The container is a symbol of globalisation. But during the coronavirus crisis, of all times, there suddenly aren’t enough steel boxes. Why is that? Tracing the journey of a container of the shipping company Hapag-Lloyd shows that global trade is out of balance.
In the four months of its existence, container HLBU 3294515 has already accomplished a lot. It has visited six ports on three continents, filled with terrace ovens, animal feed and shoes. This is what it says in the grey tables of Hapag-Lloyd’s system. Every movement is recorded here, along with times and location codes. Niklas Ohling keeps an eye on this – and he knows which container is underway and how quickly.
The 38-year-old – in a white shirt and with a neat haircut and broad smile – manages the containers like a puppeteer controls his puppet. At Germany’s largest shipping company, he is responsible for making sure that every customer that wants to ship their wares with Hapag-Lloyd also finds the right container to do so nearby. This is why Hapag-Lloyd records every movement of every box. Tracking their voyages provides an indication of how the transportation industry is doing. And the trail that HLBU 3294515 leaves behind shows that the answer is: not well. The situation is one of traffic jams, time pressure and chaos.
For over half a century, the container – measuring six metres long by 2.44 metres wide – has been the most important form of packaging in the global economy. Human strength used to load sacks and barrels onto ships from the quayside. But now cranes hoist these standardised boxes from the ships, sometimes even placing them directly onto lorries. This system has made it worth people’s time and money to have many goods transported around the globe. As a result, the container has become the most important facilitator in the trend towards globalisation – even more powerful than any free trade agreement.
But the container shipping industry is struggling with a problem: imbalance: The fact is that consumption, purchasing power and production are not equally distributed around the world – and the same holds true for containers. The coronavirus crisis has made this clearer than ever. There aren’t necessarily too few boxes – just too many in the wrong places.
The consequences are grave: Ports are congested, ships are delayed, and freight rates have increased tenfold. In Great Britain, for example, Honda has halted its auto production and IKEA has reported having empty warehouses. And, in Germany, customers waited in vain for the new Sony PlayStation to make it under their Christmas tree in time.
$3,000 for a single container
“The situation is completely crazy”, says an employee of a major provider that leases containers to shipping companies. The company normally has over 100,000 boxes available in China every day. “They’re all gone”, he says. By why not just order new containers? Doing so would be pointless, the employee explains, adding, “You might get the next new ones in May, though June is more likely.” And instead of $2,100, the factories are now charging over $3,000 for a single standard container.
Hapag-Lloyd has been lucky, as it anticipated the bottleneck. The shipping company had already placed a large order in the spring, when other carriers were still curtailing their schedules in response to the coronavirus. “We suspected that there might be stronger demand after the lull”, says Ohling. Hapag-Lloyd placed an order for boxes with a combined capacity of 290,000 standard containers, thereby boosting its own stock by more than 10 percent. Now this could turn the company into a beneficiary of the crisis.
HLBU 3294515 is one of these recently ordered containers. This so-called “40-foot high cube” is 12 metres long, or twice as long as a standard container and a bit taller. Like almost all containers, it was manufactured in China. HLBU 3294515 left the factory in Tianjin at the beginning of September, together with 4,000 structurally identical units. Just four days later, it was stuffed with its first cargo in Dalian, just a few hundred kilometres away: aluminium ovens for gardens. The destination: Minneapolis, USA.
It all makes sense. People have spent a lot of time at home during the crisis. The longer they have sat there, the more they have felt a need to modify or upgrade their surroundings. Instead of paying for cruises or concert tickets, Americans and Europeans have been putting their money into office or exercise equipment for their homes. Or they have ordered an aluminium oven to put out on their patio.
The lion’s share of the consumer goods currently in demand come from factories in Asia. Consumers have thereby been exacerbating a pre-existing imbalance, as the demand in Asia for products from America isn’t even close to as high as the other way around. “You can imagine this in terms of an assembly line that is always fully loaded in one direction and half-empty going in the other direction”, Ohling explains. Ships coming out of the United States are primarily carrying wheat or soya beans.
In Minneapolis, HLBU 3294515 is loaded with distiller’s grain – a by-product of wheat used in brewing beer, among other things. Though not very valuable, it can be used for animal feed. In any case, the container is back on its way with new cargo after just a day. Normally, it can take days or weeks for a container to get its next cargo. In fact, steel boxes spend about a third of their time in service sitting idle in depots – and that’s when things are going well.
