Geopolitical Tensions Are Worsening India’s Container Shortage Problem

India's container shortage is deepening, with rising geopolitical tensions adding to the strain. The latest trigger? An impending increase in U.S. tariffs on Chinese goods.

This shortage intensified in July and August as Chinese exporters rushed to ship goods to the U.S. and Europe before an August 31st deadline, aiming to avoid the new duty fees on imports.

“Any products exported from China by August 31st were duty-free, while after that, duties were imposed due to political issues and business concerns. This is shipping at its best. You send ships, cargo, and containers from expected flow areas, particularly where exports surge,” Partha Bhattacharyya, branch manager at Hapag Lloyd Kolkata told The Core.

In May, US President Joe Biden imposed hefty tariffs on a range of Chinese products, including batteries, electric vehicles (EVs), steel, solar cells, and aluminium, all in the name of fair competition. This includes a staggering 100% tariff on electric vehicles, a 50% tariff on semiconductors, and a 25% tariff on EV batteries imported from China.

A report from Delhi's Global Trade Research Initiative (GRTI) suggests there are unverified claims that China is hoarding shipping containers to ramp up exports to the US and Europe before any possible trade restrictions kick in—whether they’re based in China or ASEAN countries.

According to a report from Policy Circle, while rumours circulate about China hoarding containers to boost its exports, the real issue is likely rooted in broader logistical inefficiencies rather than intentional stockpiling. However, India’s heavy dependence on Chinese-made containers has left it particularly vulnerable to these shortages, exacerbating the supply chain disruptions.

India’s Never Ending Container Shortage Issue

Shipping is crucial in India as trade 95% by volume and 70% by value, is heavily dependent on it. India is also home to many ports—12 major ones and 200+ smaller ports — with plans for six new mega ports under the Sagarmala National Perspective Plan out of which Vadhavan Port in Maharashtra and Vizhinjam Port in Kerala are the latest two additions.

But there’s a slight problem. While there are plans to expand Indian ports, the country has been stuck in a never-ending container shortage loop. For nearly two decades, India has grappled with a container scarcity that hampers its exports. In recent years, this issue has escalated into a full-blown crisis, affecting both exporters and importers.

While the issue has existed for years, a chain of events in the recent past has intensified this problem — the pandemic, congestion at ports, the war in the Middle East and disruptions in the Red Sea.

The container problem intensified during the pandemic, when global shipping lanes were disrupted and ports became congested, complicating the repositioning of empty containers where they were most needed.

When global demand surged post-pandemic, Indian exporters found themselves in a bind, unable to secure containers to transport their goods abroad.

Many containers became stranded at ports or redirected to more profitable markets, such as China, where shipping companies could command higher fees.

And it wasn’t just a shortage—freight rates shot through the roof, sometimes spiking by 400%! It was difficult for exporters to find containers while the rest of the world’s demand surged post-pandemic.

Geopolitical Impacts on India’s Shipping Industry

The Indian shipping industry has faced significant challenges due to geopolitical unrest. Although demand seemed to stabilise post-Covid, the situation in the Red Sea has created new complications, leading to congestion at Singapore's container port, which reached its worst levels since the pandemic in June.

“Demand hasn’t exactly skyrocketed; we are still grappling with tariff concerns that tighten supply. As a result, India isn't prominently featured among the global export powerhouses,” Rahul Kapoor, vice president at Global Head of Shipping, Analytics and Research at S&P Global Commodity Insights told The Core.

Recently, ship arrivals at Indian ports were delayed due to the Singapore port congestion, and Indian exporters may face further disruptions if the US-China trade war escalates.

China manufactures over 95% of the world's containers, and India’s heavy reliance on these imports makes it vulnerable to global disruptions. Delays in production or logistical inefficiencies, combined with India's limited domestic container production, contribute to the ongoing container shortage.

The global container shortage could reemerge, severely impacting Indian exporters. Kapoor highlighted that container lines were bypassing India, resulting in a notable decline in container exports.

Exporters are also struggling with retaliatory tariffs on Chinese goods by the U.S. and complications from the Red Sea crisis, which has caused shipping lines to bypass Indian ports due to extended voyage times and longer routes, further limiting container availability.

For instance, while The Jawaharlal Nehru Port Authority (JNPA) at Navi Mumbai handles around 6 million twenty-foot equivalent units (TEUs) and Mundra about 5.9 million, Shanghai alone manages 47 million TEUs. “If given the choice, companies would prefer to maximise exports elsewhere rather than return ships to India,” he added.

According to a GTRI report, shipping rates for a 40-foot container have seen fluctuations between 2022 and 2024, averaging US $4,942 in 2022 and stabilising around US $4,775 in 2024, significantly higher than pre-pandemic levels of US $1,420 in 2019. These elevated rates reflect ongoing supply chain challenges.

“Until the re-routing of ships from the Red Sea to the Cape of Good Hope, we received many empty containers from the Middle East, especially Jeddah. However, due to the situation in the Red Sea, most mainline services are now avoiding the region, complicating transportation from Jeddah to Jebel Ali,” Bhattacharyya said.

