Container Leasing Giant: Container shortage will continue for 4 months until 2021

Container Leasing Giant: Container shortage will continue for 4 months until 2021

In recent months, the distribution of containers around the world has been severely uneven, with serious shortages in some regions and a serious backlog in some countries.

Both Textainer and Triton, the world's top three container equipment leasing companies, said that the shortage of containers will continue in the coming months.

According to the container equipment leasing company Textainer, it is difficult to restore balance between the supply and demand of containers before mid-February next year, and the shortage of containers will continue until after the Spring Festival in 2021.

The shipper will have to be patient and may have to pay at least five or six months of additional costs for the sea transportation of the goods. The rebound in the container market has brought shipping costs to record levels, and this seems to be continuing, especially on the trans-Pacific route from Asia to Long Beach and Los Angeles.

Since July, a series of factors have pushed up prices, seriously affecting the balance of supply and demand, and ultimately caused shippers to face high transportation costs, too few voyages, insufficient container equipment and very low liner schedule rates.

One of the key factors is the shortage of containers, which prompted Maersk and Hapag-Lloyd to inform customers that it may take some time to restore balance.

San Francisco-based Textainer is one of the world's major container leasing companies and the largest seller of second-hand containers. It focuses on the procurement, leasing and resale of marine cargo containers, and leases the containers to more than 400 maritime operators.

Philippe Wendling, the company's senior vice president of marketing, believes that the container shortage may continue for another four months until February next year.

Insufficient container production

"Our forecast is that balance will not be restored until mid-February after the Lunar New Year. Container production cannot keep up with the sudden increase in demand. The maximum monthly output of Chinese container manufacturers is about 300,000 teu, and the factory is already operating at full speed." Wendling Say.

However, due to various reasons, the gap is still large. The annual output of containers in 2019 is 2.5 million TEUs, which may sound like a lot, but it actually only covers the number of lost or scrapped containers, or the number of old containers sold for storage and other purposes. It is worth noting that more than 4 million TEUs left the factory in the previous year, which to a certain extent also indicates the low production in 2019.

In the first half of 2020, shipping companies ordered very few containers and postponed contracts because they believed that shipping demand would decrease after the Covid-19 outbreak, and when shipping demand resumed in July, the global container fleet was very less.

55% of the containers in the global liner fleet are produced by leasers such as Textainer and Triton, who lease the containers to customers, namely shipping companies.

In this regard, the forecast of the leasing company clearly indicates the direction of the market. The remaining 45% is purchased directly from the manufacturer by the shipping company.

Wendling explained that rising prices have pushed up the prices at which manufacturers sell boxes. They usually charge a fee of around US$2,000/teu, which also makes the lessor’s contract cost higher.

At an investor presentation in September, container leasing company Triton made a point very similar to Textainer's forecast. The meeting issued a report, which summarizes the following:

"Triton expects that trade activity will continue to intensify into the fourth quarter, and demand may remain strong during the Lunar New Year period (mid-February 2021)."

The shortage of containers combined with port congestion is another obstacle to the need to reposition the boxes, causing shippers and freight forwarders to criticize the services provided by carriers.

Dominique von Orelli, head of global shipping at DHL Global Forwarding, pointed out this problem. Freight forwarders face the same experience.

"Some shipping companies are currently unloading container equipment from Asia-Europe routes and intra-Asia routes in order to deploy them to a certain extent on higher-yield routes such as Trans-Pacific and Latin America."

"Based on this, we have observed a shortage of containers on Asia-Europe routes and delays in some regions."