Tag Archives: China

FMC commissioner red-flags Congress on China’s container monopoly

I am glad to see that the FMC has been looking at the container manufacturing situation. Their findings are clear– the Chinese virtual monopoly is harmful to most shippers in the aggregate. Prices have been artificially kept high.

What to do about it is another question.

Should the US try to create its own container manufacturing industry through subsidies? Chinese subsidies to the three state-owned container manufacturers are large, because the firms create lots of jobs. That’s an important thing for the Chinese government, and they are unlikely to back down on it.

I think one question to address is whether Chinese container manufacture is a more sophisticated way of ‘dumping’ steel. There is a minimum of added work in making a container out of a specialized steel product. One could imagine some sort of sanction for selling steel at below-market prices. Perhaps this would create some sort of tariff. I think a quota would be out of the question since there are so few sources of new containers.

Carl Bentzel, an FMC commissioner who wrote the report, doesn’t go into the question of recycling empty containers back to where they are most needed. There’s an excess of empty containers in the US because of our huge imports. These constitute a form of ‘pollution’ in the US.

To the extent that ocean carriers do not transport the containers back to places that are net exporters, they are contributing to degradation of the environment in the US. We can see that effect near several ports, where State governments are brokering deals to find extra space to store the empties. We already saw huge congestion, first in West Coast ports, due to empties being left in the terminal yards, and preventing finding space for newly imported containers full of shipments. Ocean carriers, who own most of the containers, were skipping ports and not loading the empties. Loading empties takes crane moves and other activity in the terminal, and not taking them meant more moves could be used for paying cargo.

My calculations show that it costs very little more to buy a new Chinese container for a shipment from say Shanghai to Los Angeles than it does for an ocean carrier to bring an empty used container back to China. And a new container may be more desirable than a used one, because it does not require the same level of inspection and cleaning that the used empty one does.

I think another arm of the solution is to get ocean carriers to ‘recycle’ the empty containers to exporting locations. Perhaps the FMC could require them to take a certain number each month, based on the number of TEUs imported in a lagged period. Such a rule would guarantee that US ports would not need to spend millions housing empties that ocean carriers are ignoring.

Another weapon is the detention charges threatened by Long Beach and Los Angeles ports on empty containers. Though the huge charges ($100 for the first day after a free period, followed by $200 for the second day, $300 for the third, and so on) were never applied to any container, the threat was enough to get empty containers moved out. From that point on the congestion at LA and Long Beach eased. The threat was sufficient. Soon, East Coast ports will feel the burden of the empty container buildup. Rather than finding space at an additional cost, a similar detention and demurrage charge should be considered.

The problem will be worse at the East Coast ports. One reason is that there are fewer calls there, thus fewer opportunities to load empties. If the ocean carriers blank sailings, it may be hard to get rid of the empties.

Some empty containers are needed in the US for agricultural exports. US ag products are in worldwide demand, but it is inconvenient to load them into containers. I think it is a good idea to commission special loading yards for ag products and route empty containers there. These need to be convenient drop-off points for ag products coming from inland, by truck or rail, and offer container loading services. Using empty containers for ag products is highly desirable. Several ports, including Oakland, have made arrangements to do this, and I hope ways can be found to take advantage of the facilities. Similar ag loading stations could be created nearer to major West Coast ag centers such as Washington state and Los Angeles. That would help a bit with the empty container dilemma.

However, it is a lot more expensive to ship ag products in containers than in bulk ships. Only high-quality products that cannot be mixed with lower quality goods can be handled that way, putting a ceiling on the number of containers required. Currently around 10% of soybean exports move by container instead of bulk. If that could be increased 5% by making it easier to ship in containers I would be surprised. Most soybeans for animal feed, the majority of US export production, can be moved in bulk ships without fear of mixing, and that is probably a lot cheaper, when the customer requires large quantities.

If unused empty containers can be viewed as a form of pollution, which is exacting a cost on communities and ports, perhaps there would be more effort to get ocean carriers to clean it up.

John Gallagher Wednesday, March 30, 2022

FMC commissioner red-flags Congress on China’s container monopoly – FreightWaves

US regulator probing China’s role in container shortage

The FMC is looking into Chinese control of containers and equipment to move them. Most containers and chassis are produced in China. So says Carl Bentzel, an FMC commissioner.

China certainly has a large stake in production of both containers and chassis. There are three state-owned firms in China that dominate container production. Even with elevated prices recently, it is still about the same cost to buy a new container in China for the voyage to the US, or to recycle one from the West Coast of the US. Even if you would rather recycle an empty container, the ocean shipping firms can affect that balance by refusing to pick empties up at say Long Beach or Los Angeles, or delay their transit by long enough to cause headaches for those who need them by a certain date.

If empty containers build up in the US, tying up chassis as well, that’s a form of industrial pollution. Having to spend large sums for storage yards rather than getting them back to China is an environmental cost that should not have to be borne by US local governments and citizens.

It’s certainly worth an investigation and perhaps some action by the US government.

John Gallagher, Washington Correspondent Thursday, May 6, 2021

US regulator probing China’s role in container shortage – FreightWaves

It’ll be ‘quality not quantity’ on China-Europe rail services as subsidies fade

The Chinese government and several states have been subsidizing rail service from China to Europe. A phase-out is planned for 2023 now. Subsidies were supposed to end in 2022 but an extension was made for COVID.

There are various claims of inflating the amount of traffic.

Rates from Europe to China, the return trip, have been low, so that empty containers get returned to China. In fact, they are set at less than cost; around $100 per container, while the real cost is around $3000 to move an empty container.

But with container rates sky-high now and so many blank sailings from Asia by container liners, the rail service rates have been very high to Europe. Perhaps a subsidy is no longer needed. We’ll see.

Quality of service will be the main determinant of the success of this route in the long run. And we will see if the various countries on the route can figure out how to cooperate over the long run to get total rail shipment times down.

By Sam Whelan 20/12/2021

It’ll be ‘quality not quantity’ on China-Europe rail services as subsidies fade – The Loadstar