Economies in a Box
I think the recession really is ending – and not for the reasons that most of the pundits tout. Certainly not for the reasons that most politicians use, since they all want to claim credit for ending it. No, it’s all about containers.
Filling up? (photo: steve gibson)
Boxes. When a recession ends, business picks up and boxes begin to move. First, last week, came Federal Express’ most recent quarterly report. The stock market focused on the financial numbers going forward (which missed “expectations”, by the way), but what caught my eye were the positive comments by FedEx execs on what seems a worldwide pick-up in volume. That tells you something positive is happening out there.
Then came an article in the South China Morning Post about a surge in demand for ocean-going containers. This time a year ago, says the article, millions of 20′ and 40′ containers were stacked up in Chinese ports because there were no cargoes to be moved. Now, not only have those containers been pressed into service, thousands of new containers are being built and empty containers in North America and Europe are being brought back to Asia to meet demand. Clearly, this take-off in demand begins in Asia, but those newly filled containers are being shipped out everywhere – which means economies are healthy enough that buying has started again.
The spot leasing rate for containers has risen about a third in Hong Kong since the first of the year. Cosco Pacific, one of the world’s largest container leasing companies (you don’t think Matson and Maersk own all those boxes, do you?), has taken delivery of 40,000 new containers since January 1 and expects to receive another 60,000 containers in the next three months. The first 40,000 cost about $2,200 a box, so that’s a sizable bet that economies are turning up. And the bet gets bigger: demand has driven the sales price of a new 20′ container to $2,800 per container.
It takes a bit longer to put whole container ships back into action, but that is happening, too. A Cosco spokesman commented that, while 10% of the world’s container ships were laid up a year ago, only 4% are laid up now – a significant increase in carrying capacity in a short time.
This doesn’t mean that the danger of a double-dip recession is definitely behind us, but the surging demand for containers does tell us the probability for a double-dip is dropping.