This disruption has extended transit times from 30 days to 55-60 days for shipments from Nava Sheva, Navi Mumbai to the US, increasing wait times for empty containers.

Challenges in India's Container Manufacturing

Using hubs outside India exacerbates the container shortage by diverting containers that could have been available for Indian exporters.

“When shipping companies prioritise major global hubs like China, Singapore, or Dubai—where demand is higher and shipping rates more lucrative—containers are redirected there. This results in fewer containers available for Indian ports,” Ajay Srivastava, founder of GTRI told The Core.

Moreover, the emphasis on foreign hubs slows the return of empty containers to India, further deepening the shortage. Geopolitical impacts are also one of the reasons why India faces container shortages. So what can India do? Can neighbouring countries help?

“We now view the Indian neighbourhood through the lens of the Indian Ocean, not just land borders. It’s about developing domestically and balancing risk. Who in the region can India rely on? Oman, UAE, and Sri Lanka—each can play a role. Friendships and trade ties are important, but actionable steps in agreements are crucial. Strong domestic stability and a solid circle of allies are key,” Deepa Kumar, head of Asia-Pacific Country Risk, S&P Global Market Intelligence told The Core.

With 90-95% of India’s cargo transported by foreign shipping liners, India’s ability to manage costs and schedules is limited. Additionally, about 25% of its cargo is transshipped through hubs like Colombo, Singapore, and Klang, which adds to transit times and freight costs.

India heavily relies on containers produced in China, leaving it vulnerable to supply disruptions and price fluctuations

By understanding how the dependence on China-made containers is creating an issue for exporters, India is striving to increase its container production, which currently stands between 10,000 and 30,000 containers annually, according to the GTRI report.

This output is a mere drop in the bucket compared to China's 2.5 to 3 million containers per year, leaving India with less than 1% of the global market share and exacerbating vulnerabilities in container availability.

“China has leveraged its manufacturing dominance to compel shipping companies to buy its products. We must see this not just as a container production issue, but as a broader supply chain challenge. We need to focus on producing containers, making them affordable—potentially through subsidies—and encouraging Indian shipping companies to use domestically produced containers. Additionally, we should engage foreign shipping firms to adopt some of our containers. While immediate success may be modest, this strategic approach can gradually improve our production capabilities,” Srivastava added.

Should India Make Its Own Containers?

In the container industry, there are two main players: manufacturers and shipping companies. Major container owners hold millions of TEUs like Mediterranean Shipping Company (MSC) handles 5.2 million TEUs, Maersk - 4.3 million TEUs, CMA CGM - 3.6 million TEUs and China's state-owned COSCO hold about 2.9 million TEUs also has a significant share.

According to GTRI analysis, recent disruptions could drive costs up by about 30%, with shipping companies potentially raising charges by 60% to 70% to justify these increases.

“This led to discussions a few years ago about India establishing its own container production. While manufacturing containers is straightforward, the real challenge is ensuring these containers are purchased by global shipping companies. Currently, India's share in global shipping is minimal, limiting our influence,” Srivastava adds.

Container production hubs in Bhavnagar (Gujarat) and Chennai (Tamil Nadu) need significant investments and policy support to scale up production. Strengthening this industry would reduce dependence on imports, particularly during global shortages, and enhance India's position in global trade logistics.

Despite the simplicity of container manufacturing—low-tech and requiring minimal resources—production remains low post-COVID due to high costs.

“To effectively tackle the container shortage, we must engage foreign shipping lines and encourage Indian companies to utilise domestic containers. This is not just a manufacturing issue; it requires collaboration across all aspects of the supply chain, from production and subsidies to persuasion and usage,” Srivastava said.

With around 95% of Indian cargo handled by foreign shipping lines, would they ditch China-made containers for Indian-made ones if we could match the supply?

“It's up to foreign shipping lines to decide how much they want to rely on China. And let’s not forget the price factor. India needs to be competitive on both fronts. Sure, countries love to pull the 'trust' card, but at the end of the day, they’re still eyeing the price tag and can’t afford to ignore it,” Kumar added.

However, Indian manufacturers face higher production costs, ranging from US $3,500 to US $4,000 for a 40-foot container, compared to China's US $2,500 to US $3,000. This disparity keeps Indian businesses reliant on imports, exposing them to global supply chain disruptions.

“Producing smaller quantities significantly increases overhead costs, making each unit more expensive. For instance, producing 100 pieces in a garment factory drastically raises per-piece costs compared to making a million. Therefore, larger orders are essential for reducing costs. Moreover, China has advanced its steel production capabilities over the past 20 years, while India is still catching up,” said Srivastava.

Kapoor believes diversifying suppliers is crucial for reducing reliance on China. While a few manufacturers in China heavily influence the current container shortage due to cost, India has the potential to produce millions of containers at scale. China achieved market success by accepting initial losses to gain scale. India must also be price-competitive to seize significant opportunities.