The Accumulation of Empty Containers in Urban Areas: Policy Implications from a Stochastic Formulation

Abstract

The accumulation of empty cargo containers in urban areas is an important issue for communities and policy makers as these containers seem to restrict the use of valuable land and diminish the quality of life of communities close to ports and storage depots. Different reasons have been offered to explain this accumulation, with no definite answer. This paper examines the validity of the most frequently cited explanations using a stochastic formulation to model the accumulation process over a time-expanded network. To the authors’ knowledge, this represents the first paper dealing with empty containers as a concern for urban planning and policy making. This paper explores the impact that the planning horizon, variability, profit margins, acquisition costs and storage costs have on the accumulation of containers at areas with excess supply of empty units. The analyses suggest that: (1) trade imbalances create the conditions for the accumulation of empty containers, but cost considerations lead shipping companies to eventually store the surplus of empties at nearby urban areas; (2) the purchase price of new containers is not the factor that explains the accumulation of empty containers, though it may become important in the future if purchase prices drop below reposition costs; (3) although there is a need to store empty containers to protect against shortages, the observed accumulation of empty containers at supply areas far exceeds what seems justifiable by the operational needs; and (4) the accumulation of empty containers is thus primarily linked to the relationship between storage and reposition costs, as low storage costs seem to provide a significant financial incentive to accumulate empty containers. The paper argues that part of the problem is that the container industry is not taking into account the externalities they produce, and that this situation could be corrected by taxing empty container storage in an amount equal to the economic value of the externalities produced. Alternative courses of action include the use of land use zoning restrictions, and/or consensus based solutions that lead to voluntary reductions in the numbers of empty containers stored.