When Shipping Containers Are Abandoned, the Cargo Becomes a Mystery Prize
(Bloomberg Businessweek) -- A mobile crane, its massive gripping arm raised like a scorpion’s tail, rolls up to a multicolored stack of shipping containers at the Pentalver storage yard near Felixstowe, the largest container port in Britain. The machine grabs the top box, backs up with a beep-beep-beep, and sets it down onto the asphalt with a clang. A worker in an orange safety vest kneels and, with a screeching spray of sparks, saws through the numbered steel bolt that seals the latch. The door swings open, and Jake Slinn, a lanky 22-year-old with a buzz cut and thick-rimmed black eyeglasses, steps forward to peer inside.
Slinn is a cargo salvage buyer. His two-man operation, JS Cargo & Freight Disposal, acquires containers filled with abandoned goods that shipping lines want to get rid of. And business is booming in his line of work. Snarls in the global supply chain have left an estimated 3 million containers idling on ships queued up at ports around the world, according to Niels Larsen, president of Air & Sea North America at DSV, a global transport and logistics company.
“When a product doesn’t reach its destination for a period of time, it often loses the value that it originally had,” says Tom Enders, owner of Michigan-based Salvage Groups Inc. When that happens, customers sometimes refuse to accept the goods; other times, they simply abandon them. In either case, “shipping lines can contact a company like ours to recover as much value from it as they can,” he says.
Stranded shipments lose worth in a number of ways. Food and other perishables can spoil; seasonal merchandise such as electric fans might not reach a wholesaler’s hands before the weather turns; and machinery intended for a construction project might arrive too late for the job. Even goods that are perfectly fine can become effectively worthless if the owner’s unable to retrieve them before storage fees exceed their value. “You leave a container on the quay for six months, you don’t want to know what the bill is—it’s frightening,” says Paul Vidler, managing director of Crown Salvage in the U.K.
Shipping rates have more than doubled since April, and containers are in short supply around the world, so sea freight lines are eager to get them back into circulation as quickly as possible. But if they’re full, all they can do is sit. “No one in the supply chain makes money when stuff is sitting idle,” Enders says. “They make money when they’re moving stuff.”
That’s where salvage buyers come in. Depending on what’s in the container, they’ll either pay for it or charge a fee to properly dispose of it. “We’re a problem solver,” says Slinn, who’s turned over more than 200 containers this year. “We’re dealing with these shipping lines who don’t really want this problem. They want the containers back empty.”
It’s hard to say exactly how much the total global cargo salvage business is worth, because it’s highly fragmented and most participants are privately owned. Houston-based Salvex, one of the 10 or so main players in the U.S., boasts that it has $5.2 billion worth of goods for sale on its online marketplace, though not all is maritime container salvage, as it also disposes of excess inventory.
The size of the buyers’ profits hinges on how cleverly they can get rid of what they acquire. When the goods are worthless or dangerous they take a cut of the disposal fee; when the goods have value they make a profit on the resale. Each case is different, a fresh test of their connections, ingenuity, and intuition. The container Slinn is inspecting at the Pentalver yard came with a manifest that says only “household goods [car].” But what does that mean? “It’s like Storage Wars,” Slinn says, referring to an American reality-TV show. “You know, you crack the doors open and it’s something completely different than we were expecting. So it’s a challenge. You’re thinking, ‘Right, where can I send this? What can I do with this?’”
As the light of a drizzly November afternoon filters through the opened doors, Slinn gets his answer. Inside sits a seven- or eight-year-old Citroën sedan lashed in place with yellow webbing. The car’s interior is stacked with clothes and housewares. The owner appears to have been relocating from Africa to the U.K. but then vanished. Slinn says he thinks the vehicle will have some value, even without a legal title or a set of keys; he’ll sell it to a dealer who specializes in such things, and anticipates making a small profit.
Because 90% of the world’s goods travel by ship, just about anything can wind up in the hands of a salvage buyer. Inside Slinn’s one-room office in a nearby industrial park are samples of some recent acquisitions: boxes of aluminum take-out pans, bagged and labeled rice, faulty electric scooters. (He kept no samples from another haul he disposed of—a shipment of defective breast implants.)
This morning he takes on a load of pumpkin seeds from China that’s gone to rot; a few hours later he acquires 6 tons of cheese—what kind of cheese and how edible, he’ll have to wait and see. Slinn is confident he’ll find a customer for the rice, which is packaged for retail sale and approved by health inspectors; the pumpkin seeds and cheese are probably fated for AD, or anaerobic digestion, a process that generates methane for power plants.
The U.K. is ahead of the U.S. on the cargo salvage surge, because in addition to Covid it’s been hit by two other whammies: Brexit and the six-day blockage of the Suez Canal by the Ever Given back in March, which didn’t affect U.S.-bound shipments as much. “We’ve never been so busy as we are now,” says Vidler, who’s been in the business for 45 years. “We’re getting absolutely inundated.”
U.S. cargo salvage buyers expect the market on their side of the Atlantic to catch up. Ben Reynolds, the director of transportation abandonment at Salvex, says an upswing in volume “is about to come. Containers are backed up, and you’re going to start having people not paying for them.” He says that while the situation at Los Angeles and Long Beach and other ports is a “nightmare” now, the snarls will get worse during the Christmas rush and persist an additional six months after that.
Slinn started his company three years ago from his bedroom in his parent’s house and was still getting established when Covid hit. “At the start, we were panicking,” he says, “thinking, you know, ‘Is our business going to survive?’” Instead, the massive economic disruption led to widespread abandonment of shipments, and his business thrived. Today, Slinn has the exclusive U.K. contract to handle unwanted containers for one of the world’s biggest shipping companies, whose name he cannot divulge. With full-time help from his older brother and part-time help from his mother, he handles 5 to 10 containers a week, with annual revenue of about £500,000 ($666,000). Next year he expects that figure to reach £1 million.
But the boom times may not last much longer. Supply chains should smooth out as vaccinated consumers in the U.S., Europe, and elsewhere shift their purchases from goods back to services. That’s already starting to happen—and one reason world shipping rates have started to come down. Of course, the new omicron variant could delay a normalization if it leads to new rounds of lockdowns.
Slinn isn’t worried. He says there will always be unwanted containers to deal with. He recently snapped up a shipment whose fate had nothing to do with shipping delays. The buyer rejected the consignment of high-grade leather—intended as wall paneling for a private yacht—because it was creased. Slinn had only a handful of photos to go on when he made his bid, but his gamble paid off, and he wound up flipping the lot to Vidler for a tidy profit.
“We’re a one-stop shop,” Slinn says. “If it’s food waste, we can get rid of it. If it’s clothing for resale, we can buy it. And that’s what our customers want—someone to come in and take the problem off their hands, so they haven’t got to deal with it.”
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