At the height of the Covid epidemic, there was a shortage of containers for shipping; however, today, there are too many containers, which is an issue for the world economy. Data reveals that container depots, which are used to store containers after they are unloaded, are now filling up or being at capacity, in addition to declining freight prices. More evidence of declining global demand and an approaching economic slowdown are indicated by this.
Traders and shippers claim that the fall in worldwide consumer demand is actually a downward shift in consumption appetites rather than a sign that the world economy is returning to normal after a frenzied post-lockdown consumption rush.
Christian Roeloffs, the chief executive of online container logistics platform Container xChange, stated in an industry report this week that “there is simply not enough depot capacity to accept all the containers.”
“Depots will come under further strain in the coming months due to the continued release of container inventory into the market, for example via the disposal of leased fleets.” Andrea Monti, the chief executive of Italian container depot owner Sogese, told Container xChange that all of his terminals are filled.
“For example, everything was coming in and out of our Milan depot is completely stuck. Additionally, the depots’ container traffic is rising to the point that we are turning down certain requests for depot service agreements.
We are unable to accept new clients for specific regions due to the current situation. As Christmas approaches, Monti told Container xChange that the peak season for cargo shipments “technically did not happen this year.” According to Monti, despite having a lot of product on hand, retailers are being cautious. Retailers have a sufficient amount of inventory, according to Monti. The cargo is once again “on time,” so as businesses get used to faster turnaround times for shipping ocean freight, you’ll notice a delay in new orders.
According to Darin Miller, national marine manager for global claims management provider Sedgwick, ports like the Port of Houston have started charging fees for empty containers languishing in terminals for longer than seven days in an effort to address overcrowded and overflowing depots. In a recent interview, he added, “What many don’t realize is that the containers inside the depots are frequently empty “The sheer volume of containers on ships or at ports leaves us with insufficient depot space, which further exacerbates our current supply chain crisis as it hampers container repositioning and mobility,” says the author. “Often left sitting for weeks on end.
Customers can anticipate discounts from stores as they try to move goods, Miller said. A crucial benchmark for container prices, the most recent Drewry composite World Container Index, has once more dropped to $2,773 per 40-foot container. Compared to the peak rate in September of last year, that is 73% lower.
As the busiest shopping season of the year draws near, blank or canceled sailings are also increasing, which is often the reverse.
When a shipping firm chooses to miss a port or an entire leg of its schedule in order to adapt to changes in demand and capacity, this is known as a blank sailing.
According to Drewry’s most recent estimate of canceled sailings, 14% of sailings on the busiest container shipping routes were canceled between late November and early December. Major shipping company Maersk warned last week that freight rates have peaked due to lessening supply chain congestion and declining demand in its third-quarter results. Investors were warned by the corporation to anticipate weaker ocean transport profits.
In a poll conducted by Container xChange last month, nearly 60% of 200 freight forwarders, brokers, and shippers said they were dealing with geopolitical, economic, and political threats that were putting downward pressure on demand for containers by reducing consumer spending.
In a recent interview, a representative for Container xChange stated, “We know already that the market is negative on consumer demand because of several variables like recessionary fears and inflationary dangers.”
Naturally, there is a large decline in consumer demand, which subsequently causes a decline in the market for freight and cargo and, ultimately, a global decline in the need for containers. According to Container xChange, shippers are donating containers to relieve depot congestion, even if many have turned to blank sailings.