How the pandemic turned shipping containers into the most sought-after product in the world.
Prior to the Coronavirus global pandemic, shipping containers were considered merely vessels for transporting goods across the sea and were regarded as little more than additional costs that could be easily passed on to consumers without affecting their bottom-line margin. However, a little more than a year into the battle against Covid-19, shipping containers have become the hottest product in the world.
According to a report by CNN Business, before the Coronavirus hit, companies could rent a humble 20-foot or 40-foot box with relative ease, allowing them to move goods at a low cost.
“Containers have a lifespan of about 15 years before they’re recycled into low-cost storage or building solutions,” the report stated.
Now, roughly 18 months into the Covid-19 pandemic, global shipping is still in crisis.
“With backlogs looming over the peak holiday shopping period, one look at the market for steel shipping containers, and it’s clear that a return to normal won’t happen anytime soon.”
CNN Business highlighted that Europe and North America are witnessing empty boxes remain scattered these regions, while supply chain delays mean the demand has surpassed supply.
“Demand for goods, has soared giving the network of ships, containers and trucks that deliver merchandise around the world little time to catch up. As a result, containers have become incredibly scarce and extremely expensive.
According to data from Drewry, a maritime research consultancy, a year prior, companies would roughly pay $1,920 to book a 40-foot steel container on a standard route between China and Europe.
“Now, firms are spending more than $14,000, an increase of more than 600%, while the cost of buying a container outright has effectively doubled. Businesses everywhere are struggling to cope. Furniture giant Ikea has bought its own shipping containers to try to ease some logistical headaches,” the news portal stated.
It may be possible for large corporations to purchase their own shipping containers to ease burdens, but for small to medium enterprises like Lavolio, a candymaker, the shipping container crisis has forced them to reconsider potential business strategies like expansion plans or even remaining market competitive by raising prices which is a sign of the broader damage caused by supply chain problems that won’t go away.
CNN Business added that for financiers who invest in shipping containers – which boast solid, stable returns and are a popular alternative asset – the market environment is favorable.
“Higher upfront costs are offset by leasing arrangements, while those selling containers can net greater profits. Clearly the market right now is attractive. Since it now costs more to obtain containers, leasing companies are asking carriers to sign longer contracts. That could bring in a new class of investors looking for a steady income as interest rates remain at record lows,” said Dirk Baldeweg, Managing Director at Buss Capital, a container investment gorupd based in Hamburg, Germany.
Read the full article here.