Shipping Container Market: Regaining an Even Keel
Three years in, the shipping container market lags other industries in its recovery from the pandemic. Hundreds of cancelled sailings in the pandemic’s early days, higher port fees, and fuel prices continue to impede the sector’s recovery. In 2022, the average price for shipping a 40-foot container between Hong Kong and Los Angeles was $8,500 — more than double the previous 5-year average. As of January 2023, that price dropped to $1,200 — the lowest since pre-pandemic levels.
In 2022, the average price for shipping a 40-foot container between Hong Kong and Los Angeles was $8,500 — more than double the previous 5-year average.
Other factors affected the sector: e.g., delays in customs clearance due to cargo security screenings, labor strikes, and bad weather. Additionally, congestion in the supply chain exacerbated rising prices through an elongated transportation supply cycle for both ocean carriers and inland trucking.
A significant cause of high container operating costs was based on demurrage and detention (D&D) fees, or fees for standing vessels after unloading their cargo. Fees vary between carriers and ports, but major U.S. ports occupy the top five spots in the current list of the most expensive ports, worldwide. For example, the standard D&D fee 2 years ago was $100–$150 per container per day. In 2022, carriers at the Port of Long Beach charged $2,730 per container per day, according to Container xChange's Demurrage & Detention Benchmark Report. Hope floats that the Federal Maritime Commission will “cap” these charges to prevent price gouging by different port authorities.
In response to rising costs and limited storage availability, some shippers began to manage their own cargo. They bought containers and shipped them on less common, multi-purpose breakbulk vessels, or on roll-on/roll-off vessels, as general cargo. Major retail players went a step further and contracted sea vessels and cargo aircraft based on time rather than by voyage. With this shift, retailers take on the shipping risk, but space on carriers is guaranteed.
In the industry, there was some debate on whether this trend indicated a long-lasting shift or a short-term reaction to a fluctuating market. Some shippers, anticipating long-term changes, signed 3-year contracts of carriage or considered building their own vessels.
These market fluctuations prove that project completion schedules must encompass a new type of instability.
As the market starts to recover and companies compete for the same container capacity, these issues will continue to affect traffic and logistics budget forecasts in the short term. In the long term, container carriers will eventually match demand with more availability: some major carriers forecast new build container vessels with 2024–2025 orders. More vessels in high-value trade lanes will increase overall capacity and schedule reliability, which gives us a sense of continued optimism that shipping budgets will stabilize.
Despite the trend toward capacity stability, these market fluctuations prove that project completion schedules must encompass a new type of instability — especially as new and evolving environmental regulations continue to influence the market.
For more TritenIAG intelligence on this topic, read our article on the long-term impact of the pandemic on supply chain planning and our articles on managing force majeure risks in early project planning and contractual language.
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