The world is short of 500,000 TEU containers, and the container supply chain is in a big dilemma
Flexport, a freight forwarding company based in the United States, said that it is now necessary to produce 500,000 new 20-foot containers to alleviate the current disruption to the global container supply chain due to lack of container equipment.
The world is short of 500,000 TEU containers, and the container supply chain is in a big dilemma
Nerijus Poskus, Flexport's vice president of global shipping, estimated in an interview with Bloomberg that hundreds of thousands of new containers will be needed to meet current market demand.
Nerijus Poskus told Bloomberg, “In order to alleviate the current container supply chain dilemma, at least 500,000 new containers need to be built around the world, which is equivalent to the number of 25 largest container ships in the world.”
The vice president of Flexport also said that the surge in demand has also caused the spot freight rate for a standard container across the Pacific to quadruple. This figure does not include additional costs related to equipment and insurance premiums to guarantee loading.
Due to the tight container supply chain, Volkswagen AG was forced to cut its production plan for the world’s largest car factory in Germany, and warned that the tight supply may spread to the world; Honda Motor Co. is also cutting five times. The output of the North American plant is difficult to purchase automotive chips.
Rob Subbaraman, global head of macro research at Nomura Holdings in Singapore, said, "Supply bottlenecks seem to be more pronounced in the United States and Europe, as their supply delivery time has recently slowed down again." "This is not good for Western industrial production and should lead to inventories. A steeper decline and put upward pressure on output prices."
"Anyone who pays for shipping in 2020 knows that the true cost of shipping is even much higher than the recent increase in shipping. We expect this number to only increase in 2021."
The world is short of 500,000TEU containers, and the container supply chain is in a big dilemma
Maersk: Congestion in the container supply chain will not improve in the near future
A Maersk executive said that in the reality of strong demand, there is almost no excess capacity in container ships, and the congested supply chain can hardly be alleviated.
Maersk Line’s parent company AP Moller-Maersk A/S Latin America and the Caribbean Senior Vice President Fan Chuyan Robbert van Trooijen recently stated that the demand for container shipping services may still remain at an unusually high level in the near future. With almost no remaining container capacity, carriers and shippers will have to continue to adapt to the tight situation of the container supply chain caused by the pandemic.
Fan Chuyan also said that factories in China and other parts of Asia have increased production because their customers in other parts of the world are rebuilding inventory that was depleted due to the suspension of production at Chinese factories early last year.
He also introduced that at the same time, the current idle capacity of the container shipping industry is at a historical low of about 1.5%, so there will be almost no additional capacity to be used in the market in the short term.
In fact, according to the latest data provided by Alphaliner, as of December 21, 2020, the global proportion of inactive containers is only about 1%, taking into account that it includes ship docking maintenance, installation of desulfurization equipment and ballast water systems, etc. Situation, this is already the lowest level in history.
The world is short of 500,000TEU containers, and the container supply chain is in a big dilemma
He said: "In the foreseeable future, the current supply and demand situation will not change significantly, because there is not enough new ship order capacity." "This (tight supply chain) situation may continue for some time."
The executive said that compared with the existing fleet, the current capacity ratio of new container ship orders is at the lowest level in history.
Due to the imbalance between supply and demand, we have also seen a sharp increase in container freight rates recently. Fan Chuyan refused to disclose his views on recent freight rates.
With the arrival of the Chinese Lunar New Year, workers need to return home to visit relatives. After the Spring Festival holiday in February, the flow of Chinese manufactured goods to other parts of the world may temporarily stagnate. But he also emphasized that demand may remain high.
For example, Xinde Maritime.com has placed an order for 18 ships of 24000TEU! Will the shipping fee be reduced? According to the article, due to the relatively sluggish state of the container shipping industry in recent years and the uncertainty about future fuel selection, container shipping companies and shipowners have previously maintained a more cautious attitude towards ordering new ships.
According to data provided by Alphaliner, Maersk, the world's largest container shipping company, has been busy in business transformation in recent years, and currently does not have many new ship orders.
Fan Chuyan said that Maersk will not have significant new capacity into operation in the future, but will focus on opening up various nodes and improving the flow of goods on land and sea.
He also revealed that Maersk hopes to expand its logistics business in the region through organic and acquisition. He declined to say which acquisition method the company will consider. In the past few years, Maersk has made investments and acquisitions in areas such as customs declaration and inland logistics.
Brazil is a major exporter of commodities, and China's demand for these commodities is very strong, the most famous of which are soybeans and iron ore. These commodities are usually transported by dry bulk carriers, and Maersk does not use dry bulk carriers in its fleet. But Brazil is also a big buyer of Chinese manufactured goods shipped in containers.
Fan Chuyan introduced that the current supply of containers on this route is severely short, and the strategies adopted by some customers to bypass congested nodes have exacerbated this situation. He said that "some customers book two or three different" carriers to make sure they can ship goods in or out of the country. "
He said that the company is working closely with some major customers to make operations smooth, including implementing a new system that will ensure that they have space and prevent overbooking.
