The droughts sweeping the country aren't limited to the weather. In the world of shipping, we're experiencing another kind of drought -- a shortage of shipping containers.
If you don't think this is a big deal, think again. In its latest Container Supply Review, the World Shipping Council (WSC) reported that the container shortage that has plagued shippers for the past 2+ years will continue into 2011's peak shipping season. In fact, the WSC estimates there will be three million fewer TEUs (twenty-foot equivalent units) this year compared to the historical industry-standard level.
The problem stems from the huge drop in container production during the recession. In 2009, production dropped to 450,000 TEU from a five-year average of three million. With shipping volumes growing steadily, there simply aren't enough containers to accommodate.
So, how does this affect you -- the average shipper? First, high demand is making shipping containers more expensive. According to a report by Drewry Maritime Research, the price of containers is twice as high compared to two years ago. Meanwhile, capacity constraints at Chinese manufacturers -- which account for approximately 96 percent of production -- are also contributing to higher costs (source: Alphaliner).
Those shippers that opt to buy their own containers are already feeling a direct impact to their shipping expenses. Carriers that purchase these containers will undoubtedly pass this cost increase on soon enough. Expect this to factor heavily into the next wave of freight rate increases.
At NPI, we're actively working with clients to help them mitigate this impact. What about you – how are you offsetting the impact of the container shortage on your transportation spending?
-- Paul Smith, VP of Transportation & Logistics, NPI