Realising the Rough Road Ahead for India’s Container Manufacturing Dreams

A total of 96% of world’s shipping containers are manufactured in China. The neighbouring dragon clearly enjoys its monopoly on the global container manufacturing business. However, the new India with its ‘Atmanirbhar’ and ‘Make-in-India’ ideologies looks to not only fulfill its domestic container needs but also stand tall against China in the global container manufacturing business. The pandemic, which strained the maritime sector came knocking at India’s door as an opportunity to scale and establish itself as a container manufacturing hub. We, in this story, embrace India’s journey of becoming a container manufacturing hub while trying to understand the challenges and required support to realise the vision.

The acute shortage in shipping containers after the pandemic related surge in demand has put pressure on existing capacities. While the issue seems to be easing in the West after almost two estranged years, the crisis of container shortage still looms large on the horizon. Trying to flip the crisis into a pool of opportunity, India is looking forward to eliminate its dependency on China, and become a container manufacturing hub – taking another step towards actualizing its vision of an Atmanirbhar Bharat.

An increase in trade agreements across nations, expansion of the e-commerce industry, digitization in container shipping, and rising demand for specialized containers has valued the Indian container market size at USD 10.3 billion by 2028, with an expected growth rate of (CAGR) of 1.7% during the forecast period, states Grand View Research.

 Further, fuelled by an increase in demand for commodities and rapid urbanization, the container market of India requires significant developments in commercial vessels and innovation of cargo ships equipped with the latest technologies such as navigation systems, advanced sensors, and other components.

The establishment of the nation as a container manufacturing hub will not only bring opportunity to eliminate India’s dependency on China – making it Atmanirbhar for its growing demands – but it will also prop India as China’s rival, especially when the global community looks at have a China plus one strategy for importing goods.

Further, “Container manufacturing in India is really a solution to meet the business requirements and will eliminate dependency on China. There is a very high demand in the market specially when break bulk cargo has been converted from a traditional mode of transport to containerised mode. There is good volume of business available and manufacturers/suppliers of commodities like cement, food grains, fly ash etc. are eying for a solution which can provide door to door service without intermediary, to prevent wastage during handling of the same,” said MK Nabi, Former Group General Manager, Container Corporation of India (CONCOR).

At present the nation is home to only a handful of small manufacturers who fulfil the demand for smaller rail operators and shipping operators with minimum requirements. The Container Corporation of India Limited (CONCOR) – India’s largest container fleet operator with 37,000 containers – has its entire fleet imported from China. The company has a requirement of around 50,000 containers in the next three years.

In light of this, the Centre has, on many occasions, put forth its intention of boosting container manufacturing activity in India with a cluster-based manufacturing approach, and commenced work with towards the same with a well-drawn roadmap.

 But how does the road ahead for India looks like?

India’s very nascent container manufacturing industry, although showing start-up like enthusiasm, has to face humongous challenges before it can establish itself as a direct competitor of China and a manufacturing hub.

The Challenges:

Price – China’s huge economies of scale give the neighbouring, or rather the potential rival, an upper hand over India, making price as the biggest differentiator between Indian container manufacturers and their Chinese counterparts.

Compared to the Indian manufactured containers, which cost anywhere about INR 1.46 lakhs a box, the containers from the dragon come at a much competitive price of INR 73,000 a piece. Who would want to pay more than a lakh for a container? Thus, Indian players are often put out of business.

The huge gap in cost can be attributed to several factors which include cost of raw material like Corten steel – which is 50% higher in India, the cost of container design approvals and licensing – which in India costs about INR 4,500- 5000 per container, and lack of production of A-grade Corten steel (which is used for international shipping and repairing of damaged cargo containers).

Mr Nabi, agreeing to the challenge of cost faced by India, says that a steep hike in ocean freight and delay in availability of slots in vessel could mitigate the price difference.

Scaling and expanding:

Although not rocket science, container manufacturing can still be complex, considering the approvals, testing and certifications. This process, which involves cutting, bending, and welding of steel plates; with approvals before commencing manufacturing; a tedious testing process including 24 parameters; approvals on every new design; and licensing, is long haul for developing portfolios as per consumer demands and scale. Dominating the market, China an established player has already about 900 different containers.

“PLI will definitely help the industry bloom in the initial stage and then the industry will chart its own path. It will attract more organizations and bring in healthy competition. The subsidy will automatically reduce the input cost and help bridge the gap between you and the price of your competitor,”Rudra Shriram, Director, DCM Containers (DCM Hyundai)

This is an abridged version of the original interview which was published in the December edition of the Logistics Insider magazine. To read the complete Feature, click here.

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