xChange 'greybox' platform could save carriers millions in repositioning costs

"Song Joong-ki 1" by LGE

A new approach is needed to reduce the enormous costs involved in moving empty containers around the world to match box demand with supply, delegates at the intermodal Europe conference in Hamburg were told this week.

A typical mid-sized ocean carrier will pay up to $500m a year in empty container positioning costs, with a staggering $15-$20bn spent industry-wide, according to Boston Consulting Group (BCG).

BCG told delegates it had studied the positioning costs of 12 global carriers and calculated that deadheading empty containers represented 5-8% of a carrier’s costs.

The standard cost of $300-$400 to reposition a container to China mostly comprises storage, trucking and stevedoring costs, given that they travel free on ultra-large containerships, and BCG said these deadheading costs could sometimes be greater than the headhaul freight rate.

While chronic overcapacity in the liner industry continues, BCG agreed with other analysts that freight rates would stay “on a long-term downward trend”, declining by 1.6-2.6% a year. With lines forced to remain focused on taking out costs, they are fast running out of options.

“Most carriers have worked through waves of improvement programmes,” said BCG’s Lars Kloppsteck, “but some costs are hard to address, like repositioning.”

Mr Kloppsteck, a principal at BCG’s Hamburg office, was promoting the firm’s newly-launched global interchange marketplace for empty containers, xChange.

Mr Kloppsteck said “a new approach was needed in the liner industry” to tackle the management of supply and demand of boxes across the world’s trades.BCG estimates the container imbalance in Europe is 29%, with the majority of boxes needing to be returned to Asia. For Oceania, the imbalance is even higher, at 34%.

Very few regions have a balanced trade, he said.

While Mr Kloppsteck accepted that an interchange of containers, dubbed greyboxes, between carriers was not a new idea, interchange opportunities had usually been pursued through personal contacts and, as such, were “flawed”, often breaking down due to pressure from commercial teams anxious not to lose business to a competitor because of a lack of equipment.

BCG’s xChange was different, he claimed, because its platform served as a “neutral, global clearinghouse for information about container demand and availability, and the potential for interchanges at specific locations”.

According to BCG, 12 carriers have already signed up to the platform, representing around 35% of global container vessel capacity, and the consultant was “in discussion” with other carriers and container leasing companies.

However, BCG admitted that for the platform to succeed, carrier organisations “must be committed to proactively pursuing interchanges with other marketplace participants, even when the sales department would prefer not to”.

In an entirely unscientific straw poll of carriers at the conference, conducted by The Loadstar, it emerged that some felt BCG’s interchange platform was workable, given the urgency to find new cost savings, and others had a “let’s wait and see” attitude.

Container leasing companies The Loadstar spoke to were less enthusiastic, pointing to the highly competitive nature of their business and the complex nature of agreements that include a variety of charges for depot returns.