The Growing Cost Burden of Empty Repositioning for Ocean Carriers

A new analysis from Sea-Intelligence shows the ratio of empty container movements is growing faster than full ones, significantly increasing empty repositioning costs for carriers—a problem exacerbated by the Red Sea crisis.

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Container vessel (Photo: Maritimegateway)

The fact that global container volumes have remained above 16 million TEU for three consecutive months has led to a less-noticed consequence: a parallel rise in the movement of empty containers. And while the cost of repositioning empties has always been a challenge for carriers, the Red Sea crisis has caused these costs to increase significantly.

New research from consultancy Sea-Intelligence shows that since 2019, the share of empty container movements within the total number of container shipments has been growing at a faster rate than that of full containers.

Based on TEU-miles – a metric that accounts for travel distance – Sea-Intelligence found that empty containers accounted for a full 41% of all container movements in July, a sharp increase from 31% at the beginning of 2019.

However, Sea-Intelligence argues that this rising share is primarily due to growing trade imbalances during this period, rather than the Red Sea crisis itself.

"The trend is relatively unaffected by the Red Sea crisis," the Sea-Intelligence report states. "Basically, indicating that the shifting of trade imbalances is relatively evenly split across trades which are, and are not, impacted by the Red Sea crisis."

The consultancy further explained: "The present situation is that for every 10 miles a full container is shipped, there is now a need to ship an empty container 4.1 miles - sharply up from "just" 3.1 miles in 2019, before the pandemic market disruptions."

Source: Sea-Intelligence

The Real Impact of the Red Sea Crisis

So where has the Red Sea crisis had an impact? It is in the total distance that empty containers must travel, which has increased by 20% since the Houthi attacks began.

"Clearly, the Red Sea crisis has made a strong impact on the average sailing distance for an empty container, showing that it is not just a relative increase versus the full loads, but also an additional absolute increase in the work needed," said Sea-Intelligence. "Consequently, the data also clearly illustrates an increasing cost pressure related to the movement of full containers, as the empty movement costs will have to be allocated to the full containers."

This places carriers in a dilemma. On one hand, the Red Sea crisis helps absorb a large amount of vessel capacity, which helps to prop up freight rates that might otherwise have collapsed. On the other hand, it increases the cost of repositioning empty containers. This may be one reason why CMA CGM has been keen to send its vessels through the Suez Canal on backhaul voyages when they deem it safe.

For other carriers, there is a "silver lining" in that whenever the Suez Canal fully reopens, although they will face a potential capacity shock, at least the cost of repositioning empty containers will decrease.

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