Box output rises in Q1 2024

A marked recovery took place in China’s container manufacturing industry in Q1 2024 with over 1.14M TEU produced, up 40% on the previous quarter and more than 273% ahead on the same period of 2023.

The rise in output was triggered by ocean carriers and lessors taking delivery of additional containers to support the influx of new tonnage coming on stream this year and slightly more optimistic views by several analysts on trading prospects this year.

However, a major reason for the increased activity stemmed from increasing concerns over falling box productivity levels and a need to raise asset inventory levels.

Since November when Houthi rebels started attacking ships in the Red Sea region, ships on Asia/Europe/Asia and Asia/US east coast/Asia routes have been avoiding the Suez Canal and sailing round the Cape of Good Hope, adding eight-to-10 days to each voyage. Therefore, it is taking containers more time to circulate in supply chains, meaning more equipment is needed to move the same volume of cargo.

Moreover, restrictions on vessel transits in the Panama Canal, despite improving recently, and detours caused by the collapse of the Francis Scott Key Bridge in Baltimore have raised concerns further.

While the scale of the slowdown in container productivity levels is not on a par with that encountered during the pandemic, it has nonetheless resulted in additional orders being placed. It has also been helped by highly competitive prices as manufacturers cut prices during the final quarter of 2023 in a bid to secure more orders and boost utilization levels in their factories.

Last year proved to be a highly disappointing year for the industry with China’s box builders outputting just 2.33M TEU. This compared with over 3.8M TEU in 2022, a decline of 39%.

This was reflected in individual companies’ financial results with China International Marine Containers (CIMC), which is the largest manufacturer of containers in the world, posting reduced revenues and profits for the year.

While CIMC’s turnover fell by 9.7% to RMB127.8B, its profits collapsed by 86.9% to RMB3.2B.

London-based research group Drewry expects overall production to exceed 4.5M TEU in 2024.