Empty shipping containers are piling up in storage depots on the U.S. east and west coasts, causing a glut of capacity even as they are sorely needed overseas in Asia to ship exports back to the U.S., Container xChange said in an analysis.
That trend will present a major challenge in the mid- to long-term range, at the same time that the industry is keeping a wary eye on looming contract negotiations between waterfront labor and port management groups on the U.S. west coast, according to Germany-based Container XChange, a technology firm which tracks container movement trends worldwide.
A tight calendar is ratcheting up pressure on the container sector even more, since the contract governing working conditions between laborers in the International Longshore and Warehouse Union (ILWU) and management with the Pacific Maritime Association (PMA) is set to expire on June 30. In addition to providing just nine weeks from today for a contentious negotiation, that period falls right at the start of the period when retailers begin stocking up inventory for the critical winter peak season.
"We know that the port labor unions are very aggressive negotiators, and the event has historically also resulted in work stoppages in the past. If that happens this year too, it will cause unloading and loading of cargo [to be] practically impossible,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release.
“I am doubtful whether the negotiations are done within one and a half months because that's effectively the time that we have before the current contract ends at the beginning of July. And it's just doubtful whether the port and terminal unions will find an agreement with the employers by that time. This will of course lead to disruptions at the beginning of the early peak season shipping, a crucial time for the shipping industry, set to have implications on consumer demand fulfillment," Roeloffs said.
Nervous trade groups representing U.S. shippers and retailers have already petitioned the Biden Administration to get engaged in the impending talks, according to recent letters to the White House from the Retail Industry Leaders Association (RILA) and the National Retail Federation (NRF).
In the meantime, shippers and carriers are coping with plunging container prices due to the box glut, marking the latest hit to smooth supply chain operations to land in recent months. "In general, logjams and disruptions lead to increase in container prices, especially in second-hand container prices because more container volume is tied up along the logistic supply chain. However, in the United States, there is a pile-up of empties as those containers cannot be repatriated back to Asia because of several disruptions one after the other in the past 2 years," Roeloffs said.
A solution may not arrive for months, he said. “Once we see depots overflowing (and this is also what we expect in the midterm once disruptions ease up a little bit), container turnaround times becoming faster and shorter again, container fleet utilization (the number of trips that container can take on average within a given year) increasing again, we do believe that container availability on a global scale will become more abundant again."