In a recent Commerce Ministry review meeting, Indian exporters voiced their concerns about a sudden shortage of containers. This issue, they say, stems from structural weaknesses that have plagued Indian exports since the COVID-19 pandemic. Now, as the European Union’s 37.6% tariffs on Chinese Electric Vehicles (EVs) take effect and the US prepares to implement similar measures, the container shortage is intensifying, impacting traders globally.
The Trigger: Tariff Hikes on Chinese Goods
Indian exporters are finding it increasingly difficult to secure containers for their goods. The primary cause? An increased demand for containers by Chinese exporters. Facing steep US and EU tariffs — up to 100% on EVs and 50% on semiconductors — Chinese exporters are rushing to ship their products before the tariffs hit. This surge in demand from China is depleting the already limited supply of containers available to Indian exporters.
The Red Sea Crisis: A Major Contributor
The ongoing Red Sea crisis has further exacerbated the container shortage. With the shipping route under blockade and frequent attacks by Yemen’s Houthi rebels, traffic through the Red Sea has plummeted by 90% compared to last December, according to the US Defence Intelligence Agency. This has forced many ships to take the longer route around the Cape of Good Hope, extending voyage times and tying up more containers. Additionally, port congestion has reached an 18-month high, with 60% of ships waiting at anchor in Asia.
Unprecedented Shortages: A Unique Challenge
While tariff hikes between the US and China have been a recurring theme, the current container shortage is unprecedented. Under President Joe Biden, the US has maintained Trump-era tariffs and targeted the rapidly growing EV market. This has created a sense of urgency among Chinese traders, who are facing significant overcapacity issues and the loss of major markets like the US and EU. Other countries, including Canada and Indonesia, are also considering higher tariffs on Chinese goods, further straining the container supply.
Dependence on China for Containers
A key underlying issue is India’s heavy reliance on China for container manufacturing. China dominates the global container market, producing 95% of the world’s large steel boxes. This monopoly is maintained by a few heavily subsidized state-owned enterprises, raising security concerns in the US, EU, and India. Calls for domestic container production in India began after the COVID-19 pandemic, mirroring US efforts to reduce reliance on Chinese containers and cranes.
Efforts to Boost Domestic Container Production in India
In 2021, The Indian Express reported that state-owned Braithwaite and Bharat Heavy Electricals Limited received orders from Container Corporation of India (CONCOR) to develop and produce 1,000 containers each. However, progress has been slow. Railway Minister Ashwini Vaishnaw informed Parliament last year that CONCOR faced issues with the supply and procurement of domestic containers. Despite placing orders for 19,000 containers from seven indigenous manufacturers across India, only about 500 containers had been delivered by the end of March 2023.
Conclusion: Navigating the Container Shortage
The container shortage is a complex issue driven by tariff hikes, geopolitical tensions, and heavy reliance on Chinese manufacturing. For Indian exporters, addressing these challenges will require both immediate measures to secure more containers and long-term strategies to boost domestic production. As global trade dynamics continue to evolve, staying agile and prepared will be key to navigating these turbulent times.
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