In the face of the pandemic, the supply of shipping containers did take a massive hit globally. Currently, while the world economy is bouncing back from the impact of COVID-19, the logistics industry is slowly crawling its way back to normalcy; though chances are that there might not be another “normal” per se.
The traditional supply chain of containers in the shipping and freight industry has been proven inefficient in the wake of uncertainties. This calls for alternate sources of containers that can benefit both the shippers and carriers. Shipper-owned containers or SOCs are one such option being explored by shippers and logistics companies alike.
At xChange, we organized a webinar about SOC containers and touched upon several aspects related to containers and the supply chain.
Up next is a glimpse into the webinar, covering:
- The current global market of shipping containers and expected trends
- SOCs and their benefits to the industry
- Growing awareness and acceptance of SOCs
- xChange’s role in SOC availability
- Feedback from the industry about SOC containers
Read on…
Availability of Containers in the Global Market
John Fossey, Head Analyst and Researcher at Drewry, spoke about the semblance of respite to the shipping industry. He noted that the port handling activity had increased by 6.5% in 2021 — caused by a boom in the production of consumer durable goods.
But, this growth rate is expected to come down to 4.6% in 2022 due to numerous hurdles still in the way. The foremost, said Fossey, was the severe congestion in the supply chain which keeps deteriorating over time. The reason for congestion? A summative result of labor shortages at the ports, production issues, hiked demurrage & detention charges, and so on.
As per Fossey, there was also an increase in inflationary pressures, partly due to the ongoing Russia-Ukraine conflict and partly due to supply chain inefficiencies. Consequently, the industry became a little more cautious and the forecasted growth rates beyond 2022 are predicted to be lower. In line with Fossey’s analysis, the expected annual growth rate is 3%.
Talking about the current production of shipping containers, we noted:
- There was a sharp increase in container production in China — more than 6.6 million TEUs of dry freight containers and 386,000 TEUs of reefer containers. 40ft high cube containers made up 80% of the dry container production and 95% of reefer production.
- This was the direct result of supply chain issues and rising container demand. It was driven by major ocean carriers that needed more equipment in their pool to carry out consumer goods from China.
- Despite all this, this hike was short-lived as production slowed down again in the fourth quarter of 2021. Fossey expects production of 4.4 million TEUs of cargo (at the least) in 2022. Lessors control 51.5% of this pool in the year 2021.
- There was also an overhang of equipment because aging containers were not being replaced. It was in the wake of exceeding demand for maritime trading.
- The productivity of containers, measured in the number of port moves made, also came down to 17.8 in 2021 as compared to 19.1 in 2020. This was a result of congestion at ports and warehousing on the landside supply chain.
SOCs and Their Benefits to the Industry
Dr. Johannes Schlingmeier, Co-founder and CEO of Container xChange, discussed the rising acceptance of shipper-owned containers (SOCs) in the shipping & logistics industry, as a possible counter to these problems.
Unlike carrier-owned containers (COCs), Shipper-owned containers or SOCs can be any container that is owned by the shipper. This happens when the BCO, freight forwarder, or NVOCC organizes their own container for their shipment.
So, instead of using a container liner’s assets, you essentially “bring your own box”. You then purchase the slot on the vessel from the carrier to carry out your shipment. A common use case of SOC containers can be project cargoes shipped into remote locations.
SOCs have a lot of benefits to shippers in terms of flexibility and saving costs.
Flexibility & Transparency with SOCs
With SOCs, shippers have more control over the availability of containers. You can choose when you want the container, where you want to keep it, and how to transport it to the carrier. Thus, you will have more transparency on the movement of the container as well.
Save Shipping Costs with SOCs
SOCs further save you operational costs and other additional charges during shipping.
First, you can save trucking costs by going with the carrier of your choice. Owing to the pandemic, moving containers back to the source location in time has become more difficult due to excessive congestion. So, shippers end up paying a hefty amount as demurrage and detention charges for COCs.
SOCs help you avoid the demurrage and detention charges at the port almost entirely by negotiating container booking separately from vessel space. So, shippers just pay USD 1-5 daily for container rent instead of USD 50-100 as merchant detention.
Choosing SOC containers gives you control, flexibility, and independence. But, this also means you need to find the right container from a reliable partner at the right time at a suitable price.
In comes Container xChange.
Find SOC containers from more than 800 reliable partners in 2500+ locations. Negotiate, finalize the deal, and execute one-way container moves with zero container repositioning costs.
SOC Containers: xChange Mystery Shopping Report
Candice Buckle, content marketing manager at xChange, shared some insights from the 3rd edition of xChange Mystery Shopping Survey Report 2021.
The survey was done to understand the current industry outlook on SOCs. xChange team, under an alias, sent SOC shipping requests to 50 of the biggest freight forwarders globally. Here are some key highlights from the study:
- 40% of the companies responded to the request placed by xChange (under an alias name). This was an 18% increase in response rates from 2019. The decline rate for the request came down by 50% while acceptance increased by 200%.
- Interestingly, 90% of the freight forwarders know what SOCs are. This is a sharp increase of 200% from SOC awareness in 2019.
- The cohort analysis of these companies showed how diverse the cohort was in terms of company size and ranking. The list included big names as well mid-level freight forwarding companies, including industry giants like FedEx, Gefco, and Mainfreight.
Schlingmeier accredited it to the difficulties faced by forwarders in sourcing containers. Let’s have a look at some problems posed by SOCs and how platforms like xChange help solve them.
xChange’s Role in SOC Availability
SOC containers, however beneficial, are still hard to source for some shippers. Here’s why:
- There isn’t much transparency across the supply chain which makes buying decisions for SOCs quite difficult.
- Shippers have to break through elite networks or freight forwarding connections in the industry to source SOCs.
- Due to such hurdles and the rarity of SOCs, sourcing them can be time-consuming and slightly costlier.
xChange has made the process of leasing or buying containers a lot easier with the help of technology.
- Our platform allows shippers to choose from more than 800 vetted container lessors and traders in over 2500 locations — all at one place at the click of a button.
- It brings down communication barriers across the supply chain and thus, ensures greater transparency over operations and costs.
- xChange also helps in the end-to-end process of sourcing SOCs, right from buying or leasing to insurance, empty container repositioning, and even container repairs.
Here’s what a reputed freight transportation and logistics company had to say about its experience with SOC containers sourced from xChange.
Feedback for SOC from the Industry
Alexander Gnedov, CEO of Conway, talked about how SOC containers are helping their business reach newer markets. SOC leasing on xChange allowed companies like Conway to accept container requests in special or remote locations.
This is especially helpful when customers are not able to return the container to the destination after their shipment has arrived. Companies can easily trade these containers at xChange in the new drop location and avoid any losses or additional costs.
Gnedov also emphasized the need for a qualified SOC agent, who can ease the admin burden tied to the usage of SOC. xChange helps a lot in this area by providing end-to-end management of the container buying/leasing process.
Summing Up…
The industry outlook on shipper-owned containers or SOCs seems to be improving rapidly, even after the impact of the pandemic and supply chain disruptions subside. xChange is doing its part in making the container-trading process relatively smoother and easier for businesses and forwarders alike.
Watch the webinar replay here:
And don’t forget to follow our LinkedIn page to get regular updates about the latest industry happenings and developments around SOCs. And stay tuned for the next webinar in April!
