Containing The Container Crisis
by Business Monitor International
The rebound in container shipping has caught many operators unaware.
While overcapacity was the main problem threatening the sector this time last year, with the oversupply of box ships dragging down container shipping rates, this year has been marked by shortages, particularly those of equipment, with lines faced with a lack of containers.
The problem stems from last year, when decreasing demand in the box shipping sector on the back of a global decline in trade prompted shipping lines to stop replenishing their container stocks. Slackening demand led to a number of containers being sold for scrap or finding a new role in the construction sector. Bizarrely, a Travelodge hotel in the UK made entirely of shipping containers opened in 2008.
A lack of replenishment has led to problems for the container shipping community in 2010. Volumes have surged year on year (y-o-y) as inventories were re-stocked in the first half of the year. BMI expects container shortages to continue as we head into peak season.
Lines are tackling the container shortfall with a policy of surcharges, a strategy that shippers have condemned as a revenue drive tactic.
BMI believes the companies that will benefit from this container crisis are – unsurprisingly – the container manufacturers. Most are based in Asia, with China dominating the field. The top two companies in this industry are CIMC Group and Singamas. Singamas is already starting to feel the effect of the strengthening demand for containers, with the company posting a positive profit warning and its order-book full until the end of September. To better illustrate the turnaround in this companies’ fortunes, Singamas estimates that it is producing 65,000 20-foot equivalent units (TEU) per month: an incredible recovery considering that the company produced just 86,600TEU boxes in the whole of 2009.
With volumes surging and containers in short supply, a recovery is indeed afoot. BMI, however, errs on the side of caution, noting that the recovery is from a low base and demand volumes of 2008 are still some way off. On top of this, BMI’s sluggish consumer growth predictions for both the US and eurozone indicate that the demand boom will peter out.
The rebound in container shipping has caught many operators unaware.
While overcapacity was the main problem threatening the sector this time last year, with the oversupply of box ships dragging down container shipping rates, this year has been marked by shortages, particularly those of equipment, with lines faced with a lack of containers.
The problem stems from last year, when decreasing demand in the box shipping sector on the back of a global decline in trade prompted shipping lines to stop replenishing their container stocks. Slackening demand led to a number of containers being sold for scrap or finding a new role in the construction sector. Bizarrely, a Travelodge hotel in the UK made entirely of shipping containers opened in 2008.
A lack of replenishment has led to problems for the container shipping community in 2010. Volumes have surged year on year (y-o-y) as inventories were re-stocked in the first half of the year. BMI expects container shortages to continue as we head into peak season.
Lines are tackling the container shortfall with a policy of surcharges, a strategy that shippers have condemned as a revenue drive tactic.
BMI believes the companies that will benefit from this container crisis are – unsurprisingly – the container manufacturers. Most are based in Asia, with China dominating the field. The top two companies in this industry are CIMC Group and Singamas. Singamas is already starting to feel the effect of the strengthening demand for containers, with the company posting a positive profit warning and its order-book full until the end of September. To better illustrate the turnaround in this companies’ fortunes, Singamas estimates that it is producing 65,000 20-foot equivalent units (TEU) per month: an incredible recovery considering that the company produced just 86,600TEU boxes in the whole of 2009.
With volumes surging and containers in short supply, a recovery is indeed afoot. BMI, however, errs on the side of caution, noting that the recovery is from a low base and demand volumes of 2008 are still some way off. On top of this, BMI’s sluggish consumer growth predictions for both the US and eurozone indicate that the demand boom will peter out.