As the US and global economies emerge from the COVID-19 pandemic, supply chains are stressed by demand coupled with scarce materials and labor shortages. The 2021 shipping container shortage and the associated increase in shipping container costs and availability is both a cause and a symptom of overall economic inflation. Shipping containers are scarcer now than they have been in the past 30 years, putting supply chains and storage operations in a challenging predicament.

What Has Caused the Container Shortage?

Since containers transport roughly 70% of the world’s goods, the shipping container shortage has led to broad scarcities of products and components on a global scale. This affects us at Page Street Leasing and our customers in a similar way, with decreased availability and increased prices on shipping containers for onsite storage. While the factors that have created this issue are complex, we’re going to examine some of the major contributors.

Manufacturing Bottleneck

It should come as no surprise that almost all ISO steel shipping containers, which comprise most of Page Street Leasing’s rental fleet, are produced by a handful of factories in China. When the COVID-19 pandemic emerged in late 2019 into early 2020, factories producing containers largely shut down due pandemic mitigation efforts. However, during this period, demand for products carried by containers increased greatly. Essentially, while North America was facing lockdowns and remote work arrangements, consumers increased purchases from large store chains and online retail giants whose goods are overwhelmingly container-borne from Asia. Thus, the shipping container ship owners saw an increase in demand for ocean transport, but they were unable to purchase enough containers to meet this demand due to the factories being shut down. Even after manufacturing capacity began to rebound, the backlog of orders from container ship owners and companies that lease to them has put order fulfillment out far into the future. Stated plainly, the demand for shipping containers by ship owners has created more orders than factories can supply for the next year.

Soaring Shipping Rates

For companies like Page Street Leasing and for our customers, shipping container cost and availability is highly correlated with the prevailing shipping rate being charged by ocean carriers. The cost of shipping a container from ports in China to the East Coast of the US has increased by over 4x. Last year, shipping a 40’ container was approximately $1,500. As of September 2021, it is over $10,000.

How does this affect shipping container costs? The ocean carriers’ ability to charge such high rates for transportation feeds their need for more containers and dominates most of the container production capacity. Ship owners are able to make so much revenue that they are willing to pay a lot more for shipping containers than in the past. They are also much less willing to sell off shipping containers that are currently in service, which is where the supply of used containers for portable storage typically originates.

Congested Ports

As of October 2021, there are over 75 container ships anchored waiting to unload cargo at the ports of Los Angeles and Long Beach. The reasons range from shortages of longshoremen at the ports to offload the ships and a dearth of truck drivers to take the loaded shipping containers to their ultimate destination so they can be unloaded and returned to the port and the ships. While the port worker shortage is more localized, the truck driver shortage is a national issue that has been slowly coming to a crescendo over the past decade. The American Trucking Associations indicated a shortage of 60,000 drivers for available freight in 2019. More drivers are retiring or exiting the profession than new drivers starting their career. By 2024, the shortage is projected to top 100,000 unless the rate of replenishment changes course. Driver compensation has been climbing to help attract and retain a fleet of safe, professional CDL holders, but many factors will need to change and at a faster rate than is realistic to expect. Rail capacity is similarly constrained. What does this mean for end-users of containers for portable storage? The congestion and wait time involved in unloading containers is keeping availability exceptionally slim.

Other Factors

There have been other events in recent months in addition to some ongoing concerns that have caused the shipping container shortage. The blockage of the Suez Canal by a giant container vessel was a global news headline for weeks starting in March 2021. The Ever Given, a 20,000+ TEU (Twenty-foot Equivalent Unit) container ship, was out-of-service when it was stuck in the canal and for months later while the ship operator reached a settlement with government authorities. The tens of thousands of shipping containers on the Ever Given were prevented from reaching their destinations and from reuse, but more importantly, other cargo ships were blocked from utilizing the vital canal route to navigate on to their destination ports.

The trade imbalance between the United States and China also poses a challenge to the global supply chain and flow of container traffic. The greater need for containers is wherever goods to be shipped are located. In this case, the overwhelming majority of goods are in Asia and destined for North America and Europe. Early 2020 saw a shipping container shortage starting on the US coasts and proceeding to inland commercial centers, where the need for empty containers in China to accept product pandemic-fueled consumers became akin to a giant magnet attracting containers from all points of the globe.

Factories in China have been hampered by electricity constraints in 2021, further dampening inventory replenishment efforts. Goldman Sachs estimates that over 40% of China’s industry has been affected by outages and rationing. The extent to which this has specifically impacted container manufacturing is not clear, but suffice it to say that production of shipping containers and the Corten steel used to construct them will likely be hampered.

On The Horizon

Attempting to forecast container availability is a formidable task even for trained supply chain economists. The ability to reliably predict the myriad of moving parts of this issue is difficult and any recommendations should be considered critically. If you are in the market to rent or purchase a container for onsite storage, there are some options to consider, depending upon your individual needs. One option would be to wait it out. There are some indications that this shortage could be temporary, as Chinese manufacturers are on track to produce a record number of shipping containers in 2021, which would be a logical way to effectively nullify a shortage. Increased production could cause container prices to stabilize and return to a level more in line with the 10-year average within the next couple of quarters. However, there’s reason to believe that this will not help the shortage anytime soon, as the number of ships to take these new containers will not be in service for another year or two, and this does not address the bottleneck at the ports and inland transportation. A near-term decrease in container prices may depend upon a sharp decrease in demand for consumer products.

If you need a container sooner than the ‘wait and see’ scenario, renting is an option that might make sense. In general, rental prices have not increased at nearly the same rate as purchase prices. If you’re planning upon having the container for less than 3 years or so, renting a unit may protect against the risk of buying an expensive container only to have the asset value drop significantly if/when the market normalizes. The cost to rent a container for a year could very well be less than the amount it would depreciate if it were purchased at a record high in the market. If you plan on keeping the container for longer than that and need it now, then the higher price might not make as much of a difference to you in the long term, especially when broken down by years of useful life left in the container. However, it’s important to realize that this is all speculative and should not be taken as financial advice.

Contact Us

Whether you decide to rent or buy a shipping container or trailer, our purpose is to help fulfill the onsite storage needs of our extended local community. Please don’t hesitate to contact us for assistance or for any insights we might be able to add with respect to your situation. We’ll continue to look ahead and navigate through the supply chain issues with the best information available.

Page Street Leasing LLC was established in 1986 to provide convenient, flexible storage at the customers’ site. For over twenty years, homeowners and businesses have trusted Page Street Leasing for their on-site storage solutions throughout southern New Hampshire and beyond.

Areas served include the following and surrounding areas: Nashua, NH, Portsmouth, NH, Concord, NH, Brattleboro, VT, Keene, NH, Lebanon, NH, Sanford, ME, Kittery, ME, Biddeford, ME, York, ME, Claremont, NH, Tewksbury, MA, Andover, MA, Rochester, NH, Derry, NH, Exeter, NH, Haverhill, MA, Chelmsford, MA, Billerica, MA, Lowell, MA, and Wilmington, MA.