Jean-Paul Rodrigue (2013), New York:
Routledge, 416 pages.
The Repositioning of Empty Containers
Author: Dr. Jean-Paul Rodrigue
1. The Container Shipping Market
The growth in global trade and freight distribution has led to a
demand for new containers. Each year, about 2 to 2.5 million TEUs worth
of containers are
the great majority of them in China, taking advantage of its containerized
export surplus. Production peaked to 3.9 million TEU in 2007 with the
global inventory of containers estimated to be at 28.2 million TEUs.
This approximately implies 3 TEUs of containers for every TEU of maritime
containership capacity. The standard 20 foot container costs about $2,000
to manufacture while a 40 footer costs about $3,000. Therefore, a twenty
foot container costs $1.71 per cubic feet to manufacture while a forty
foot container costs $0.80, which underlines the preference for larger
volumes as a more effective usage of assets. Even so, the twenty foot
container remains a prime transport unit, particularly for the shipping
of commodities such as grain where it represents an optimal size taking
account of weight per unit of volume capacity of containers, around
34 metric tons.
China accounts for more than 90% of the global production of containers,
which is the outcome of several factors, particularly its export-oriented
economy and its lower labor costs. Considering that China has a positive
trade balance, notably in the manufacturing sector which highly depends
on containerization, it is a logical strategy to have containers manufactured
there. This enables a free movement since once produced a new container
is immediately moved to a nearby export activity (factory or distribution
center), then loaded and brought to a container port. A long distance
empty repositioning is therefore not required for the newly manufactured
container. Every container utilization strategy must thus take into
account production and location costs.
The great majority of containers are either owned by maritime shipping
companies or container leasing companies. With the beginning of containerization
in the 1970, a container leasing industry emerged to offer a flexibility
in the management of containerized assets, enabling shipping companies
to cope with temporal and geographical fluctuations in the demand. Following
a period of growth correlated with the ebbs and flows of global trade,
the leasing industry went through a period of consolidation in the 1990s,
on par with the container shipping industry. An important trend in recent
years has been the growing share of container ownership
to maritime shipping companies, which reached 59.8% in 2008.
can be explained by the following:
About 60% of the equipment available for location is controlled by
five leasing companies having fleets exceeding 1 million TEU each. If
the 13 largest leasing companies are considered, they account for 90%
of the global container leasing market and controlled the equivalent
of 10.7 million TEU. Shipping and leasing companies often have contradictory
strategies in the usage of their container assets. From the point of
view of shipping companies, their containers are assets enabling a more
efficient usage of their ships through a higher level of cargo control.
They consequently maximize their ship usage, which are their main assets
and the container a tool for this purpose. From the point of view of
leasing companies, containers are their main assets and the goal is
to amortize their investments through
arrangements. These arrangements come into three major categories
that differ in terms of length of the lease and who is responsible for
the repositioning of empty containers. In the past, maritime shippers
relied extensively on leasing but recent trends underline their more
active role in the management of container assets, particularly because
a container spends a large share of its
life span idle
or being repositioned.
Chassis fleets are also an important element of the market as they
are necessary to carry containers by road and sometimes within terminals,
particularly rail. A breakdown of the chassis ownership reveals that
shipping lines (70%) and leasing companies (10%) have the bulk of the
assets. What remains is owned by railroads (8%), truckers (8%), and
terminal operators (4%). The high share of chassis ownership by shipping
companies is related to their high share of container ownership, particularly
if they are as well involved in terminal operations. In this case a
chassis pool enables to offer intermodal services such as moving containers
in and out of stack and providing drayage operations for their customers.
A container is a transport as well as a production unit and can move
as an export, import or
repositioning flow. Once a container has been unloaded, another
transport leg must be found as moving an empty container is almost as
costly as moving a full container. Shipping companies need containers
to maintain their operations and level of service along the port network
they call. Containers arriving in a market as imports must eventually
leave, either empty or full. The longer the delay, the higher the cost.
Repositioning thus begin immediately after a container has been unloaded
and it is important since it involves costs that must be assumed by
the shippers and are thus reflected by the costs paid by producers and
consumers. Also, they represent development opportunities for export
markets as every disequilibrium tends to impose a readjustment of transport
rates and can act as an indirect export subsidy. Firms taking advantage
of this may reduce, likely temporarily, their transport costs.
An increasing number of containers are repositioned empty because
cargo cannot be found for a return leg. The outcome has been a growth
in the repositioning costs as shippers attempt to manage the level of
utilization of their containerized assets. The positioning of empty
containers is thus one of the most complex problems concerning global
freight distribution, an issue being underlined by the fact that about
2.5 million TEU of containers are being stored empty, waiting to be
used. Empties thus account for about 10% of existing container assets
and 20.5% of global port handling. The major causes of this problem
- Containers are an asset that maritime shipping companies
make available to service their customers. Providing containers
help increase the utilization rate of containerships.
