Containers and container rentals: unbelievable price increases because of the pandemic

The price of renting a container for shipping the cargo has increased by 750% in just one year.

According to the statistic data from the Ministry of Industry and Trade, the 18-month covid pandemic has pushed the shipping industry into a full-blown crisis. And the alarming thing is that many containers have been abandoned for a long time and degraded, which makes containers no longer meet the standards for use while the supply is scarce.

Generally, a container has a shelf life of about 15 years. However, due to the supply chain stagnation, containers have been left empty for a long time. It has caused the grave deterioration of a series of containers.

This problem will cause grave consequences for the import-export businesses when the demand for the supply chain increases again after vaccines are popular. In particular, they have to face difficulties in renting containers due to high prices or no ships.

According to data from the Ministry of Industry and Trade, the rental price for a standard cargo container from Vietnam to Europe was only about 1800 USD a year ago; however, they have skyrocketed to more than 14,000 USD, equivalent to an increase of 750%.

The purchase price of containers has even increased sharply by 100% for businesses operating in the transportation segment.

The dramatic increase in container prices caused many companies to find new directions.  To avoid the super high rental costs of containers, some large corporations with high reputations have bought their containers to transport goods because the rental price is too high. On the other hand, due to the lack of capital, the small and medium enterprises have no choice except to increase the selling price to cover the cost.

A large corporation like Hoa Phat Group also turned to container production with a capacity of 500,000 TEU/year.

Containers and container rentals unbelievable price increases because of the pandemic 2

The anarchy

Over the past several months, the social distancing requirement of states has caused many containers to wait at ports with increasing costs.

Another factor that drives up the price of containers is that cargo ships have to spend more days doing procedures at ports, so delivery time is prolonged. As a result of this factor, the number of containers needed for cargo transportation forces to increase to meet market demand.

The increase in demand doesn't accompany an increase in the supply of containers that makes containers' prices more expensive than ever.

"If you look at container usage, it's clear that we need more containers for the same route than in the past. This difference is about 15-20% compared to normal," Rolf Habben Jansen, CEO of Hapag Lloyd-one of the largest shipping groups in the world, said.

Having the same opinion, Konstantin Krebs, director of Capstan Capital investment fund, emphasized that delays at current ports make cargo ships take four times longer to load and unload than usual.

While the supply of containers is in trouble, CPB data shows that global trade has increased by 5% compared to before the pandemic, especially China's import-export volume in the past month has reached a record high.

Uncertain future

Container prices are high not only because of the supply-demand gap but also because of production costs.

Currently, most container factories are in China, and the corrosion-resistant steel material used to make the containers in this country has increased the price. It leads to the price of the container increase. Besides, the cost of other materials and wages also increased, forcing factories to push up prices.

Currently, industry experts believe that the shortage of containers and high prices will not end in the short term. Meanwhile, some people think the situation can improve a little.

Director Fossey said the problem could improve on the Lunar New Year in February 2022 when factories are closed and Chinese exports suspend operation, thereby releasing part of the containers at the port.