. This will not return to the peak levels seen during the epidemic, but it will certainly return to the long-term average upward trend. What is happening is that cargo is being delivered 'on time' again, so a slowdown in new orders will be seen as companies adjust to more efficient ocean freight turnaround times.

To address the problem of overflowing warehouses, ports such as the Port of Houston have begun charging fees for containers parked on the dock for more than seven days, said Darin Miller, national marine manager for global claims management provider Sedgwick.

Too many containers on ships or in ports, often sitting for weeks on end, lead to a shortage of warehouse space, which only exacerbates the ongoing supply chain crisis as it affects repositioning and shipping of containers.

For container owners, this could mean higher container storage fees for warehouses as more and more containers are stacked, said Johannes Schlingmeier, co-founder and CEO of Container xChange.

Also according to Drewry's latest report, there is currently an estimated surplus of more than 6 million TEU containers, due to a record number of new containers being delivered in 2021. More than 7 million TEU of containers were produced at that time, and lessors and shipping companies are avoiding eliminating older containers due to congestion issues.

Aging containers are now being sold into the secondary market at an accelerated rate as ocean carriers address overcapacity issues to align with existing and short-term demand and vessel capacity forecasts. Since the summer, there has been a significant increase in the amount of equipment being returned due to non-renewal of contracts by shipping lines. This will continue through 2023.

Container xChange's latest monthly logistics report shows that the average transaction price and one-way lease cost for standard containers in China has fallen to its lowest level in two years. the price was US$3,711 in October and has fallen further in November (so far).

CAx (Container Availability Index) values are much higher than before the outbreak, which means that inbound containers are significantly higher than outbound containers at Chinese ports this year compared to 2019 and beyond.

Since May 2022, one-way lease rates for standard containers from China to North America have declined month by month, from $1,773 to $344 in October. One-way lease rates from China to Europe have fallen from $2,845 in January to $1,726 in May and further to $910 in October this year.

Roeloffs added: The decline in freight rates and container prices indicates weak container demand and a surplus of containers. The larger this gap, the lower container freight rates and prices will be. Due to the lack of peak season this year, logistics companies have already started to prepare for the Chinese New Year.

The growing imbalance between container supply and demand, the increasing number of empty containers destined for Asia and increasingly tight warehouse storage space will be topics of concern in 2023.