Why is my shipment taking so long?
Why is everything low in stock?
When will things go back to normal?
These are just some of the common questions many Americans, and people around the world are searching for on the internet. And for good reason.
From the outside looking in, it can seem like a trivial problem. So what if there’s a shortage of storage containers? Make some more. Alas, if only it was that easy. But why isn’t it that easy? And back to your original question, when will things go back to normal? In this article, we’ll provide a recap of how the storage container shortage became what it is today, and address the state of the industry.
Storage Container Shortage Recap
It all started with Covid-19. It seems like every business or industry has been impacted by the pandemic in one way or another, but regarding shipping containers, the pandemic led to the GLOBAL shortage of containers. As the pandemic spread from Asia, countries imposed lockdowns, halting economic activities and production. Because of this, many factories closed temporarily or indefinitely causing an operational bottleneck.
Shipping companies began to reduce the number of cargo ships they sent out. The result was not only the interruption of imports and exports but also the failure to collect empty containers. This brings us to the current storage container “missing link.” The majority of containers have been stacked up at cargo ports and inland depots.
The shortage on its own is an issue, but simultaneously to the production halt and storage container stacking, there is an increase in demand. The pandemic resulted in a shift in customer spending. Increased demand and low inventory lead to increased prices, longer wait times, and the continued container shortage issue.
How it Impacts You
So what if people at home want to buy the supplies needed to make bread from scratch, what does that have to do with you needing to buy a storage container? Well, the storage container you’re wanting is currently being hoarded, still in use, or being sold back to China. It’s important to understand the supply chain relationship to get a full picture of just why this impacts your purchase.
Understanding the Supply Chain Relationship
In supply chains, companies and their suppliers collaborate to produce and distribute products. When it comes to the storage container supply chain there are six key factors.
You’ve got China, which has three main manufacturers that represent the majority of the world’s shipping containers. They work with freight companies, which then sell to container companies. The container companies work with a broker to sell to suppliers. The supplier is who you are buying or renting a storage container from. Below is a visual representation.
Now that we understand how each interacts with one another, we can determine just why prices and delivery estimates seem to be increasing.
Earlier we asked the question, why not just make more containers? Looking at the chart you can see that China is the main export hub. Meaning they control how much commodity is made and the pricing of the container. While they could very well manufacture more containers, that would be detrimental in the long run. Overproducing now would lead to them being stuck with too many containers later on. So what’s their solution? Buying back their containers. And this is where it impacts the storage container you’re wanting to buy.
Where Are All The Containers?
Due to increased demand and low staffing, containers have been piling up. For example, 33 cargo ships were floating off the coast of Los Angeles waiting to dock. To put this into perspective, just unloading one cargo ship can take 1-3 business days. With 33 ships floating you’re looking at some ships waiting for a month at the very least.
So to recap. There are containers that are being sold back to China, containers that are floating waiting to dock, and in addition, there are containers being abandoned. And this is why there's a global shortage.
Container Companies Have Low Incentive to Sell to Suppliers
A container company will look at the freight cost plus the container cost. Then they’ll add a mark-up cost and work with a broker to sell to a supplier. After this, they sell it to a supplier and make money. But what if there was an easier option? Well, that’s what many container companies are being given by China.
China is currently offering container companies more money to sell the container back to them than what suppliers are willing to pay for the container. The more the supplier pays for the container the more your total cost will be. So either supplier companies pay more and charge their buyers extra, or they lose out and the container company sells it back to China. Either way, the cost of the container remains high for buyers.
When Will the Storage Container Shortage End?
The question everyone wants the answer to, when will it end? From what we’re hearing from suppliers in the storage container industry, there’s talk of things beginning to get better in late winter and early spring. Ultimately by Summer 2022, the cargo ships can be back on their tight schedule. However, the price, according to the suppliers is not likely to go down and will stay high.
Unlike other articles or companies, at 360Connect, we believe in full transparency. Although this information was provided by those directly within the industry, we need to be clear that these are predictions and are subject to change. The main takeaway is there is hope for the industry to gain some normalcy again.
Need A Storage Container?
Experts agree that the price of shipping containers isn't going to drop soon, and that may be the case for the next year as well. Prices will continue to rise as long as demand stays strong, and buying now is the best option for anyone needing a new or rented storage container.
Providing you with a supplier that fits your needs is our mission at 360Connect. And by staying on top of industry trends, we make sure our customers are always up-to-date.