Shippers and carriers can expect container supplies to remain tight this year as the industry tries to compensate for shortages during the global recession, the World Shipping Council says.

Supply and demand were thrown off balance by the recession, which in 2009 resulted in a 1.4 percent decline in the total global container fleet after years of expansion and produced the first-ever annual decline in global container cargo volume, according to a new report from the World Shipping Council (WSC).

“The global recession of 2009 was felt deeply in the container manufacturing sector, which had seen demand for new containers average in excess of 3 million TEU [20-foot-equivalent units] a year for the previous five years,” the WSC’s Container Supply Review says. “In 2009, however, world container production of new boxes was just 450,000 TEU, which included orders held over from 2008.”

In its analysis of container supply — looking at global trends rather than individual trade lanes — the WSC says that the combined production of 2009 and 2010 equaled 2.95 million TEU. As a result, at the start of 2011 the global container fleet had approximately 3 million fewer containers than the historical industry-standard level.

While container factory production has been restored in 2011, several sources believe that container supply may be insufficient to meet demand in 2011.

Current production estimates for 2011 range from 3 million to 3.5 million TEU, which is consistent with the historical annual production but insufficient to make up for the production losses of 2009 and 2010, when container shortages forced carriers to take a number of aggressive and often costly steps to improve the availability and utilization rate of the existing fleet.

Based on the current projections for 2011, manufacturers are expected to operate at about 60 percent to 65 percent of their total maximum production capacity of 5.5 million to 5.7 million TEU. While container production output is on track to deliver the 2011 projected new-container supply of 3.5 million TEU, it is unlikely that an annual output of more than 4.5 million TEU would be possible without increasing staff and production lines.

The WSC says that container supplies appear tight according to several benchmarks, including the container versus vessel slot ratio and scrapping rates, as well as the ratio between actual cargo volume moved each year and the size of the container fleet for that year (aka “Container Traffic to Container Fleet Ratio”).

“The container fleet will be constrained in 2011 as each available container TEU will need to handle more cargo than ever before, with a projected Container Traffic to Container Fleet Ratio of 5.62,” the report states. “By comparison, if we apply the 2008 ratio of 5.29 to the projected cargo demand for 2011, it would compute a required container fleet of 31.304 million TEU, or 1.82 million TEU above the current 2011 projected container fleet size.”

The WSC paper concludes that equipment supply will be tight in 2011, especially during the peak shipping season, and that proper planning and forecasting by shippers and carriers will be important to manage through times of constrained equipment supply.

Resources

Container Supply Review
World Shipping Council, May 2011

Comprehensive Review Concludes Equipment Supply Will be Tight
World Shipping Council, May 16, 2011