ALAN PEAT THE GLOBAL container market has see-sawed for the last three years, with overproduction in 2004 seeing massive stockpiles of units sitting waiting for demand to pick up. Most of this oversupply was caused by a burgeoning container manufacturing market in China – which now has more than 90% of the world’s total capacity. After a fairly sluggish 2005 the global dry freight container market showed signs of recovery in 2006, according to Barron Charsley, director of container suppliers and converters, Container World, with twenty-foot equivalent unit (TEU) output growing by about 15% – but still falling short of the highs reached in 2004,. “Uncertain demand and volatile prices were commonplace in 2006,” he told FTW, “with new container prices starting the year at a low, peaking in the middle and falling off again towards the end of the year.” Much of the price increase during the year was a direct result of increasing major raw material costs – including Corten steel (44% increase), plywood and the price of zinc (used in container primer paint) increasing by 150% and adding 5.4% to the 2005 selling prices on its own. Ex factory prices of new dry freight containers in mid-2006 were up by as much as 50% when compared to the lows of 2005, Charsley added. “Although these were partly because of lower production costs,” he said, “the primary reason for the lower prices was that 2.8-million TEUs were built in 2004 – giving an oversupply to the tune of 800 000-TEUs. “This took till early 2006 to be absorbed into the market, because of lower demand during much of 2005.” In an effort to compensate for this market surplus, total TEU production in 2005 decreased by 15% when compared to 2004. “But since then,” said Charsley, “production has risen by 415 000-TEUs a year – leaving total 2006 production only 0.7% below the production high reached in 2004.” At the same time, off-take began an upward shift, with shipowners and container leasing companies again out in the market looking for new boxes The massive shipbuilding splurge of recent times played its part – with the total slot capacity in the global container fleet increasing by around one million TEUs in 2006. This, according to Container World, means a total need for at least two million TEUs - which, when added to demand for replacement containers, indicated that total 2006 demand would exceed dry freight container production by around 8%. Said Charsley: “This demand surplus – when combined with the higher raw materials cost – is likely to stimulate further price increases in the first half of 2007.”
