Record box prices set to stay as demand way outstrips supply
The world's top container makers provided an illustration of why Asia’s shippers are facing a shortage of boxes.
In a normal year (normal being a year when consumers actually consume things), the world's two main box makers make 3.5 million boxes.
Last year, Singamas Container Holdings and the market leading China International Marine Containers (CIC) produced just 220,600 TEUs, according to research outfit Alphaliner.
This year, the two companies are expected to produce 1.35 million containers, still far short of what is needed by Asia’s frustrated exporters.
Singamas Container president and CEO Teo Siong Seng told the South China Morning Post that his 12 factories were full until the end of September. They are churning out 65,000 boxes a month, or 780,000 units a year.
The rapid rebound has production lines and company accountants operating at maximum speed as carriers collect finished boxes and revenue pours back into the coffers.
As expected, the shortage of boxes has been a boon for both the shipping lines – enabling them to impose massive surcharges – and for the box makers. Last year, dry TEUs at Singamas were going for US$1,850, but those being delivered to lines and leasing companies in August have been sold for US$2,700. That is a tidy little increase of 30 percent per unit and has taken container prices to their highest level since 1991, according to Alphaliner.
Over at CIMC, the past year was as crippling as it was for Singamas. When you are leading the market and the market crashes, business gets real depressing real fast.
With a 40 percent market share, the company saw its net earnings plunge 32 percent as demand for containers dropped to one-tenth that of a normal year.
Just 134,000 TEUs were made in 2009 by CIMC, and production of dry containers was almost shut down completely. In total, the company made 72 percent fewer boxes than in 2008.
Orders are coming in fast, and Alphaliner said CIMC secured orders for 102,000 TEUs in the first quarter alone. An impressive rebound for sure, but nowhere near what the market requires.
The world’s two largest container manufacturers have their factories working flat out, but the demand far outstrips their production capabilities. So expect the already record prices to continue breaking records.