Smart shipping companies have begun to plan ahead
Since 2021, the container industry has experienced a process from hard-to-find a container to an increase in empty containers. Changes related to containers have been closely watched by the international market. Recently, there have been media reports that a large number of empty containers have piled up in Chinese ports, which has aroused concerns about China’s foreign trade situation. On March 20, the director of the General Administration of Customs of China responded in a conference that the reasons for the increase in empty containers include the excessive amount of new containers in the early stage, the low cost of stockpiling in China, and the short-term return of empty containers in large quantities after the Covid-19 situation in foreign countries has eased and so on.
Bullwhip effect leads to oversupply
The situation where one container is hard to find appeared in 2021. Affected by factors such as the blockage of the supply chain caused by Covid-19, port congestion, and slow production of new container equipment, the supply of containers is tight. The US Institute for Supply Management website reported that the bullwhip effect was formed due to the continuous variation and amplification of demand in the transmission process, which stimulated the manufacture of new containers and led to excess supply. According to the annual report released by Drewry, a British shipping research and consulting organization, in 2021, the total number of global containers increased by 13%, and the output of new containers increased by 118% year-on-year. At the same time, in order to ensure trade demand, the plan for old containers in circulation has also been postponed. And just at the end of last year, the container market encountered new changes, and empty containers piled up in many international ports. The US CNBC website reported that from shortage to surplus, the global shipping industry has encountered new troubles. Recently, a number of foreign media reported that the empty container rate indicates that China’s manufacturing industry is outflowing, the export capacity has declined, and overseas demand has decreased.
The chief information officer of the Shanghai International Shipping Research Center said on the 22nd that as a logistics resource, the empty container rate depends not only on the number of containers but also on the speed of circulation. Over the past period of time, Covid-19 has superimposed a series of incidents such as the congestion of the Suez Canal, the congestion of Long Beach and other ports, and the strikes of some European and American ports, resulting in a backlog of goods and weakened container mobility, making it difficult to find a container. At that time, a large number of new containers were ordered by shipping companies and large cargo owners, and many old containers that should have been eliminated were repaired and continued to be used, resulting in an increase in the actual number of containers in the world and a surplus of containers. Generally speaking, a container availability index of 0.5 indicates a balance between supply and demand. At present, the container availability index of major ports in China is between 0.6 and 0.7, while the container availability index of ports such as Antwerp Port and New York Port are all higher than 0.8, far exceeding China. More empty boxes do not necessarily mean less volume. If the time the goods are in transit is shortened, the container turnaround time will also be accelerated, resulting in higher empty container rates.
Piled containers are temporary problems
The recent recovery of international trade has shown a positive trend, and the stockpiles of empty containers at the terminal have decreased significantly. The staff of Ningbo Zhoushan Port Group said on the 22nd that in order to ensure foreign trade exports, the port terminal will keep a certain number of empty containers on a daily basis, but recently more empty containers have returned from overseas. The staff also said that the current empty container storage capacity of Ningbo Zhoushan Port is sufficient, and the empty containers have been quickly allocated to the north and south of the port and various inland stations, and the port is operating normally. Like Zhoushan Port, the number of empty containers piled up in many ports is decreasing. According to the total data, from March 13 to March 19, the container throughput of monitored ports was 5.288 million TEUs, a month-on-month increase of 3.04%. On the 20th, the director of the General Administration of Customs stated that when the relevant departments interpreted the statistical data released by the customs for the first two months, the overall view of China’s international trade development situation was that the start was stable and the trend was positive.
A large number of ships stop near China
A large number of empty containers are ready to leave in China, which to some extent also reflects that the international market is still optimistic about the export capacity in the next stage. According to the latest customs data, since late February, the volume of export containers has continued to grow. On March 17, the Shanghai Containerized Freight Index (SCFI) reported 909.72 points, up 0.35% week-on-week. Driven by the export of heavy cargo such as steel exported from the north, the SCFI composite index rebounded for the first time this year. In terms of routes, the North American route is still weak, the freight rate of the European route has rebounded, and the routes of emerging markets represented by Southeast Asia are generally positive.
Smart shipping companies have already begun to plan ahead. Their main strategy is to concentrate empty containers close to major trade routes and where a rebound in demand is expected. As a result, a large number of ships are docked near China, waiting for economic recovery. The signals from China are encouraging. The US CNBC website quoted a logistics practitioner as saying that some Chinese manufacturers chose to open in stages this year, so some employees returned in early March. Many practitioners are very confident about the accelerated recovery of production activities in the future. At present, many European and American banks are in deep trouble, exposing the problem of the sustainability of the interest rate in the United States. The consumer demand suppressed by the inflation rate is expected to rebound.
