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Global Supply Chains Have Built Resilience Over the Past 2 years, Further Disruptions to Cause a Limited Impact on Containerized Trade

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Global Supply Chains Have Built Resilience Over the Past 2 years, Further Disruptions to Cause a Limited Impact on Containerized Trade

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As the shipping world enters peak season shipping, freight forwarders and shippers are concerned about the geopolitical risks that will knock as tensions between China and Taiwan increase soon after the US House Speaker Nancy Pelosi visited Taiwan.

Nearly half the world’s container ships passed through the narrow Taiwan Strait — which separates the island from the Chinese mainland — in the first seven months of this year, according to data compiled by Bloomberg.

“The global supply chain is interconnected and all the major stretches like Taiwan Strait are nerve centers of these value chains. And if any one stretch is blocked, the undercurrents are felt across the system. Especially at a time when the industry is busy shipping cargo for the peak season, the impact will be reverberated across. What will decide the degree of impact is the tenure of this disruption.” said Christian Roeloffs, cofounder and CEO, Container xChange, a technology marketplace and operating platform for container logistic companies.

“While we do expect trade disruptions across Taiwan, China, South Korea and Japan due to this if the military action persists longer or in intensity, another view is that the supply chain industry has built resilience over these past 2 years owing to many such shocks in the past. Case in point, we were expecting lockdowns in China (that lasted 2 months) to impact the peak season negatively. However, we do not see any such disruption, especially on container prices and leasing rates. Therefore, it will be very difficult to forecast the degree of impact that this show of strength by China will cause on containerised trade in these markets.” added Roeloffs 

“The immediate impact will be rerouting of the vessels through the eastern side of the island which will add a few days in the voyage of the containerised cargo”, according to information shared by a customer of Container xChange with business in Taiwan.

No signs of rise in container prices due to peak season shipping 

The global average container prices decreased from $3339 in July to $2730 (so far in August) by 18%.

The average container prices have declined in the month of July as compared to the month of June in the United States by 20%, China by 5% and India by 7%. These prices continue to drop into the month of August so far across the U.S and China.

Average one-way pickup rates of cargo-worthy containers from Asia to North America decreased from $1612 in June to $1052 in July, by 35%. The pickup rates declined on China to the U.S stretch from $2088 in June to $1220 in July.

Watch out for more next week in the August edition of our monthly container logistics report, ‘Where are all the containers’, a monthly round-up of insights and analysis on average container prices, leasing rates and container availability.

About Container xChange  

Container xChange is a technology company that offers a container trading and leasing platform, payment infrastructure (for transparent and easier payment handling) and efficient operating systems to manage the end-to-end container movement across the globe for container logistic companies worldwide. Covering the entire transaction process of shipping containers starting with finding new partners to track containers and managing payments, xChange makes using 3rd party equipment as easy as booking a hotel. We are on a mission to simplify the logistics of global trade.

Being one of the top ten logistics tech companies globally, xChange is fundamentally transforming thousands of processes involved in moving containers globally. xChange is trusted by more than 1000 container logistic companies such as Kuehne+Nagel, Seaco or Sarjak that use xChange every day to improve operational effectiveness and improve productivity.

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Oversupply of Containers Leading to Second-Hand Container Market Price Correction

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The oversupply of containers is contributing to second-hand container market prices plummeting, Container xChange shared in a recent analysis.

“The current situation of oversupply of containers is a result of a series of reactionary market disruptions that began soon after the outbreak of the pandemic in early 2020. With the rise in demand, congestion at ports increased and the container capacity was held up for a considerably long period of time. This led to the panic ordering of new boxes at record levels. With time, as markets reopen and demand softens, the oversupply is a natural outcome of demand-supply forces balancing at new levels.” said Christian Roeloffs, Cofounder and CEO of Container xChange, a tech platform that simplifies the logistics of container movement.

“The oversupply situation does not come as a surprise because the average container prices and leasing rates have been declining globally since Sept-Oct 2021.” added Roeloffs.

Short to mid-term outlook on freight rates, spot rates and container rates 

Freight rates have come down by approximately an average of 20% since the beginning of the year 2022 and these will continue to slide gradually, but there will not be a massive decrease because the underlying disruptions in the supply chain are still there. Inflation, for one, has started to create build stress on the US economy and the EU. With inflation and pandemic-induced lockdowns, disruptions will continue to change the equation between supply, demand and prices. In the longer term, these will phase out and create a new normal balance of supply and demand.