- A growing level of intermodal integration and
control where maritime shippers are interacting with
port terminal operators (some directly operate port terminals
such as APM) as well as with inland transport systems such as
railways and inland ports. In such a context, controlling
container assets enables a more efficient use of the transport
- The rising cost of new containers, the repositioning of empties
and systematically low freight rates along several trade routes,
have made the container leasing business less profitable.
Ocean carriers also have a greater ability to reposition empty containers
since the control a fleet and can reposition their containers when
capacity is available. It is also not uncommon that a whole containership
will be chartered to reposition empties.
Container repositioning can take place at
three major scales,
depending on the nature of the container flow imbalances. Each of these
scales involves specific repositioning strategies:
- Trade imbalances. They are probably the most important
source in the accumulation of empty containers in the global economy.
A region that imports more than it exports will face the systematic
accumulation of empty containers, while a region that exports more
than it imports will face a shortage of containers. If this situation
endures, a repositioning of large amounts of containers will be
required between the two trade partners, involving higher transportation
costs and tying up existing distribution capacities.
- Repositioning costs. They include a combination of inland
transport and international transport costs. If they are low enough,
a trade imbalance could endure without much of an impact as containers
get repositioned without much of a burden on the shipping industry.
Repositioning costs can also get lower if imbalances are acute as
carriers (and possibly terminal operators) will offer discounts
for flows in the reverse direction of dominant flows. However, if
costs are high, particularly for repositioning container inland,
shortages of container may appear on export markets.
- Revenue generation. Shipowners allocate their
containers to maximize their revenue, not necessarily the economic
opportunities of their customers. In view of trade imbalances and
higher container rates they impose on the inbound trip
for transpacific pendulum routes, shipowners
often opt to reposition their containers back to Asian export markets
instead of waiting for the availability of an export load. For instance,
while a container could take 3 to 4 weeks in the hinterland to be
loaded and brought back to the port and earning an income of about
$800, the same time can be allocated to reposition the container
across the Pacific to generate an return income of $3,000.
- Manufacturing and leasing costs. If the costs of manufacturing
new containers, or leasing existing units, are cheaper than repositioning
them, which can be possible over long distances, then an accumulation
can happen. Inversely, higher manufacturing or leasing costs may
favor the repositioning of empty containers. Such a condition tends
to be temporary as leasing costs and imbalances are correlated.
- Usage preferences. A large number of shipping lines uses
containers as a way of branding the company name and to offer
readily available capacity to their customers. This observation
combined with the reluctance of shipping lines and leasing companies
to share market information on container positions and quantities
for competitive reasons, makes it very difficult to establish container
pools or to widely introduce the ‘grey box’ concept. Still, as demonstrated
by the North American rail system (TTX rail equipment pool), it
is possible for transport companies to distinctly separate container
assets from modal assets so that the efficiency (such as the turnover
rate) can be improved.
- Slow steaming. Excess capacity and rising
bunker fuel prices have incited maritime shipping companies to
reduce the operational speed of their containerships from 21
knots to 19 knots, a practice known as slow steaming. The
resulting longer transoceanic journeys tie more container
inventory in transit, incite transloading in proximity of port
terminals and reduce the availability of containers inland.
Empty container repositioning costs are multiple and include handling
and transshipping at the terminal, chassis location for drayage, empty
warehousing while waiting to be repositioned, inland repositioning by
rail or trucking towards a maritime terminal and maritime repositioning.
An empty container takes the same amount of space in a truck, railcar
or containership slot than a full container. Shipping companies spend
on average $110 billion per year in the management of their container
assets (purchase, maintenance, repairs), of which $16 billion for the
repositioning of empties. This means that repositioning accounts for
15% of the operational costs related to container assets. To cover these
costs, shipping companies have imposed surcharges on full containers
on a number of export routes. These surcharges can amount between $100
and $1,000 per TEU and are thus an important share of shipping costs
towards developing countries in Africa, Asia and the Caribbean. The
outcome is higher costs for imported goods, which is economically damaging
for countries having a low level of income.
4. Repositioning Strategies
Within large commercial gateways, containerized distribution and
empty repositioning are facing numerous challenges:
- Local (Empty interchange). Occurs regularly as containers
are reshuffled between locations where they are emptied to those
where they are filled. They are of short duration with limited use
of storages facilities since containers are simply in queue at the
consignee or the consigner, especially if they are managed by the
same freight distributor. This problem is compounded by the availability
- Regional (Intermodal repositioning). Involves industrial
and consumption regions where there are imbalances, often the outcome
of economic specialization. For instance, a metropolitan area having
a marked service function may be a net importer of containers while
a nearby area may have a specialization in manufacturing, implying
a status of net exporter. The matter then becomes the repositioning
of the surplus containers from one part of the region to the other.
