News Analysis
A recent report from the U.S. Federal Maritime Commission (FMC) showed that China’s control of global container manufacturing poses a threat to supply chains and economies worldwide.
On March 30, FMC Commissioner Carl Bentzel released his assessment (pdf) of China’s control of container and intermodal chassis manufacturing after a year of research, market observation, and synthesis interviews.
The report points out that the three largest Chinese manufacturers control over 86 percent of the world’s supply of intermodal chassis. Those same companies manufacture over 95 percent of the 44.2 million containers used in global shipping, including U.S. domestic train and truck intermodal containers.
According to Bentzel’s assessment, the Chinese communist regime effectively controls the world’s container and chassis production, arguing that Beijing may manipulate market prices and add to the global supply chain disruptions.
“When demand for ocean containers increased, Chinese-based intermodal equipment manufacturers were notably slow in ramping up production, raising the question of whether this was part of a deliberate strategy to manipulate prices,” the report said.
The prices for Chinese manufactured containers had risen to $6,500 in 2021 from $1,600 in 2019, a nearly 400 percent increase over pre-pandemic prices. Meanwhile, container leasing rates were also up by around 50 percent in the span of six months before November 2020.
The report called China’s near defacto worldwide monopoly in shipping container production “deeply concerning.”
China’s Rise to Container Production Monopoly
Containers are one of the key elements of globalization. Ocean freight costs were high before the wide use of intermodal containers. Cargo loading and unloading efficiency at the port terminals were sometimes even longer than the ship’s sailing time.
Today, 95 percent of industrial products worldwide are shipped via containerized intermodal freights.
The United States was the largest producer of freight containers in the 1960s. However, due to changing economic and logistical factors, production centers soon moved to Europe and later to Japan and South Korea. In 1991, South Korea became the world’s largest container producer, with an annual output of 349,000 TEU, according to Jiemian News, a Chinese financial news site.
Twenty-foot and 40-foot containers are the most commonly used containers for shipping. A standard 20-foot container is referred to as a TEU (Twenty-foot Equivalent Unit), while a 40-foot container is two TEUs.
In the 1990s, China’s manufacturing capacity and export demand rapidly grew as it integrated into the global economy. And with cost advantages, the container manufacturing industry gradually shifted from South Korea to China. The container market share in China rose from 7.2 percent in 1990 to 69 percent in 1999, growing nearly 10 times in under decade.
An article published in 2021 by Shenzhen-based Neptune Logistics breaks down the three primary reasons for China’s monopoly of the container production industry.
The low cost of raw materials in China was listed as the top reason. The country is the world’s largest steel producer, accounting for 55 percent of global output. Its cost advantages and strong production capacity in steel and other related industries have contributed largely to its industry monopoly. However, the article noted that China’s cost advantages had been surpassed by Vietnam and Malaysia in recent years as it has been eliminating outdated steel plants, resulting in a reduced production capacity.
Secondly, the demand for Chinese exports remains strong. China has been the largest exporter of goods since 2009, and it uses a massive amount of containers that it produces.
Thirdly, the CCP (Chinese Communist Party) virus pandemic has benefited China’s container industry.
Since 2020, the pandemic has slowed down the production of goods worldwide, and many factories have shut down or suspended operations. Yet, China’s exports have grown against the trend. It has continued to supply goods and materials worldwide, taking advantage of its large container reserves and production capacities. Meanwhile, there weren’t many foreign goods sold to China, so most containers from China stayed at their destinations without needing to return.
Shipping companies and freight forwarders can only keep purchasing new containers in China to avoid delayed delivery to their destinations. On the other hand, the world’s major ports are filled with empty containers from China that exceed their usual reserve by three times, resulting in the destination countries not needing to produce containers.
However, the article failed to mention another key reason—China’s container manufacturers benefited from the Chinese regime’s financial support.
Government subsidies allow companies to undercut competitors significantly. China International Marine Containers (CIMC), the world’s largest container manufacturer, accounting for a 42 percent global market share, has had up to 28 percent of its expenses subsidized by the Chinese regime, U.S. FMC Commissioner Bentzel said in his report.
The U.S. Department of Commerce also found that CIMC is indirectly owned by the Chinese regime through its State‑owned Assets Supervision and Administration (SASAC).
Expert: Global Supply Chain Restructuring is Underway
Wu Jia-Long, a macroeconomist in Taiwan, told The Epoch Times that he believes a global supply chain restructuring to decouple from China is underway.
“The supply chain restructuring has actually started since the U.S.-China trade war in 2018. The United States has begun to see the serious problem of letting an autocratic country—China—join the global economy. Not only did it fail to transform itself into a democracy, but it also initiated unfair competition and unfair trade through political intervention, breaking the rules set by the international community. Amid the Russia-Ukraine conflict, the CCP chose the side of Russia, meaning the U.S.-China decoupling is inevitable.”
Wu added that the White House’s recent introduction of the “Indo-Pacific Economic Framework (IPEF)” outlines the United States’ key priorities to align with allies and partners to more effectively compete with China and restructure the supply chain.
The IPEF addresses China’s much more assertive and aggressive behavior in the Indo-Pacific region and the importance of establishing a high-tech supply chain independent of China.