Container prices surge; availability continues to be key concern for exporters

September 17, 2021: The continued surge in container prices and growing imbalance of availability is negatively impacting and leading to supply chain slowdown - a massive problem that will continue to 2022 and beyond, according to Container xChange, a global platform for container logistics.

Data indicates that there is a further rise in the high prices of 20 ft. and 40 ft. dry containers at Indian ports (Nhava Sheva, Mundra and Chennai).

Compared to May, prices for 20ft. dry containers have risen by 18 percent in September and the prices for 40ft. containers have risen by 37 percent, according to Container xChange data. The average price of a 20 ft. dry container in India in September is $2,462 (around ₹1,81,300), up from $2,078 in May 2021. The pre-pandemic price of the same specification container was approximately $1,000 for 20DC and $2,000 for 40DC, respectively.

Similarly, the average price of a 40ft. dry high cube container in India now is $4,193.75 (over Rs 3,08,000), a 37 percent increase from May when it was $3,041.84 (around ₹2,24,000).

(Source: Container xChange)

Moving on to another index - the Container Availability Index (CAx). A tool used to monitor inbound and outbound volumes of containers for every port globally, CAx indicates that the inbound containers are at an all-time high since 2019 by about 4X at the Chennai port (and similarly other ports in India) indicating an all-time high in the imbalance of inbound and outbound containers at ports.

“The growing imbalance of inbound and outbound containers being experienced in CAx at major Indian ports (including Nhava Sheva, Mundra and Chennai) is an indication of two key market conditions – 1. exports are being impacted immensely (in spite of a record month in July for exports) and 2. imbalance of inbound containers over outbound containers is getting worse by the week, ” said Christian Roeloffs, CEO and cofounder, Container xChange.

And the bottleneck is being traced back to the U.S. “The queue of container ships waiting to berth at the Los Angeles/Long Beach port complex grew to a record 60 vessels as the ports remain inundated with import volumes during peak shipping season,” according to cFlow, Platts trade flow software.

The vessel queue has swelled well beyond the 40 ships from the last import surge in February as the August-November peak season for restocking ahead of year-end holidays got underway, Platts said in this report.

“Strong demand for space on ships for exports from Asia to the US lifted Platts Container Rate 13 — North Asia to West Coast North America — to $9,000/FEU Sept. 15, a 137% jump from the year-ago date,” the report added.

The strong demand is also reflected in the announcement by Danish shipping giant Maersk, which has upgraded its earnings outlook. “The full-year guidance for 2021 has been revised upwards with an underlying EBITDA now expected in the range of $22-23 billion (previously 18-19.5 billion) and underlying EBIT expected in the range of $18-19 billion (previously $ 14-15.5 billion).”

"Nothing in our data suggests that the situation will change this year," Maersk chief executive Soren Skou told Reuters. He expects global trade volumes to grow 7%-8% this year compared with 2020.

The free cash flow (FCF) for the full-year 2021 is now expected to be at least $14.5 billion (previously minimum $11.5 billion) while the cumulative capex guidance for 2021-22 is unchanged at around $7 billion, the statement added.

“We are committed to realising our business transformation and become a full-service end-to-end integrator of container logistics, which is why our focus is on creating long term values for our customers,” a Maersk official told Indian Transport and Logistics News (ITLN). “In this pursuit, we are moving towards a larger share of long term contracts, which now has increased to around 60 percent of our total bookings.”

To lessen the impact on customers’ supply chains, given the extraordinary market conditions triggered by both the global pandemic as well as other logistical disruptions, Maersk has introduced over 600,000 TEUs (twenty-feet equivalent units of containers), significantly higher than what would be in-fleeted under normal circumstances.

So, here’s the background that remains unresolved: multiple supply chain bottlenecks unresolved even now like slow cargo movement from port to hinterlands and back, Covid-19-related restrictions, slower port and infrastructure operations and lack of manpower are not only slowing logistics down in general but are also adding up to create container shortages due to slow turnaround times. Maersk remarked that everybody needs to zoom out a bit and look at the way we operate the supply chain.

“Current freight rates are adequately explained by market dynamics. Arguments to the contrary, and calls for a maritime regulator, are fatally flawed,” Shipping Australia said in a statement.

The shippers’ association went on to explain why it is wrong to question the market dynamics and allow regulators to fix/decide on freight rates or related issues.

“A substantial part of the problem also rests on the inland side where shortages of trucks, drivers, chassis, rail etc drastically reduce the flow in and out of the ports which in turn amplifies the congestion problem significantly,” said industry veteran Lars Jensen in his LinkedIn post.

In a related development, the United States Federal Maritime Commission has decided to move ahead on complaint proceedings about demurrage and detention billings.

Dr Johannes Schlingmeier, co-founder and CEO, Container xChange said the rising container freight and spot costs over the past months, containers stuck in other locations which delay their cargo and vessel capacity issues are some pain points. “Another major cause of delay in container loading is, of course, the continued impact of Covid-19 outbreak which led to a shortage of human resource at the ports. This has continued to impact the system since the outbreak in India in late March 2020.”

Container Availability Index data India (main ports)

(Source: Container xChange)