Port Authority of NY and NJ have announced a new container fee payable by ocean carriers. The fee will be levied when the outbound containers don’t exceed inbound containers by 110% in the same period. The port authority also plans to find additional space to store containers near the port, and already has identified 12 acres on the port.
It seems that these two measures are what works to reduce congestion. The same two kinds of measures were invoked at the Port of LA and Port of Long Beach to get ocean lines to start moving empties out. In California, though, the container fees were just threatened; they never were begun. that alone was enough for ocean carriers to start moving containers out.
Perhaps we have found a credible set of options to get container carriers to move those boxes.
There are now too many containers in the world. And they are cluttering up the ports and yards we need to move containers through. And they cause detention and demurrage charges, because lines won’t move them out of ports.
The global container pool is around 50 million TEU right now. According to Drewry, that is an excess of 6 million TEU. However, Drewry is not too concerned about the excess at present, feeling they can be absorbed if trade picks up. Interestingly, Drewry seems to think that the excess will be absorbed by ‘slower sailing’!
As economics tells us to expect, the price of second-hand containers is falling. However, some carriers, such as Evergreen, continue to order more. Most containers are built in China these days. Three Chinese firms, with state connections, are the primary sources. The problem is that empty used containers cost a lot to return to exporting destinations. They displace paying cargo, forcing ocean carriers to use space to carry them. And especially, with the cost of bunker fuel in the stratosphere, and the need to use very low sulfur fuel in some busy port areas, the transportation cost is high. Ocean carriers have to ‘bundle’ the cost of returns into the one-way cost of the loaded shipment. Either that, or they take a hit by moving the old containers back.
The Seatrade article by Gary Howard has nice graphs showing the average price of 40-foot used containers in Europe, and in China, provided by Container xChange. Again the question of where excess containers will be stored is raised. There haven’t been many answers to that one yet.
The excess estimated in this article is mostly in dry containers. Reefers are still much in demand. The problem is, what’s going to happen to them? Resales are down, and there aren’t enough container houses being built to use them up.
It’s time to think about scrapping them, just like ships. If the Chinese factories can continue to produce them at low cost so that it doesn’t pay to ship them back, we have to get rid of them somehow.
In freight transport, backhauls are always a problem. They are basically unpaid miles and tons. Their cost must be recovered in the head haul freight cost. It’s like the packaging when you buy something online. We either have to find something to do with it, or throw it away, or take up valuable space storing it for reuse. Here’s an entire shelf in my coat closet, stuffed with packaging.
We have worked out various systems for recycling packaging. In the US most locations have some recycling capability, and customers are urged to separate trash. The usual destination is a recycling facility, or perhaps a landfill. The landfill is very undesirable, because of contamination leakage from the dumps, which can be hard to control. Landfill space is also at a premium in the US in most places. Who wants a landfill next door?
Over time, however, the rules have changed. It used to be we could export our trash waste to other countries. China took a large amount of paper waste in the past. They did not have clean sources of paper waste for papermaking in China. But in the last few years they have refused to take the waste, since they created domestic sources.
Similarly, plastic waste used to be exported. It’s a usable feedstock for certain plastic manufacture, and has a few other uses. But more recently countries have recognized the problem and are refusing to take it.
Containers fall into the same category. They are packaging. They are recyclable, though it takes some work. The steel scrap has a value in future steelmaking, but it isn’t large. And they cube up the world, taking up both area space and height when stored in yards. In California during the recent congestion crisis at the ports, additional empty container yards were created at considerable expense off the port properties, to provide storage space off the port terminal yard where empties were clogging up the movement lanes.
We’re going to be faced with an increasing problem as long as the US is an importing nation.
There have been various schemes for modifying containers floated. Foldable containers would be quite a bit less costly to ship back, and take up less space at the cost of some labor to fold them and then unfold them. One design I saw allowed five forty-foot containers to fit in the space of one forty-foot unit for storage and shipping. But they are a lot more expensive than standard units, and reefers would be hard to handle this way.
As long as current export-import patterns continue, it would be worthwhile for entrepreneurs to spend time on the empty container problem. Other industries have improved the recyclable aspects of their packaging, and ocean carriers and shippers should start addressing the issue.
Supply Chain and Logistics 