Fresh data published by Drewry indicates an excess of 6 million TUEs of capacity in the global fleet of containers. Container xChange analysis further states that the oversupply will obviously lead to the requirement of more depot space which is already scarce. And in a scenario where we assume that the global supply chain disruptions will fade away with time, there will be higher box productivity and we will need fewer boxes per unit of cargo.

As we witness the easing of supply chain disruptions in the coming months it will lead to higher box productivity and a structural surplus of containers. If we also see further softening of demand, this will increase the supply of containers available for cargo.

There is a high possibility of a scenario where the equipment capacity will not get soaked.

“This situation will lead to tighter depot space, carriers will rush to get rid of their older equipment, second-hand container prices will continue to slide gradually only to reach a new normal level and the new market will dry up.” 

The situation can be studied from the perspective of the market forces of demand and supply. If the demand for containers falls (resulting from the decline in consumer demand over the course of the next few months considering, the rising inflation which could contribute to negative consumer sentiment), then the supply of containers will naturally increase. Also, price is a function of demand and supply. If demand falls and supply increases, prices will fall. And that is what is currently happening with the container prices.

The shape of the Peak Season  

We’ve said it before that the main factor that has driven up prices much more than the historical levels has been a supply-side crunch over the past two years because of lengthening turnaround times of containers caused by supply chain congestions. That still holds true. We still have about 10% of transport capacity tied up and removed from the value chain. Demand on the other hand has softened now.

U.S. Imports decreased by 2.4% between March and April.  Purchases of goods went down USD 0.1 billion as higher imports of industrial supplies and materials (up 1.8 billion) were offset by lower imports of consumer goods (down 1.5 billion). source: U.S. Census Bureau

 An interesting point is that in the long run, ocean freight demand is forecasted as a multiplier of global GDP growth. And if global GDP doesn’t plummet by for instance 5%, the global demand for shipping capacity will not significantly plummet.   

“To sum up, we foresee a significant rise in the pent-up, peak season demand. This will likely keep container prices potentially stable (prevent them from falling further down or skyrocketing) in the short term as we inch closer to the peak season.”

“What remains to be seen is how the geopolitical circumstances and the pandemic-induced lockdowns (for instance, in China) play out in the coming months.”

About Container xChange  

Container xChange is a technology company that offers a container trading and leasing platform, payment infrastructure (for transparent and easier payment handling) and efficient operating systems to manage the end-to-end container movement across the globe for container logistic companies worldwide. Covering the entire transaction process of shipping containers starting with finding new partners to track containers and managing payments, xChange makes using 3rd party equipment as easy as booking a hotel. We are on a mission to simplify the logistics of global trade.

Being one of the top ten logistics tech companies globally, xChange is fundamentally transforming thousands of processes involved in moving containers globally. xChange is trusted by more than 1000 container logistic companies such as Kuehne+Nagel, Seaco or Sarjak that use xChange every day to improve operational effectiveness and improve productivity.

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Oversupply of Containers Leading to Second-Hand Container Market Price Correction

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The oversupply of containers is contributing to second-hand container market prices plummeting, Container xChange shared in a recent analysis.

“The current situation of oversupply of containers is a result of a series of reactionary market disruptions that began soon after the outbreak of the pandemic in early 2020. With the rise in demand, congestion at ports increased and the container capacity was held up for a considerably long period of time. This led to the panic ordering of new boxes at record levels. With time, as markets reopen and demand softens, the oversupply is a natural outcome of demand-supply forces balancing at new levels.” said Christian Roeloffs, Cofounder and CEO of Container xChange, a tech platform that simplifies the logistics of container movement.

“The oversupply situation does not come as a surprise because the average container prices and leasing rates have been declining globally since Sept-Oct 2021.” added Roeloffs.

More details on pricing and leasing rates, container availability fluctuations across China, India, Indian Subcontinent and the Middle East in the monthly container logistics report by Container xChange here – https://www.container-xchange.com/reports/monthly-container-logistics-update/ )

Short to mid-term outlook on freight rates, spot rates and container rates

Freight rates have come down by approximately an average of 20% since the beginning of the year 2022 and these will continue to slide gradually, but there will not be a massive decrease because the underlying disruptions in the supply chain are still there. Inflation, for one, has started to create build stress on the US economy and the EU. With inflation and pandemic-induced lockdowns, disruptions will continue to change the equation between supply, demand and prices. In the longer term, these will phase out and create a new normal balance of supply and demand.

