Record freight container production fails to alleviate supply chain crisis

Supply chain updates

Chinese manufacturers are pumping record volumes of freight containers after shippers order vast stacks of steel crates in a bid to ease disruptions in the global supply chain.

Despite the additional wave of orders, however, shipping officials warn that it won’t do much to alleviate global ocean freight and supply issues, as limited container availability persists after the surge in online shopping. .

The world’s largest box manufacturers, China International Marine Containers (CIMC), Dongfang International Container and CXIC Group, are struggling to keep up with demand, even as production has increased with the extended working hours.

“The factories are running at full speed,” said Brian Sondey, managing director of Triton International, the world’s largest container leasing company, which leases boxes to shipping groups.

The big problem is moving jammed containers to the wrong places rather quickly enough rather than the number in circulation, as supply chain bottlenecks clog the system.

John Fossey, analyst at Drewry consulting firm, said the number of boxes in circulation around the world was “adequate” to meet trading volumes.

“It’s more of a logistics issue than a supply issue,” he added, referring to supply chain congestion.

Container ships have run aground at sea as the global shipping and supply chain crisis delays deliveries and puts considerable pressure on logistics groups © Mario Tama / Getty

Hapag-Lloyd, one of the largest container shipping groups, estimates that 20% more containers are tied in shipments than before the crisis.

Niklas Ohling, who manages a container fleet for the German carrier, said there were few signs that the containers, which carry everything from clothes and bikes to smartphones, were reaching destinations faster, despite additional supplies. .

The industry, which is led by the three big Chinese groups that make about 80% of the world’s containers, is expected to pump a record 5.2 million twenty-foot equivalent units (TEUs) this year, up two-thirds from compared to 2020, according to Drewry.

“Never before has the global container industry produced more than 5 million TEUs in a year,” said Fossey.

The industry’s largest, Shenzhen-based CIMC said last month that its container production and sales set a new record, selling 1.15 million dry cargo containers in the half-year ending in late June. .

This is more than triple the amount for the same period last year, while its net profits have increased from Rmb 239 million ($ 37 million) to Rmb 4.4 billion ($ 680 million).

Production lines in China are working hard to manufacture freight containers © Shen Chunchen / VCG via Getty

The production increases come as container prices have more than doubled to $ 3,645 per 20-foot box in the middle of this year since the end of 2019.

The increase in demand for cartons also benefited container rental companies. New York-based Triton has spent $ 3.4 billion to expand its assets by 25% this year, while benefiting from longer leases signed by carriers and soaring container prices. opportunity.

In addition, the limited availability of containers has heightened concerns about the dominance of Chinese producers, as the U.S. Federal Maritime Commission has informally launched investigations, officials said.

Another concern is the quality of the boxes coming off the production lines after Chinese groups have extended working hours and days.

As the world’s largest exporter, China has a competitive advantage in container manufacturing, as moving an empty box can be a quarter of the cost of manufacturing it.

China has dominated the market since production left Japan and South Korea three decades ago.

Analysts say Vietnam has the best way to break China’s grip on the market, with India, Turkey and Russia also being potential challengers.

Wang Xueqiao’s Additional Reports

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