Since last year, “one box is hard to find” has been closely linked to shipping. If there is a gap on the demand side, the supply side will keep up. With the increase in production capacity of container manufacturers, from the supply side, the situation of “one box is hard to find” in the market has been alleviated, but the problem of smooth global logistics has not been resolved. Affected by the epidemic, container turnover efficiency in major European and American ports has decreased, and there is a structural and regional shortage of usable containers around the world.

The China Container Industry Association issued an article in September last year stating that the current container supply shortage is a structural and phased problem. It is caused by poor return of empty containers abroad. The balance of empty container circulation has been broken, not a global shortage of containers.
 
1 Empty boxes piled up in European and American ports
 
Although the production capacity of the container manufacturing industry continues to increase, and supply and demand have reached a relative balance, on the other hand, both freight forwarders and foreign trade enterprises still call for difficulties in shipping. What's the problem?
 
Li Muyuan, executive vice president and secretary general of the China Container Industry Association, said that the container shortage that occurred during the epidemic was a structural shortage in the Chinese market under special circumstances. Structural shortages mean that under the influence of the global epidemic, China's foreign trade surplus has increased. After a large number of goods are exported, empty boxes cannot be returned in time, resulting in a shortage of boxes in the domestic market, and a large number of empty boxes piled up in European and American ports.
 
According to data from the Port of Los Angeles Signal platform on December 28 last year, 41 container ships were docked at the anchorage waiting to enter the port, while the average waiting time for ships to berth reached 20.1 days.
 
Shipping consultancy Sea-Intelligence said that in the past two years, the transit time from Chinese ports to US ports has increased from 45 to 112 days, and cargo owners have had to use more containers to “make up” for cargo inventories on the way. And when the shipping time returns to 45 days, the extra container will become an “extra” empty container. According to a new report by Sea-Intelligence, when the supply chain normalizes, the trans-Pacific route alone could generate up to 3.5 million teu of extra empty containers.
 
The main reason for “one box is hard to find” is not a global shortage of boxes, but because empty boxes are not returned well. Heavy goods could not be shipped, and empty boxes could not be returned, causing congestion throughout the port. In this case, there is only deblocking, but the time period for blocking is usually half a year.
 
Referring to the current global shipping market, personnel from the customs department of COSCO Haifa said that the uncertainty of the development of the epidemic still affects the smooth operation of the overall supply chain. At the same time, we should also note that behind the busy global supply chain is actually an increase in global trade volume.
 
The “2021 Statistics Manual” released by the United Nations Conference on Trade and Development (UNCTAD) in December last year predicts a strong 22.4% increase in global merchandise trade volume in 2021 compared to 2020, despite still being affected by the pandemic. Global merchandise trade recovered rapidly, surpassing pre-crisis levels by the end of 2020, but growth gradually slowed during 2021.
 
Among them, shipping is the most important mode of transportation in international trade. Statistics from the United Nations Conference on Trade and Development, China's customs and ports show that from before the outbreak of the epidemic in 2019 to July 2021, more than 80% of goods in global trade were shipped by sea, while the proportion of China's foreign trade imported and exported goods by sea increased from 94.3% before the epidemic to 94.8% at present.
 
Personnel from the investment department of COSCO Haifa believe that the global supply chain is a systematic project that requires the participation of all parties to create synergies in order to operate smoothly. As a container manufacturer, the company implements “Six Stability” and “Six Guarantees”, and has always carried out production and service with quality and quantity according to customer order needs.
 
2 Overcapacity has lessons from previous cars

In fact, as early as 2005, there was a situation of overcapacity in containers. According to corporate news released on the Xinhuachang Group website in December 2005, “The China Container Industry Association recently organized some industry giants such as CIMC Group, Shengshi Group, Maersk Industries, Jindao Group, and Xinhuachang Group to hold a seminar on the current situation facing the container industry. Participating manufacturers announced joint production cuts and will postpone the progress of new construction projects that have been planned but have not yet been put into operation (except Dongguan Maersk Container Industry Co., Ltd.) in order to solve the problem of overcapacity in the industry to a greater extent.”
 
Wu Di, member of the Container Committee of the China Society of Navigation and a teacher at the School of Transportation Engineering of Dalian Maritime University, said: “If the global epidemic is effectively controlled in the later stages, congestion in US and European ports is alleviated, and containers' floating 'at sea and' piled 'in ports can return to the market. Under such circumstances, if container builders continue to mass-produce, container overcapacity will emerge one day in the future.”
 
