The research report shows that the oversupply of containers has led to a sharp fall in the market price of second-hand containers.

Christian roeloffs, co-founder and CEO of container xchange, said that the current oversupply of containers was the result of a series of reactionary market disturbances that began shortly after the outbreak of the epidemic in early 2020. With the increase of demand, port congestion has intensified, and container capacity has been shelved for  quite a long time. This led to record levels of panic ordering of new boxes. Over time, with the reopening of the market and weak demand, oversupply is the natural result of the balance of supply and demand at a new level.

The oversupply is not surprising, because the global average container price and rental rate have been declining since September to October 2021. Roeloffs added.

Medium and short term outlook of freight, spot freight and container freight

Since the beginning of 2022, the average freight rate has decreased by about 20%, and will continue to decline gradually, but will not decline significantly, because the potential disruption in the supply chain still exists. On the one hand, inflation has begun to put pressure on the U.S. economy and the European Union. With the blockade triggered by inflation and pandemic, disruption will continue to change the equation between supply and demand and prices. In the long run, these will be phased out and a new normal balance of supply and demand will be created.

The latest data released by Drury shows that the transportation capacity of the global container fleet exceeds 6million Tue. Container xchange analysis further points out that oversupply will obviously lead to the need for more scarce warehouse space. Under the assumption that the global supply chain disruption will gradually disappear over time, carton productivity will be higher, and we need fewer cartons per unit of goods.

With the easing of supply chain disruptions in the coming months, this will lead to higher box productivity and structural excess of containers. At the same time, further weakening demand will increase the supply of containers available for goods. It is likely that the equipment capacity will not be soaked.

This situation will lead to the tightening of yard space, carriers will be eager to eliminate old equipment, and the price of second-hand containers will continue to decline gradually until it reaches a new normal level, and the new market will dry up.

This situation can be studied from the perspective of supply and demand market forces. If container demand declines (taking into account the decline in consumer demand in the coming months, rising inflation may lead to negative consumer sentiment), then container supply will naturally increase. In addition, price is a function of supply and demand. If demand falls and supply increases, prices will fall. This is what is happening to container prices at present.