The FMC is looking into Chinese control of containers and equipment to move them. Most containers and chassis are produced in China. So says Carl Bentzel, an FMC commissioner.
China certainly has a large stake in production of both containers and chassis. There are three state-owned firms in China that dominate container production. Even with elevated prices recently, it is still about the same cost to buy a new container in China for the voyage to the US, or to recycle one from the West Coast of the US. Even if you would rather recycle an empty container, the ocean shipping firms can affect that balance by refusing to pick empties up at say Long Beach or Los Angeles, or delay their transit by long enough to cause headaches for those who need them by a certain date.
If empty containers build up in the US, tying up chassis as well, that’s a form of industrial pollution. Having to spend large sums for storage yards rather than getting them back to China is an environmental cost that should not have to be borne by US local governments and citizens.
It’s certainly worth an investigation and perhaps some action by the US government.
John Gallagher, Washington Correspondent Thursday, May 6, 2021
Spot rates for container shipments might be coming down from the stratosphere. There are a few indications, such as Xeneta’s XSI short-term index from Asia to North Europe.
If short-term rates really are coming down, what is going to happen to many new ocean shipping entrants in the trade from Asia? These new firms offer regular shipments with no blanking, faster transits, calling at less congested ports for faster unloads, status monitoring, and good communication.
Most of these firms have a limited number of smaller ships. The conjecture here is that they cannot survive if rates drop back to reasonable levels.
I think this position underestimates the value of on-time and reliable service. Many shippers will pay to get out of the bottleneck system the alliances are running, with large ships calling at large congested ports, and frequent delays of service, including simply canceling voyages if they aren’t full enough. You can’t have a viable business if you’re only on-time 30%-40% of the time. Lots of customers will choose another way.
We have already seen large container shippers such as Amazon, IKEA, and Costco choose dedicated service with captive vessels for some of their cargo. If it works well, that could expand, leaving the major alliances with less cargo to carry.
Interestingly, the large ocean carriers have a new name for what they are doing. Canceling a voyage is not to be called ‘blanking’, but rather ‘sliding’. Whatever you call it, it’s a disruption in service supposedly guaranteed.
This article stresses the awful situation seafarers find themselves in, as a result of ships being stranded offshore unable to unload or load, and national COVID rules about flying and debarking, which prevent them from getting home when their time at sea ends. It’s a terrible situation, and countries have not done enough to make it better. International organizations such as the ILS don’t really have much influence in the face of the pandemic.
That’s not the only cost of containerization. Just like Amazon packaging, empty containers are overwhelming America’s ports, and large ports elsewhere. Countries that import more than they export are at risk of a buildup of empty containers. The original idea was that they would go back cheaply to exporting countries, kind of like HP empty printer cartridges, to be refilled and sent again, an example of a reverse supply chain.
Enter the Chinese steel industry, and Chinese nationally-backed container manufacturers. Cheap steel in China and a huge demand for containers has conspired to let these firms make new containers for just about the cost of bringing the empties back. One could argue that it’s better to use a new container because it’s less likely to have hidden damage that might affect the cargo, and that might offset the small price difference. Also eliminated is the coordination overhead of managing the shipment of empties, and then matching the empty used container with a shipper that needs it, and getting it to the loading spot.
The article also points out that the very large container ships of today have caused enormous capital investments at ports around the world. Their draft of around 50 feet meant that harbors needed to be deepened, bridges raised (New York); and their length meant that extra-long quay space is required, cutting out space for smaller barges and feeder ships (Rotterdam, Antwerp) which meant that inland transport of goods (and return of empties) could not be as efficient and timely.
The huge capital investments at ports also created winners and losers. Ports that invested reaped the benefits of increased traffic. A port is an economic engine in its neighborhood, providing jobs and business flow. Ports that did not or could not invest can no longer count on ships coming.
It’s interesting that now, in the midst of the congestion panic, a few larger shippers are forsaking the world of the megaships and alliances. They are chartering smaller container vessels themselves, buying their own containers, and seeking ports that don’t have the same level of congestion. IKEA, Amazon, Wal-mart, and others have sufficient cargo flow that they can invest in this bypass to the ocean carrier-dominated shipping scene. This could prove a boon to smaller ports who did not invest before, but who can handle the smaller ships.
It’s an old adage of operations management that a lean system will reduce batch size. In terms of our supply chains, that would mean smaller ships, more frequent sailings, and use of a wide variety of ports. And it would spread the wealth and the environmental issues shipping brings over a wider landscape.
Supply Chain and Logistics 