But boxes are normally also not in such high demand. In autumn, shippers in China were already desperately searching for containers. This prompted Hapag-Lloyd to not wait until all the containers in the American hinterland had been filled with new cargo. Instead, the company opted to send some of them back early and empty.
Customers weren’t very happy about this. The Minnesota-based Specialty Soya and Grains Alliance (SSGA) feared that its members wouldn’t be able to ship their crops. It was “devastating”, one representative complained. But it isn’t just the shortage of containers that is upsetting customers so much; it’s also the prices. For years, the freight rates from Asia to Europe have barely surpassed $1,000 per container. But the bottlenecks have increased these prices by a factor of ten. As a result, people are suddenly asking themselves whether exporting certain goods is even worthwhile at all.
Niklas Ohling has a kind of museum exhibit in his office: the wall of an old container that he had cut out and hung on the wall. Next to it is a plaque stating that the container had travelled 600,000 nautical miles, the equivalent of 28 times around the world. Prices were low in the wake of the financial crisis, as there were too many ships. But the situation is now reversed. Hapag-Lloyd CEO Rolf Habben Jansen had recently said that one should expect freight rates to go up. Bottlenecks and crises, highs and lows – they are as much a part of the industry as the ebb and flow of the tides, as dents in a container. The object on Ohling’s wall spent 13 years at sea before the shipping company took the container out of service due to damages.
But things would be different today, says Hinnerk Braun. His company buys, repairs and resells decommissioned containers. Some of them are used to make some more trips on land, and some of them are used by retailers for storage. Braun converts others into tiny houses or emergency accommodations for refugees.
But, these days, he can hardly get his hands on any containers. Braun pans his smartphone camera over his company’s container yard in Hamburg. The boxes there are stacked three-high, though they are normally stacked up to seven-high. A forklift truck is driving across the yard. “Normally, you could hardly move here. But now it’s empty, very empty”, Braun says. “With the Chinese New Year coming up in a few weeks, the situation could get back to normal,” he says with a hint of hope in his voice. In China, even the ports and factories close for this holiday. The global economy takes a break.
Ohling is less optimistic. For the first few months, the container fleet could still be “fully utilised”, he says. Once the chaos has been created, it will take a while to straighten it out again. The same holds true for HLBU 3294515. In Cambodia, the container was stuffed with 869 boxes of shoes. The cargo was supposed to arrive in Hamburg on 9 January. But the container has gotten stuck in Singapore. Perhaps there is a shortage of workers in the port; maybe the ships are full or delayed. The only thing for sure is that it will still be a while before HLBU 3294515 makes it back to Hamburg.
A VOYAGE IN A GLOBALISED WORLD
Tracking a container’s journey around the world in the age of the coronavirus:
1. A new container is manufactured in Tianjin (China) in August 2020; 1.9.2020: Hapag-Lloyd acquires the container
2. The first cargo: terrace ovens 16.9.2020: The container departs from Dalian
3. Transhipment in Korea 3.10.2020: Arrival in Busan (Korea); 7.10.2020: The containers departs from the port
4. From the port into the hinterland 29.10.2020: The container reaches Vancouver (Canada); onward transport via train and truck
5. The first destination 4.11.2020: The container with the terrace ovens arrives at the consignee’s in Minneapolis (USA)
6. The next cargo: animal feed 5.11.2020: The container is stuffed and returns to Vancouver (Canada)
7. From the Americas back to Asia 21.11.2020: The container departs from Vancouver (Canada)
8. Transhipment in Singapore 13.12.2020: The container reaches Singapore; 18.12.2020: The container departs from the port and heads to Cambodia
9. Animal feed delivered 20.12.2020: The container arrives in Sihanoukville (Cambodia); onward transport via truck to the consignee in Phnom Penh, the capital city
10. The third cargo: shoes for Germany 22.12.2020: The container is stuffed again; 30.12.2020: The container departs from Sihanoukville (Cambodia)
11. Waiting in Singapore 2.1.2021: The container is stuck in Singapore; 16.1.2021: The container is expected to depart from Singapore one week later than planned
12. The next destination: Hamburg 2.2.2021: Expected arrival