Update: Container shipping remains tangled web

[Editor’s note: This article was written before a large container ship blocked traffic on the Suez Canal for several days, causing further, if temporary, disruption to global shipping and container positioning.]

Container shipping has been hailed as a 20th and 21st century logistical marvel, helping goods move across the country and around the world in a secure and orderly fashion not previously fathomable.

For many recyclers in the past nine months or so, however, the sector has fallen off its pedestal as headaches pertaining to 1) a container shortage, 2) difficulties securing bookings that stick and 3) demurrage or detention charges on those containers that are shipped have combined to make freight an ongoing challenge.

The Washington-based Institute of Scrap Recycling Industries (ISRI) has communicated with the Federal Maritime Commission (FMC) regarding the woes affecting its members, specifically container detention and demurrage practices.

Industry consultant Wade Schuetzeberg of Netherlands-based Way Forward Enterprises says recycling plays a crucial role in the current container repositioning dilemma in the form of policies enacted by the Chinese government that have banned or restricted imports for many scrap materials.

Posting to his LinkedIn account, the veteran recovered fiber buyer says scrap exports from the United States “no longer balance the return journey: This was the crucial role that these commodities performed in the logistical/supply chain balance.”

Schuetzeberg says the former backhaul pattern, “yielded total freights that were lower overall with very ‘cheap’ rates westbound to China, which helped the recycling economy in the United States. With China banning imports of [scrap paper and plastic], this relationship no longer exists, so no surprise that the rates from China to North America (eastbound) have to go up and pick up the slack for overall profitability.”

Other factors being cited by shippers and port officials include slower unloading caused by health and distancing restrictions and requests by Chinese exporters to have containers sent back immediately, even if empty. That latter factor, however, could be tied to the interruption in the former North America-to-Asia trade in recyclables that maintained a steady Asia-bound flow of containers.

In late February, ISRI requested the FMC further investigate those practices and thanked FMC Commissioner Rebecca Dye for her initial actions.

“ISRI appreciates the work of Commissioner Dye in her initial fact-finding investigation into detention and demurrage practices,” said ISRI Vice President of Advocacy Adina Renee Adler. “We look forward to providing her with more information through comments submitted by ISRI members detailing their experiences with container shortages.”

A mid-March online article by the New York-based Journal of Commerce seems to indicate the situation has not improved in the subsequent few weeks.

That article focuses in part on conditions in the Port of New York and New Jersey region, where the closure of a single parking lot seems to have led to a “scramble for new places to store empty containers, affecting [the port’s] ability to deliver loaded imports in a timely manner as the port deals with record volumes.”

The article says the New York-New Jersey situation is part of a larger “ongoing problem of ocean carriers diverting empty container returns to sites other than where loaded imports are picked up—a problem truckers say has gotten worse [in March] and drives up costs to shippers.”

By January of this year,  a Washington Post reporter using the Freightos Baltic Index as his benchmark calculated that “the cost of shipping a container of goods has risen by 80 percent since early November and has nearly tripled over the past year.”

As of March 21, the Freightos Baltic Index stood at $4,045, nearly triple the $1,377 index figure of March 20, 2020. The FBX.com website indicates the rate for the Asia to North American West Coast route recently had dropped by 8 percent, and the reverse route also has fallen 6 percent. On the U.S. East Coast, however, the rate from China to there has risen by 3 percent, with the reverse route index price falling by 3 percent.

Paper recyclers in the U.S. have been commenting on the aggravation and higher costs since last year, and a nonferrous scrap trader tells Recycling Today container shortages at inland intermodal yards are perhaps even more severe than those on the Atlantic or Pacific coasts.

Journal of Commerce Associate Editor Michael Angell, in his March article, says the Port Authority of New York and New Jersey is “working with ocean carriers to increase their empty sweeps and looking for places where truckers can easily store empties.”

He also quotes a port authority deputy director as saying, “We need creative thinking on where to stage empty containers since we still have loads piling up at terminals.” The New York-New Jersey authority indicates it “experienced its busiest two months for empties in the past four years recently,” with more than 240,000 TEU (20-foot equivalent units) in December 2020 and January 2021. “Those figures account for about one-third of total container volume coming through NY-NJ.,” writes Angell.

Recyclers of all materials in every U.S. region would be thrilled to get their hands on some of those containers, as they are among those in the supply chain missing more interested in the containers themselves rather than what was shipped inside on the way to the U.S.

Beijing-based state-owned media firm China Global Television Network (CGTN), in an essay posted in mid-March to the Hellenic Shipping News website, says the global container imbalance was caused by the “black swan” COVID-19 pandemic. “Containers from Asia were sent to North America, but due to COVID-19 restrictions, almost nothing moved in the opposite direction,” writes the firm regarding shipping patterns in mid-2020.

“There is currently a massive 40 percent imbalance in North America,” CGTN says of global container positioning. “This means that only four [containers] were sent back for every 10 containers arriving, while six remained at the arrival ports,” adds CGTN, making no mention of the restrictions on China-bound secondary commodities.

Just as U.S. shippers are clamoring about container shortages, so too are shippers in China, with CGTN referring to “reports of growing congestion and container shortages going to major ports in China” caused in part by “the slow return of containers from North America to Asia.”

If CGTN has it right, that means American recyclers are not chasing containers found on the other side of the world. Rather, means and methods might be needed to move empty containers away from domestic stockpiles and back to the loading docks of recycling plants and other places of business throughout the U.S.