India’s attempt to become a new hub for manufacturing freight containers is not yet gaining momentum, as Container Corporation of India Ltd (CONCOR), India’s largest buyer of steel crates, laments that the container manufacturing ecosystem is “spending time.” needs” and consequent shortage of containers Containers have become a major “obstacle” in his plan to expand local business to neutralize inertia in export-import trade.
The idea of manufacturing freight containers locally came after India’s export-import trade suffered from a huge shortage of steel boxes as a result of supply chain disruptions caused by the pandemic. It also aimed to reduce India’s dependence on China, the world’s largest container maker, amid a flare-up at the border.
CONCOR placed orders with local firms including Bharat Heavy Electricals Ltd, Braithwaite & Co Ltd, Mazagon Dock Shipbuilders Ltd and APPL Containers Pvt Ltd for the manufacture of around 19,000 containers as part of the Atma Nirbhar Bharat initiative.
“But the development of the ecosystem still needs time. Container production is not going at the pace that we expected and wanted. So there is a shortage of domestic containers,” V Kalyana Rama, CEO and CEO of CONCOR, told analysts during the fourth quarter and full-year earnings release on May 19.
Railway Minister Ashwini Vaishnaw told Parliament in April that CONCOR was “confronted with some”.
Problems in the supply and procurement of domestic containers”.
CONCOR, Vaishnaw said, has ordered 19,000 containers from seven domestic container makers in Andhra Pradesh, West Bengal, Chhattisgarh, Punjab, Maharashtra and Gujarat.
Vaishnaw Lok Sabha announced on April 5 that around 500 containers had been delivered to CONCOR by March 31, 2023.
Stagnant trade and a skyrocketing surplus of shipping containers as a result of the easing of pandemic-era supply chain restrictions have resulted in a collapse in global newbuild container production, which is expected to fall to its lowest level in 14 years, said Drewry Shipping Consultants Ltd , an independent maritime research consultancy based in London.
Drewry estimates that global cartonboard production fell 71 percent year-on-year to 306,000 TEU (twenty foot equivalent units) in the first quarter of 2023, the lowest level since the same period of 2010. However, some recovery is expected for the remainder of the year According to Drewry’s Container Equipment Forecaster, released May 24, full-year production is not expected to exceed 1.8 million TEU, the lowest level since recession-hit 2009.
CONCOR’s Kalyana Rama said India’s export-import scenario is “not very encouraging”.
“Indian exports are under pressure as handicrafts no longer work and exports of goods are lower.
Aside from primary agricultural exports, other exports are down and India is building up a lot of empty container stocks,” he said.
As export-import volumes face headwinds as western economies grapple with a looming recession, CONCOR is banking on domestic trade to boost growth.
“We are doing very well in the domestic sector. This is the third year that we have had good growth in domestic business. We grew by 25 percent on the revenue side and almost 15 percent on the volume side. Also this year (FY24) we are working to grow in the same way. But the biggest limitation is container availability,” explained Kalyana Rama.
The shortage of domestic containers has hampered CONCOR’s plan to expand shipping of cement in steel boxes, a business the company recently got into and has shown good success.
In March alone, CONCOR transported around 3,800 containers loaded with cement last year
That’s around 800 containers.
“The interest is great. Business has stabilized, but the lack of containers is a big problem. So we’re not really pushing it very fast. We need 25,000 more containers. But the Indian container manufacturing industry has yet to gain momentum. So we work in a balanced way,” noted Kalyana Rama.
“Currently we can maintain our supply lines, but to grow faster we need more containers.
So we’re working on different aspects, like renting out some containers,” he said.
CONCOR is also “working” on deploying double-stack container trains in the domestic sector to improve margins.
Despite the slow pace of manufacture and delivery, CONCOR will order more containers to encourage new manufacturers to enter the sector by stimulating interest in the business, he added.
According to Drewry’s Container Equipment Forecaster, this year saw a record return of containers to lessors while shippers were busy discarding obsolete and excess boxes in their own fleets. Currently, the priority for most container owners is to better align their equipment pools with current trade and ship supply parameters and remove obsolete or damaged containers that have accumulated due to supply chain congestion during the pandemic.
Drewry expects these closures in 2023 to be about 2.8 million TEU on a par with the previous year.
Despite high sales in the secondary market, used dry cargo container prices have held up well and are expected to remain stable throughout the year.
As a result, the global container fleet is expected to shrink 2 percent to 49.9 million TEU this year, the first decline in 14 years. Global container shipping trade is expected to remain weak, growing just 1 percent in 2023. However, freight demand is expected to recover in subsequent years as the global economy gains momentum.
This, coupled with a growing shipping fleet, will result in increased demand for newly built shipping containers, with production set to more than double over the next year, according to Drewry’s latest estimates. This will result in modest growth in the global shipping container fleet, which is expected to grow at an average rate of 2.9 percent per year through 2027, according to Drewry’s Container Equipment Forecaster. Source: ET Infra