With the rebound in container trades likely to last into 2018, container production might struggle to keep up with demand, according to some leasing companies that are now starting to worry that they could run out of containers after Chinese New Year. For the shippers that fill the steel boxes with their cargoes, the prospect of equipment shortages, even if only temporary, will be particularly scary as any limitation on space availability would likely drive up freight rates.

Lessors say the problem is compounded by new regulations introduced in April that require manufacturers to use water-based paint instead of traditional solvent-based coatings. This takes longer to dry in the cold, humid conditions of the Chinese winter, slowing delivery and clogging up storage space. Added to this, Chinese plants often shut down in February for maintenance, followed by the more general shutdown for the Lunar New Year.

The new paint regulations could disrupt production in the temperate regions of China during the coldest winter months, potentially affecting as much as 60 percent of global capacity. Given that demand is expected to stay strong into 2018, and there are no precedents to judge how bad the disruption might be, it’s easy to understand why buyers are worried.

The situation is certainly awkward, but is there likely to be a full-blown crisis? Drewry’s analysis suggests the problem might be exaggerated.

Lessors and carriers took their eyes off the ball in 2016, responding to the extended downturn in container trade since 2013 and failing to anticipate the recovery seen in the past 12 months. They have been playing catch-up ever since, but it has hardly been an undignified scramble: carriers and lessors alike know that cargo surges can be transitory and are still hedging their bets rather than panic-buying. So if the cargo surge continues, the container industry will be starting from a position of weakness.

Production has picked up during the first 11 months of this year, and Drewry is currently predicting production of 3.5 million TEU for the full year, as published in the Container Census and Leasing Industry Annual Report 2017. Most factories have been running with one or 1.5 shifts per day for most of this decade, so utilization has tended to be around 60 to 70 percent. If they returned to double-shift production, capacity would be close to 5.5 million TEU a year, or 50 percent up on the current production volume.

If the production forecast of 3.5 million TEU this year is accurate – and it seems close enough – then this will mark a slight increase on the norms of recent years. Drewry has been predicting similar production of 3.5 million TEU for 2018, and this still seems reasonable even if there is a squeeze at the beginning of the year.

It is notable that the loudest complaints have come from leasing companies. Their purchases of new containers have exceeded those of carriers in six of the last eight years, while they have also been buying up the carriers’ older stock of containers. Better access to finance will keep the leasing companies on the front foot, as carriers move away from direct ownership of boxes much as they had earlier moved away from direct ownership of tonnage. Any supply squeeze is thus likely to hit the lessors hardest.

But the leasing firms do have a safety valve. Most new purchases in recent years have been for replacement rather than expansion. That makes sense, since the leasing companies own a large number of older units bought from transport operators in recent years. If there is a tightening of supply, the leasing firms have much more scope to hang on to their older units rather than scrap them, thus artificially expanding supply. Those boxes will eventually have to go, but we are looking at a short-term tightening of supply rather than a long-term crisis.

There is some slack in the system. Current production capacity is under-utilized, so factories not affected by climatic problems could increase their production for a short time if demand does spike. Even with the new paint rules, this hardly looks like a major crisis so lessors and shippers alike can relax.