January 2019 | News | Global Logistics

Collapsing High Container Costs

Tags: Ocean, Global Logistics, Logistics

The global shipping sector has a container problem. To be precise, it has a $30-billion container problem, and that price tag is increasing every year. In addition to their financial costs, empty containers congest deck spaces and crowd ports. And forcing ships to transport millions of empty containers around the world every year creates unnecessary pollution.

As global demand for shipping grows, our industry's container problem will only get worse—unless we do something about it. If we don't, we'll continue to pay billions of dollars to ship and store billions of cubic meters of air around the globe.

On average, 21 percent of transportation and port handling costs are wasted on empty containers. Here's just one example: Due to trade imbalances, 60 percent of containers on the Australia-China route are shipped empty. In addition to deck space, shipping companies must shoulder the costs associated with loading, unloading, storing, and transporting these mostly-empty container shipments.

Now let's factor in the environmental costs of shipping these millions of empty containers.

Start with the conservative estimate that 15 percent of containers being shipped are empty and that there are some 20 million containers in the global supply chain. That adds up to millions of empty containers being shipped every year, and millions of wasted TEU shipping capacities.

Those containers aren't carrying any freight, they are certainly on ships in motion, and we know that a moving ocean freight liner can burn through 16 metric tons of fuel per hour. In addition to running a six-figure daily price tag, that's a lot of pollution—at least 15 percent of which can't even be justified for economic purposes. It's a pure loss.

One large container ship emits about as much pollution as 50 million cars. Eliminate that 15 percent waste of space taken up by empty containers, and you take the equivalent of 7.5 million cars off the road per year with just one ship. Now add up all the ships in use right now and you start to get the picture.

I've been careful to keep my economic and environmental estimates on the conservative side because we're in an industry that doesn't appreciate hyperbole. Even so, the picture is quite dire and demands action—which means eliminating the space taken up by millions of empty containers. The industry needs to sit down and go back to the drawing table. Literally. Not to reinvent the container, but to redesign and make it collapsible when it's not in use.

Conventional wisdom has held that there has always been ample capacity on ships to carry containers. But that's not the whole picture. Accepting the empty container problem fails to account for the true costs. In addition to artificially inflating rates, failing to act demonstrates a lack of customer care by discouraging meaningful innovation and does not consider future trade growth.

The cost advantage of a collapsible container over a regular container is approximately 57 percent, according to a 2016 study conducted by Singapore University of Social Sciences,

While the upfront costs and annual maintenance costs are higher, the advantages of collapsible containers are higher yet, making them a viable alternative for carriers and lessors. When collapsible containers are applied to inland shippers and/or consignee locations, the benefits are even greater.

Due to the fact that four collapsed units can be joined to form a single container, the solution eliminates a significant portion of the costs associated with the inland repositioning of empty containers.

Collapsible containers significantly reduce the financial and environmental impact of managing empty containers on shipping line operations. We cannot continue to ignore the costs associated with the old way of doing business.

We need to act now to reduce transportation costs, save the environment, and ameliorate space constraints at seaports and shipyards.

—Nicholas Press, Managing Director and CEO, CEC Systems