Fresh data published by Drewry indicates an excess of 6 million TUEs of capacity in the global fleet of containers. Container xChange analysis further states that the oversupply will obviously lead to the requirement of more depot space which is already scarce. And in a scenario where we assume that the global supply chain disruptions will fade away with time, there will be higher box productivity and we will need fewer boxes per unit of cargo.

As we witness the easing of supply chain disruptions in the coming months it will lead to higher box productivity and a structural surplus of containers. If we also see further softening of demand, this will increase the supply of containers available for cargo.

There is a high possibility of a scenario where the equipment capacity will not get soaked.

“This situation will lead to tighter depot space, carriers will rush to get rid of their older equipment, second-hand container prices will continue to slide gradually only to reach a new normal level and the new market will dry up.”

The situation can be studied from the perspective of the market forces of demand and supply. If the demand for containers falls (resulting from the decline in consumer demand over the course of the next few months considering, the rising inflation which could contribute to negative consumer sentiment), then the supply of containers will naturally increase. Also, price is a function of demand and supply. If demand falls and supply increases, prices will fall. And that is what is currently happening with the container prices.

The shape of the Peak Season  

We’ve said it before that the main factor that has driven up prices much more than the historical levels has been a supply-side crunch over the past two years because of lengthening turnaround times of containers caused by supply chain congestions. That still holds true. We still have about 10% of transport capacity tied up and removed from the value chain. Demand on the other hand has softened now.

U.S. Imports decreased by 2.4% between March and April.  Purchases of goods went down USD 0.1 billion as higher imports of industrial supplies and materials (up 1.8 billion) were offset by lower imports of consumer goods (down 1.5 billion). source: U.S. Census Bureau

 An interesting point is that in the long run, ocean freight demand is forecasted as a multiplier of global GDP growth. And if global GDP doesn’t plummet by for instance 5%, the global demand for shipping capacity will not significantly plummet.   

“To sum up, we foresee a significant rise in the pent-up, peak season demand. This will likely keep container prices potentially stable (prevent them from falling further down or skyrocketing) in the short term as we inch closer to the peak season.”

“What remains to be seen is how the geopolitical circumstances and the pandemic-induced lockdowns (for instance, in China) play out in the coming months.”

About Container xChange  

Container xChange is a technology company that offers a container trading and leasing platform, payment infrastructure (for transparent and easier payment handling) and efficient operating systems to manage the end-to-end container movement across the globe for container logistic companies worldwide. Covering the entire transaction process of shipping containers starting with finding new partners to track containers and managing payments, xChange makes using 3rd party equipment as easy as booking a hotel. We are on a mission to simplify the logistics of global trade.

Being one of the top ten logistics tech companies globally, xChange is fundamentally transforming thousands of processes involved in moving containers globally. xChange is trusted by more than 1000 container logistic companies such as Kuehne+Nagel, Seaco or Sarjak that use xChange every day to improve operational effectiveness and improve productivity.

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Global Average Monthly Container Prices Increase for the First Time in 2022 

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Average container prices and leasing rates continue to decline in China

Decline in consumer demand for goods not expected to impact change in container prices and rates in the coming times

For the first time this year in May, the average container prices globally have soared month on month at an average of 5.4% (from $2207 to $2330) for the 20 ft DC and by 15% (from $3800 to $4410) for 40 ft HC. However, the average container prices and the leasing rates continue to decline in China even as the country reopens after massive two months of lockdowns.

The insights are a part of the monthly container logistics report titled ‘Where are all the containers’ published by Container xChange, a technology infrastructure provider for container logistics players.

“We expect a surge of containers onto the transpacific, leading to higher utilization of vessels on this route. We could see a surge in spot rates especially with the upcoming peak season.” said Christian Roeloffs, cofounder and CEO, Container xChange.

“Not only Shanghai was in lockdown, right now Beijing and its biggest harbor Tianjin is still in lockdown. All cities are so interlinked that it influences the whole of China. For instance, Shanghai is the main hub to produce car parts and Shenzhen is for assembly. Since no parts are dispatched to Shenzhen, nothing can get assembled and thus exports out of Shenzhen also experience slow down.”

“If we look at the west, there is major congestion in Los Angeles and Houston. It has become particularly challenging to find open depots and moving units in Shanghai. Depots in Rotterdam are also quite full, followed by Hamburg (but less flagrant than Rotterdam).”

“We saw a decrease in pick up charges in the past months in China because there was a lack of demand for containers there. In the short term, we expect a spike in container prices because the demand (the pent-up demand) for containers will shoot up especially because we have the peak season coming up.

