The price of shipping containers has vastly increased compared to previous years. Six months into 2021, container prices remain high due to a series of unprecedented global events.
These global factors have created a domino effect causing a shortage of available containers. This in turn has caused increased prices. So, when do we expect the cost of shipping containers to return to normal? In this article we address this and more.
Why are shipping containers so expensive?
The likes of global pandemics, Brexit and blocked shipping routes have caused havoc for shipping lines. Due to delays and shortages, it’s natural that the price of new and used shipping containers has increased. Recent demand for containers has also increased which has resulted in fewer new and used containers being available.
Production of shipping containers
The majority of shipping container units are produced in China. To make production cost-effective, containers are loaded with cargo and shipped to the UK or Europe. They are then sold on as a “single-trip” container for storage or a conversion project.
One element driving prices is that demand for containers is growing, but manufacturers are unable to meet it. Following the pandemic, manufacturers are struggling to increase their hours enough to accommodate the exceeding demand. Many factories also had to close for lockdown. This wasn’t a problem at first as there were fewer orders for containers in Q1 of 2020. Container orders then boomed at the same time factories were coming out of lockdown and so had reduced staff. Factories have been working to one third of their previous capacity due to the pandemic, which means we are only getting 33% of the stock we typically expect.
Global shipping difficulties
There have been many difficulties in international shipping in the last 18 months. Some of these difficulties have coincided with UK businesses struggling to import and export with Europe following Brexit.
Contrary to popular belief, Brexit has had minimal impact on price of containers or shipping. As containers come from Asia, Brexit hasn’t been an issue for shipping – the only delays have occurred from shipping within Europe and the UK.
The main problem contributing to shipping difficulties is that many containers were held up in ports that they weren’t supposed to be in. When factories in China closed for lockdown, empty containers were stuck in Europe and the USA, and unable to return as borders had closed.
Unfortunately, when China’s lockdown restrictions were lifted the USA and Europe started their own lockdown, so the usual import and export was unable to resume. The industry relies on the movement of used containers being imported and exported. If used boxes are not returned from overseas to China for re-exporting, there will continue to be delays and stock shortages.
Additionally, there has been a recent container ship blockage at the Suez Canal. Even though the blockage has now cleared there will be a backlog of ships needing to pass through. Due to the amount of time the canal was blocked, the backlog could take a long time to clear.
To avoid this backlog and delays in the area, some carriers are missing out calls to European ports completely. This only contributes to the container shortage as it’s taking longer for units to arrive at the intended destination.
As container distribution is not as rapid as it once was, leasing companies are reluctant to sell their stock, which has had a knock on effect for the used container market.
Demand has only been increasing whilst all these delays and container shortages have been occurring. Hospitals and businesses needed increased emergency PPE following the coronavirus outbreak. Because of this, they needed to stockpile equipment to ensure they had enough.
The lockdown also meant less people left the house, so ecommerce usage boomed. As businesses grew, there was a huge demand for items shipped from overseas to stock online. Not only were people online shopping at home, but more were now remote working. This increased the need for computer parts, monitors and office furniture which all needed to be shipped overseas.
All these individual events have created a domino effect, resulting in a container demand surge. Many are still enquiring about a container but have experienced a longer wait and a higher price due to the unprecedented demand.
When will shipping container prices go down?
Given the global circumstances, it’s very difficult for anyone to predict when prices of shipping containers will begin to drop. Currently, there is no market evidence to suggest prices are set to come down. It is more likely that as demand decreases and the backlog of vessels lessens, there will be a gradual price decrease over time. China has announced that they will be taking steps to increase the production of containers in order to meet demand, but this could take a long time before it has a noticeable effect.
As containers are a commodity product, again, it’s almost impossible to predict when this gradual drop-off will occur. That’s why at S Jones, we not only provide you with the lowest price we can offer, but also guide you towards the best solution for your actual needs. By asking questions and getting to understand why you really want a container, we save our customers money over the long term – no matter how high container prices rise!