What would Malcom McLean have been thinking if he witnessed the empty container chaos in the container industry? Malcom McLean revolutionized the shipping industry with a simple but brilliant idea: intermodal container shipping. Since that point of time the containerization has been increasing exponentially during the last decade. The world merchandise, the seaborne trade and the GDP have been growing at different levels indicating that the need for containers in the world is going up as well. According to the United Nations the container port throughput in 2017 was more than 750 million TEU (twenty-foot equivalent unit).
Nowadays containerization is the most cost-effective method to move goods and materials between markets. Around 90% of the world’s trade is transported by sea. Free trade and globalization have increased the need for boxes. China’s economic boom in the last few years have created a trade imbalance between Asia and Europe and Asia and North America. Therefore, North America and Europe have a surplus of boxes and Asian ports a shortage. This imbalance is one of the main reasons for the accumulation of empty containers at different ports and depots. Between 40 to 50 percent of the total TEU worldwide are empty. The Boston Consulting Group estimated that the shipping industry spends between USD 15 billion to 20 billion per year in the repositioning of empty equipment. The reduction of empty container moves will reduce fuel consumption, congestion and emissions and will save money.
Container Availability Index (CAI)
The container availability index indicates how likely it is to find containers in a specific location. The CAI is the ratio between the surplus and the shortage of equipment per location using the demands and stocks information from the last 2 years. The CAI is a value between 0 and 1. A CAI value of 1 means a location has a total surplus of boxes and a value of 0 indicates there are no free boxes in the location. As an example, figure 1 presents the container availability index for Mundra and Singapore during the first 32 weeks of 2018. Mundra presents a slow but steady growth of free boxes in the first 20 weeks and reaches almost a value of 1 by week 21. The following weeks decrease and increase in the range between 0.2 and 0.5. The CAI for Singapore goes up slowly during the year and reaches the maximum level of free units by week 31.
Figure 2 shows the CAI for Shanghai and Los Angeles for 40 HC containers. Shanghai presents a very low availability of units. As discussed before, the exports from China have been increasing and therefore almost all containers are booked beforehand. Los Angeles is a different case, where there are more containers going in than out. There are more empty boxes lying in Los Angeles than in Shanghai.
Forecasting the available containers
Forecasts can contribute to a big range of decisions. Companies in the container industry are taking everyday decisions to improve their logistics and performance. Each of these decisions is different and depends on the need of the companies. For example, traders or container owners make decisions on selling and buying containers, depending on the development of the market in terms of freight rates, new building prices and second-hand prices. What if you could have a look to where the containers will be lying in the following weeks? The forecasting of the CAI allows players in the container industry to increase their revenue and decrease the movement of empty boxes without need. Figure 3 presents the forecasting of the container availability index for Mundra and Singapore. Based on past values and different forecasting techniques, the CAI forecast estimates the availability of boxes. For Singapore the CAI will be around 0.6 and for Mundra, the value will decrease to 0.3
David Hume concluded in one of his most famous books: “we conduct our lives on the assumption that future events will generally follow the patterns we have observed in the past”. What would have Malcom McLean thought if he knew where to sell and buy boxes at his time? Probably he would die wealthier than he already was.