How Shipping Containers Control Global Trade

Container

shipping

is responsible for moving 90% of the world's goods. Most of it is in metal boxes like these. You can have hundreds of items from hundreds of different companies in a single container. And that's why it's really a logistical marvel. But if

shipping

containers

are not in the right place at the right time, problems can arise. Normally, those

containers

would be ready in 1 or 2 days, but it's been a week and they're still here. Crops that are going to waste. The supply chain is not there. Know. It just isn't. Congestion in ports. Limit the availability of those coveted containers.

Then he inflates the price. In fact, all of this is being passed on to consumers. Suddenly people realize how important that container is to everyone's standard of living, to be honest. According to my calculations, if you take the value of everything that moves in container shipping, it works out to $937 per year per person on the planet. Sea containers support the flow of

global

trade

. We're kind of a hidden secret in the background trying to make sure everything is available everywhere. Just as China leads the world in exports, it also leads in container manufacturing. In one way or another, half of the world's merchant fleet owes its existence to China.

Here's how shipping containers can save or cripple the

global

economy. Supply chain disruptions can have big ramifications for American shoppers and have a major impact on inflation. They have contributed, on average, about 60% of the increase in US inflation from 2021 to 2023. However, avoiding disruptions is not so simple. The skill involved in creating containers is to move that container from point A to point B and get it back to point A as quickly and efficiently as possible. A bottleneck in the supply chain can affect the availability of shipping containers. We have a more than adequate global offer. The reason container supply becomes an issue is because of events.

And as a result, one is afraid that the containers are in places where they cannot be filled. For example, the situation in the Red Sea. Iran-backed Houthi militants on boats in the Red Sea continue to wreak havoc on global

trade

. Hundreds of large ships are diverting to the southern tip of Africa, adding 10 to 15 days to their journeys. With longer trips tying down containers. Prices may increase. Therefore, they are not going to pay the Suez toll and are simply going to pass the higher charges on to their customers to make that extra payment. What is it? The three weeks to go around Africa?

Longer shipping routes are just one obstacle. The coronavirus pandemic caused multiple bottlenecks along the supply chain. Every single chain in the supply chain was diminished. There were delays in China because there were fewer people making the product and then once it arrived at a port, there were fewer people moving those containers. Labor and manufacturing issues caused supply bottlenecks, but at the same time, demand for goods increased as people turned to online shopping. Many containers were needed. As a result, we had a shortage of containers. As demand outstripped supply, freight rates increased in 2021 and 2022. Prices skyrocketed to around $30,000.

A container from China to a West Coast port like Los Angeles or Long Beach, prices have more than doubled. This also affected American exports. Now, this is actually causing a big problem for American companies because it is now so lucrative for the shipping companies and the leasing companies that

control

the boxes, that they would rather ship the empty cargo containers to China, rather than go somewhere. place within the United States. United States to pick up food or other exports. It was more profitable to ship empty containers to China as quickly as possible, which weighed on farmers looking to sell their harvest before it spoiled.

The logistics simply don't exist to get fresh vegetables to those who need them. Instead, everything is being torn down. Prices now range between $3,000 and $4,000 per 40-foot container. The market is returning to greater normality. Historically, container shipping has been a very low-margin, low-profit industry. It's just these last few years: complete outliers. Before the shipping container as we know it today, global trade was very different. If you go back about 150 years ago, it was really the largest industry. Luxury items, which today help the French to appear gallant to the world. The ships were much smaller then. The cost of loading and unloading a ship was quite high.

It was very, very laborious. It is a true achievement on the part of Moore-McCormack and other land, sea and air transportation industries that they have been able to keep products moving as fast as our farms and factories do. Shipping something, you know, would easily add 50 or 100% or 200% to the cost of the merchandise. The invention of the container really wasn't that long ago. Only USA. Style, speed, service and efficiency. I worked for 20 years with Malcom McLean, the gentleman who invented container shipping in 1956. Malcom McLean pioneered the container shipping we know today, guiding the era of globalization, containerization and its standardization.

With that idea, transportation became a commodity, right? And it became much easier to handle and also much cheaper. All containers are standardized and that's why we call them 20-foot equivalent units. 20-foot equivalent unit, also known as TEU. Take the Ever Given, the cargo ship that got stuck in the Suez Canal. Stuck in Egypt's Suez Canal, blocking one of the world's busiest shipping routes. That ship has a capacity of 20,388 TEU. Container growth was always some kind of multiple of GDP, often 2 or 3 times. There was a huge increase in container utilization when China joined the WTO. All that manufacturing went to Asia.

China is the leading manufacturer and supplier of containers. More than 95% of containers are produced in China and the top three producers in China are China International Marine Containers. There is Dong Fang International Containers, which is related to the Cosco Group, which also manages shipping lines, ports and terminals. And then we have a company called CXIC. Steel is one of the key materials used to manufacture containers. Container manufacturing in China makes sense considering its leading steel production and China's status as the world's largest export market. The factory of the world is in Asia. That's where things are usually done.

And we buy things in North America. We don't do that many things. So if you're not making things, you have nothing to give back. There are two dominant buyers of containers: ocean carriers and leasing companies. Since the industry was created, the ranges have been very, very close. Leasing companies represent around 48% and the rest, transport operators and ocean carriers, around 52%. When ocean carriers order ships, they often purchase more containers at the same time, or companies place an order for containers to replace old ones. On the ocean carrier side, there are companies like Maersk Line of the A.P. group.

Moller-Maersk. MSC Shipping, Mediterranean shipping company based in Geneva. Evergreen line based in Taiwan. Hapag-Lloyd in Germany. CMA CGM in France. Cosco shipping group in China. Ocean carriers can also lease shipping containers globally. These companies also operate fleets of containers that they rent to any of the steamship lines. In fact, we have leased containers. The main leasing companies that are purchasing containers are Triton International, Textainer, Florens, SeaCube and SeaCo. The US government is taking steps to strengthen supply chains, including the shipping container market. One of the factors that affect prices is this. Nine large shipping companies consolidated into three alliances

control

the vast majority of the world's maritime transport.

Furniture, appliances, clothing, anything that crossed the Pacific on a ship from Asia saw its price skyrocket. As families and businesses struggled around the world, these shippers made $190 billion in profits in 2021. Additionally, these foreign-owned shippers have also refused to transport American-made products to Asia. It damages the entire economy. The commissioner of the Federal Maritime Commission released a report on container manufacturing in China and wrote: "It should be alarming that of the 44.2 million shipping containers in the world's inventory, more than 95% are manufactured in China..." Today, it is a fact that most ocean capacity is controlled outside the United States.

This is a problem? In my humble and personal point of view? Um, no, because I think the places where those companies have their headquarters are not necessarily countries that we care about. The US government is more concerned that there will always be enough capacity for US exporters to transport cargo to market. The industry is expanding production to other Asian countries. I think the industry as a whole would welcome an alternative to China's dominant position in container manufacturing. India is also investing in some container factories and there are now investments in Vietnam. You know, Vietnam, during Covid, had difficulty finding a sufficient amount of equipment to move some of its exports.

I think that has influenced the government's strategy to support the development of these container factories. Outside of Vietnam, and perhaps other parts of Asia, I don't see any real change, or certainly in the near term, of China dominating this industry. Demand for shipping containers is likely to grow. Whatever happens in globalization, container transport will always be seen to grow with it. But so far in the last 30 years that I've been in this market, containerization has always grown over a longer period of time. Globalization remains the way forward for many when deciding where to manufacture certain goods, where to sell them or where to obtain raw materials.