Empty container repositioning is a term to describe how to arrange empty containers to where they are needed most. An all-too-common scenario: A Carrier has 200 empty containers in Hamburg that must be transported to Asia to carry export cargo. None of the carrier’s northern European customers’ needs these boxes to ship cargo to China. That’s why the carrier needs to reposition empty containers from Hamburg to China and pay approx. $500 per container, mainly fees charged by terminals and trucking companies. Why does the empty container problem exist and what can you do to avoid empty container repositioning costs?
Why are containers being moved empty?
Trade imbalances: Thats the single biggest reason for empty container moves! Equipment flows typically are not balanced in opposing directions. China exports more than they import, that means a carrier must inevitably reposition empty containers from Europe or Northern America to China. Approximately two-thirds of empty container repositioning arises from such structural imbalances between regions.
Revenue generation: Carriers allocate their boxes to maximize their profits, not necessarily the economic opportunities of their customers. They often reposition their empty 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 used to reposition the empty container to across the Pacific and generate a return income of $3000.
Manufacturing and leasing costs: If the costs of manufacturing new containers, or leasing existing units, are cheaper than repositioning them, then an accumulation can happen. Inversely, higher manufacturing or leasing costs may increase empty container repositioning.
Head-Haul volume: Sometimes also sales teams contribute to a high number of unused containers by focusing on increasing head-haul volume rather than optimizing container flows. Their incentive is to sell units to the customer so they prefer to always have a certain amount of empty containers that they could potentially sell. There are three main types of costs related to empty containers – repositioning costs, storage costs and costs of ownership. Since empty containers need the same capacity of the ships that move full containers, the repositioning/ moving costs for both are almost the same. Storage costs depend on the individual contract with the depot where companies typically have some free tier after which they pay different rates. And last but not least, the more containers you want to have as a reserver, the higher the cost of ownership which is usually between $0.5-1 per TEU per day.
Unreliable forecasts: Typically people tend to “over-forecast” the demand for containers based on different agents and gut feeling. Due to that and huge seasonal fluctuations in seasonal demand for shipping containers the accuracy of forecasts is usually low.
How expensive is empty container repositioning?
The costs of empty container repositioning amounts to as much as $20 billion per year industry-wide. Between 60 to 75 percent of total repositioning costs are handling fees for terminals, depots and intermodal operators. The remaining repositioning costs include intermodal transport provided by rail truck or barge operators. For a typical carrier, repositioning costs represent 5 to 8 percent of total operating costs. For container owners that don’t own vessels such as NVOCCs or leasing companies, it is even more expensive as they have to pay for slots as well.
How to avoid empty container repositioning?
Approaches to reducing the costs of moving empty containers include negotiating better rates with terminals, depots and intermodal operators, forming partnerships with trucking companies or procuring repositioning services with other carriers. There is also IT solutions to optimize flow forecasting and planning or services for “triangulating” hinterland movements by sending containers directly to export customers’ sites from locations where imports are unloaded.
With Container xChange, we came up with an IT solution that helps the industry players collaborate more efficiently at scale and developed the world’s first platform connecting users and suppliers of container equipment to avoid containers being moved empty. The platform offers more than 300 000 potential opportunities to interchange containers in more than 2500 locations. The average savings is $200 – $400 per container, arising mainly from the avoidance of expenses related to land transportation and the use of terminals. Scaling up this impact to the whole industry, the saving potential with xChange increases to $5 billion to $7 billion annually.