Container prices soar as supply fails to meet demand

THE shortage of containers is pushing up equipment prices to new highs as fear grow that production will not be able to meet surging demand.

"As both carriers and container leasing companies rush to place fresh orders to meet the demand, prices for new containers have soared to their highest levels in almost 20 years. The current price for TEU has reached US$2,750 compared to less than $2,000 at the end of last year," Alphaliner reports.

"Even at these higher prices, demand will still outstrip supply for the current peak season. Container manufacturers are facing difficulties in restoring full capacity following the halt in production of dry containers since October 2008. Total capacity at the main container producers have been cut back significantly since late 2008, as production lines were shut and twin-shift operations reduced to single shifts.

"Although annual production capacity at the two largest container manufacturers, CIMC and Singamas, is over 3.5 million TEU, these two suppliers are expected to produce only 1.35 million TEU this year. The global output of new containers is estimated at 1.5-2.0 million TEU for the full year, well down from the peak of 4.2 million TEU produced in 2007 and a global capacity of five million TEU."

Demand has picked up since the beginning of the year, with CIMC reporting sales of 102,900 TEU of dry van containers in the first quarter, up from 60,400 TEU in the whole of 2009.

"The price of new containers has risen to its highest levels since 1991 and currently stands at $2,750/20' unit. The average price in the last 10 years lays between $1,500 and $ 2,400," said Alphaliner.

Leasing companies are said to account for 65 per cent of the 370,000 TEU delivered to April this year. "Until the first quarter of 2010, some carriers still looked for sale-and leaseback deals for their container fleet... carriers now also placing new orders as the current equipment stock has run to extremely low levels," it said

Current container manufacturing capacity in China is estimated at five million TEU. The problem is that total production is expected to be less than two million TEU in 2010 as factories struggle to resume production following the suspension in late 2008.
(Source:www.schednet.com)