Around $20 billion is spent on repositioning empty containers every year!
With a bill higher than the GDP of some countries, it’s a massive problem for the logistics industry.
So, what exactly is empty container repositioning is and why is it happening?
What is empty container repositioning?
In an ideal world, every shipping container would be filled with cargo for every journey, but in reality, this isn’t possible.
Often, a carrier will have a surplus of empty containers at one port (London, for example) but won’t have enough containers for a shipment from another port (Shanghai, for example). This means the carrier has to ship the empty containers to the Shanghai port without any cargo inside. The shipping of these empty containers is called ‘repositioning’ in the logistics industry.
An empty container takes up the same space as a full one, so moving it can cost the same amount. And with no one paying to fill that container with goods, the cost comes directly out of a carrier’s pocket and eats into their profits.
If carriers only had to ship a small number of containers empty, these extra costs would easily balance out. But the average container spends a whopping 56% of its lifespan either idle or empty – which is more time than they spend shipping cargo and generating revenue.
(Data credit: transmetrics)
So why is the logistics industry wasting so much potential space to ship goods when margins are so tight?
What causes empty container repositioning?
There’s a large combination of factors that contribute to empty container repositions – but here are some of the main causes.
1. Trade imbalances
A port that imports more than it exports will end up accumulating empty containers simply because there’s nothing to put in them. Similarly, if a port exports more than it imports, it will eventually run out of containers to ship all of its cargo.
To deal with this imbalance, companies have to ship empty containers from ports with a surplus to the ports where they don’t have enough, increasing transport costs and tying up capacity.
The most common container imbalance is between European and American ports and Asia: European and American ports tend to have surplus of empty containers while Asian ports often face shortages.
2. Storage costs
Carriers would be more inclined to wait for cargo before moving their container if it was free to store them at ports long-term. But storing an empty container at a port can cost hundreds of dollars depending how long they’re there.
Carriers can usually store a container at a port for around five days for free, but if they go over this limit it can cost around $100 per day! These exact cost of storing empty containers will depend on contacts the shipping companies have with ports – but regardless, they can really add up fast.
This means it’s often more cost effective for carriers to move empty containers to another port, than to wait for enough cargo to ship them.
3. Time pressure
If export demand is very high in one region, it puts pressure on carriers to ensure they always have enough containers at these ports. To keep up with demand, carriers have to prioroitise sending empty containers to these ports as fast as possible.
A good example of this happened in 2020 and 2021 during the corona virus pandemic. Consumers in America and Europe shifted their spending from services, like eating out, to buying tangible goods they could enjoy in their own homes. This caused imports to soar and put pressure on carriers to move more empty containers to exporting ports quickly.
This resulted in some carriers shipping 75% of their containers from the US and Europe to Asia empty.
(image credit: Suppychaindrive)
4. Outdate logistics planning
The logistics industry is notoriously old-school and still relies on outdated technology. This reluctance to innovate means that many shipping companies still use excel to plan their container repositioning.
Using complex excel sheets makes it difficult to plan efficiently and leads to logistics companies shipping more containers empty than they need to.
There is tech on the market that utilises AI to help shipping lines plan empty container reposition in the most efficient way – but many companies are still hesitant to make the switch.
5. Lack of cooperation between carriers
Imagine a scenario where a carrier (let’s call them Carrier 1) has to ship cargo from Sweden to the US but doesn’t have enough containers. Meanwhile their competitor (Carrier 2) has too many containers in Sweden and is repositioning them empty to the US in order to have enough to export goods from there.
If Carrier 2 let Carrier 1 use their containers to move their cargo to the US – both companies would save money and it would be more efficient and environmentally friendly in general.
With millions of containers being moved around the world by different carriers and leasing companies, this scenario happens all the time.
But with so much competition between these companies, many refuse to share information on their container positions and volumes with each other. This makes it difficult to set up container pools to avoid empty container repositioning.
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Designed and built by experts in logistics procurement, SHIPSTA is bringing transparency, automation and efficiency to the global logistics industry. It is used by some of the world’s largest companies to respond to market volatility, control freight costs and manage risk. The company was founded in 2015 and is based in Mertert, Luxembourg and Hamburg, Germany.