Logistics News, Port News

Should shipping container production move out of China?

A Container xChange survey revealed scepticism in the industry regarding a production change, but is it a smart idea to move this sector away from China?

The shipping industry has recently been stepping up efforts to manufacture shipping containers outside China, after the COVID pandemic highlighted a reliance on manufacturers in the world’s second-largest economy. 

Manufacturers and government bodies are developing factories across Asia, specifically Vietnam and India,to mitigate an over-reliance on China and help with supply chain issues. 

Container xChange recently conducted a survey involving 1500 supply chain professionalsthat revealed 54 per cent of container logisticsprofessionals doubt the effectiveness of shifting container production away from China in alleviating supply chain woes. 

The survey also delved into concerns about potential cost implications stemming from shifting container production. 

A significant 51 per cent of respondents anticipated that such a transition could result in increased costs in the shipping industry, indicating a strong concern about the financial aspect of the change. 

Container xChange CEO Christian Roeloffs says the repositioning of containers is a more pressing concern than manufacturing changes.   

“In the global trade landscape, it’s not where containers are produced that matters but rather where they are repositioned at the right place and the right time,” Roeloffs says. 

This challenge is further exacerbated by factors such as supply chain disruptions, labour strikes, COVID-19 and the unforgettable incident in the Suez Canal.” 

Why has China been the top choice? 

China is at the forefront of container production globally, contributing to more than 95 percent of the world’s containers.  

In 2021, China produced a staggering 7.1 million twenty-foot equivalent units (TEUs), a substantial increase from the average annual production in the previous decade, which stood at just 2.6 million TEUs. 

One of the main reasons companies manufacture their products in China is because of the abundance of lower-wage workers available in the country. 

China’s business ecosystem of networked suppliers, component manufacturers and distributors have also evolved to make it a more efficient and cost-effective place to manufacture products. 

China also has immediate domestic demand that is noteasily replicated, and Chinese manufacturers generally operate under a much more permissive regulatory environment. 

Where would they move manufacturing too?  

Manufacturers outside of shipping containers have even begun looking to new locations for production. 

Vietnam and India have stood out as strong contenders, with the the capacity to manufacture a significant chunk of the world’s steel boxes.  

Apple recently started producing some of its products in India, with large companies like Nike following suit.  

Sceptics biggest concerns revolve around quality control and the price of goods.  

Non-Chinese containers may come with a higher price tag, primarily because they can’tleverage China’s massive scale to keep costs down. 

While India and Vietnam do present certain advantages, such as the ability to produce smaller batches and customise containers, the extent to which production will shift to India and China remains uncertain.  

The challenge of container repositioning 

The industry is currently facing a surplus of containers, with a 13 per cent boost in capacity in 2021 due to various supply chain issues increasing transit times. 

The shorter transit times that followed and fluctuating demand left the industry with an excess of 13 million containers globally in the spring of 2023.   

The surplus also led to a drop in container rates, about $0.5 to $1 per TEU per day for regular containers, and potentially more for specialised containers like reefers and chemical tanks. 

Roeloffs says that the surplus is a more important matter to focus on, and that discussions regarding production changes shouldn’t be the priority.   

“There was a significant discussion about container scarcity during the pandemic, but it had nothing to do with any geopolitical underlying reasons,” Roeloffs says.  

The only reason, in my view, would be geopolitical risk management — for example you want to hedge yourself against a black swan event where trade relationships with China are sanctioned or the like.  

The numbers don’t lie. While diversifying container production away from China might seem like a great idea, we need to tread carefully. The surplus of containers and the complexities of repositioning containers raise concerns about the effectiveness of this strategy in addressing global supply chain challenges.” 

Previous ArticleNext Article
Send this to a friend