Box manufacturing: Now or never

V Sajeev Kumar September 19 | Updated on September 19, 2021

Move prompted by container shortage and surge in freight rates

With India gearing up for container manufacturing under the ‘Atmanirbhar Bharat’ initiative, industry experts are pinning hopes on the success of the plan.

The ongoing shortage of containers faced by shippers and the resultant hike in freight costs have prompted the government to pursue manufacturing boxes in the country.

Currently, India is dependent on China for its needs.

Demand shoots up

The rising trade is also an indication of high demand for boxes. By 2026, about 250,000 new containers will be required by the trade at an annual addition of about 50,000 containers a year, lending a competitive edge to container manufacturing firms, says experts.

However, a few in the container industry are looking at the plans with cautious optimism, citing the closure of all major container manufacturing facilities in India some 20 years ago, including the one owned by Balmer Lawrie in Aroor near Kochi. The uneconomical operation due to high raw material import costs, lower exports coupled with competition from China forced the shuttering of these facilities.

But India’s story is vastly different today, given the rising domestic demand which augurs well for the requirement of more boxes across transport modes such as coastal shipping, road or rail transport, a shipping industry official said.

Bijoy Paulose, Chairman, VS&B Containers Group which owns a fleet of containers said container manufacturing would be a viable business proposition today due to surging domestic cargo movement. However, the production facility should be centred around those ports where exports exceed imports. The locational advantage is a major contributing factor for the success of container manufacturing in view of the rising export demand. More imports would lead to rise in empties unless there is matching cargo to ship.“The ports in Gujarat such as Mundra can be an ideal location because of rising exports rather than imports,” he added.

The raw material availability is also a critical component as the US patented Corten steel is used, which is not produced by Indian steel manufacturers.

Hence, there is a need to depend on imports, which adds to the cost of manufacturing. The rest of the items that are required such as flow boards are not difficult to procure.

Countering the market

Paulose said the government should also come up with incentives for domestic container manufacturing and facilitate an export surplus regime to create demand for more boxes.

Short-term manufacturing may not be a solution to overcome the crisis as it needs investment in new machinery, says S Jeevan, Chairman of the Kochi-based Samudra Shipyard.

“If we are unable to match international price and quality, container manufacturing will become a non-performing asset,” he added, citing the Chinese strategy to become a monopoly in the business by buying old containers, recycling and replacing them with new ones with state subsidy.

The setting up of a container manufacturing unit would take a few months. After establishing the infrastructure in about six months when the situation returns to normal, the Indian built containers may not find takers, as Chinese boxes will flood the market, a second shipping industry source said.

“India does not have a significant fleet of container ships. Almost 90 per cent of the cargo to and from India is carried on foreign ships. Without our own ships, we cannot counter the market and help cool the freight rates,” the source added.

Published on September 19, 2021

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