“However, in the mid to long term, we do expect container prices to go down, containers availability to go up and container turnaround times to normalize because we expect the supply chain disruptions to ease.” said Roeloffs.

Impact of decline in consumer demand for goods on shipping? 

“A metric cited by Goldman Sachs shows goods consumption about 5 percent higher from before the pandemic, down from a peak gap of 15 percent. However, the demand side was never really the massive driver of the price increase on the rates. Owing to the supply chain shocks, the containers just took much longer than before and hence there was just not enough supply of containers which coupled with a little bit of an increase in demand and led to this situation that we faced. So, I don’t think that slight reduction in demand will be a massive driver of market changes but of course, it will contribute.”

“To sum up, I think the consumer demand (and eventually presumable unprecedented container demand) wasn’t the biggest driver of the destabilization of market, but it was rather a sort of supply shock and that there were just not enough boxes to go around and because they took longer to move from A to B.” said Roeloffs

Emergence of new trade routes

We do foresee a gradual increase in demand for smaller vessels meant for smaller trade networks. This is because there will be an uptick in more complex networks with more stops and longer turnaround times. Supply chain routes and transhipment lanes are being reimagined to build resilience and to lower the reliance on bigger trade blocks. So, in a way, diversification of trade blocks to diversify the supply chain risks.

For instance, this could mean more stops in Southeast Asia, then all of this goes into Singapore or Hong Kong in a major hub and then re-export to across, for example, the Pacific. That again, not only increases intraregional traffic, but it also increases the importance of these transit hubs. And then lastly, I think it will increase the importance of smaller players in the market.

For more information on container prices, availabilities and one-way rates, please find the full report here – https://www.container-xchange.com/reports/may-monthly-container-logistics-update/

About Container xChange  

Container xChange is a technology company that offers a container trading and leasing platform, payment infrastructure and efficient operating systems to container logistic companies world-wide. Covering the entire transaction process of shipping containers starting with finding new partners to tracking containers and managing payments, xChange makes using 3rd party equipment as easy as booking a hotel. We are on a mission to simplify the logistics of global trade.

Being one of the top ten logistics tech companies globally, xChange is fundamentally transforming thousands of processes involved in moving containers globally. xChange is trusted by more than 1000 container logistic companies such as Kuehne+Nagel, Seaco or Sarjak that use xChange every day to improve operational effectiveness and improve productivity.

A funded company, Container xChange acquired TankContainerFinder.com in 2021 to further strengthen its product offerings portfolio for tank containers trading and leasing capabilities. http://container-xchange.com/ 

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The container logistics implications of war in Ukraine

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The container logistics implications of war in Ukraine

The spoils of the recent war in Ukraine has largely weighed down on the global container logistics and its threatening to slap even further as the day goes by. As major container logistics companies have cried out.

According to a recent MEDIA STATEMENT on behalf of Christian Roeloffs, co-founder and CEO, Container xChange reads “I would like to express my horror at the events of the last week and my deepest sympathy for all the Ukrainian families who through no fault of their own have been dragged into this conflict following Russia’s invasion of its neighbour.
“This is a tragedy for Europe and has shocked us all at Container xChange. Our thoughts are with our friends in Ukraine. We can only hope that peace returns to this great country soon”.

This is how severe the condition is. From what Roeloffs reported, it was gathered that Parts of the Black Sea and Sea of Azov are now dangerous or unpassable. There have been missile attacks on vessels and ship arrests and lane closures for commercial shipping. The Ukrainian seaports of Odessa and Mariupol are closed/damaged/under attack. Trade and container movements have ceased. Cargo and equipment are stuck at ports.

Due to ongoing disruption to shipping in the Black Sea, container build-ups are expected at ports to exacerbate at storage areas across the region. Maersk has pulled out booking shipments to and from any Russian ports (with exception of foodstuffs, medical and humanitarian supplies) and other carriers have started following.

Russian and Belarussian ports in the Baltic and Black Sea will likely see a build-up of boxes if carriers refuse to make port calls due to the security situation and sanctions. The full implications of sanctions are not yet clear but the closure of the SWIFT system to Russia will make payments from Russian partners more difficult. The Rouble has also been in freefall after Russia’s central bank was cut off from its reserves.

Roeloffs concluded “Maritime trade with Russia and Russian businesses could be very difficult in the months and even years to come. On Monday, the UK banned all Russian ships from entering its ports. There has been at least one ship arrest by the EU. Our legal team is monitoring the situation.

