Covid-19 worsens global container imbalance

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Covid-19 worsens global container imbalance

The Covid-19 pandemic has worsened the continuous issue of container imbalance in the global shipping industry, according to Germany-based digital marketplace Container xChange. 

The company explains that in an ideal world, a container being shipped would already have shipments waiting to get loaded, and would then be on its way back.

However, this doesn't happen in the real world, where supply and demand create an imbalance.

Around one in three containers being shipped from Europe to Asia is empty, the company said in a blog post. That can be due to the lack of import in Asia, or because of a lack of export in Europe to keep up with the number of containers arriving at the ports.

This mismatch of import, export, and expenses are all components in the worldwide container imbalance.

With China being a manufacturing hub, it and large areas of Asia are often faced with a deficit of containers. Large amounts of commodities need to be shipped to Europe and the U.S. At the same time Asia's exports exceed its imports, and it therefore often doesn’t have enough containers available.

When they then arrive in Europe and the U.S. they pile up at the ports and storages, as the import these places exceed the export.

This produces a surplus of containers - a tendency that is assumed to grow, and thus creates an imbalance across the industry.

At least, that was how it used to be until Covid-19 began spreading. According to the Container Availability Index (CAx) containers have started piling up in China.

This is leading to congestion at Chinese ports as well as interrupting sailings. All these tendencies create equipment shortage in Europe and the U.S. where especially 40ft containers are stuck at ports in China.

This has in effect turned the imbalance and the market upside down, and the market is still waiting to see just how big an impact Covid-19 will have on the industry.

Reuters recently reported that Chinese port congestion has been easing over recent days. But it says that a logjam of refrigerated containers has significantly pushed up prices around the globe.

Frank Madsen, global director of reefer and marine logistics at Danish freight forwarder Blue Water Shipping, said that spot market freight rates have increased as much as 200% and are set to rise further. 

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