Global container shortage crisis

The global shipping system is currently experiencing a unique and unexpected crisis.

A series of unusual events triggered by the epidemic led to a serious container shortage crisis. This situation can be classified as global, because the shortage of containers will have a knock-on effect on all supply chains and fundamentally disrupt international trade.

During the recovery phase of trade, the shortage of containers had a huge impact on freight rates.

According to market participants, in February this year, the transportation cost of each container has increased from US$1,500 to US$6,000-9,000. The shortage of containers has also pushed up the price of new containers.

Currently, the dominant Chinese container manufacturer is priced at US$2,500 for new containers, up from US$1,600 last year.

In the previous six months, container rents have also increased by about 50%.

There are four main reasons for this crisis:

First, due to the reduction in the number of available containers;

Second, because most ports are congested due to labor shortages;

Third, due to the decrease in the number of ships in operation;

Finally, due to major changes in consumer buying sentiment.

In the middle of last year, the real "black swan" appeared.

A large number of containerized cargoes from Asia were shipped to North America, but due to the restrictions of the epidemic, almost no containers were shipped to Asia. Since the shipping company is not interested in this, it pays little attention to the return of empty containers.

So far this supply asymmetry has evolved into a terrible huge imbalance.

In addition, there has been a catastrophic labor shortage in US ports. It's not just docks and warehouses. Due to border restrictions, customs work has also been partially suspended. Although China resumed exports earlier than other countries in the world, other countries still face continued blockade restrictions and layoffs.

There is currently a 40% unbalanced gap in containers in North America. This means that for every 10 containers that arrive, only 4 return, and 6 remain at the arrival port. The average monthly trade between China and the United States is 900,000 TEU, and there is indeed a huge absolute imbalance in containers.

In the first quarter of this year, sales increased by 23.3% over the same period last year. The container shipping crisis has affected various business areas in different ways. For example, the transportation of high-value commodities such as mechanical engineering products, electronic products and computer equipment will be less affected.

But for other types of goods, especially the textile industry in Asia, the increase in transportation costs has brought more serious consequences. Exporters claim that the sharp increase in freight rates has led to the closure of many low-profit textile mills.

Delays and container shortages are pushing up freight rates. In Asia, delivery delays can be up to several weeks, forcing many companies to negotiate price increases with buyers.

The container shipping industry consulting company at the port of Felixstowe in the United Kingdom said that the freight from Shanghai to Los Angeles for a 40-foot container is 0.66 US dollars, while the freight from Shanghai to Los Angeles is less than 0.10 US dollars. The ticket price from Shanghai to Melbourne is US$0.88, and the ticket price from Shanghai to Santos is US$0.75.

There is a consensus that empty containers should be shipped back to Asia so that carriers can continue their business. The trade route from Asia to the United States has become so profitable that the carrier does not even have to wait for the arrival of the cargo to ship the container back to Asia, especially when there is no cargo at the port.

With reports of increasing congestion and container shortages in China's major ports, the country has begun to call for cooperation to obtain more containers and lower freight rates.

A number of measures are currently being taken to break the deadlock. However, it is not clear how the global container shortage crisis can return to normal in the coming months. Unfortunately, it is expected that the contracted freight rate will remain at a relatively high level throughout the year. It is already clear that for trading and transportation companies, and therefore for the world economy, this year will be a challenging year.