As a result, containers have become incredibly scarce and extremely expensive. One year ago, companies would pay roughly $1,920 to book a 40-foot steel container on a standard route between China and Europe, according to data from Drewry, a maritime research consultancy. Now, firms are spending more than $14,000, an increase of more than 600%. Meanwhile, the cost of buying a container outright has effectively doubled.
Businesses everywhere are struggling to cope. Furniture giant Ikea has bought its own shipping containers to try to ease some logistical headaches. But that's not an option for a small candymaker like Lavolio, which is rethinking its expansion plans and may have to raise prices — a sign of the broader damage caused by supply chain problems that won't go away.
The container mess
For months, global supply chains have been stretched to their breaking point, triggering shortages of items from computer chips to McDonald's milkshakes.
Container boxes have played a central role in the chaos. When the pandemic hit, major shipping lines canceled dozens of sailings. That meant empty boxes weren't picked up before China's export sector began to bounce back, and global demand for consumer products like clothing and electronics surged.
The glut of empty containers — or "empties," in industry lingo — has persisted as coronavirus restrictions continue to snarl operations at ports and depots, and as shipping costs have continued to rise.
"Do we see more empties in port? Yes, we do," said Emile Hoogsteden, vice president of commercial at the Port of Rotterdam in the Netherlands, the largest port in Europe. Rotterdam has had to create extra storage capacity for the containers as "a temporary solution."
One point of friction is that a lot of the cargo going from Europe back to Asia is low-value materials like waste paper and scrap metal, Hoogsteden said. As shipping prices have gone up, those trips aren't worth it anymore, leaving boxes stranded.
Another issue is that containers in circulation are getting held up for extended periods of time. That means more boxes are needed to execute shipments and to avoid getting even further behind schedule.
"If you look at container usage, we need significantly more boxes to move the same amount of cargo as we get them back, on average, 15% to 20% later than normal," Rolf Habben Jansen, the CEO of Hapag-Lloyd (HPGLY), one of the world's largest container shipping lines, said on a call with analysts last month.
Konstantin Krebs, managing partner at Capstan Capital, an investment banking firm that works with investors in containers and container shipping, said backlogs at ports mean it can currently take ships up to four times as long to dock and unload goods.
"These ships are now sitting there for seven to eight days with all the containers on them," he said. "That takes a lot of containers out of the market."
Working through bottlenecks has been a priority, but long lag times persist, thanks in part to the sheer volume of goods that need to work their way through a clogged system. Global merchandise trade is about 5% higher than it was before the pandemic, according to the CPB Netherlands Bureau for Economic Policy Analysis, and China just posted a new trade record last month.
The physical shortage of containers is one reason the cost of buying or booking a container has skyrocketed.
"We are seeing record high rates, particularly on the spot market," said John Fossey, head of container equipment and leasing research at Drewry, referring to the just-in-time reservation of trips on ocean carriers.
But it's not the only contributor. Fossey also noted that the companies that make containers, which are largely based in China, have had to contend with rising raw material costs. Shipping crates are largely made from a special type of steel that resists corrosion, and it has gotten significantly more expensive, as have flooring materials like plywood and bamboo, he said. The cost of paying workers has gone up, too.
"It's a mix of raw material cost, increased labor cost, and a very strong supply-demand balance," Fossey said.