Why do Shipping Container Prices Change Over Time?
In the past couple years Sigma, alongside many of our customers, learned that like many other consumer products, shipping container prices are surprisingly sensitive and tend to change over time. Like the general inflation of goods and services we as consumers experience everywhere, the container market prices are volatile and can easily change even on a month-to-month basis.
This constant change can be due to a mix of different factors, including changes in supply and demand, changes in the cost factors such as the raw materials and transportation fees, and even changes caused by global events.
Factors of Supply and Demand
In general, market pricing, which is the determined price of a product or service, is determined based on supply and demand in the market. For shipping containers, when there is high demand and limited supply, the shortage causes the price of containers to increase. On the other hand, when there is a low demand and a surplus of containers, the surplus causes the price to decrease.
Over the past 3 years, we’ve witnessed a persistent trend of shipping container shortage. By understanding the law of supply and demand, we’ve worked alongside our customers to try and stabilize container pricing. For example, Sigma has practiced shipping container stockpiling in order to provide a price buffer to our customers. Some customers have also tried to wait for the container prices to drop. We’ve tried our hardest, but learned that our efforts are a small drop in the bucket to the bigger global economy. While we were initially able to hold prices at bay, Sigma eventually had to adjust the pricing of our for sale and rental containers to be consistent with the true market value.
Factors of Costs
Raw Materials and Manufacturing
Let’s take the consideration of just the shipping container itself. Like its other name, “Steel Container” suggests, the main raw material for a shipping container is corten steel. The price of steel would then directly impact the pricing of shipping containers. When the cost of raw materials increases, this drives up the cost of manufacturing the containers, leading to higher prices for the market.
On top of the cost of the materials, factories would add in the labour costs to manufacture the boxes. If you would like to learn more about how shipping containers are made, please refer to our past blog here. (How Are Shipping Containers Made? | Sigma Container Corporation)
As there are currently no shipping container manufacturers in Canada, every shipping container you see in Canada has made a long journey along overseas shipping routes. Transportation costs from the manufacturer to the port, from the port to the customer, any changes in this delivery chain can impact the price of containers.
Reflect back to the Suez Canal Obstruction incident of 2021 where a ship carrying shipping containers was stuck for 6 days. If anywhere along the transportation chain gets bottlenecked, that will ultimately influence the market pricing. An increase in transportation delays and costs would lead to higher prices.
The most recent factor to note about transportation fees is the spike in the price of fuel. The increase in diesel prices has led the trucking industry to also increase prices, leading in turn to increase transportation costs on the supply route of these containers.
Factors of Global Events
Global events can also affect the price of shipping containers. Not just global economies of recessions that correlate to lowering demand, but events such as natural disasters, the Covid-19 pandemic, and the Ukraine-Russia war also made an impact.
Covid-19 had a significant impact on the shipping industry and the price of shipping containers where we saw large fluctuations of pricing. In the beginning of the pandemic, it halted global trade and as mentioned earlier, any bottleneck in the delivery chain can increase pricing. At the same time, the start of Covid-19 also led to a decrease in demand for containers because of the lockdowns and restrictions on movement.
As the pandemic continued, the industry continued to face multiple challenges. Other than the mentioned disruptions of supply chain and lockdowns, there was an increase of costs impacting production, and a shortage of containers that more than doubled the cost.
Another global event that had less impact is the ongoing Ukraine-Russia war. The main impact that it has on shipping containers is the supply route. For example, if companies are concerned about the safety of their cargo or supply route, they may have to go around any conflict areas, which would then cost more in transportation.
Shipping containers are something used on a worldwide scale.There are many factors that can influence the market price of these containers. The price of these containers are mainly determined by the ever changing supply and demand, changes in costs of manufacturing and transportation, global events, or a combination of these and other factors!
CONTACT US TO LEARN MORE
Whether you’re ready to purchase or rent a shipping container or are just starting to think about it, we’re here to help! Here at Sigma, we are dedicated to helping our customers gain clarity to the container they are purchasing so that they can make an informed decision. Call Sigma Container Corporation at 1-877-225-7765 or contact us online to get started.