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6m teu oversupply of containers after ‘panic’ ordering

Photo: YouTube screenshot A vessel on northbound transit along the Suez Canal (Credit YouTube).png
Container prices are plummeting as panic ordering of boxes during the pandemic has brought oversupply to the market.

Container trading and leasing company Container xChange said there has been a downward trend in container prices since around September 2021.

The issue began with container ordering in the early stages of the pandemic, when demand rose sharply and supply was constrained by congestion and disruption in supply chains.

“This led to the panic ordering of new boxes at record levels. With time, as markets reopen and demand softens, the oversupply is a natural outcome of demand-supply forces balancing at new levels.” said Christian Roeloffs, Cofounder and CEO of Container xChange.

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In the short- to mid-term, Container xChange expects that easing supply chain disruptions will lead to improved productivity per box, and therefore a need for fewer containers to serve cargo demand. This trend could be exacerbated if demand continues to soften as consumers face economic pressures in Europe and the US, and raises questions on where excess containers will be stored.

“This situation will lead to tighter depot space, carriers will rush to get rid of their older equipment, second-hand container prices will continue to slide gradually only to reach a new normal level and the new market will dry up,” said Roeloffs.

The company quoted Drewry data which indicates an excess of 6m teu of capacity in the global fleet of containers.

“We foresee a significant rise in the pent-up, peak season demand. This will likely keep container prices potentially stable in the short term as we inch closer to the peak season. What remains to be seen is how the geopolitical circumstances and the pandemic-induced lockdowns (for instance, in China) play out in the coming months,” said Roeloffs.