If you work in the world of logistics or are generally interested in news about trade, you might’ve encountered the term TEU in one form or another. But what does it mean and why is it important to supply chains?

Twenty-Foot Equivalent Unit - Capacity and Containers

TEU stands for "Twenty-foot Equivalent Unit". A TEU is a standard unit of measurement for cargo. It is most commonly used with maritime shipments but can be found when talking about ground and air transportation as well. 

Its name derives from the standard size of multimodal shipping containers. In general, a shipping container can be divided into two broad categories based on their length: twenty or forty feet. The length can change further but, in the vast majority of cases, will fall in either of these two categories. Their height and width tend to be standardized to ensure containers can be easily interchanged between forms of transportation. 

Therefore, a TEU refers to the space taken up by a single 20 ft multimodal container and such containers can also be known as a TEU container given the metric. If, for example, a ship is loaded up with 12,000 containers 20ft in length, we could say that such a ship is carrying 12,000 TEUs of cargo. A 40 ft container, by extension, is equivalent to two TEUs since the only difference between the two is that one has double the length of the other. When looking at TEUs we don't necessarily know if the containers in question are actually 20 ft in length or 40 ft in length. All we know is the space taken up by such containers.

Quite importantly, TEUs should be thought of as a measure of the volume occupied by cargo and not of its ultimate weight. Since each container could be filled with different objects with a broad array of weights, knowing the TEUs carried in a ship does not equate to knowing the total tons of cargo carried in any given moment. 

What Is TEU Used For?

TEUs are the fundamental unit of measurement for the world of container shipping and logistics. Simply put, they are used to measure the amount of cargo transported every year by ships, trucks, and planes. But, more importantly, they can also be used as a measurement of capacity.

Often times, cargo companies will speak of TEUs not just as the actual number of containers transported, but also as a the total capacity of a ship or a port. Think, for instance, of a modern container ship. Depending on the size of the vessel it could carry anywhere between 500 and 15,000 TEUs. This doesn't mean the ship is actually carrying 500 or 15,000 containers each trip. Instead, it just signals that the ship has the capability of carrying those containers from one port to another. The same occurs when speaking of port capacity. A port with the capacity of handling 20 million TEUs in a year might actually receive significantly less containers than expected.

In the recent history of trade, TEUs have also become a point which companies seek to maximize. Since ships with a higher TEU capacity can transport more cargo with a single trip, they are a great vehicle to maximize potential profits. As such, the last couple of decades have been characterized by an overall pursuit for higher TEU capacity. In the early 1990s, for instance, the largest shipping container was able to carry up to 3,400 TEUs. Today, the largest shipping containers can carry upwards of 24,000 TEUs—a sevenfold increase in capacity.

Largest Vessel by TEU Capacity Over Time

(Source: Port Economics)

How to Calculate TEU?

Since TEUs are such a specific unit of measurement to the world of trade, there is no straightforward way of obtaining the TEUs in a vessel from another unit of measurement. Instead, one has to engage in a manual process of counting, categorizing, and standardizing the containers themselves. 

The first step, then, is to know how many containers were in the ship in the first place. As we know, containers themselves can vary in length so, as we count the number of containers, we must also bear in mind their length to later find the equivalent value in TEUs-

If a container is not precisely 20 ft in length, its TEUs can easily be found by dividing its length by 20, since we know the height and width must remain constant. Thus, a 40 ft container would represent 2 TEUs while a 10 ft container would represent 0.5 TEUs. Only after you’ve found the equivalence in the number of containers to overall TEUs can you add the numbers together to find the total TEUs carried by a vessel.

So, in summary, to know the TEUs carried by a ship you must first know the overall number of containers and their subcategories to then convert them to TEUs.

How Many TEUs Arrive at a Container Port?

The number of TEU containers that arrive at each port varies significantly based on a number of conditions ranging from broad supply chain disruptions to the port’s own capabilities. Since many ports might also be limited in space or resources to expand, their overall capabilities to arrive at large amounts of TEU containers will also be limited. In fact, it’s more common for ports to be able to handle smaller TEU container ships than the ultra large vessels that have become the norm.

In 2023, the World Bank released a study attempting to measure the performance of ports across the world. In that study, over 54% of ports were only able to handle ships carrying 5,000 TEUs or less, effectively excluding the large container ships that became more common with the turn of the century.

Total ports by range of ships attended (2023)

(Source: World Bank)

This doesn't mean that modern ports are ill-suited to handle large amounts of cargo. In fact, the world’s largest port in the world—the port of Shanghai—is estimated to have handled over 47 million TEUs in cargo during 2021 alone. In fact, the ten largest ports together handed over 268 million TEUs of cargo. To put this into perspective, you’d have to perform 11,021 trips with the largest container ship in the world to carry that amount of containers to the world’s largest ports.

Top ports in the world by TEUs imported (2021)

(Source: World Shipping Council)