Sinking container demand creates stacks of excess boxes around Europe

As container shipping demand continues to sink from its pandemic highs, that change is creating stacks of excess containers stranded across Europe, triggering congestion bottlenecks and space shortages at ports, warehouses, and storage yards, according to Container xChange.

Those conditions were further strained on Wednesday by a labor strike over wage complaints at the Hamburg Port Authority, which is currently closed to large ships. That strike has already lead to a 27% decrease in TEU capacity in early March, a 31% decrease in vessels in port, and import/export dwell spikes as high as 7 days, according to data from supply chain visibility supplier project44.

Overall container overcapacity currently amounts to between three and five million twenty-foot equivalent units (TEUs), enough to cause storage space shortages and put “substantial downward pressure” on box prices and leasing rates across the continent, Hamburg, Germany-based online logistics company Container xChange said in the March edition of its “Europe Container Market Forecaster” report.

“The critical Asia-Europe container shipping lane has seen demand tail off rapidly since the summer of 2022, which has been reflected in sharp falls in container shipping spot freight rates. This is prompting carriers to cut services or cascade capacity on to regional trades. The problem is that this is leaving empties stranded across Europe instead of being sent back to Asia and other origin markets to be loaded with more exports,” Christian Roeloffs, Container xChange’s CEO & co-founder, said in a release.

“When export demand picks up once more, this huge pile-up of boxes will gradually be whittled down with most returning to Asia. But strike action during March at the port of Hamburg in Germany and at various container terminals in France will slow that process,” Roeloffs said.

Those lingering labor troubles could slow the industry’s recovery from those congested flows, even as negotiations on the U.S. West Coast run far overdue to find a solution for a renewed labor contract agreement between the International Longshore and Warehouse Union (ILWU) and the Pacific Maritime Association (PMA), according to the ITS Logistics U.S. Port/Rail Ramp Freight Index.

In a parallel to the European markets, slower container flows in the U.S. are changing the dynamics of those protracted debates over working conditions, Reno, Nevada-based third party logistics provider (3PL) ITS said.

“The ILWU has lost leverage because of the low volumes on the West Coast, which further solidifies the stance that PMA is taking in negotiations in the near term,” Paul Brashier, vice president of drayage and intermodal for ITS Logistics, said in a release. “With volumes where they are now on the West Coast and the diversions to the East, the ILWU is not in a strong negotiation position. I also do not believe the Biden Administration will tolerate more than work slowdowns with inflation currently being of significant importance.”