The global shipping industry faces a new problem: too many containers

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Trends in global supply chains continue to reverse as container prices fall and container depots fill up, logistics data shows.

Sasin Tipchai | 500Px | Getty Images

While there was a shortage of containers at the height of the pandemic, the global economy is now facing the opposite problem: too many containers.

In addition to falling freight rates, data shows that container depots — which are used to house containers after they have been unloaded — are now filling up or filling up.

It points to more signs of declining global demand and an impending economic slowdown.

Traders and shippers say the decline in global consumer demand is not a sign that the global economy is returning to normal after a frantic post-lockdown consumption storm, but a downward shift in consumer appetite.

What has happened now is that the cargo is back ‘on time’ and so you will see a delay in new orders…

Andrea Montic

Chief executive, Sogese

“There just isn’t enough depot space to house all the containers,” Christian Roeloffs, CEO of the online container logistics platform Container xChange, said in an industry update this week.

“With the further release of container stock in the market, for example from the sale of lease fleets, there will be extra pressure on depots in the coming months.”

Reject new customers

The Italian owner of container depots, Sogese chief executive Andrea Monti, told Container xChange that its depots are full.

“Whatever came in and out, for example our depot in Milan is pretty stuck. And the container volume at the depots is increasing to such an extent that we are returning some requests for depot service agreements.”

“We are in a situation where we cannot accept new customers for some locations.”

Monti told Container xChange that the high season of freight shipments — as Christmas approaches — “technically hasn’t happened this year.” Retailers are wary of the high level of inventory they have on hand, Monti said.

“There is plenty of stock at retailers,” says Monti.

“What has happened now is that cargo is back ‘on time’ and therefore you will see a slowdown in new orders as companies adapt to more efficient lead times in ocean freight delivery.”

The high volume of containers on ships or in ports, often standing for weeks at a time, leaves us with insufficient depot space, exacerbating our ongoing supply chain crisis…

Darin Miller

National Marine Manager, Sedgwick

To combat overcrowded and overcrowded depots, ports like the Port of Houston have begun levying fees for empty containers left in terminals for more than seven days, according to Darin Miller, the national naval manager of Sedgwick’s national claims administrator.

“What many don’t realize is that the containers in the depots are often empty,” he told CNBC.

“The high volume of containers on ships or in ports often leaves us for weeks at a time, leaving us with insufficient depot space, which only exacerbates our ongoing supply chain crisis as it affects container repositioning and relocation.”

Consumers can expect retailers to offer discounts to clear inventory, Miller added.

The latest composite Drewry World Container Index – a major benchmark for container prices – has fallen again to $2,773 per 40-foot container. That is 73% lower than the peak in September last year.

Sailings cancelled

Blank or canceled sailings are also on the rise in what is usually the opposite as the biggest spending period of the year approaches.

A blank sail occurs when a shipping company decides to skip a port or an entire portion of its schedule to manage changes in demand and capacity.

There is a significant dent in consumer demand, which in turn leads to less freight and freight demand, and thus a commensurate dent in global container demand.

Spokesman

Container xChange

In his latest analysis of canceled sailings, Drewry said that between late November and early December, 14% of sailings were canceled on major container routes.

Last week, major shipping group Maersk warned in its third quarter results that freight rates have peaked amid easing supply chain congestion and falling demand. The company told investors to expect lower profits in the shipping industry.

Nearly 60% of the 200 freight forwarders, merchants and shippers who spoke to Container xChange in a survey last month said they are grappling with geopolitical, economic and political risks that have put downward pressure on consumption and thus container demand.

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“We already know that the market is bearish on consumer demand due to multiple factors such as recession fears and inflation risks,” a Container xChange spokeswoman told CNBC.

“So naturally there’s a significant dent in consumer demand, which in turn leads to less freight and freight demand, and thus a commensurate dent in global container demand.”

Shippers are giving away containers to reduce congestion at depots, while many have resorted to blank sailings, Container xChange added.



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