Page 18 - Logistics News - July August 2022

C O N T A INE R S

Oversupply of containers

impacting second-hand prices

The oversupply of containers is contributing to Fresh data published by Drewry indicates an excess of six
second-hand container market prices plummeting, million TUEs of capacity in the global fleet of containers. The
Container xChange shared in a recent analysis. Container xChange analysis further states that the oversupply
will obviously lead to the requirement of more depot space, which
is already scarce. And, in a scenario where we assume that the
global supply chain disruptions will fade away with time, there
will be higher box productivity and we will need fewer boxes per
unit of cargo. There is a high possibility of a scenario where the
equipment capacity will not get soaked. “Carriers will rush to get
rid of their older equipment, second-hand container prices will
continue to slide gradually only to reach a new normal level and
the new market will dry up,” says Roeloffs.

The situation can be studied from the perspective of the
market forces of demand and supply. If the demand for containers
falls, then the supply of containers will naturally increase. Also,
price is a function of demand and supply. If demand falls and
supply increases, prices will fall. And that is what is currently
happening with the container prices.

“ he current situation of oversupply of containers The shape of the peak season
is a result of a series of reactionary market
We’ve said before that the main factor that has driven up
T disruptions that began soon after the outbreak prices much more than the historical levels has been a supply-
of the pandemic in early 2020. With the rise in demand, side crunch over the past two years because of lengthening
congestion at ports increased and the container capacity was turnaround times of containers caused by supply chain
held up for a considerably long period. This led to the panic congestions. That still holds true. We still have about 10 percent
ordering of new boxes at record levels. With time, as markets of transport capacity tied up and removed from the value chain.
reopen and demand softens, the oversupply is a natural Demand, on the other hand, has softened now.
outcome of demand-supply forces balancing at new levels,”
says Christian Roeloffs, Co-founder and CEO of Container US imports decreased by 2.4 percent between March and
xChange, a tech platform that simplifies the logistics of April. Purchases of goods went down US$0.1 billion as higher
container movement. “The oversupply situation does not imports of industrial supplies and materials (up 1.8 billion) were
come as a surprise because the average container prices and offset by lower imports of consumer goods (down 1.5 billion),
leasing rates have been declining globally since September- according to the US Census Bureau. In the long run, ocean freight
October 2021,” he adds. demand is forecast as a multiplier of global GDP growth. And if
global GDP doesn’t plummet by, for instance, 5 percent, the global
Freight rates have come down by an average of 20 percent demand for shipping capacity will not significantly plummet.
since the beginning of 2022 and these will continue to slide
L O GI S T I CS NEWS the underlying disruptions in the supply chain are still there. season demand. This will likely keep container prices potentially
gradually, but there will not be a massive decrease because
“To sum up, we foresee a significant rise in the pent-up, peak
stable in the short term as we inch closer to the peak season.
With inflation and pandemic-induced lockdowns, disruptions
will continue to change the equation between supply, demand
What remains to be seen is how the geopolitical circumstances
and prices. In the longer term, these will phase out and create
and the pandemic-induced lockdowns play out in the coming
a new normal balance of supply and demand.

16 JULY/A U GU S T 2022 months,” concludes Roeloffs. • www .l o g ist i csn e w s .c o .z a