Shipping Container Shortage Pushing Up Prices

Freight shipping volume has been picking up in 2010 and while that is great news for the world economy it has caused an unexpected shortage of containers. According to the July cover article in American Shipper, this shortage in shipping containers is being sited as one of the main causes for the rise in freight rates and has led to difficulty in moving product to buyers. Many shippers have complained about signing contacts with shipping lines only to have rates rise the following week or to be denied space completely. The average price for a 20ft shipping container has grown from about $2,000 to $2,700.

One of the major reasons for the container shortage was the drop in production of new shipping containers in 2008 and 2009.  From 2004 through 2008, TEU supply grew by an average of 8% per year. Once the world recession hit, trade dropped dramatically and so did demand for shipping containers. There was a 95% reduction in shipping container production in 2008 and almost no containers were built in 2009. In response to the drop in demand many of the factories that build the containers, mostly based in China, were forced to shut down. Now with the increased demand for there is a reduced capacity for factories to produce new containers. Some estimate that it will be until 2011 before production will be able to catch up with demand.

While this shortage is bad for manufactures and ultimately consumers, container-leasing companies are appearing to benefit in the short run from this problem. Stocks of publicly traded container-leasing companies have reached 52-week highs this spring and summer. Additionally many leasing companies are taking the opportunity to increase their share of containers. Historically, liner carriers have owned about 55% of the world shipping containers with leasing companies owning the remained 45%. However, recently leasing companies have been responsible for 65-70% of the new container purchases. Leasing companies are also purchasing containers from the shipping lines who are in need of building up there cash reserve.

This shortage in shipping containers due to worldwide demand is a very good sigh of  economic expansion however many shipper are hoping that container product will soon catch up to demand.

Source: Boxed-Out, American Shipper

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