The Federal Maritime Commission (FMC) released a report on March 30 showing that China controls the vast majority of global containers. Its potential price manipulation poses a threat to the security of the world’s supply chains.

The author of the report, FMC Commissioner Carl W. Bentzel found that there are 44.2 million shipping containers in the world.

China International Marine Containers (CIMC), the dominant container manufacturer, produces approximately 40% of the global shipping containers.

Three Chinese state-owned companies – CIMC, Dong Fang International Containers, and CXIC Group Containers Company Limited (CXIC) – control about 82% of the world’s container supply. Moreover, together with other Chinese companies led by CIMC, they also make more than 95% of the global containers.

The remaining containers are used for either specific markets or non-international trade, so almost all containers in the world come from China.

As a result, Chinese government-controlled manufacturers effectively dominate all major container production worldwide.

The report said prices of new containers have doubled. At the beginning of 2020, the price of a 20-foot dry cargo box was only 1,800 dollars, rising to 2,500 dollars by the end of 2020. The price now has roughly fluctuated around 3,500 dollars.

The report argues that Chinese manufacturers thus likely manipulate container prices.

Importance of containers in globalization

Containers are one of the symbols of globalization. If there were no containers, never be there globalization.

Before containers, the cost of shipping is very high. The loading and unloading efficiency of the terminal is extremely low. The dwell time of the cargo in the terminal is sometimes even longer than the ship’s voyage.

Containers are uniform-sized packages, convenient for transportation, loading, unloading, and layer-by-layer stacking.

It usually took a week to load and unload goods at the terminal. But with containers, the time reduces within half a day. Containers contribute to standardizing the entire transportation process.

Since their advent in the 1950s, containers have been present in multimodal transportation of logistics, such as ships, ports, and routes.

The freight rate is significantly reduced thanks to larger ocean-going ships under containerization. As a result, countries started a vigorous global trade.

Today, 95% of the world’s industrial products are shipped in containers. This seemingly simple tin box is known as one of the great inventions of mankind.

Commonly used containers are divided into 20 feet and 40 feet. A 20-foot standard container is called a TEU (Twenty-foot Equivalent Unit), and a 40-foot container is two TEUs.

Containers are also divided into dry/bulk containers, liquid cargo containers, reefer containers, and special containers.

How China formed a monopoly

The U.S. was the first container producer in the 1960s. Europe, Japan, and South Korea then joined the industry. In 1991, South Korea was the world’s top container manufacturer with an annual output of 359,000 TEU containers.

By 1993, China began to take the lead with its integration into the international trading system, rising manufacturing capacity and export demand, and cost advantages. It then surpassed South Korea, with a nearly tenfold increase to 69% in market share in 1999 compared to 1990.

In an analysis article last year, Shenzhen-based Dayang Logistics Group presented three reasons for the Chinese container monopoly.

First, strong steel production and low price give China a significant cost advantage. China is the world’s top steel producer, accounting for 55% of the global output. The cost of materials is also low.

Although its cost advantage is still lower than those of Vietnam and Malaysia, China still dominates the container industry thanks to its only source of demand. China itself is the largest exporter of commodities and needs many boxes to load.

The last reason involves the covid-19 epidemic. Since 2020, while slowing production and suspended factories have spread worldwide, China’s exports have kept growing. As a result, it requires a large number of containers to supply goods overseas.

At the same time, there are not too many foreign goods sold to China, so the containers from China basically have no return. Shipping companies and freight forwarders can only continue to purchase new containers to limit delivery delays. The world’s major ports are full of empty containers whose number triples the usual level. Therefore, other nations do not need to produce containers.

The article believes that China’s monopoly in the container industry mainly comes from the demand side.

Benzel’s report adds another reason for China’s monopoly. That is the financial support from the Chinese government.

He reported that CIMC received 28% of subsidies from Beijing. Moreover, the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) controls most of CIMC’s shares.

According to Benzel, “SASAC exists to serve the Chinese Communist Party.”

Companies like CIMC can significantly undercut competitors thanks to the government’s subsidies.

In an interview by American Shipper, John Fossey, head of container equipment and leasing research at Drewry, said, “That was very much supported by the Chinese government.”

Bentzel concludes, “The level of interconnectivity” in container shipping “poses the greatest threat to economic welfare.”

He added, “the fact that the PRC controls an industry that has a near defacto worldwide monopoly in the production of shipping containers should be deeply concerning.”

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