Market reports for the global cycling industry
For those hoping that the worst of the container crisis has passed, both Shanghai and the USA this week bring further bad news with traffic jams impacting the possibility of improved supply.
With China’s zero-tolerance Covid policy having less success at this attempt Shanghai currently has more than 300 cargo ships queued at its port waiting to either be loaded or unloaded.
Effects are likely to be felt around the world for months to come, Peter Sand, a shipping analyst with Xeneta told Spiegel this week. “Depending on the terminal, the waiting times are between three days and a week, sometimes even more,” he told the German paper.
A lack of truck drivers is not just a UK problem, Shanghai’s policy has crippled movement in both directions as, once unloaded, there are few drivers available to take containers away. This is in part down to strict Covid testing policy and movement of people between districts being severely hampered. It is reported that at the ports workers have been contained in a bubble, living together rather than returning to homes.
The result is that shipping companies are now diverting and withdrawing from the Shanghai backlog. The issue is finding an alternative port that is not similarly affected; Ningbo and Guangzhou – some of the closest available – are similarly subject to Covid regulations.
The shipping expert says that turning the tap on too fast once restrictions lift could compound problems, with a race to destinations all at once creating new bottlenecks.
It is noted by shipping experts at Container Xchange that a pile up of empty containers in the USA are adding to bottlenecks. Availability of empty containers is, at least, driving down some prices, with some down “by as much as 30% in the past two months across the east and the west coast and more than halved at some ports from 2021 prices.”
“In general, logjams and disruptions lead to increase in container prices, especially in second-hand container prices because more container volume is tied up along the logistic supply chain. However, in the United States, there is a pile-up of empties as those containers cannot be repatriated back to Asia because of several disruptions one after the other in the past 2 years, and more recently due to the China lockdowns and Russia Ukraine crisis,” said Christian Roeloffs, cofounder and CEO, Container xChange.
“We might see a continued slide in container prices because depots are overflowing of the containers. Carriers and other container owners will be getting desperate to get rid of those units. Once we see depots overflowing (and this is also what we expect in the midterm once disruptions ease up a little bit), container turnaround times becoming faster and shorter again, container fleet utilization (the number of trips that container can take on average within a given year) increasing again, we do believe that container availability on a global scale will become more abundant again.
“As more and more containers will be required to be stored in depots in the US and because the depot space is limited, there will be a massive downward push on container prices in the immediate short to mid-term.”
To give some example of price movements, it is expected that 40 ft HC containers at the port of LA will continue a downward trend. In late February they cost $3,467, but today are $2,754. A 20ft DC at LA has near halved in priced since August of 2021 to reach $1,661.
“It does seem that the China lockdowns have impacted the US logjam positively in the short term. But there will be a lot of disruptions when the lockdowns are lifted, and vessels will storm the east as well as the west coast ports. There will be an added element of panic shipping. This will further increase supply chain pressures and logjams in the US,” added Roeloffs.
Other factors weighing into the slowdown include congestion in northern Europe, plus a quantity of vessels struggling to navigate the warzones around Russia and Ukraine.
Container Xchange’s monthly report can be read here in full.
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