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A wave of investment in container manufacturing facilities seems set, as the major box makers anticipate a recovery in the global liner trades.
There are different bellwethers for gauging the health of the container transport industry – while we often look at the what is being carried on ships and trucks or handled in forwarders’ warehouses, container manufacturing also tells a story. After the bankruptcy of Lehman Brothers in 2008, box making crashed as carriers cancelled orders en masse.
However, last weekend China International Marine Containers (CIMC), the world’s largest container manufacturer, announced it had moved forward on a MoU signed last April with a local government in the Pearl River Delta region to build a new production facility.
The company will invest an initial Rmb2.5bn (US$400m) into a 72ha site in Dongguan Fenggang county, adjacent to the provincial capital of Guangzhou. This will, over the course of the project, rise to Rmb7bn.
The eventual production capacity of the facility will be 750,000teu a year and will represent a significant increase in CIMC’s overall capabilities. The company currently has capacity to produce around 2.4m teu of standard dry containers and another 190,000teu of specials, such as reefers, a year.
A statement from CIMC said: “[The] container business is one of the principal businesses of the group. Leveraging on the gradual recovery of the global economy, as well as the steady increase in global containerisation rate, it is expected that the long-term growing trend of demand for containers will continue in the future.”
A similar note was sounded this morning in Hong Kong, where the second largest box maker, Singamas, posted its results for 2013. At face value they weren’t pretty – revenues fell 16.6% to US$1.25bn in 2013 compared with 2012, and operating profits dropped by just over 51% to $46.7m.
The results came on the back of lower sales volume – the company’s total teu sales were down 5% to 542,442teu – combined with lower prices for new containers. The average price per 20ft dry container fell from $2,452 in 2012 to $2,195 last year.
Nonetheless, chairman Teo Siong Seng struck an optimistic note: “Demand for new containers remained soft in 2013, which directly affected the performance of the group. Despite of the headwinds, Singamas’ operations remain highly streamlined and cost-effective by adopting integrated production lines and disposal of less profitable facilities.
“On the other hand, our production capabilities are further expanding, via [new] Qidong facilities, which supports our new movement regarding tapping into offshore container market to diversify our portfolio for the anticipated market upturn in the second half of 2014.”
The company said that a new plant at Qidong would reduce manpower requirements by some 30-40%, and take its overall annual production capacity past the million-teu-a-year mark.
In its earning statement, Singamas said global container trades were expected to grow by 5% this year, suggesting that the shipping industry could finally see a turnaround in its fortunes.
“Though we are cautiously optimistic about the container industry, and expect its prospects to gradually pick up in second half of this year, we are well prepared to adapt to market conditions and capitalise on opportunities that emerge by adopting a series of measurements,” Mr Teo added.
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