Box shortage adds to supply chain chaos at US west coast ports

After struggling with excess containers for much of 2020, Los Angeles is now facing a worsening equipment shortfall, according to new data from Container xChange.

After struggling to cope with excess containers for much of 2020, the Port of Los Angeles is now facing box shortages on top of already severe congestion and labour supply issues, according to the latest data from Container xChange.

According to the container monitoring specialist’s Container Availability Index (CAx), the port has seen the availability of 20 ft Dry Containers (20DCs) and 40 ft Dry Containers (40DCs) plummet by more than half in recent weeks compared to the average index values for weeks 1-48 last year.

“US container shipping supply chains have been under pressure since the summer and now the Port of LA is coping with an outbreak of Covid-19 and labour shortages. While earlier in the year the high-volume US box import port was overwhelmed with boxes, now there is a dearth,” said Johannes Schlingmeier, CEO of Container xChange, a leading online platform for buying, selling and leasing shipping containers.

“A combination of global coronavirus lockdowns, blank sailings by containers lines early in the year and a surge in US consumer demand for retail imports from Asia saw boxes build up across the US during the second half of 2020. Approximately 1.5 million containers had a turnaround time of 115+ days in Q3 2020 across the US, compared to an annual average of fewer than 80 days, according to a research study published by Container xChange and FraunhoferCML.”

At the Port of Los Angeles, this saw Container xChange’s Container Availability Index (CAx) average 0.64 across 2020 – an index of 0.5 on CAx indicates a surplus of containers while below 0.5 indicates a shortage.

The excess of boxes was particularly acute from week 37 to week 45. For 20DCs the index soared to 0.86 in week 42 and, for 40DCs, reached 0.91 – a plus of 25% and 42%, respectively, compared to the 2020 average.

However, as lines have rushed to move empties back to Asia, the picture has dramatically reversed at the port, a leading gateway for the trans-Pacific container trade.

“This has created a deficit of containers in Los Angeles,” highlighted Florian Frese, marketing lead at Container xChange. “Container Availability Index values plummeted to only 0.27 for 20DCs and 0.29 for 40DCs in week 49, 2020 – a minus of 57% for both container types compared to the average index values for weeks 1-48.”

Frese added: “We’re expecting further volatility in container availability in the coming weeks with every element of the transpacific ocean freight supply chain under unprecedented pressure.”

Positive trend ex-China

As reported last week in Lloyd’s Loading List, Container xChange believes an end could be in sight to the exceptional container equipment shortage experienced in recent months at key ports in China and more widely in Asia, highlighting a “positive trend” this month on the organisation’s Container Availability Index (CAx) that it says could make Chinese New Year the turning point. Availability values for 20-foot dry cargo containers (20DCs) and 40-foot dry cargo containers (40DCs) in Shanghai have improved in January to 0.34 and 0.37, respectively, indicating much higher availability of empty containers than last month.

Developed by Container xChange, the (CAx) index tracks millions of container moves to monitor and forecast equipment availability. An index of 0.5 describes a balanced market, below 0.5 a shortage of containers. Although those latest figures for January are still well below 0.5 and thus represent a shortage of available containers, those figures for 20DCs and 40DCs are beginning to resemble the ‘normal’ level of container shortfalls experienced for major Chinese export markets, Container xChange noted. Index levels for 40-foot high-cube containers (40HCs) are also significantly higher this month, although at below 0.2 their availability remains low.

David Amezquita, head of data insights at Container xChange, commented: “With a growth of 37.5% for 40HCs and even 200% for 40DCs in January compared to December 2020, the Container Availability Index finally shows a positive trend for shippers and forwarders who are looking for equipment in Shanghai.

Factories at full production

With Chinese container factories now working at full production, and due to the aggressive repositioning of empties back to China by the shipping lines, Chinese New Year “stands to become the turning point of equipment shortage”, the company indicated.

“With the vast increase we’re seeing in the container availability, Shanghai is on its way back to normal levels. A similar development is happening across other ports in China. Qingdao, for instance, even reaches index values of 0.5 for standard equipment – which represents a balanced equipment situation.”

And for some of the other major hubs across Asia like Singapore, Nhava Sheva and Port Klang, the Container Availability Index shows the same trend, Container xChange said, noting: “Compared to December 2020, container availability is up 58% in Singapore, 35% in Nhava Sheva and 54% in Port Klang across standard container types in January 2021.”

