Where have all the empty containers gone? – Impacts on container availability in the European hinterland

The ocean carrier’s challenges

Ocean carriers follow differentiated strategies to make empty containers available in the hinterland – all consisting of a juggling act. 

On the one hand, this aims to achieve a satisfying service level – which means availability of empty containers whenever and wherever the customer needs them. On the other hand, carriers are facing increasing stock keeping costs, the higher the number of depots required for storage in the hinterland. In addition, cost drivers are complex tasks such as planning, forecasting and positioning to match the demand at the right place, at the right time, and in the correct dimensions.

While the export industry is wondering where all the empty container equipment has gone, and why pick up fees are increasingly higher, carriers are facing multiple challenges of their own.

It is no secret that all carriers are striving for cost efficiency and try hard to minimize indirect costs for things like storage and (unpaid) positionings of empty containers. Reducing stock as well as the number of depots would result in tangible cost savings; however, realising these efficiencies in full risks jeopardizing standards of service, and creating an inability to provide empty containers when needed. 

Facing the impact of imbalance 

Different exporting industries have vastly differentiated container dimension requirements. For example, the chemical industry demands 20’ containers to cater to heavy goods, as opposed to voluminous. The automotive industry requires 40’ containers to accommodate large parts.

In addition, demand for export and import transportation differs depending on industry presence per region. Exporting of chemical and automotive outweighs imports, however, demand for consumer goods (clothes, toys, electronics, etc.) in these regions increases exponentially. Regional industry mix heavily influences the availability of empty containers; as a result of the type of factors explained above, the imbalance of transport flows can vary enormously. 
From a macro perspective, other causes of imbalance exist.

Let’s say carrier A controls a business with 20’ import containers in the Munich region – meaning 20’ empty equipment is available in Munich for export. But what if carrier B is the exporting shipper’s preferred partner? Carrier A can’t realize the opportunity.

Or, simply consider the scenario in which demand for 20’ exports does not match incoming 20’ imports. Either way, carrier A loses out with increased empty 20’ container stock combined with the cost of stock keeping and positioning. 

Of course, shippers often end up paying the bill because carriers either charge drop off fees, or simply deny the return of empty containers to requested locations, resulting in extra costs on the shipper’s side for transportation to the next empty depot.

The empty equipment itself

The average age of empty containers worldwide grows, and the condition of equipment gets worse. In turn, the rate of refusals at shippers’ sites due to damage or bad condition (e.g. soiling) also increases. The need for repairs (and associated costs) grows too. Meanwhile, service providers for container repairs are often stretched to capacity, their storage areas overflowing with a backlog of damaged containers. What an irony that these exact storage areas can’t be used to make empty containers and returning options available.

We must not forget that empty container depots in the hinterland are integrated into, or located near, barge and rail terminals – mainly in agglomeration areas where the concentration of ex- and importing companies is high. However, within these areas it is nearly impossible to extend capacities for container transportation, let alone build up new ones – appropriate areas are missing, or land-use plans and local authorities do not designate properties to match current and future demands.

The influence of Covid19

Today more than ever, after more than 12 months of Covid19-related restrictions and global economic impact, transport decisions as well as ocean freight rates are especially volatile. Current rate level changes as a result of decisions made by both carriers and shippers has led to less fixed binding contracts. It remains to be seen if this situation will change any time soon.

Finally, despite the fact that vessels from Asia are fully booked, empty stocks in the hinterland seem to decrease. Driven by current rate and cost developments, carriers tend to send damaged equipment to Asia to be sold or repaired at notably lower prices.  Equally, containers in good order are shipped empty as well – a very attractive option for carriers who can realize a higher turnover, faster on the Asia-Europe trade, with ocean rates now 4-5 times higher than one year ago.

Current outlook

Since 2019, the EU’s trade surplus has continued to grow. As a result, the demand for empty containers in the European hinterland is higher – and probably will increase – than for unloaded import containers being returned in the hinterland.

In addition to this, considering the impacting factors explained above on availability of empty equipment, one might conclude that the gap between offer and demand will grow further in future.

And this is why carriers as well as shippers must prioritize(empty) container transportation costs.

Shippers should consider that costs for hinterland transportation will increase – not only due to general inflation, but especially in order to retain and establish future oriented concepts to continuously meet the demand.

Conversely, one could argue that carriers must intensify their focus on getting strategic about empty equipment organization – in particular combining the knowledge of different stakeholders of this supply chain element (shipper, forwarder, rail/barge/truck/terminal operator), and by pushing digitization to make flows and dependencies visible, easier to interpret, and actionable, to realize greater efficiency of empty container management in the European hinterland.

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