Production delays and a surge in demand led to a significant increase in shipping prices due to shipping container shortages. Here’s what you need to know.
Shipping container shortages due to the pandemic are leading to a surge in shipping pricing that’s expected to continue throughout 2022. While this isn’t good news for customers looking to ship their products, it’s important to understand why shortages are happening and how the pandemic affected the price increases.
How lockdowns affected the supply chain
As Covid-19 cases surged at the beginning of the pandemic, global lockdowns were implemented, closing down most countries’ economies. While shipping containers were still available (about 180 million, to be exact), they were unable to be shipped due to these lockdowns.
Orders for new containers were canceled early in the pandemic. Now, as demand has significantly increased, shipping container manufacturers in China have scrambled to catch up, only producing about 2-3 weeks of supply at a time.
Lack of container manufacturers led to surging prices
When trying to understand why shipping has become so expensive, it’s important to note that only three Chinese companies produce 80% of the world’s shipping containers. While high demand often means higher prices, there’s also the issue of containers simply not being manufactured quickly enough, which only exacerbates the shipping container shortage.
This explains why a new container reached a high of $3,500 per cost equivalent unit (CEU) in 2021, compared to the price in early 2020 ($1,800 CEU) and in late 2020 ($2,500).
The prices of used containers also increased due to demand – and nearly doubled – from $1,299 CEU in November of 2020 to $2,521 in March of 2021.
This increase is due to the difficulty of finding a used container because of shipping delays. Many are stuck in inland depots, cargo ports or onboard vessels that have been held up.
How the Suez Canal crisis affected container pricing
Production issues aren’t the only driver of container shortages. The Suez Canal accident in March 2021, when a shipping vessel blocked the waterway for a week, caused a huge shipping bottleneck. This was especially detrimental because about 12 % of the world’s trade goes through the canal. The trade delays caused by the accident cost companies about $2.2-$3.9 billion internationally. This situation also made it more difficult to find used shipping containers, as they were tied up in the delay.
Covid cases further delayed container production
As countries like China faced spiking Covid cases in 2020 and 2021, production of containers had to be further delayed. These delays not only affected waiting time at ports, but it also led to more difficulties in meeting demand, which led to increased prices.
Not over yet
As container manufacturers work to meet growing demand and mitigate shipping container shortages, ING said that prices will likely remain high until at least 2023. Learn how Ship North America can help you meet your shipping needs, even during these problematic times.