The world production of shipping containers is piling up in the major ports due to the lack of demand for goods

Global production of shipping containers has fallen significantly as demand for goods fell after the easing of pandemic restrictions and corrugated boxes piled up in major ports.

Figures provided to the Financial Times by Drewry, a maritime research consultancy, show that production of 20-foot equivalent units – the industry standard size for a container – increased by 71 percent between the first quarter of 2022 and the same year 1.06 million has dropped to 306,000 period this year.

The decline marks a significant reversal from two years ago, when container manufacturing boomed in response to a pandemic-driven surge in demand for physical goods, leading to a shortage of rectangular cartons.

However, since restrictions were eased and the economy reopened, demand for exports has fallen, leaving the shipping industry with a container surplus that threatens to overwhelm ports in China, where up to 95 percent of the world’s cartons are produced.

AP Møller-Maersk, one of the world’s largest shipping groups, has said it will halt production of dry containers by at least 2024, but said construction of 20ft boxes could resume sooner than the larger 40ft versions , as demand for the former seemed to be more resilient.

Anne-Sophie Zerlang Karlsen, Maersk’s head of customer supply in Asia-Pacific, said the company also intends to sell or scrap more of its older boxes to benefit from the flooding.

The fall in demand has hit manufacturers hard. Profit of China International Marine Containers, one of the largest crate makers in the country, fell 91 percent year-on-year to RMB160 million (US$23 million) in the first three months of this year.

Sales of standard containers fell 77 percent during that period, the Shenzhen-headquartered company said, blaming a “continuous decline in container trade and insufficient demand for new containers.”

Profit of Cosco Shipping Development, the container maker of state-owned shipping company Cosco, fell 71 percent to Rmb 398 million in the first quarter of this year.

Economists at the World Trade Organization expect export growth to falter this year, suggesting demand for containers will remain weak. Last month’s latest WTO forecasts see trade in goods growing just 1.7 percent this year – compared to growth of 2.7 percent in 2022.

Container shipping lines are already facing a sharp drop in profits after enjoying a record period during the Covid-19 lockdowns, when supply chain disruptions – coupled with booming demand for goods – drove up transport costs.

The boom caused shipping companies to rush to stock up on new containers after pandemic-related shortages in many ports led to shortages of crates for shipping goods from Asia.

According to Drewry, global production in 2021 reached 7.1 million standard-size containers, more than double the production in 2020.

Demand has now fallen so sharply that port owners in the region are facing a new problem of finding space for record numbers of unused containers.

Inventories are now at record levels across the Asia-Pacific region, Karlsen said, adding that “large amounts” of containers are expected to continue piling up at the region’s ports this year.

She said the “lion’s share” of the units stored are 40ft high cube containers, used primarily in the Asia-Europe and Asia-US markets, reflecting weaker demand on those routes. At the same time, there has been a shortage of 20-foot dry containers in the past month, which are in demand in markets like Latin America and Africa, she added.

Container availability in Shanghai, the world’s largest container port, was higher this year than during the spring lockdown of 2022, according to analytics firm Container xChange.

However, Michael Fitzgerald, deputy chief financial officer of Hong Kong-listed shipping group Orient Overseas Container Line, said earlier this month that congestion at Chinese ports had eased “over the past few weeks”.

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