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

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

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

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 – used to store containers after they are unloaded – are filling up or are now full.

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

Traders and shippers say the drop in global consumer demand is not a sign that the global economy is normalizing after a post-lockdown consumption frenzy, but a drop in consumer appetites.

What has happened now is that the shipment is “on time” again and so you will see a slowdown in new orders…

Andrea Monti

Managing Director, Sogese

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

“With the continued release of container stocks into the market, for example from the divestment of rental fleets, there will be additional pressure on depots in the months ahead.”

Refuse new customers

Andrea Monti, owner of the Italian container depot, managing director of Sogese, told Container xChange that his depots are full.

“Everything going in and out of, for example, our Milan depot is pretty much blocked. And the volume of containers in 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 are unable to accept new customers for certain sites.”

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Monti told Container xChange that the peak season for cargo shipments — in the run-up to Christmas — “technically didn’t happen this year.” Retailers are cautious about the high level of inventory they have on hand, Monti said.

“There is enough inventory at retailers,” Monti said.

“What’s happened now is that cargo is ‘on time’ again and so you’ll see a slowdown in new orders as companies adjust to more efficient turnaround times for the delivery of ocean freight.”

Often left sitting for weeks, the sheer number of containers on ships or in ports leaves us with insufficient drop-off space, which only exacerbates our current supply chain crisis…

Darin Miller

National Marine Director, Sedgwick

To combat full and overflowing depots, ports such as the Port of Houston have started charging fees for empty containers parked at terminals for more than seven days, according to Darin Miller, national marine manager for the global cargo management provider. Sedgwick claims.

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

“Often left in place for weeks, the large number of containers on ships or in ports leaves us with insufficient drop-off space, which only exacerbates the current crisis in our supply chain as it has a impact on container repositioning and movement.”

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

Drewry’s latest Global Container Composite Index – a key benchmark for container prices – fell again to $2,773 per 40ft container. This is 73% less than the record rate in September of last year.

Departures canceled

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

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

There is a significant drop in consumer demand which then leads to a drop in demand for cargo and freight, and therefore a proportional drop in container demand globally.


xChange Container

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

Shipping major Maersk last week warned in its third-quarter results that freight rates had peaked amid easing supply chain congestion and falling demand. The company told investors to expect lower shipping profits.

Nearly 60% of the 200 freight forwarders, traders and shippers that Container xChange spoke to in a survey last month said they were grappling with geopolitical, economic and political risks that imposed downward pressures on consumption and therefore container demand.

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

“So of course there is a significant drop in consumer demand which then leads to a drop in freight and cargo demand, and therefore a commensurate drop in container demand globally.”

Shippers are donating containers to reduce congestion at depots while many have resorted to blank shipping, Container xChange added.

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