What is container imbalance in shipping industry?
India’s exports have bounced back rather spectacularly, said Maersk, the world’s biggest container shipping line. Between July and September, India’s export volume grew 24 percent; at the same time, imports reduced by 28 percent. In October, while exports registered a 5.4 percent fall, imports registered an even higher fall of 11.26 percent.
Well, rising exports and falling imports should be good news for any country, however, it is not so good when the country doesn’t have enough containers to carry out the said exports.
“A sudden improvement in exports and a slump in imports, especially from China, have created a shortage of containers for exports,” said industry experts and company executives.
“The waiting time for access to a container for exporters is now two-three weeks, compared with a maximum of four days earlier,” they added.
India is facing a container shortage.
For shipping products, shipping lines use containers, and the prices of shipping containers to countries such as the US and Africa have more than doubled in the past few months. There is a three-week backlog to secure a booking at some of the Indian ports.
As we mentioned earlier, India is keen to export, but we don’t have enough containers to ship.
Usually, the containers that carry a consignment a country expects to use those containers to bring their consignments back to India. And that makes sense; why should shipping companies bear the cost of sending and receiving empty containers?
So when exports match imports, there is no problem, as they have never been before now.
But what if the destinations don’t have anything to send back? The companies wouldn’t want to ship empty containers back to India. This way, containers pile up at one location while other locations face scarcity. This is called container imbalance.
If a country still wants containers, they have to pay higher prices.
When the lockdowns were at their peak and trading was down, the shipping lines also had to cut the capacity, and ally transportation systems like trucks were also unavailable.
Now when our exports rebounded, and imports fell, the containers piled up in some ports and became scarce in others.
“As a result, the shipping lines which until July 2020 used to ship out empty containers from India, had to start repositioning empty boxes into the country and move them inland to demand locations at a huge cost for the shipping lines,” Container Shipping Lines Association (CSLA) executive director Sunil Vaswani told ET.
Moreover, because of the worsening trade relations with China due to the fall out between India and China, the shipments took longer to process.
The other side of the story
While India is fighting a pandemic and a shortage of containers, China is enjoying the post-pandemic time and a surplus of containers.
Despite being a manufacturing hub, and exporting more than India does, it is not facing shortages.
This is because China started opening up while the rest of the world was closing down. So the containers had nowhere to go but to end up in China.
But India could not benefit from this, in spite of being a trade partner with China. The reason being coronavirus and border fallout. The restrictions resulting from the military level tensions reflected on the imports. Since India wasn’t importing anymore, it couldn’t get containers from there either.
Other factors causing the shortage
Container shortage is not limited to India; it is a global issue since containers are a part of the global cycle.
Congestion at transshipment ports of Colombo, for instance, is adding to the lead time. The railroad system in the US is congested, further leading to delays.
Moreover, shipping companies themselves had cut down their capacity by some 25 percent on the backs of low demand due to the pandemic.
Between March 23 to April 15, no containers were cleared, which further exacerbated the issue.
Vessels being quarantined, additional checks on Chinese shipments and an overall negative outlook for China worsened the issue.
Carotar rules implemented by the Customs to check the stock of the importers have caused further delays in shipments by delaying the assessment of bills of entry. Some technical glitches in the clearance procedure implemented by customs officials made the issue worse.
What is the scene now?
CLSA is working with the government to resolve the issue. It has suggested the railways move containers from coast to inland free of cost to reduce cost burdens on exporters. In the longer term, however, the government can encourage local businesses to manufacture containers.
The issue has also kicked off the clearing of 50,000 long-standing containers that have been around for years. The contents of the containers would be auctioned, and the containers would be sent to shipping lines.
It has also suggested reducing the quarantine period to seven days for Chinese shipments.
Besides, shipping companies have been trying to optimize container repositioning strategies for quite some time now.