The humble shipping container has a new status in the Covid-19 pandemic: hot commodity.
Shortages of the ribbed steel boxes that have plied the global economy for a half-century are plaguing trans-Pacific routes in particular. The dearth is boosting the purchase price of new containers and lease rates by 50%, snarling port traffic, adding surcharges and slowing deliveries heading into the holidays.
A surge in Chinese exports and robust consumer demand in the US help explain the tightness, and major shipping liners like Hapag-Lloyd are scrambling to reposition their bigger, 40 foot containers from less busy parts of the world. Nico Hecker, Hapag-Lloyd’s director of global container logistics, dubbed it a “black swan” moment.
The German sea freight company is “experiencing the strongest increase in 40 foot demand following one of the strongest decreases in demand ever”, Hecker said in a post on the company’s website last week. “The containers must be returned to China as quickly as possible to be equipped for an expected strong fourth quarter.”
The squeeze shows up in an indicator developed by Container xChange, an online platform based in Hamburg, Germany. The latest reading of its Container Availability Index was 0.04 for the 40-foot extra-tall boxes – the size popular for consumer products – in Los Angeles, while Shanghai slumped to 0.22. On a scale of zero to 1, the dividing line between surpluses and shortages is 0.5.
Dire predictions that global trade would collapse this year prompted container carriers to cancel sailings to underpin freight rates. Those forecasts proved far too pessimistic, though, and industry observers now say a sharp second-half rebound may mean container volumes for 2020 end up not far off levels reached in 2019.
Economists have long debated whether international commerce lifts all economic boats and many nowadays agree that it does, in theory at least. But the market for a commodity like shipping containers is very much a zero-sum game, where winners and losers are decided by who does and doesn’t have their hands on available supply.
“I’ve had no used containers for sale for three or four weeks now,” said Chris Osborne, managing director of Budget Shipping Containers in Birmingham, England. “I am missing out on sales, definitely, by not having the stock there but I’m also not losing them to competitors because they’re in the same boat.”
About 35 million shipping containers are currently in use globally, making some 170 million full trips a year, according to Florian Frese, marketing director at Container xChange. About 55 million of those trips are made when they’re empty – on returns trips or as shipping companies realign them with the demand.
The current scarcity means importers are facing longer waits for their goods and might pay extra fees to secure the transport equipment. The impact can ripple beyond the flow of goods between the world’s two largest economies.
“The more profitable the China-US lane becomes, the more incentivised carriers are to divert containers from other lanes, increasing the prices on shipping in secondary markets,” said Eytan Buchman, chief marketing officer at Hong Kong-based Freightos, an online shipping marketplace.
“Historically, this has been a driver of higher intra-Asia rates, with spare containers located in Asia diverted to the trans-Pacific route.”
Shipping liners own roughly half the world’s containers, and the rest are owned by lessors including Bermuda-based Triton International, whose US-listed shares jumped 34 per cent in the third quarter, more than quadruple the increase in the S&P 500 Index.
Shares of Textainer Group Holdings, a San Francisco-based container lessor, surged 73 per cent in the last quarter and CAI International, a leasing firm also based in San Francisco, jumped 65 per cent.
“We hear from customers that they expect a fairly significant container shortage to remain through [to] at least Chinese New Year” in mid-February, Brian Sondey, Triton’s chief executive, said on a conference call in October.
He said leasing rates for new containers were up “well over 50 per cent” from the second quarter and its inventory of 40 foot containers is as “close to full utilisation as you can get”. Triton ordered $350 million worth of new containers for delivery in the first few months of 2021.
The beneficiaries of such booming demand are Chinese manufacturers that dominate the global market for newly built containers, the price of which has increased to about $2,500 each, from about $1,600 a year ago.
Industry figures show the availability of dry-freight containers produced in China were down to about 250,000 20-foot equivalent units at the end of October, from 871,000 in May. Order books are full until April or May next year.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
ONCE UPON A TIME IN GAZA
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Guide to intelligent investing
Investing success often hinges on discipline and perspective. As markets fluctuate, remember these guiding principles:
- Stay invested: Time in the market, not timing the market, is critical to long-term gains.
- Rational thinking: Breathe and avoid emotional decision-making; let logic and planning guide your actions.
- Strategic patience: Understand why you’re investing and allow time for your strategies to unfold.
How has net migration to UK changed?
The figure was broadly flat immediately before the Covid-19 pandemic, standing at 216,000 in the year to June 2018 and 224,000 in the year to June 2019.
It then dropped to an estimated 111,000 in the year to June 2020 when restrictions introduced during the pandemic limited travel and movement.
The total rose to 254,000 in the year to June 2021, followed by steep jumps to 634,000 in the year to June 2022 and 906,000 in the year to June 2023.
The latest available figure of 728,000 for the 12 months to June 2024 suggests levels are starting to decrease.
England v South Africa Test series:
First Test: at Lord's, England won by 211 runs
Second Test: at Trent Bridge, South Africa won by 340 runs
Third Test: at The Oval, July 27-31
Fourth Test: at Old Trafford, August 4-8
The 12 breakaway clubs
England
Arsenal, Chelsea, Liverpool, Manchester City, Manchester United, Tottenham Hotspur
Italy
AC Milan, Inter Milan, Juventus
Spain
Atletico Madrid, Barcelona, Real Madrid
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Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
UK’s AI plan
- AI ambassadors such as MIT economist Simon Johnson, Monzo cofounder Tom Blomfield and Google DeepMind’s Raia Hadsell
- £10bn AI growth zone in South Wales to create 5,000 jobs
- £100m of government support for startups building AI hardware products
- £250m to train new AI models
