Prior to containerization, freight was packed on pallets and hoisted on board ships. This applied to bulk cargo as well as small orders. Although loading and offloading may have been a little slower and more manually intensive, it worked. The key was experienced stevedores, an accurate ship’s manifest, and a bill of lading for each order. Nowadays, everything apart from enormous heavy machinery is shipped in containers. The process is certainly faster which helps to manage and control shipping costs, provided there is no container imbalance.
What Is Container Imbalance in the Shipping Industry?
The Problem
The problem, or the imbalance, which is a shortage of containers, is that there are too many empty containers sitting in some places and not enough to be loaded in other parts of the world. The biggest problem is having multimodal containers sitting empty inland. Moving an empty container is similar to driving an empty truck – it doesn’t pay. A container imbalance will force manufacturers and producers in other cities and countries to stock pile finished goods until container to arrives in their yards. The aggravation of such stockpiling is threefold:
- Suppliers can’t fill orders on time
- Stockpiling eats up cash flow as orders remain unpaid
- Manufacturers start running out of storage space. As a result, they either have to slow production (causing layoffs) or rent more space which is an unnecessary expense.
A container will only be available if a full one was offloaded nearby. This is an age-old problem in the shipping industry, though it is not always a big one. However, the COVID-19 pandemic of the past few years has seen the demand for consumer goods drop, causing manufacturing of non-essentials to slow down. The result is that there is not enough freight to collect to fill a container that has just been offloaded to one destination.
Global Supply Chain Harmony
The trick is to deliver a full container from the port and have a full container return to it. The supply chain is harmonious as the flow of containers, offloading and loaded again nearby (in the same city), is available in all quarters. When harmony is achieved, the supply of shipping containers is able to meet the demand. Any vendor taking too long to load or offload containers faces financial penalties for creating delays in the supply chain when demand for containers is high.
Right now, while there is a container shortage, vendors have to pay higher fees known as CICs (container imbalance charges) to have a container made available to them for them to pack.
Container Imbalance Effects
First, there are delays in the supply chain in getting products on local shelves. The second impact is that of the increased cost of goods. To put this in perspective, the September report from Railfreight.com noted that last September the cost of empty containers went from $500 to $1200 in only three days. The Shanghai Shipping Exchange reported an increase in shipping costs from Shanghai to the US west coast of over 80 percent and 70 percent for the east coast. As you can see, consumers in North America as well as all around the world are forced to pay higher prices when freight rates jump due to a container imbalance.
Additional Reading: Nebraska Freight Plan
The Junction LLC | Truckload Shipping
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