Container imbalance is an underlying issue in the shipping industry where not only do you face container imbalance charges (CIC charges) but also suffer loss. A nervous market can make the imbalances more unpredictable and overwhelming.

The severe conditions of the coronavirus pandemic have brought container imbalance into the limelight. In order for the global supply chain to function, containers need to flow easily and effectively from point A to point B. Supply must meet demand, after all. However, the COVID-19 pandemic had quite a crippling effect on the economy. The result? A gross imbalance between capacity and demand.

In simpler terms, it basically means that you have cargo to ship but there are simply no containers available to carry your goods from the pickup to the destination point. Read on to understand what this means for you and how you can protect yourself from container imbalance charges.

What is container imbalance in the shipping industry?

Container imbalance occurs when there’s too much cargo to be shipped and a lack of containers to ship them in. When goods are carried from one point to another in shipping containers, the same box is used to carry goods back to the country of origin, so when the import matches the export, no imbalance occurs. However, when a country has nothing to return, the containers remain empty at the port, and this is when the problem begins.

Eventually, the cargo will start to build up and the port simply doesn’t have the capacity for it. Containers are left full in this instance and don’t return back to service, which further contributes to the imbalance. Though there are many reasons for this, we’ve narrowed them down for you to understand better.

container imbalance explained

What causes container imbalance?

COVID-19 has had devastating impacts on the trading industry after making its way across the world and remains the most common reason for container imbalance. Production came to a stand-still as the virus spread and more and more companies closed their doors. The lockdown meant no reason to ship goods, therefore, resulting in a myriad of problems within the industry. Apart from the pandemic, there are a few other reasons for container imbalance.

High shipping rates

It’s much harder to find a shipper or carrier at an affordable rate, so importers and exporters end up with a surplus of cargo and nothing to ship them in because the rates are too high. It’s always good to explore methods to lower your shipping expenses. Paying high rates causes severe financial strain for your business. An easy solution to this is to make smaller shipments or choose a destination where the rates aren’t as expensive.

Space issues

In some cases, containers don’t always have the capacity to fit the cargo they require to ship and this leads to containers being left at the port because they’re too heavy to move or are overfilled. One way to alleviate this is to consider shipping less cargo or choosing the right container type and size.

Using one freight forwarder for multiple destinations

If you use a single freight forwarder to ship goods to multiple locations/destinations, it means they’ll pass through multiple vendors which means it’s available to more customers. The vendor increases the cost, so it’s important to use multiple freight forwarders to create a balance in your shipment.

Container shortage

Container shortage directly links to container imbalance. Shortage of containers means more cargo piling up at ports or warehouses, which naturally creates a container imbalance.

Cargo weight

If cargo is too light or too heavy, it tends to move at a much slower pace and causes delays during the loading and unloading stage. Delays in shipment link to container imbalance.

Container imbalance effect on the shipping industry

When trade between nations temporarily stopped in the initial months of the pandemic, certain vessels underwent repair, and some were in transit to maintain good profit due to the pause of imports and exports. Manufacturers and producers in other cities and nations were forced to store manufactured commodities till the containers arrived at their yards.

When manufacturers have no choice but to store commodities, it means suppliers can’t fill orders in on time and this disrupts cash flow. The disruption in cash flow leads to orders unpaid, and so the cycle continues. Container imbalance also causes prices to surge which makes importers and exporters second guess shipment due to affordability and will have to wait until a cheaper box is available — another way the container flow is affected.

There are also container imbalance charges to consider, which we’ll dive into next.

Leasing SOC containers also help you avoid container imbalance charges and regulate container flow. You can lease affordable SOC boxes on Container xChange easily. Simply click the banner below to get started. 👇

What are container imbalance charges? (CIC)

A container imbalance charge or CIC is a cost charged to compensate for the repositioning of empty containers between countries where you’ll find a trade imbalance. When there’s no use for a container that’s been previously imported to those specific countries, it remains empty, and so there’s a cost involved to reposition the empty container.

It’s pretty costly to move your empty containers to and from different ports. Container imbalance causes around 10 percent of the global container assets to be empty. They also account for around 20.5 percent of port handlings around the world. It costs the industry between $15 – 20 billion per year to reposition all these empty containers.

Relocating the containers also include extra costs for drayage, transshipping at the terminal, and empty warehousing when the containers wait to be relocated. All these are expenses for an empty container, that doesn’t give much of a return. That’s one of the reasons why using these empty boxes as one-way containers have become more and more popular.

