Global shipping container shortage: the full story

Why is the world in a shipping crisis?

The surge in shipping costs points to our shortage of semiconductors and lumber chicken chlorine and really everything related to global shipping. The global impact on shipping and container prices has led to more delays due to the pandemic.

Why do we feel this container shortage will affect global supply chains and global trade for the long haul? Let’s get into it in this article.

Why is the industry facing a shortage?

It’s no question that the global pandemic created a massive shortage of containers all across the world. It’s a simple supply and demand issue.

The container shortage is the result of an increase in demand as more and more eCommerce retailers ship items using these containers. The shortage and covid pandemic affect a wide range of different industries, manufacturers and the data shows a sign that congestion may be lasting longer than just a few weeks.

Durable and food production, retail and manufacturing are all impacted by this problem. There are not enough containers to put the orders into, which is resulting in cargo being backed up and left waiting to be chosen. Until there’s a solution, many industries are impacted by the shortage.

The shipping container shortage in 2021 and 2022 is due to the record-high demand for containers. The shortage is making it difficult for industries to ship their products around the world. This form of cargo is in high demand in every major trading country.

One of the main reasons for the ship container shortage is that cargoes require more than one container to move, which contributes to higher demand. Manufacturers and retailers are looking to optimize shipping space and many are using smaller-sized boxes.

Other factors

Many of these shipping containers have been at storage depots while others have been stacking up across ports for cargo ships. The epidemic has resulted in a shifting of the customer’s spending from services to goods. However, as China recovered slowly, other nations were still faced with security controls which meant carriers could not be sent into Asia (where they were truly needed) to continue the trade partnership.

Along with that, Chinese New Years honestly played a bit of a part in this shortage. This year, we could see an increase in tariffs and a slowdown in Chinese production due to the main demographic holidaying.

The issue still persists

Container shortages already exist, so it’s not an impossibility, but it’s a dystopian future that no one wants to see. Shipping containers are a necessity for most shipping companies. Today, the industry ships operate at 99% capacity and they are needed in ever-increasing numbers. There are a number of industries, including retail, construction, and mining, that depend on the use of containers. Without them, they may be forced to turn to more expensive transport methods like shipping by truck or by plane.

The shortage of containers is NUTS.

In order for California nuts companies to increase their delivery time dramatically, they must be able to make products available in the market internationally. In recent months however reports indicating high export shipments of California almonds are still available. Jim Zion managing partner of Meridian Nut Growers in California said his recent load took 77 days and that this was up from 35 days typical transit time. “My goal is to help our customer to plan for longer processing times delays and cancellations,” he wrote. All this is beyond our control. The trend will lead to California exporting more than two million tons of almonds in the 2020-21 market year.

Carrier consolidation

Rabobank reports on the restructuring of maritime operators to three alliances from 18 companies. The country faces a difficult time transferring commodities overseas because of the restrictions charged by naval shipping companies. The price of Spot Market containers is reportedly going up $12,000 per shipment to $15,000.

The time necessary for unloading, transforming, and returning a ship that once held American agricultural goods has become a financial incentive for marine shipping companies. Conversely, an empty container entering China can be filled with products and returned to the United States with immediate results.

What will the future hold?

Alibaba giant Cainiao launches its own container reservation service. This service aims to reduce the backlog of empty containers. Maersk, the major container carrier in the world, says the current situation will improve.

As it leaves Covid-19 and global shortages behind the industry there is an increasing uncertainty arose. Containers are generally available with congestion decreasing but there are some bottlenecks. When a new year arrives the business expects improvements along the way. It is hopeful that transparency is key for the entire industry to be supported to help with global trade.

Container production hits all-time highs

Chinese manufactures accounts for about 80% of worldwide ship containers. They increased their production already at record numbers. But that alone won’t do much to fix the deficit. Some container movers accused container firms of maintaining low supply to push up prices.

According to a firm offering containers and equipment, companies are cautiously avoiding increased production. A post-pandemic steady-state will appear more like the pre-pandemic times, Acharya said, thus building more now could eventually lead to a glut of containerization later. “There is absolutely an ongoing need for more containers…”

Demand record

Export records mean higher demand for goods will be in effect for the second half of 2020. The box usage has expanded due to all the delays extending the time taken a product is delivered to its next customer.

“There should be sufficient boxes for a normal volume of customers in normal conditions”, claims Simon Haney, senior manager of Container Research at Drewry Shipping Consultants Ltd., “The problem has long been the usage for boxes due to delays and it takes longer to return them to another customer.” Haney continues… “Box-use has extended longer than usual.”

We need to make sure containers are being used again and maybe consider renting containers instead of buying them and shipping them back to Asia.

Last year, this was not an issue but now we are looking at a huge container shortage for new containers and used containers alike as we see freight rates and container costs rise.

Shipping container shortage 2021

Covid-19 data has caused a massive container shortage here in America and across the globe. Ships and ports both have felt this shortage and the commodities market has responded by seeing a huge uptick in all things related to shipping supply.

A port in Asia and a port in China have both reported news of going weeks without any containers and this has caused a massive influx in demand for these shipping containers as news has spread about the world’s covid pandemic.

It’s a sign that we need to keep the supply higher for these types of black swan situations. The media certainly hasn’t helped the international capacity of ports being able to properly ship cargo.

When covid news hit in March of 2021, major shortages were seen almost immediately within the year. Costs rose and manufacturers/carriers were unable to meet the demand for production.

Global Trade Supply Chain

When it comes to the availability of shipping containers, the overall supply chain is at a massive shortage. Freight rates have risen tremendously and trade has slowed down to a halt compared to last year. Many freight ships in the trade industry have empty containers sitting at their port.

China may be able to resume back to normal in a few years but for now, new containers will be hard to come by and a used container may be the only option for many ports.

Still only 2-3 weeks of supply

The Chinese firms have produced about 80% of container sales. Productivity has grown sharp with projections for 6%-8% growth in container capacity this year. Even though this means box production is not fast enough to slash capacity.

The price for a new container is $3,500 per cost equivalent unit (CEU) compared to $1,800 per CEU in mid-2020 and $2,500 to mid-2020. The latest price rises were more extreme in China’s used container market which nearly doubled in the last three months. The absence of available containers results in price increases week on week in the event of inventory depletion.

When will container crunch ease?

Many containers were put back by traffic jams of ports such as an accident in the Suez Canal. After clearing log-by-log problems more containers shall be available. They are getting more desperate to turn around so they will need to leave empty containers behind when they return to China” Sondey said. At the end of the year or early next year, we might see trades starting returning to normal.”. I have not seen any of our customers express confidence we’ve got the capability to unblock – especially in this moment of strength.

Port constraints

The California Food and Farm Bureau reports that a significant percentage of agricultural export exports come from California. Edible foods account for 78% of all exports of American agriculture originating in Long Beach, Los Angeles or Oakland.

Nearly half of all US meat exports leave California ports including: Almonds, walnuts pistachio and pistachio.

The higher projected shipping prices are motivating old crop manufacturers to be pulled before the new crops start taking place. That’s about half.

Equipment lessors top expectations

Triton posted a net income of $149.3 million during Q1 2021 versus $67.5 million during Q1. TGH and CAI have been up in recent times though they topped out at mid-to late-March and reversed last year.

After the report was released Keefe / Bruyette – Woods (KBW) had raised its full-year EPS forecast to $8 ($7.24). CAI reported earnings of $32.47 million in the first quarter.

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