An article published on May 9th,
2008 in Wall Street Journal discussed bottlenecks at U.S. overloaded ports
making it difficult for U.S. exports to go overseas. The problem can be traced
to a shortage of once-plentiful shipping containers and other transportation
equipment, along with a lack of space on outgoing ships.
Cargo-ship operators are raising
prices. Many cold-storage facilities are packed to near capacity with pork and
other meat products waiting to be loaded into containers — rectangular boxes
that are generally 20-feet or 40-feet long.
Peter Friedmann, executive director of the Agricultural Transportation
Coalition, estimated agricultural exporters could have shipped 20% to 30% more
products in the past six months if more containers were available.
Earlier, it was easier to find enough containers for agricultural products. The U.S.'s massive demand for
imports meant shipping firms typically scoured the country for anyone willing
to fill outgoing boxes. However, in recent times, with lucrative routes in Asia and between Asia and Europe, there are fewer
containers available to handle grains and other commodities in the vast
agricultural heartlands of the U.S. and Canada.
"Before, the price would take into consideration that the empty
container was sitting down the road in Chicago or somewhere else close,"
said Victor Cruz, of Lakehurst, N.J., who makes international delivery
arrangements for shipping companies. "Now the container has to be hauled
out from New Jersey, so [customers are] paying for a round trip."
Partly to address the problem, Mr. Friedmann of the Agricultural
Transportation Coalition held a conference call with 59 members in late April
to discuss what to do. Participants talked about getting Congress — with the
help of other industries — to repeal parts of a shipping law that allows
carriers to discuss and fix transportation rates and service. By doing so, he
believes carriers will respond more to supply and demand. They also considered
pushing federal regulators to examine shipping companies' pricing practices.
Exporters' frustration is
building even as U.S. agricultural exports have jumped 20% by weight in the six
months ended Feb. 29, compared with the same period last year, according to the
Department of Agriculture.
Source: Brat, Ilan. and Aeppel, Timothy, “Container Shortage Frustrates U.S. Exporters,” Wall Street Journal, May 9, 2008.
2 responses to “The Issue of Container Shortage”
Shipping prices have since come down drastically as the global recession takes hold. However, instituting a fixed price for transportation and service will create issues in the form of waste or surplus given the macroeconomic circumstances and increase inefficiencies. Ship builders were rapidly increasing the number of ships they were building as orders were coming in rapidly as these shipping prices were rising and demand was outstripping supply. Again, these massive container ships are not built overnight thus it takes time for the supply of ships to catch up with demand. Once these ships were online supply and demand will once again find an equilibrium. In the meantime supply chains adjust and move the necessary goods where needed.
Hi Joey:
Thanks for your comment. The prices of container shipping have indeed come down drastically during the last year. The overall capacity in the $150 billion container shipping industry is also getting affected by some merger activities observed during last year. Along with supply chain initiatives, shipping companies are also examining novel markets where the approx. $50 million apiece containers could be deployed in case the downturn persists. According to a consulting firm it was reasoned that the best option might be to convert the ship to a tanker or a cruise ship and then sell it at a loss. It will be interesting to see the direction that the industry would take.