Supply chains updates
Sign up to myFT Daily Digest to be the first to know about Supply chains news.
Chinese manufacturers are pumping out record volumes of freight containers after shippers ordered vast stacks of the steel boxes in an attempt to smooth out disruptions in the global supply chain.
Despite the extra wave of orders, however, shipping executives are warning it will do little to ease the global ocean freight and supply problems as limited availability of containers persists after the surge in online shopping.
The world’s biggest box manufacturers, China International Marine Containers (CIMC), Dongfang International Container and CXIC Group, are struggling to meet demand, even though production has been increased with workers’ hours extended.
“The factories are running pretty hard out,” said Brian Sondey, chief executive of Triton International, the world’s largest container leasing company, which rents boxes to shipping groups.
The big problem is moving containers stuck in the wrong places quickly enough rather than the number in circulation as supply-chain bottlenecks clog up the system.
John Fossey, an analyst at consultancy Drewry, said the number of boxes in circulation globally was “adequate” to accommodate trade volumes.
“It’s more of a logistics issue than a supply issue,” he added, referring to congestion in the supply chain.
Hapag-Lloyd, one of the largest container shipping groups, estimates that 20 per cent more containers are bound in shipments than before the crisis.
Niklas Ohling, who manages a fleet of containers for the German carrier, said there was little sign that containers, which carry everything from garments and bicycles to smartphones, were reaching destinations any faster despite extra supplies.
The industry, which is led by the three big Chinese groups that make about 80 per cent of the world’s containers, is set to pump out a record 5.2m twenty-foot equivalent units (TEUs) this year, up two-thirds on 2020, according to Drewry.
“Never before has the global container industry produced 5m TEU plus in a year,” said Fossey.
Shenzhen-based CIMC, the industry’s largest, last month said its production and sales of containers had set a new record, selling 1.15m dry cargo containers in the half year to the end of June.
This is more than treble the amount in the same period last year, while its net profits soared from Rmb239m ($37m) to Rmb4.4bn ($680m).
The production increases come as container prices have more than doubled to $3,645 per 20ft box at the middle of this year since the end of 2019.
The uptick in demand for boxes has also benefited container lessors. New York-based Triton has spent $3.4bn to expand its assets by 25 per cent this year, while gaining from carriers signing longer leases and soaring second-hand container prices.
In addition, the limited availability of the containers has heightened worries over the dominance of the Chinese producers, with the US Federal Maritime Commission informally launching investigations, according to officials.
Another concern is the quality of boxes flying off production lines after the Chinese groups extended hours and working days.
As the world’s largest exporter, China has a competitive advantage over the manufacture of containers because moving an empty box can amount to a quarter of the cost of making it.
China has dominated the market since production shifted from Japan and South Korea three decades ago.
Analysts say Vietnam has the best shot at breaking the Chinese hold on the market, with India, Turkey and Russia also potential challengers.
Additional reporting by Wang Xueqiao