The Shipping Industry has been facing supply chain disruptions and bottlenecks since the outbreak of the COVID-19 pandemic, with container shortages leading to increased freight rates and longer delivery times. However, the situation seems to be changing now as shipping containers are beginning to pile up at the biggest ports in China and America, indicating a drop in consumer demand.
China, which is the world’s largest container exporter, is witnessing an increase in empty containers piling up at its largest ports, such as Shanghai, Ningbo, Tianjin, and Shenzhen. The Container availability index created by Container xChange, a German box buying platform, measures the ratio of inbound to outbound containers port-wise. The index reading for February 5 was 0.64, indicating a surplus of containers at these ports. The surplus is leading to shifting surplus inventory by the management at many terminals to secondary ports to free up space.
Christian Roeloffs, CEO of Container xChange, described the current market outlook as “bleak” and noted the significant increase in empty containers littering China’s coastline over the past five months. He said, “The falling rates and increased availability of containers in certain regions of the world are indicative of weak demand and slower economic growth.”
Similarly, the ten largest American box ports have experienced the largest monthly inbound drop in volumes since the global financial crisis of 2008, with January marking the seventh straight month of expanding year-over-year declines at American ports. West coast ports were even weaker with a decline of 23.5% in January. This decrease in demand is leading to empty containers piling up at ports, indicating a slowdown in the US economy.
The shipping industry’s struggles are likely to continue, with global box volumes predicted to drop by 2.5% to 3.1% this year, according to Maersk and Clarksons Research, respectively. The situation is a cause for concern, given that shipping containers are becoming one of the largest products inside the world’s containers. The increasing number of empty containers and the drop in demand is indicative of weak consumer demand, slower economic growth, and supply chain disruptions.
The current market outlook suggests that shippers and carriers need to prepare for tough contract negotiations at next week’s TPM (Trans-Pacific Maritime) event. The negotiations are expected to be difficult, with long-term and spot rates both massively down over the same period a year ago. However, the current situation may provide an opportunity for shippers and carriers to renegotiate terms, given the surplus of containers and the drop in demand.
In conclusion, the shipping industry is witnessing a drop in consumer demand, leading to empty containers piling up at the biggest ports in China and America. This is indicative of weak economic growth, supply chain disruptions, and a bleak market outlook. While this situation presents challenges for the industry, it also provides an opportunity for shippers and carriers to renegotiate terms and work towards more efficient and resilient supply chains.
