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The Costs of Empty Tank Containers & Repositioning

The world's economic development has resulted in an increase in the demand and supply of goods and services, which leaded to a growth in the use of containers to transports goods from one place to another. As the shipping companies strive to meet their goals and objectives and thus organizational success, it is imperative for them to focus on the repositioning of empty containers in the global market. The repositioning of empty containers does not only affect the economic aspect of the shipping line business but also has profound environmental effects. 

The shareholders feel the economic effects because of the high operating costs which greatly reduce the profit margins for the shipping lines. The transportation of empty containers increases the fuel consumption of the ships and trucks, results to congestion and emissions that affect the environment as a whole. 

The challenge of empty containers is brought about by the imbalances in the global trade which in turn results to imbalances in the demand and supply for containers. This is what results in the repositioning of empty containers. For instance, the Asia-Europe trade route is dominated with containers exporting cargo from Asia to Europe as opposed to those exporting cargo from Europe to Asia. From this setting, it is clear that the ports in Europe will experience a surplus in the containers as more containers with goods are brought in from Asia. On the other hand, the Asia ports will experience a shortage of containers to export goods from Asia as empty containers will still be lying idle in the European ports. The case is the same for North America as well as Africa which experience and influx of exports from Asia at their ports.

The cost of repositioning empty tank containers involves both the inland as well as international transport costs. Various models that have been developed to figure out how the repositioning challenge can be addressed. To begin with, if the repositioning costs remain at a low, then there will not be a profound effect on the repositioning of the containers on the operations costs for the shipping lines. There are also the issues of the costs involved in the manufacture of new tank containers as well as the leasing of the units that are already available. Accumulation of empty tank containers will occur if it is cheaper to manufacture new ones or lease those that are already at their dispersal than the cost of repositioning the ones in the various ports around the globe. 


It is imperative to mention that the global fleet of tank containers is composed of various types of tank containers which vary in their specification. There are the liquid tanks, liquefied gas tanks, special tanks and swap tanks. Even though the containers industry is well developed in regards to structure and resources, a 2017 report by the International Tank Container Organization, revealed that the tank container industry has not yet been able to develop a tank register that can be used to obtain systematic data regarding tank containers. Usually, the organization depends on the company owners as well as leasing firms to provide tank container information. For this reason, there is a challenge in the determination of the total number of empty tank containers in the global market. Nonetheless, based on the statistics obtained from the total number of empty containers, regardless of the type, the number of empty tank containers can, therefore, be estimated.

According to the ITCO, the total number of tank containers grew by 8.5% between 2016 and 2017, (Tank Container Fleet Survey 2017). The survey indicated that at the beginning of 2017, there were 508,000 tank containers globally. Also, it is also important to mention that the figure takes into account the number of tank containers that are disposed of due to damages or structural defects. A report (Market  Analysis) by the World Shipping Council revealed that 20% of the total containers shipped in the world are empty. There, all factors held constant; it can be estimated that the total number of empty tank containers is 101,600 which is 20% of the total number of tank containers in the global market.


The International Tank Container Organization also reported that there were 342,500 tank containers that were lying idle globally. The value is much higher compared to the above mentioned estimated figures for the empty tank containers being shipped globally. The number is substantially high because it takes into account other parameters such as the maintenance or repair of the tank containers. It is estimated that the 10% of the tank containers owned by the operators & leasing companies are idle in the sense that they are either being repositioned or undergoing tests and maintenance procedures. Moreover, the organization also reported that the idle tank containers make up between 12-15% of the total fleet leased. As one of the leading manufacturers of tank containers, it is expected that China should have a huge number of the idle tank containers. However, this may not be the case because China also happens to be the leading export in the world thus substantially reducing the number of tank containers in lying idle in China compared to the United States, Europe, Asia, and Africa.

A report published by Alexander Whiteman in the Load Star stated that the repositioning of empty containers cost shipping companies up to $20 billion on an annual basis which amounted to 8% of the operating costs incurred by the shipping lines, (Whiteman, 2017). This is a situation that does not only have a negative implication on the shipping companies but also on their clients as well as the final consumers of the products being transported using the tank containers. As the shipping companies strive to meet their organizational goals and objectives, they are bound to share or shift the extra costs to their clients who will in turn to the same by increasing the prices of their products. The result is that the final consumers end up taking the burden as they will have to purchase the goods at the market prices which are greatly influenced by the shipping costs.

As the global world business continues to grow and develop, more goods are bound to be transported from one port to another. It is also the case that the Asian Pacific trade route, as well as other trade routes linked to the Asian trade block, will continue to experience an imbalance in the trade as most producers and manufacturers shift to China because of the low production costs. It is therefore imperative to come up with an effective solution to the challenge of empty tank containers as well as all the other types of containers. There are potential solutions that are already being implemented such as the digital interchange platform developed by the Boston Consulting Group to help shippers link with good and thus reduce the repositioning of empty containers. Even though the platform gradually growing, it is estimated that it will save the industry up to $20 million on an annual basis.

 

References
Bureau of Transportation Statistics. (2017). Trends in Container Throughput | Bureau of Transportation Statistics. Rita.dot.gov. Retrieved 8 July 2017, from https://www.rita.dot.gov/bts/sites/rita.dot.gov.bts/files/publications/americas_container_ports/2009/html/box_01.html

ITCO Tank Container Fleet Survey 2017. https://www.international-tank-container.org/facts-figures/

Rodrigue, D. (2017). The Repositioning of Empty Containers. People.hofstra.edu. Retrieved 8 July 2017, from https://people.hofstra.edu/geotrans/eng/ch5en/appl5en/ch5a3en.html

Rodrigue, D., & Slack, D. (2017). Intermodal Transportation and Containerization. People.hofstra.edu. Retrieved 8 July 2017, from https://people.hofstra.edu/geotrans/eng/ch3en/conc3en/ch3c6en.html

Whiteman, A. (2017). Empty container repositioning costs the shipping industry up to $20bn a year - The Loadstar. The Loadstar. Retrieved 8 July 2017, from https://theloadstar.co.uk/empty-container-repositioning-costs-shipping-industry-20bn-year/

World Shipping Council. (2017). Global Container Fleet | World Shipping Council. Worldshipping.org. Retrieved 8 July 2017, from http://www.worldshipping.org/about-the-industry/containers/global-container-fleet



Published on 2017-08-01 at 10:00 by TankContainerFinder.com


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