On the Asia-Europe trade we could see more demand for maritime shipments and equipment out of Asia due to modal shift. For example, the Asia-Europe rail and road routes through Russia and
Belarus are reportedly closed and/or being used by militaries. Borders with the EU are closed.

The closure of air space across Russia and Europe has also reduced air freight capacity. We expect this awful war to add to the stretched nature of global container supply chains, bringing yet more inflation, disruption and delays.

Overall, the situation for container availability is likely to worsen, but this will vary by port and region. Central and Northern Europe is already congested, and any further trigger to the cargo flow will only worsen the state of container pileups.

We will continue to monitor the situation and what this means for global equipment networks and box availability. We will continue to support our customers in uncertain times with data and technology for better container operations, enhancing productivity and informed decision making.

Once more, we send our deepest sympathies and support to the people of Ukraine at this terrible time for them all”.

About Container xChange:   
Container xChange is one of the world’s leading container leasing and trading marketplace. More than  800 companies such as Kuehne+Nagel, Seaco, Sarjak use xChange to gain market
transparency, avoid demurrage & detention charges and increase operational flexibility.

Covering the entire transaction process from finding new partners to tracking containers and managing payments, xChange makes using 3rd party equipment and now container trading as easy as booking a hotel. Founded by Dr. Johannes Schlingmeier and
Christian Roeloffs in 2017 and headquartered in Hamburg, Germany, the company has more than 200 employees.

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Container xChange: Suez Canal Closure Increases the Pressure on Europe’s Ports

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The anticipated box crunch at European ports following the closure of the Suez Canal at the end of March has been less severe than expected, according to Container xChange.

However, Europe’s leading box hubs are still receiving far more boxes than are departing.

The average CAx reading of incoming 20-foot dry-containers across three of Europe’s biggest ports – Rotterdam, Antwerp, and Hamburg – climbed just 3% in week 17 compared to the week before.

At Rotterdam, the increase in incoming 20 ft. dry containers was most stark, with box numbers rising +3.75% week-on-week. At Antwerp, the week-on-week increase was +3.5%, while at Hamburg it was +2.2%.

At all three ports, incoming box traffic has been heavy since March. In Container xChange’s Container Availability Index (CAx) an index reading of below 0.5 means more containers leave a port compared to the number which enter. Above 0.5 means more containers are entering the port.

Chart: Container Availability Index for 20 ft. Dry-Containers at the ports of Antwerp, Rotterdam, Felixstowe, and Hamburg in 2021. For more info, click here.

Hamburg has recorded a CAx reading of above 0.8 since week 9 of this year. In week 17 its CAx reading was 0.93, up from 0.48 in week 1. Rotterdam’s CAx reading has also risen steadily in 2021, climbing from 0.65 in week 1 to 0.74 in week 9 and up to 0.83 in week 17.

Antwerp, meanwhile, recorded a CAx of 0.38 at the start of the year, 0.78 in week 9 and 0.9 in week 17.

In contrast, the situation at heavily-congested Felixstowe has been dire all year. The hub’s lowest CAx this year was 0.87 in week 3. In week 17 it recorded a CAx of 0.95, up from 0.94 in week 16.

Dr. Johannes Schlingmeier, CEO & Founder of Container xChange, the world’s leading container leasing and trading platform, commented:

“Europe’s top container terminals have been struggling to keep congestion at bay, with incoming boxes outweighing outgoing boxes for much of 2021. The closure of the Suez Canal appears to have only made the box crunch at Europe’s hubs only slightly worse than it already was.

“What we’re hearing from our container leasing and trading members is that they find it increasingly difficult to book export containers with the carriers across Europe. It seems shipping lines are prioritizing empty containers in order to move the boxes back to China as fast as possible.”

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About the Container Availability Index:

The Container Availability Index tracks millions of monthly container moves to monitor and forecast the global container equipment supply. An index of 0.5 describes a balanced market, below 0.5 a shortage of containers. For more information and weekly email updates, check out https://container-xchange.com/features/cax/

About Container xChange:

Container xChange is the world’s leading online platform used by 600+ companies to buy, sell and lease shipping containers. Container users and owners use the platform to find containers, work with vetted partners and automate the operational workload. Started by Dr. Johannes Schlingmeier and Christian Roeloffs in 2017, the company has now more than 100+ employees with headquarters in Hamburg, Germany. https://container-xchange.com/