Blog April 22, 2015

China is changing the tank container market and the market in China is changing

By Nicola Byers

As the world’s biggest economy, China is a key market for logistics service providers. They help supply the country with the massive quantity of raw materials it requires and enable its manufactured products to reach international consumers.

The transport of bulk liquids in tank containers is undergoing some key changes in China that could have far-reaching implications. Here’s a roundup of just a few of them:

Tanks are being built to a different specification

The Chinese tank container market and its regulations (see below) have prompted some operators to tweak tank designs for use within the country.

This past month, Eurotainer took delivery of a first batch of containers built specifically for domestic use within China. The tanks are 31,000 litres in capacity compared to conventional tank containers, which are 20,000 to 26,000 litres in capacity. Eurotainer says there is growing demand for larger capacity containers in China, so we can expect this trend to develop.

The new specialised Eurotainer tanks have a lower tare weight than those they are replacing, allowing for higher payloads and greater efficiency, which is key for handling bigger containers in such a huge market.

It’s the world’s biggest tank manufacturing centre

It’s no surprise that China leads the world in tank container manufacturing. During 2014, the country produced 33,000 tanks – way more than its nearest rival South Africa, which produced 5,400, according to a survey published in December by the Asian Tank Container Organisation (@tco).

“With the selling price low, leasing companies are buying again from Chinese manufacturers. Many of these tanks are being leased to Asian companies to feed the ever-increasing need for equipment in that region,” Reg Lee, president and founder member of @tco, noted in the December report.

“The tank container section of the liquid supply chain is still growing strongly and has healthy growth year-on-year, mainly fuelled by increased use of the tank containers in Asia,” Lee said.

There’s steady demand for maintenance services

China is the country where the most tank containers are refurbished every year. Around 1,500 tanks were refurbished or remanufactured in China during 2014, compared to 600 in South Africa and 900 refurbished by operators in-house, according to @tco figures.

Together, the tanks that underwent maintenance last year account for just under 10% of the global fleet, and @tco expects tank refurbishing to stay at this level for at least the next five or six years as tanks with thicker shells are phased out.

The economy is slowing, but chemicals are growing.  China is seeing a slow-down in its economic growth, which could have some effect on operators, manufacturers and refurbishers of tank containers in the country.

China’s GDP growth has fallen from 10.6% in 2010 to
 7.4% last year; this year’s figure is expected to be 7%. This could have significant implications for domestic demand, profitability and trade with other nations. The country still has a healthy trade surplus, but growth in the value of foreign trade fell 2.3% in 2014.

Nevertheless, China’s chemical industry keeps expanding and posted 10.4% increase in value during 2014. The overall manufacturing sector showed growth of just 6.8%. Most sectors of the chemical industry posted volume increases but China still relies on imports for certain products – good news for tank containers.

A phase-out of flexitanks?

International testing requirements for tank containers are tough and units are expected to offer thermal protection and leak prevention, plus the ability to withstand acceleration forces in four directions.

No regulations currently govern the transport of bulk liquids in flexitanks within conventional containers, which has seen a rapid increase within China over the past 10 years. But many accidents and leaks from flexitanks are leading to a growing awareness of the problems and risks posed by this mode of transport. Because tank containers are built to a higher specification, they pose less risk and greater safety, which is key for international shippers and big chemical companies (see below) and will hopefully trickle down to shippers of smaller volumes too.

More regulation and Responsible Care

China is getting up to speed on regulating the transport of dangerous goods with in the country. The Ministry of Transport (Mot) implemented new measures in October for hazardous chemicals, which include the adoption of risk assessment techniques, training standards and improved accident investigation and response strategies.

Over 60,000 companies operate across China’s fragmented transport industry, and it remains difficult for shippers to maintain standards of safety and quality throughout the supply chain. For that reason, big companies like Dow Chemical are looking for logistics providers they can trust. The company is promoting the Responsible Care precepts to all its stakeholders and is lobbying the Chinese government for legislation.

In the future, tank container operators will need to compete in terms of safety as well as on price, particularly if they want to win business from multinational companies.