Container Self-sufficiency Key for India’s Trade

India, a South Asian giant and BRICS member with great export ambitions, has just started taking baby steps towards attaining container self-sufficiency. It is surprising to learn that India currently does not have any worthwhile container manufacturers. After suffering massive disadvantages due to container shortage during the pandemic, import-dependent India zeroed in on undoing this void and reviving container manufacturing competencies which died down two decades ago. Let us learn more about the container manufacturing journey of India.

India has just started taking baby steps in building a robust container ecosystem, starting with indigenous manufacturing competencies. Until recently, India was almost entirely dependent on China, the world leader in container manufacturing.

This strategy of import dependence exposed the vulnerabilities, especially at a time when China itself suffered container manufacturing slowdown due to the pandemic, including suffering box production and sales drops in 2019.

In the second half of 2020, during the peak of the pandemic, an unexpected trade boom gave rise to unprecedented demand for containers, catching many Chinese producers by surprise. Covid-19 threw nearly 25 million containers haywire from their usual trade lanes.

A Bloomberg report highlighted that there was a surplus stock of up to 3 million empty TEUs at Chinese ports by March-end 2020 and another 1.2 million under storage with container manufacturers.

Consumers in the US and other countries started heavily ordering online for computers, work equipment, etc. taking everyone by surprise and inflated the demand for containers. Despite raising production to meet this demand, shortages continued to persist even as freight rates soared.

India’s Container Crisis

According to a recent BusinessLine report, India’s trade massively suffered because of container shortage due to the Coronavirus pandemic, Suez Canal blockade in March 2021, and acute congestion at American and European ports. These developments were further aggravated by the Russia – Ukraine war.

Considering these kinds of unexpected global contingencies pushing India to the corner, there arose a need to resurrect container manufacturing, and thereby making Indian trade immune to external shocks.

In 2021, there was a proposal to establish a container manufacturing ecosystem at Bhavnagar in Gujarat. However, these plans continue to remain on paper.

Chinese Economies of Scale Cost Indian Players‍

The BusinessLine report noted that India was one of a few countries manufacturing container nearly 20 years ago with players such as Balmer Lawrie (Chennai and Kochi), DCM Hyundai (Chennai) and HIM Containers (Kolkata) but all of them shut down, except DCM producing some local containers in Delhi.

Meanwhile, China emerged as a global container powerhouse, enabled by its cheap labor, plentiful availability of raw materials, capability to swiftly scale up, and achieve economies of scale.

Compared to India-manufactured containers which were costing up to Rs 146,000 (Rs 1.46 lakh) a box, Chinese containers were coming at a competitive price of around Rs 73,000 apiece, forcing Indian players out of business.

For economical container manufacturing, experts believe India should emulate China by employing scrap as a raw material. According to industry experts, China managed to become the top producer of ISO containers by virtue of becoming a global steel recycling hub.

Ennarasu Karunesan, a maritime and port expert, observed that India can become competitive but first it should emerge as a larger steel recycler.

Container-xchange observed that imported containers from China are 40 percent more expensive and went on to project that India will need at least 60,000 new boxes in the next half decade.

‍Exports Incentivize Container Manufacturing

For a country, attaining economical container manufacturing competencies is more feasible when exports outperform imports. When there are more exports, a given set of containers manufactured in a country will carry those products and merchandise outside the country as exports, instead of going empty.

One of the main reasons why China managed to monopolize container manufacturing was because it had humongous amounts of merchandise to export to the world, requiring millions of boxes and thereby ruling the container world.

According to Jagannarayan Padmanabhan, Practice leader and director, Transport logistics and Mobility, Crisil, China enjoyed a well built and all round ecosystem to ace container manufacturing.

Padmanabhan highlighted that China’s labor productivity is far better when compared to India, including financing terms being better and robust. He also noted that India should produce steel at competitive prices and offer fiscal benefits for plant and machinery to resurrect container manufacturing.

Long Road Ahead

After many years, India is witnessing some green shoots in the container manufacturing ecosystem. In 2021, Jindal Steel & Power Ltd (JSPL) showed interest to establish a container manufacturing unit at Paradip in Odisha, with a plan to produce up to 50,000 containers a year.

It was also reported that Tata Steel was receiving enquiries from wagon builders interested in manufacturing containers and scouring for partners to manufacture them.

Container Corporation of India (CONCOR) recently floated a tender to Indian companies for manufacturing 6,000 containers which resulted in Brathwaite and the Bharat Heavy Electrical Limited (BHEL) qualifying. DP World has also placed orders with public sector entities for containers.

According to Container-xchange, Braithwaite & Co has earmarked $6.5 million as capital expenditure for expanding container manufacturing. Container-xchange has listed BHEL, Braithwaite & Co, DCM Shriram, JKT, AB Sea Container and Kalyani Cast Tech Pvt Ltd as some manufacturers of containers in India.