The Role of the Intermodal Container in Trade

The Role of the Intermodal Container in Trade
  • Opening Intro -

    The complex network of global trade can hardly exist without intermodal containers.

    Also known as shipping, cargo, or freight containers, container vans, etc., they are used for secure and efficient freight transport by rail, truck, and ship across the world (hence the term intermodal.)

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Over 20 million containers of different types are currently in circulation; their sturdy, metal frames are built to withstand any cargo so it can safely reach the final destination.

Unfortunately, the ongoing pandemic is affecting international supply chains, leading to a shortage of containers. As a result, that freight costs are soaring, as well as the prices for consumer goods.

This unfavorable situation is a major blow for exporters, who find it difficult to cope with increased wait times and delayed shipments. Until we get back to normal, they have to find a way to stay afloat and deliver goods, which proves to be an increasingly demanding task.

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Why the Struggle?

The main issue with freight containers is the imbalance rather than an actual shortage of these products. Meaning, there’s more than enough of them to sustain trade, but they’re piling up in all the wrong places. The COVID-19 restrictions have made it impossible for regular trading routes to function normally, resulting in heaps of containers in rail depots and ports worldwide.

A classic example of this phenomenon is China and other large-scale Asian manufacturers. Namely, there was no problem with shipping containers when they could deliver cargoes to the rest of the world and return with new loads. However, as we all know, the pandemic led to national lockdowns, and countries had their hands tied.

As things progressed, consumers were getting increasingly frustrated. They had to get their products somehow, so they opted for shipments instead of in-person purchases that carried a high risk of getting contaminated.

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As you might assume, trade blossomed again, but now ports had a hard time loading and unloading the many waiting ships, leaving piles of unused containers behind. Therefore, exporters faced a shortage of these crucial means of transport. For instance, the six-day Suez Canal blockage in March 2020 was only one in a series of serious shipping challenges.

Oversupply is Not a Solution

One logical answer to this hardship would be to produce more containers. If there’s a shortage, you build more of them, and problem solved, right? Well, not really.

Although production is hitting an all-time high at the moment, with Chinese manufacturers at the forefront, who make around four-fifths of all containers in the world, shipping continues to suffer. This is solid proof that trade needs functional routes to succeed, rather than an oversupply of freight containers.

Companies that produce them have to deal with constant accusations of driving prices up. It’s only logical when you think about it: manufacturers don’t have enough containers, so of course, they’ll pay more to get them.

On the other hand, manufacturers refuse to increase the supply, claiming it is unnecessary to overcrowd the market with an excess of containers, especially once the pandemic ends.

Go to https://indianexpress.com/article/explained/explained-why-there-is-a-major-container-shortage-and-its-impact-on-international-trade-7503664/ for more info.

Prices Are Skyrocketing

According to industry watchers, the lack of available containers is a real nightmare for shipping. Companies, especially in Asia, send off cargo and often have to wait weeks at a time for the empty containers to return. Pressed by time, they are willing to pay high rates to get them back, driving shipping costs through the roof, which does little to even the global economy.

These circumstances are especially damaging for developing regions, where consumers can hardly afford such rates. Let’s take a typical route between China and South America, or maybe West Africa.

Ships have to cover long distances, and importers need to pay a lot for containers. On top of that, these regions usually import more goods than they export, so companies are forced to send empty boxes back to China and cover all shipping expenses.

The Impact on Construction Business

While most industries are affected by the supply chain shortage, construction suffers significant damage. This is because the industry depends on imported materials and various supplies. Hence, the lack of off-shore support creates difficulties for contractors, engineers, developers, and everyone involved in construction projects.

Contractors and owners alike feel the impact of delayed projects. Both are obliged by contracts and have to recover time and costs in case of disruption. Many ports were closed because of the pandemic, so builders couldn’t receive timber, steel products, and doors, windows, and other necessary items in time, forcing them to seek extensions.

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Therefore, they have to take measures to protect themselves and keep operations going. Possible options include granting time for delays, sharing the cost impact, sourcing domestic materials as much as possible, paying early deposits, up-front pricing of the delay risk, etc. These strategies will probably increase the overall costs, but they will provide some certainty and lessen the negative impact.

As you can see, it’s really tough for any contractor to determine a fixed price for a project and predict its completion. It’s important to look for resources. For instance, intermodal containers from ContainerAddict.com can help a great deal. Contracting parties have to work together to solve these issues; otherwise, they’ll get stuck and end up paying large amounts of money for delayed projects.

Predictions for the Future

Experts believe that the shipping industry will eventually get back to normal. They consider container shortage a temporary problem; however, the current global import level puts too much pressure on companies. The demand for consumer goods is too high, and wait times are too long.

Hopefully, the situation will stabilize soon enough, and the world will return to its pre-pandemic state. But until it does, manufacturers have to make a collective effort to distribute goods more effectively, regain control over the shipping industry, and put an end to the crisis. It seems like we’ve put the worst behind us, yet it’s still too early to put our feet up.

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Image credit: role of the intermodal container by envato.com

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