Can India’s exporters overcome the container shortage crisis?

As the European Union and the United States slap new tariffs on Chinese electric vehicles (EVs), a ripple effect is felt throughout global trade. Indian exporters, along with dealers globally, are facing historic container shortages. This predicament is exacerbated by the current Red Sea Crisis and India’s reliance on Chinese container supplies.

The arguments

Structural weakness in Indian exports

The container shortage highlights a deeper structural weakness in India’s export infrastructure. Reliance on Chinese containers and the slow pace of domestic production leave Indian exporters vulnerable to global trade disruptions.

Impact of trade tensions

The tariffs imposed by the US and EU on Chinese goods have unintended consequences, impacting global supply chains and causing shortages that ripple through international trade. The urgency of Chinese exporters to ship goods before tariffs take effect exacerbates the container crunch.

Red Sea crisis aggravation

The conflict in the Red Sea not only disrupts a key shipping route but also contributes to global port congestion. The longer voyages required to bypass the Red Sea blockade result in containers being tied up for extended periods, reducing their availability for other traders.

Need for self-reliance

The current crisis underscores the need for India to boost its domestic container manufacturing capabilities. Reducing dependence on Chinese containers is crucial for mitigating the impact of future trade disruptions and ensuring smoother export operations.

Government intervention

Effective government intervention is required to address these shortages. This includes expediting domestic container production, resolving procurement issues, and developing policies to mitigate the impact of international trade tensions on Indian exporters.

Future preparedness

The ongoing container crisis is a wake-up call for the global trade community. Countries must invest in resilient infrastructure and diversify supply sources to withstand similar disruptions in the future.

The facts

The European Union has imposed a 37.6% tariff on Chinese Electric Vehicles (EVs), effective from Friday, July 5. The US will implement similar tariffs next month, with rates up to 100% on EVs and 50% on semiconductors.

These tariffs have led to a surge in demand for containers from Chinese exporters, who are rushing to ship goods before the new tariffs come into effect. This rush has caused a significant shortage of containers available for Indian exporters and traders worldwide.

The ongoing conflict in the Red Sea, with attacks by Yemen’s Houthi rebels, has drastically reduced shipping traffic through this critical route, forcing ships to take longer routes and increasing voyage times. This has exacerbated the container shortage.

Global port congestion has reached an 18-month high, with 60% of ships waiting at anchor in Asia. This congestion has further strained the availability of containers for global trade.

India relies heavily on China for container supplies, with China producing 95% of the world’s large steel boxes. This dependence has magnified the impact of the current shortage.

India initiated domestic container production post-2021. However, progress has been slow, with significant delays in manufacturing and delivery.