The universal use of the TEU volume measurement by the container shipping industry provides a simple and powerful means of making across-the-board comparisons, but it can mask some important trends. Analysis of intermodal data shows a long-term move away from the 20-foot containers preferred by inland exporters of typically heavy-loading commodities. Further, the trend has accelerated of late, perhaps telling us something about the nature of the current import surge.
Most ocean carriers and ports provide data on a TEU basis, but the Intermodal Association of North America’s ETSO database provides a monthly view of revenue movements by equipment type and length. Isolating the revenue moves for the major ISO equipment sizes — 20-foot, 40-foot, and 45-foot containers — provides a good picture of the state of the Inland Point Intermodal market (IPI).
When it comes to IPI, it’s a 40-foot world. Thus far in 2020, 40-foot containers comprise just over three out of every four IPI revenue moves, 75.1 percent to be exact. Twenty-footers account for another 23 percent and 45-foot units, a bit player in the IPI world, have generated just 1.9 percent. But this was not always quite the case.
A long-term look at this data shows that there has been a continuous evolution.
The graph tracks the changes in volume by container length over the past 20 years. Volume in the year 2000 is set at an index of 100. Things have changed, particularly since the Great Recession. IPI movements of 45-foot containers have dropped precipitously. These “hi-cube” units are ideal for transporting low-density import cargo, but there is little export cargo with those characteristics. Hence these units are typically returned to origin empty. The steamship lines have therefore evolved an incentive structure to encourage customers to turn the units near the ports and discourage their inland movement, eliminating the need for expensive empty repositioning from the nation’s interior back to the coast. We infer that the import cargo arriving in 45-foot units is often then transloaded into 53-foot domestic containers for onward movement inland.
More importantly, the movements of 20s and 40s, which moved in tight formation during the first decade of the 2000’s, have become uncoupled since the Great Recession. Almost all the growth has been in 40-foot units, while the inland movement of 20s has stagnated. Further, the trend has really accelerated lately. While over the last 20 years, the share of 20-foot containers has declined by an average of 0.3 percent per year, it has plunged 1.4 percent in just the past 18 months.
What’s behind the change?
It’s not entirely clear what is driving the change. It is possible that the equipment makeup of IPI is diverging from that of the ocean leg. But it also might mean that the complexion of our imports has been shifting away from heavy industrial goods toward low-density consumer-oriented items that need the additional cube of a 40-foot unit. That certainly makes sense given the recent divergence of the consumer and industrial sectors of the economy.
Regardless of the cause, however, the change has big implications for inland exporters. Many of these exporters are involved with heavy-loading commodities that require 20-foot boxes. The inland supply of these units is determined by the demand generated by the import markets. There is minimal long-haul repositioning of empty capacity because the low export rates per unit won’t support the expense.
The data shows that the inland supply of 20-foot units has not been growing since 2014, while 2019 saw a big decrease. There were a lot of anecdotes reported in 2019 and the first half of this year regarding tight supplies of export containers. Most recently, it appears the recent import surge has washed a sufficient number of containers inland to meet current needs, and just in time. But the data shows that a long-term trend exists that is likely to result in enduring headaches for exporters.