03 May Tackling the Container Shortage
Around 90% of the world’s trade goes through the sea, and globalization has continued to expand the demand for containers. Ships can carry a large volume from one place to another, and compared to other means of delivering cargo, water transportation has been proven to be the most cost-efficient and secure way of shipping goods. But it does not come without its own problems, like container shortage, which was made especially prevalent during COVID-19.
Global Shipping Container Market
According to a shipping containers global market report done by The Business Research Company, the market is expected to decline at a compound annual growth rate (CAGR) of 2.48%. The change in growth can be attributed to companies finding a balance for their output after adapting to high demand caused by the COVID-19 pandemic. Demand for cargo transportation through waterways has only been increasing, which is projected to boost growth for the market.
But commercial growth of the market is expected to be constrained by the high costs associated with shipping containers. Prices vary depending on size and condition, with bigger and newer containers costing more. A used 20-foot container could cost around $2,000 USD, a used 40-foot container ranges from $3,000 to $4,000 USD, while a brand new unit of the same size would cost approximately $6,000 USD. The prices of new containers have also been driven up, as manufacturers know there is high demand. Furthermore, beyond the containers themselves, there could be other fees such as container home plans or foundation costs that make them even less affordable to purchase.
Container Availability Index
The Container Availability Index allows people to monitor the availability of containers in 11 ports and whether or not they have a container shortage. Values over 0.5 indicates there is a surplus, and values under 0.5 indicates shortage.
2021 began with container shortage across the globe, as the industry was still dealing with the effects of COVID-19. Problems were caused by labour shortages and uncertain demand. While trade volume became more consistent in the second half of 2020, containers were still short in supply, and scarcity led to high prices. The index shows that across all ports, container shortage started to become less of an issue around mid to late February. There was a steady increase in container availability up until recently. And while availability is decreasing in most, if not all ports right now, the values are still over 0.5.
The Future of Containers
Freight rates were very high at the beginning of 2021, which was a direct result of 2020 pandemic-induced consumer spending habits. With the inability to spend money on services, leisure, and restaurants, consumers turned to online shopping instead. This led to the combination of high purchase rates for personal equipment, like new hobby supplies and furniture, with container shortages, port congestions, and labour shortages. High demand and extended container ship turnaround time contributed to container shortages and caused an exponential increase in freight costs.
As disruptions and container shortages caused by the pandemic gradually get addressed, rates are expected to reduce, or at least plateau. The competitive industry will have to adjust pricing as the availability of containers fluctuates. Current container trends imply that rates will not be as high as they were in the second half of 2020, but with most of the world still working with pandemic restrictions, there is no guarantee that prices will actually decrease. Consumer spending habits are forecasted to remain the same, and the continuation of reduced labour will not alleviate port congestion either. Forwarders should keep an eye on the index to watch out for more potential container shortages in the future.
With the vast container volumes that Straight Forwarding, Inc. has buying power over, SFI provides customers with a highly competitive rate via our relationships with major fleet lines. The experienced professionals working at SFI are all armed with knowledge of the freight forwarding business, and can provide solutions and answers to all kinds of shipping problems.