Clogged depots to be a feature of 2023 container market

The shipping industry is witnessing a major slump in the order-to-inventory ratio with high inventories but slower demands. According to the November edition of the Container xChange Forecaster, this creates a ripple effect throughout container logistics.

As a result, one of the issues which will impact container repositioning and container movement well into 2023 is insufficient depot space.

“There is just not enough depot space to accommodate all the containers. With the further release of container inventory into the market (e.g., from the disposal of leasing fleets), there will be added pressure on depots in the coming months. This will be a key challenge for some and a competitive advantage for others in the business, especially in China because of the empty container repositioning there,” said Christian Roeloffs, cofounder and CEO of Container xChange.

Andrea Monti, CEO at Sogese who also owns container depots in different locations in Europe commented during the Digital Container Summit in October: “Whatever was coming in and out of, for instance, our Milan depot is quite stuck. And the container volume at the depots is increasing to an extent that we are returning some requests for depot service agreements. We are in a situation where we are not able to accept new clients for some locations.”

This peak season, which has technically not happened this year, retailers and companies are more cautious in their stock management strategy as they adjust to the shorter cargo delivery cycle.

“There is enough inventory with retailers. Once these inventories exhaust in North America and Europe, companies will order again, and demand for shipping capacity will pop back up. This won’t go back to max pandemic levels but certainly be back to the long-term average upward trend. What has happened now is that the cargo is “on time” again and hence you’ll see a slowdown in new ordering as companies adjust to this more efficient turnaround times in ocean freight delivery,” said Johannes Schlingmeier, cofounder and CEO, Container xChange.

“For container owners, this could potentially mean a rise in container storage fee by depots as more containers pile up to disincentivize longer staying containers at the depots.”

The average container prices (for trading) and one-way pickup charges (for leasing) for standard containers declined to their lowest in two years in China. These were at US$3,711 in October in China, and a continuing to decline in November.

CAx (container availability index) values are much higher than pre-pandemic – meaning that the inbound containers are significantly higher at the Chinese ports than the imported boxes this year as compared to 2019 (pre-pandemic) and since then.

One-way pickup charges for standard containers from China to North America are declining month on month since May 2022 from $1773, to $344 in October.

One-way pickup charges from China to Europe declined from $2,845 in January 2022 to $1,726 in May 2022 and further to $910 in October.

One-way pickup charges declined by 80 percent from $1,773 in May to $344 in October over the past six months at the China-North America stretch, and a 47 percent decline on the China-to-Europe lane.

“The declining rates and container prices indicate a weakening demand and surplus of containers. The wider this gap, the lower the container rates and prices. The logistic companies have already moved onto the planning for Chinese New Year because of the weak peak season this year,” added Roeloffs.

Rising imbalances in supply and demand for containers, rising empty container repositioning to Asia and tighter depot space will be topics for attention well into the year 2023.

A majority of those polled by Container xChange in the month of October suggest that the freefall of container prices is not an indicator of global economic normalization well into 2023.