Global Container Shortage – An opportunity for India!
A year after the pandemic broke out, the dust is yet to settle. While the financial markets have swiftly recovered and vaccination drives are securing countless people’s health, the harsh reality is that the significant damage to global trade and commerce is yet to be undone. One such concern is the disruption of maritime trade due to an otherwise barely heeded object – a shipping container!
And no better time to talk about it than right after the Suez crisis – an incident that has temporarily taken away an estimated 2% of containers available globally, almost doubled freight cargo costs in some areas, and caused billions in trade disruptions in the northern hemisphere that will take months to normalize again.
An already growing demand for inter-continental products and services was made worse by the COVID crisis. When lockdowns were imposed worldwide, demands for at-home products and services skyrocketed. Further, a steep and sudden decline in logistical resources globally only added to the woes. The result? Mankind is now facing an acute shortage of shipping containers globally.
Where is the demand-supply chain today? Practicing social distancing, the seaports are working with a reduced workforce, thus operating at limited capacities. Cargo ships are idling for as long as two weeks off the coasts of prominent global ports. The axed momentum has resulted in longer turnaround times for the limited containers that are being used. Such operational challenges are not only increasing the cost of logistics but also slowing the pace of the recovery of economies globally.
What lies for India? India saw a sharp growth in trade in the years leading up to the COVID saga. The ‘Atmanirbhar Bharat’ or ‘Self-Reliant India’ initiative of the Hon’ble Prime Minister, Narendra Modi, resulted in a rise in the manufacturing and production activities under the ‘Make In India’ program, thus, boosting India’s containerized exports. The country currently has around 1.5 million containers at its disposal; however, this corpus is nowhere close to matching the fresh supply-demand imbalance. Hence, to support its ambitious plans of a $5 tn economy and to curb the ongoing container shortage, India stands at the crossroads of a golden opportunity to emerge as an important supplier of shipping containers for itself and the world.
India has plenty of shipyards, which, instead of lying idle, could be deployed to manufacture containers. Indian steel companies are already planning to use this opportunity to enter this space and start their manufacturing. Domestic participation and boost by the government would eventually bring down the cost of procuring containers from other countries such as China, which makes about 90% of the global shipping containers. The government of India has been quick to realize this vacuum and to harness this window, with the help of the Ministry of Ports, Shipping and Waterways, has already set up a committee to study the feasibility of manufacturing containers at Bhavnagar in Gujarat; a pilot project which has already been rolled out.
If scaled up well and in a planned manner, India’s decision to boost container manufacturing will not only reduce the shortage on major routes in and out of India but will also lower the logistics costs within the country.