Empty shipping containers are piling up in Long Beach, California, the port that ships most of our exports to other countries, including apples from Oregon and rice from California. One-third of all shipping containers leaving the port of Long Beach in September were empty. These empties tell us more about the state of the economy than most economic reports.
Erica Phillip’s article in last week’s Wall Street Journal told us about these empty containers and how they got that way. Phillips connects box emptiness to developments in the global economy, starting with the steep rise in empty containers at the ports of Oakland and Long Beach, California. Empty containers pile up after they deliver their contents and fail to find exports to ship out of port. The fall in exports came when trade imbalance increased and China’s economy began to falter. China’s imports slowed and the US ports felt the loss of trade from one of their biggest trading partners. And, the strength of the US dollar has made US exports expensive for big buyers such as China, whose currency is in decline.
In the big world of intermodal transport of food, repositioning containers, as the movement of containers from one port to another, is a big deal. China manufactures most of the world’s shipping containers, often called TEUs (twenty-foot-equivalent units). One container costs about $2,000 to make and can transport about 34 metric tons of materials, including coffee beans, fish sauce, and canned tomatoes. Optimizing the use of each container requires the coordination of shippers, port terminals, freight rates, and container leasing organizations.
Leasing companies, usually connected to shipping companies, control about 60% of all containers, which has both advantages and disadvantages. The disadvantage is that one industry controls the global shipping capacity, the advantage is that one key player can better optimize the hundreds of dynamic conditions that come into play when making a decision to move containers on to a ship.
The longer an empty container sits empty in port, the more costly that container becomes since it requires space and maintenance without generating any trade revenue. If global trade and China’s economy continues to decline, these empty containers will accumulate and shippers will have to ship them around empty in a process called repositioning control.
Keep an eye out for more reports about container traffic in our key food shipping ports, and consider what they tell us about the impacts of economic policies and the flow of food around the world.