Positive trend to continue in February 

Looking at the forecasts, the indications are that the equipment situation will remain stable in the coming weeks, Container xChange added, noting that “until mid-February, the Container Availability Index will settle at around 0.35 for 20DCs and even 0.38 for 40DCs”.

It highlighted that the average availability of containers in Shanghai for 2019, a “normal year” for the shipping industry, puts the recent development into perspective. “Average index values of 0.19 for 40DCs and 0.38 for 40HCs show that Shanghai used to be a deficit location even before COVID-19,” it added

“The positive container availability trend for Shanghai proves that actions taken by the shipping lines are working. The aggressive repositioning, which has grown by 125% in December on the online platform Container xChange, and the increased number of newly built containers contribute to normal availability levels again.”

Container xChange is a leading online platform used by more than 600 companies to buy, sell and lease shipping containers.

Challenges globally

But as reported yesterday, an acute lack of available empty containers in key export locations is continuing to be a major challenge for shippers and their suppliers, with senior industry forwarders and analysts split on how long the problem will persist – and whether Chinese New Year this month will be a turning point.

The misalignment of empty containers with demand in export locations has been a significant contributing factor in ocean rates on major trade lanes soaring to unprecedented levels since the final quarter of last year and continues to present major problems so far in 2021 to a backdrop of buoyant demand, tight vessel capacity and congestion at certain key ports.

At a webinar last week, US forwarder Flexport’s VP of ocean freight, Nerijus Poskus, noted that “equipment issues are still very big in Asia and the question is, how long this is going to last into 2021.”

He continued: “If you look at some of the fundamentals, equipment is prioritised for the better-paying trade lanes and premium products and I would expect that to continue as long it (the equipment) remains globally tight. But it doesn’t mean there are no containers; they are simply in the wrong places. When this is an issue, carriers prioritise trade lanes.

“For example, when a transpacific journey pays say, US$0.50 a mile and the Asia-Europe lane pays a dollar a mile, the carriers will, if they can, prioritise loading to Europe rather than the US. And this is what we’ve seen. Asia-Europe prices were too low in 2020 and transpacific prices were high. So, equipment availability was better for the transpacific trade lane. Now it’s the opposite: Asia-Europe prices are high.”

Poskus underlined that it was important to remember that new containers are actually being delivered all the time, shipping lines having put in sizeable orders in the second half of last year, although he questioned whether they are being delivered to the right places – especially beyond the main ports, “where equipment is even tighter”.

He added: “It also varies by carrier. It could be that one carrier has equipment and another none at all. I think this situation will continue until at least the first half of the year.”

Poskus also said the fact containers and vessels are currently moving more slowly was a major related issue. “It’s kind of a blank sailing, which reduces capacity from the market”, he noted.

“We’ve discussed why containers and vessels are moving more slowly – ports are congested; there are labour issues at the ports (COVID outbreaks); there are no chassis available and not enough vessels. All these things are adding up, and until they are resolved, equipment will continue to be considered ‘gold’. My personal view is that conditions should improve in the second half of the year.”

Prediction of a swifter resolution

But Lars Jensen, CEO of Sea Intelligence Consulting, predicted a swifter resolution to the equipment issue.

“We saw the same scenario play out in 2010,” he noted. “That was the ‘comeback’ after the financial crisis where we also had equipment shortages for the same reasons. At that point, there was a massive ordering spree of containers. Obviously, it (the shortage) had to be alleviated, but we ended up with over-capacity on the container side. And we’re going to see a replay of it.”

Her continued: “In 2020, globally, we’re going to move basically the same amount of containers as we did in 2019. We surely had enough containers in 2019; the reason we didn’t have enough in 2020 is because everybody insisted on moving them in Q4 instead of Q2.

“The only other thing that could change the need for equipment is if we suddenly saw a re-arrangement on TEU miles – if sourcing patterns changed; but they haven’t. It’s just the timing.”

Larsen added: “There’s absolutely nothing in the data for 2021 indicating that we would have insufficient equipment. Actually, there’s a building spree of equipment.

“If you look at 2010, it took about three months from when the problem really arose to

when it was resolved. If we put that in the same context now, that basically means it (the equipment issue) should be resolved by Chinese New Year.”

Larsen concluded: “The ‘wildcard’ this time round is the port congestion, because that ties up a significant part of the ability to re-position the empty containers and bring the flow back into balance. That could delay it somewhat.

“But once this gets alleviated, equipment is not going to remain ‘gold’ for very long. I have the view that it is going to be resolved, again, with the ‘wildcard’ of the port congestion, much sooner than summer.”

Source: lloyd´s