Just when shippers were starting to feel good about equipment supplies this year, carriers and container lessors alike are warning of possible container shortages during the peak season.
Although containers are in short supply almost every peak season, a World Shipping Council study came to a disconcerting conclusion that the equipment environment this year is different than in the past.
Textainer, one of the world’s largest container lessors, agrees. The Bermuda-based company has a container fleet of 2.5 million 20-foot equivalent units, but only 14,000 of the boxes are idle, and half of those are committed to customers. “We almost literally have no depot inventory now,” President and CEO John Maccarone said.
Most U.S. shippers say the container supply this year has been acceptable, but equipment is getting tight in booming intra-Asia trade lanes. That market is considered a precursor of the eastbound trans-Pacific because the parts, components and materials moving now will end up in consumer products shipped to the United States this fall. “It’s the canary in the coal mine,” Maccarone said.
The WSC’s “Container Supply Review” warns 2011 began with a significant shortfall of equipment. In the five years leading up to the 2009 recession, Chinese container factories produced about 3 million TEUs a year. In 2009, they produced only about 450,000 TEUs, and increased that to 2.5 million TEUs last year.
But the rebound in production was so slow a global container shortage developed in early 2010. Shippers bid up the price of securing containers, and carriers in the eastbound Pacific implemented a peak-season surcharge in January, an additional fee not usually imposed until the summer.
By historical standards, container factories in 2009 and 2010 should have manufactured 6 million TEUs but turned out less than 3 million total. The WSC report argues that means 2011 began with a global shortage of some 3 million TEUs.
The factories this year are expected to crank out 3.5 million TEUs, about 60 percent of their capacity. But even if carriers place large orders now, the producers wouldn’t be able to ramp up in time for the peak season. And, with containers selling for a record $3,000 per TEU, the factories don’t want to overbuild and reduce their profits.
The WSC report cites other troubling statistics. Carriers normally maintain a ratio of three containers for every slot on the vessels they deploy. Last year, the box-to-slot ratio dropped to 2.03 to 1, according to research analyst Alphaliner, which projects the ratio will drop to 1.99 by the end of 2011.
Another measure of equipment availability is the relationship between the loaded TEUs moved for each TEU in the global fleet. That ratio generally used to be 4.5 to 1, but jumped to 5.08 in 2003 and has stayed above 5.0. While that’s positive because it means equipment owners are getting more turns per container, the WSC noted the ratio in 2010, when there was a severe shortage of boxes, was 5.54 to 1. The WSC said it could go even higher this year.
Carriers also appear determined to continue slow-steaming their vessels to save money at a time of high fuel prices. Doing so requires carriers to have about 5 percent more containers to maintain existing services, the WSC estimates.
On a positive note, carriers and lessors have been slower to scrap older containers since last year, the WSC report notes. The historical annual disposal rate of 5 percent of the global fleet dropped to less than 4 percent during the recession. In 2011, it will be about 4.5 percent, thereby boosting somewhat the supply of containers.
Shippers aren’t necessarily convinced by all of the arguments listed in the report. The report appears to be the first of its kind from the carrier organization, which is usually devoted to political and regulatory issues. And it comes as carriers are trying to bolster rates that started slipping this year as vessel operators began taking new ships and placing new orders, leading some analysts to project capacity would grow ahead of vessel capacity this year.
Slow-steaming also has existed for a couple of years, and carriers have said they’re able to manage their services without inconveniencing customers, said Peter Gatti, executive vice president of the National Industrial Transportation League. Now slow-steaming is given as one of the drivers of a possible container shortage. “Which is correct?” he asked.
Some carriers intend to step up their leasing activity. “Certain carriers are asking leasing companies to purchase the containers and lease the containers to them,” said Steven Blust, president of the Institute of International Container Lessors.
Exporters are accustomed to tight equipment supplies, even when containers are plentiful. Interra International, an Atlanta-based food distributor, is preparing for possible shortages of refrigerated containers by adding more shipping lines to its list of carriers.
There is also the perpetual tug-of-war between exporters and carriers. Some carriers overbook their outbound vessels because they say shippers fail to fill all of the slots they book. Exporters say they book the same shipments with multiple carriers because carriers shut them out when business is brisk.
“It’s a catch-22,” said Hayden Swofford, independent administrator of the Pacific Northwest Asia Shippers Association.
Some shippers and carriers say planning ahead is the solution. “In order to continue the flow of containers,” Maersk Line spokeswoman Mary Ann Kotlarich said, “it is important for the import containers to quickly turn to containers for export.”
Contact Bill Mongelluzzo at email@example.com.