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Container shortage: “It´s currently an enormous unseen challenge”

Empty 40-foot-containers are currently in short supply – more than ever before. Nico Hecker and Christian Halgmann from Hapag-Lloyd´s Container Steering department explain why now it is particularly important that everyone at Hapag-Lloyd works closely together. Even unconventional measures need to be considered.

The supply of empty containers is under enormous pressure and reflects a historic challenge our entire industry is facing. The unprecedented speed with which the COVID-19 pandemic has impacted economic developments becomes clear in a conversation with Nico Hecker and Christian Halgmann from Container Steering. We are sitting in front of the container utilization chart of the 40-foot container fleet and see a very clear “V”-shape in the development curve. “From the third quarter onwards, things really started to get challenging,” says Nico Hecker, Director Global Container Logistics. While the demand in the second quarter was extremely low and we were searching for strategic and cheap storage places for containers, the demand for equipment has now increased tremendously. Hard to believe that in early July 600,000 TEU of 40’ containers were “empty on ground” And today? “The 350,000 TEU sitting on ground are hardly covering 2 weeks of global export volumes - ”.

A “Black Swan” has appeared

“We are currently seeing a ‘black swan’ and are experiencing the strongest increase in 40’ demand following one of the strongest decreases in demand ever. Both happening within just 6 months. Almost 3 out of 4 containers in our 40-foot fleet are currently deployed in Customer Shipments and is therefore not available for the time being. The containers must be returned to China as quickly as possible to be equipped for an expected strong fourth quarter”, explains Hecker.

“Considering this enormous and unprecedented pressure, optimizing container utilization and availability is not a task for one department but a task for the entire company,” he continues. “We all have to exchange ideas and decide which businesses we want to push primarily.” Do we deliberately want to transport empty containers instead of cargo to speed up availability in Asia? Will our customers accept it if we transport their cargo in other container types? The development mainly affects the 40-foot standard high-cube container. This container is mostly booked for consumer goods. And it is now in higher demand than ever before.
 


Lucky us: Hapag-Lloyd started planning early

“We were the first mover in 2020 by placing an order for 91,000 TEU new HL branded containers in January already for production from March to July. In addition, 80,000 TEU were leased in March, even though the expected increase did not yet become apparent in April, as many countries outside Asia went into lockdown. Supported by our leasing partners involved, we have delayed the pick-up of the containers to the 3rd Quarter creating a competitive advantage”, says Christian Halgmann, Director Container Procurement. “These very containers helped us a lot in the third quarter when it came to buffering the current rush in the market,” says Nico Hecker. With the return of normality, business developed particularly positively in the third quarter. But the ships leaving China are not returning at the same time to the same extent. “The leasing market for new and used containers in Asia, Europe and other demand Areas is basically empty,” continues Halgmann. “Currently the demand for new containers is exceeding the production capacity by far, resulting in lead times for newly built containers until end of Q1/2021. This applies for own production as well as for leased containers. Fortunately in September we could secure some leasing volume to be delivered prior Chinese New Year 2021 to support our customers.”

Rethinking and staying flexible: What is crucial now?

The current situation makes it particularly clear that the shortage of empty equipment is affecting all areas of Hapag-Lloyd already today. Once the containers are empty, they must be refilled as quickly as possible. Currently, we are doing that 25 percent faster than usual. Every container counts! And in order to manage this optimally, colleagues from all departments have to do their part, be that Trade Management, Network, Operations and Commercial teams. Together they take unconventional paths for Hapag-Lloyd's customers. For example, 40-foot reefer containers that have been switched off (so called Non-Operated-Reefers) are filled with dry goods like textiles, shoes or electronics to Reefer demand locations. 20-foot containers and 45-foot containers will likely be the next types offered as substitute for 40-foot containers, to take advantage of all containers that we have.
 


44 vessels deployed to move empty containers

Whether High Cube or Reefer: Bringing empty containers and open space on our ships towards Asia together is one of the critical success factors. Container Logistics and Slot Control Team in all Regions are working closely together to make sure no slot remains unused. “30,000 TEU of empty containers are lifted towards Asia week-by-week, with a strong push for more” says Nico Hecker. “When we don't succeed in meeting evacuation demand, we are chartering extra ships to get the empty containers to their destination. This is not cheap and at this moment a limited option – as charter vessels are extremely scarce as well.” Since the beginning of this year, we moved 164,000 TEU of empty containers on 44 vessels, which were deployed for empty loader voyages.

“Every Areas globally has to tighten their belts and working on a smaller safety buffer,” says Nico Hecker. “We have to reduce empty idle times even further and shorten loading times, which means that the container is only available for exporters seven to eight days before the ship arrives. A better availability of containers is THE competitive advantage in this prevailing market environment. All teams involved are aware of it and that is what drives us.”
 

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