Why in news?

India and global traders are grappling with severe container shortages as the European Union’s 37.6% tariffs on Chinese electric vehicle (EV) imports begin, preceding upcoming US tariffs.

At a recent Commerce Ministry review, Indian exporters highlighted that container shortages, a persistent issue since the COVID-19 pandemic, are exacerbated by structural weaknesses.

The Red Sea crisis and renewed US-China trade tensions have further increased ship voyage times, intensifying the shortages.

What’s in today’s article?

• Reasons behind the container crunch
• Container production in India

Reasons behind the container crunch

• Steep US and EU tariffs on Chinese products
  • Indian exporters face severe container shortages due to heightened demand from Chinese exporters aiming to beat steep US and EU tariffs on products like electric vehicles (EVs) and semiconductors.
  • The US tariffs, which can reach up to 100% on EVs and 50% on semiconductors, along with the EU’s 37.6% tariffs, will become effective from August 1.
  • These have prompted a rush to ship goods, leaving fewer containers for Indian exporters.
    • Due to the scale of trade between the US and China, container demand has gone up leaving Indian exporters with fewer containers for exports.
• Contribution of the Red Sea crisis
• The Red Sea crisis further exacerbates the shortage, with near-daily attacks by Yemen’s Houthi rebels reducing traffic by 90% and forcing ships to take longer routes via the Cape of Good Hope.
• This has increased port congestion, with global congestion hitting an 18-month high and 60% of ships waiting in Asia.
• Continued and expanded tariffs
  • Unlike past tariff hikes, the current situation is worsened by the continued and expanded tariffs under the Biden administration, targeting high-demand items like EVs.
  • Additionally, other countries like Canada and Indonesia are also imposing higher tariffs on Chinese goods, increasing global demand for containers.
    • Indonesia has also announced an import tariff of up to 200 percent on a range of Chinese goods.
• Dependence on China for containers
  • India's dependency on China for containers, which produces 95% of the global supply, is a significant issue.
    • China is the largest exporter of containers.
  • Much of the container manufacturing in China is done by a handful of highly subsidized state owned enterprises that has sparked security concerns in the US, EU as well as in India.
  • Efforts to mitigate this dependence began post-COVID-19, with India and the US initiating domestic container production to reduce reliance on Chinese manufacturing.

Container production in India

• In 2021 that state-owned wagon manufacturer Braithwaite, and engineering major Bharat Heavy Electricals Limited had received an order from Container Corporation of India (CONCOR) to develop and produce 1000 containers each.
• However, the production did not go as expected.
• In 2023, Railway Minister told Parliament that CONCOR was facing problems in supply and procurement of domestic containers.
• He told the Parliament that CONCOR had placed orders for 19,000 containers on seven indigenous container manufacturers located in Andhra Pradesh, West Bengal, Chhattisgarh, Punjab, Maharashtra, and Gujarat.
• However, till 31 March 2023, about 500 containers had been delivered to CONCOR.