Port delays have caused a shortage of shipping containers. Prices are high. Everyone who has a stake, including shippers, intermediaries, and carriers, is doing their best to respond.
Photo from CFP
By BAI Fan
As the economy returns to life, exporters face a new problem: shipping container shortages. Ships are stacking up around the world, holding containers up for weeks or months on and sending prices up. It now costs US$10,000 (65,000 yuan) to ship a 40-foot container from Shanghai to Rotterdam by sea, more than three times higher than last year’s rates. But even with money, containers and cargo spaces are hard to come by.
Freight costs are at record highs and consumer prices will soon follow.
Demand is strong in western countries, better than pre-pandemic levels. In the first five months of this year, China's export volume increased 30 percent compared to a year ago, reaching 8 trillion yuan, of which 95 percent were shipped by sea.
The problem is that the containers are all in the wrong places. While shippers wait weeks for containers in Europe, Australia and the US are overflowing with tens of thousands of empty ones. These containers are not going anywhere, anytime soon, so carriers are buying up new containers and even new ships, which may take months or sometimes years to deliver. In the interim, leases for container ships can be as much as US$130,000 a day.
China International Marine Containers (CIMC), which makes close to 50 percent of all containers in the world, has increased its monthly production from around 200,000 units to more than 400,000, but the overall situation may not improve until 2023.
In normal times, freight forwarders book containers and cargo space directly with the carriers. With prices high enough to make it worth their while, scalpers have jumped in, buying empty containers and cargo space and selling them on at a profit. Especially in last-minute orders, scalpers can be a godsend. Shippers are only too willing to pay, sending prices even higher.
The shortage is worsened by the fact employees at big carriers conspire with scalpers to pay even more through forged shipping orders, or outright tampering with the ports’ operating systems.
Carriers have taken measures to prevent scalping, but the profits of freight forwarders have suffered. Some, lucky enough to get hold of containers or space have become scalpers themselves, it is much easier and more lucrative than freight forwarding. A scalper makes at least 10 percent on each flip.
Prices are not just high; they have gone wild. Quotes are useless. Last-minute price increases are not just common but expected. All the freight forwarders interviewed by Jiemian News said the charges couldn’t be finalized until the goods are on a ship and ready to go. Sometimes the containers cost more than the goods themselves. Wild price swings happen almost every week. It began last September. Prices used to go unchanged for months.
It doesn’t help that carriers have responded to port delays by raising prices. Hapag-Lloyd recently raised prices by a significant amount. CMA CGM has a “congestion charge.” Even if shippers can secure a spot on a ship, there is no guarantee of departure. Backlogs from previous delays often slow down later shipments for weeks or even months. Freight indices keep setting new highs. SCFI (Shanghai Containerized Freight Index) hit 2591.4 on June 2.
Shippers have taken matters into their own hands, contacting their own ships and paying for empty containers to be brought back immediately upon unloading. Those with fewer resources are left with overflowing warehouses. Hankook Tire is reported to have halted production due to a shipping backlog.
Eventually, higher costs are passed on to consumers. A sustained global consumer price increase may last up to five years, and carriers are making more money than ever. CMA CGM’s net profit rose to US$2 billion in Q1, more than 40 times more than last year.
