Mothballing Container and Rail Capacity

I had a call a couple of weeks back with a consulting firm that got something wrong when they told me that their research suggested that global sourcing freight costs had not yet dropped to levels reflecting reduced demand and lower oil prices. Nothing could be further from the truth, in fact. The Baltic Dry Index is down nearly 80% from its highs last year. And consider that according to the China Supply Chain Council, Hong Kong container volume was off 23.2% in January, a month that usually sees an "annual cargo rush before the Chinese New Year". But this year, such a rush failed to materialize, "sending out a dire warning". As a result of reduced demand, "some 390 unused container ships are currently anchored mid-water or in harbors around the world, equivalent to around 11pc of the global fleet".

The downturn in volume is creating container traffic jams of sorts: "In Hong Kong, the glut of empty containers is clogging up much-needed space. There is talk that the disused Kai Tak airport in Kowloon Harbor could be used as a temporary home for the empty steel boxes". Closer to home -- at least my home -- The Wall Street Journal reports on the last mile of the global shipping equation, describing how box cars sit idle on tracks in residential neighborhoods, mothballed until further notice. According to the story, "The nation's five largest railroads have put more than 30% of their boxcars -- 206,000 in all -- into storage, according to the Association of American Railroads. Placed end-to-end, the cars would stretch from New York to Salt Lake City". Perhaps in the recession -- and reduced container shipping volumes -- HUD would do well to check into converting some of the rolling stock to temporary housing. After all, with the scrap markets the way they are, you would not get much for disposing of an idled container or boxcar these days. Best to capitalize on the one organization spending money -- government.

- Jason Busch

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