This may involve a longer time period, due to the scale and scope
of repositioning and often requires the usage of specialized storage
facilities. This scale offers opportunities for freight forwarders
to establish strategies such as dedicated empty container flows
and storage depots (or inland ports)
at suitable locations. However, locating empty depots near port
facilities consumes valuable real estate.
- International (Overseas repositioning). Is the outcome
of systematic macro-economic imbalances between trade partners,
as exemplified by China and the United States. Such a repositioning
scale is obviously the most costly and time consuming as it ties
up substantial storage capacity, in proportion to the trade imbalance.
Significant inland freight distribution capacities are also wasted
since long distance trade, especially concerning manufactured goods,
tend to involve a wide arrays of destinations in a national economy.
This is paradoxical as maritime container shipping capacity will
be readily available for global repositioning, but high inland freight
transport costs could limit the amount of empty containers reaching
the vicinity of a container port. It may even force an oversupply
of containers as the trade partner having a net deficit of containers
(exporter) may find more convenient to manufacture new containers
than to reposition existing units, which disrupts the container
The fundamental reason behind the repositioning of a container is
the search for cargo to insure the continuity of paid movements.
A container is an asset which usage level is linked with profit and
thus must constantly be in circulation. Its velocity involves higher
turnover rates and three main options are available to promote this
- Transport companies must cope with access and storing charges
at terminals as well as wear and tear on equipment.
- Truck drivers are losing hours waiting to access terminal
gates and distribution centers to return empty containers and chassis.
- Terminal operators lose productivity because of congestion
and are facing pressures from localities to reduce the number of
idle trucks at their gates.
The case of the United States is particularly eloquent. For 100 containers
entering the United States, half will be repositioned empty to foreign
markets. Of the 50 that remains, most return empty to port terminals
awaiting for export cargo to become available. When so, the empty container
is picked up from the port terminal to a distribution center to return
to the terminal once loaded. Only 5 of the 50 containers will be loaded
with export cargo shortly after being unloaded of import cargo and without
coming back empty first to the maritime terminal. Cargo rotation appears
as a simple repositioning strategy but requires a fairly complex coordination.
It can take place if import and export activities are located nearby
and thus enable a quick rotation. Otherwise, an intermediary stage implying
the usage of an empty
container depot is required. Thus, cargo rotation is an operational
process for repositioning that can be supported by empty container depots,
which are physical infrastructures. Those two elements require a management
system where involved actors in supply chains interact to combine movements
needs and the availability of containers.
In recent years, a new concept was brought forward to help connect
the various commercial needs (imports and exports) with the availability
of containers, which came to be known as the virtual container yard.
This system implies an online market where information about container
availability is displayed without the necessity for the container to
be in a physical storage depot. The container can as well be in circulation
or in a distribution center, but the important point is that its availability,
both geographically and temporarily, for a new load is known. The main
goals of a virtual container yard are:
- If there are few opportunities to load empty containers on the
backhaul trip, an efficient repositioning system must be
in place to insure the overall productivity of the distribution
is part of such a strategy as it frees maritime containers by moving
loads into domestic containers. There are therefore less risks that
shipping companies would impose surcharges because of imbalanced
- Improve the efficiency of existing
cargo rotation with
a better link between import and export activities through a synchronization
of flows. Instead of returning directly to the rail or maritime
terminal, an empty container can be brought right away to an export
location to be loaded. However,
between import and export-based logistics make this a difficult
- Develop an export market taking advantage of filling
empty containers with new cargo, notably commodities. This can imply
a variety of strategies such as a substitution from bulk to containers
or the setting of consolidation centers enabling to regroup small
cargo batches into container loads. This particularly benefits small
companies and enables them to access new global markets.
Therefore, a virtual container yard is a "clearinghouse" where detailed
information is made available to the the involved actors. Firms that
are the most likely to use a virtual container yard are of small and
medium size. They generally have less logistical expertise and available
resources in the management of containerized assets. Large logistics
firms and maritime shipping companies are less prone to use such a system
since they already have substantial expertise and their own management
systems. A strategy will therefore be necessary to eventually involve
all the actors in a system where a market for the exchange of empties
becomes possible. In the case of Southern California, investigations
have underlined that while an empty container yard have some potential
advantages, they should not be expected to be highly significant. It
was assessed that the share of containers returning full to a terminal
without initially been picked up empty from that terminal or a depot
would shift from 2 to 10% if a virtual container yard was used. Thus,
repositioning strategies are important in the management of containerized
assets, but effectiveness is a difficult goal to achieve.
- Display status information about containers such as their
characteristics, location and availability.
- Improve information exchange between actors involved
in supply chain management such as trucking companies, shipping
companies, distribution centers and equipment leasing companies.
- Transfer the container lease and the related documentation
without bringing back to container to the depot or the terminal.
- Assist the actors in supply chain management in their decision
making process about the usage of container assets, namely
returns and exchanges.