Transport & Logistics mode

The Coronavirus is severely reducing container availability

March 02 2020

Stocks of empty containers are starting to run out in the United States and Europe. A considerable number have been immobilized in China as a result of the Coronavirus. This should start to affect freight rates in March and April.

Many containers, full and empty, are currently immobilized in China following the Coronavirus outbreak. Two factors are at play here. Production at many factories is still at a low level and travel restrictions have prevented the delivery and collection of goods.

The situation is particularly critical for reefers. Several shipping companies have announced that they are bringing in surcharges to take account of congestion in Chinese ports. Maersk and CMA CGM, for example, are among them.

A preoccupying situation in the ports

In the United States and Europe, this shortage of equipment syndrome is making itself primarily felt in inland depots, where there is a huge lack of empty containers. In France, this is the case in Lyons, Paris and Bâle-Mulhouse.

The situation is also preoccupying in the ports, where Imports have been well below normal since the start of the crisis. This period of the year is already one where the equipment availability threshold tends to be low in any case in Europe. During the Chinese New Year, shipping companies cancel port calls to adapt themselves to the slowdown in the Chinese economy. But, this year, this phase has been extended because of the coronavirus.

If we look more closely at French ports, the imbalance has been aggravated by cancellations of port calls caused by strike action at Le Havre and Marseilles-Fos.

This is already affecting road transport prices. The shortage of containers in inland depots is forcing shippers to pay for return journeys in almost all cases, which is not normal operating practice.

The effect on freight rates

The lack of available containers, along with the low number of ship departures announced over the next two months against a background of strong demand, will inevitably result in increases in freight rates and the overall transport costs of European exports in March and April. This is already obvious to the markets which have begun to anticipate the phenomenon.

The most strategically inclined companies can change their habits and load large quantities of empty containers from China while there is still time and space aboard vessels allows it to be done easily. Once Chinese production has resumed, probably at 120% or 130% to make up for lost time, it will be too late and the swing of the pendulum will be all the more violent as a result.

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Expert in Ocean shipping for 25 years, Jerome puts all his knowledge of the industry to contribution for Upply. Ship captain at heart, he has written the English-French Lexicon of Containerized Shipping (Paris: CELSE, 2001).