Empty container repositioning

Moving empty containers from a location with an excess of containers to one where there aren’t enough is known as empty container repositioning. Empty container repositioning is a major financial drawback for container owners. European and American ports experience a high surplus of empty containers, and at the same time, Asian ports face severe shortages.

There are 170 million containers being shipped globally; of that, 50 million of them are empty. This is caused by imbalances within the industry linked to trade, company specifics, and structural and time imbalances. It’s safe to say that empty container repositioning is a big problem in the maritime world. Here’s why:

Trade inefficiencies  Approximately two-thirds of all empty container transfers are caused by regional trade imbalances. The remaining one-third of these repositioning expenses is due to carrier-specific inefficiencies, which might be challenging to eliminate.
Revenue generation  Container owners rarely wait for export loads to be available because it takes weeks to find new customers, load the containers and return them to the port. This leads to container owners repositioning their boxes back to the Asian region which creates a revenue of up to US $3000. 
Lease and manufacturing costs  Containers can build up if the price of manufacturing or leasing new boxes is less expensive than relocating them. Selling leftover containers and purchasing brand-new units in Asia might occasionally be even more cost-effective. Therefore, the quantity of empty container repositioning increases when the cost of manufacturing or leasing rises.
Headhaul volume Most of the empty containers link to sales teams. Instead of maximizing container flows, they concentrate on boosting head haul volume. The sales teams focus on container availability to sell units to demanding customers.
Unreliable forecasting Container owners frequently overestimate demand and base their forecasting on intuition or gut feeling. This means they don’t take uncontrollable circumstances (weather, strikes, or port congestions) into account. The accuracy of these forecasts set container companies back when planning. 

Sharing equipment globally is a popular way of avoiding empty container repositioning and so does container interchanges.

Container interchanges reduce the number of empty containers through partnerships with other carriers. Container xChange is the biggest platform for container interchanges with more than 1500 shipping companies. By allowing both container users and owners to find partners that move their containers from surplus to deficit locations, we can alleviate the costs of empty container repositioning.

Lease shipping containers at best price

Multicolor shipping containers stacked high at a port.

2 ways to avoid container imbalance

Here are the two main solutions and the most effective ways to reduce the impact of container imbalance: Digitization and researching market forecasts. Since container imbalance is linked to container shortage and empty container repositioning, it’s wise to start there.

Digitization Research market forecasts
Digitization acts as a simple solution to many issues within the logistics industry — container imbalance is one of them.  Digitization allows you to handle your container operations online. Track and stay up to date with where and how your box is moving so you can plan better and know exactly which destinations will have a surplus of empty containers for your usage.  You have to be as informed as possible within the shipping industry. The market fluctuates so often and it’s important to know what these changes are and how they affect you. Research market forecasts as often as possible so you can avoid delays and port congestion.

Another way to combat container imbalance is to consider leasing SOC containers. If your shipment goes to an empty container surplus location, the carriers and container owners might charge a higher price.

Avoid CIC by leasing SOC containers on Container xChange

You’ve heard of a SOC container before and probably already know how it benefits you, but in case you might have forgotten, let’s recap quickly:

Finding containers can be a time-consuming ordeal especially when the market is facing container imbalance. There are several processes for finding and using SOC shipments. Such as background checks, negotiating terms, and producing legal agreements.

SOC gives you more independence, control, and flexibility, but you want to be sure of who you’re partnering up with. Are they reliable and trustworthy? Container xChange makes the process of finding partners to lease SOC containers easy, so you can avoid CIC and lease SOCs on our platform from trustworthy, vetted partners.

Track containers in near real-time, manage bookings and work efficiently from one website. Avoid high carrier rates, demurrage, and detention charges, and have the power to choose exactly which containers you need. You also have the option to choose the condition your box comes in. You’ll have access to more than 1500 carriers, leasing companies, and traders that have available SOCs listed in more than 2500 locations worldwide when you join Container xChange.

Adapting to an industry that’s constantly changing is easier with SOC containers. Have the freedom to plan your shipments and transportation according to your needs. Avoid CIC charges by getting access to hundreds of new SOC partners on Container xChange.

Balancing out the Container Imbalance
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Balancing out the Container Imbalance
Container imbalance is a continuous issue in the shipping industry where not only container imbalance charges (CIC) and loss of profit is on the line. A nervous market can make the imbalances more unpredictable.
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Container xChange
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