Generally speaking, overcapacity may exacerbate vicious competition in the market and affect the healthy development of the industry. As to how to avoid overcapacity, Wu Di believes that empty container transfer is the core issue. The solution involves many aspects. One is the global supply chain, which requires collaboration from multiple countries, and there will be a joint effect if any link goes wrong. Second, if shipping companies, ports and cargo owners from all over the world can form joint efforts, empty container transfers may stabilize, resulting in a corresponding decrease in container demand.
 
If the subsequent market returns to normal, the global epidemic improves, and the circulation of terminals and containers around the world accelerates, it may cause order grabbing and price drops. Sun Wenfang, founder of the GLA Global Logistics Alliance Network, said that currently, shipping companies have abundant container holdings, and in the future, the number of containers can be balanced by selling and reducing the number of new purchases. In addition, there are currently many foreign containers. Some can be used as warehousing functions, and some are used to transform containers into other products, or shipped to various ports around the world according to the trade conditions of various countries. For container manufacturers, they can adjust themselves by reducing production time and shutting down excess production lines.
 
3 Container demand may have a “smooth pullback”
 
According to data provided by the China Container Industry Association, as of December 19 last year, the output of international standard shipping containers had reached 5.48 million TEU, and is expected to exceed 5.5 million TEU by the end of the year. In previous years, the average figure was 2 million TEU. In 2021, container manufacturers increased production of new containers. Currently, new container inventories have also rebounded to a historically high level, with more than 700,000 TEU.
 
Regarding the demand for new containers, Li Muyuan told First Finance: “There is no shortage of containers in the world as a whole, so our container manufacturers will not blindly increase the volume of containers built.”
 
Li Muyuan said that the container manufacturing industry has already suffered from overcapacity for a long time. Over the past five years, the industry has been compressing production capacity, shutting down some outdated production lines, updating environmental protection equipment, eliminating backward production capacity, entering automated production systems, and adjusting employment hours. The industry's production capacity had reached a reasonable utilization rate before the epidemic. Therefore, under the condition of “one box is hard to find”, enterprises can quickly release production capacity, adopt flexible production planning arrangements, and rely on existing and mature container manufacturing enterprises to produce, so that the supply problem can be solved.
 
In response to hidden concerns about overcapacity, Li Muyuan said, “We recognized this risk very early on and have been controlling it. Capacity risks can be controlled without external interference and without the intervention of new box builders.”
 
Companies have also put forward their own views on the problem of overcapacity that the market is concerned about.
 
Generally speaking, containers have a useful life of about 15 years, after which they are usually sold according to the second-hand container sales market. Personnel from the customs department of COSCO Haifa said that container demand was strong in 2021, the market was in short supply, the rental rate continued to remain high, and the sales volume of second-hand containers decreased relatively.
 
Last year, at the CIMC Interim Results Conference, CIMC Chairman McBoliang said that now (the container manufacturing industry) has “eaten” the volume in the next two or three years, there will definitely be a correction in the future. However, at the same time, he believes that with global trade continuing to grow, there will be no serious overcapacity. Many containers have not been 'old boxes' for two years, and after the epidemic has passed, goods will also be phased out again. Taken together, there will definitely be a turning point in the (industry). It is impossible to maintain this high boom for a long time, but it is not enough to fall “cliff-style”.
 
CIMC judged that this pullback process may be a smooth curve. The main reason is that in the past two years of the COVID-19 pandemic, container shipping demand was strong and container demand was high. Most shipping companies basically stopped or reduced the pace of eliminating old containers, and some used containers were “out of service”. After the epidemic is over, this batch of old boxes will definitely be phased out. There are currently more than 40 million containers in the world. Generally, about 5% of used containers are eliminated every year, that is, 2 million per year. At that time, the demand for replacement of more than 4 million old containers has been accumulated for two years. This can replace the demand for new containers brought about by the current poor circulation of empty containers, and allow the demand curve to shift smoothly.
 
Drury predicts that from 2022 to 2025, the annual output of international shipping standard containers will be between 3.7 million TEU and 4.6 million TEU.
 
Talking about the future outlook for the container manufacturing industry, CIMC said at a roadshow event on December 15 last year that overall, the epidemic is only a short-term influencing factor. The underlying growth logic of the container manufacturing industry is demand recovery, downstream financial improvement, and basic container renewal and elimination.