The business of containers is a tricky one. Since the pandemic, it has been rocked by various factors - trade wars, actual wars, terrorism, and even ships getting stuck across critical shipping routes.
The latest drama has been in the Red Sea, where militant attacks off the Horn of Africa have resulted in weeks of delay, caused a traffic jam at the Port of Singapore, and jacked up freight costs and insurance bills.
So much that empty containers are gravely short on supply, and rates for 40-foot containers are up nearly 4x in the past year. While all these factors suck for manufacturers and consumers, and are nightmarish for ship operators, one would imagine these would be a boon for container makers.
But no! The Container Corporation of India, or Concor, which is the largest logistics service provider, specialising in containerised freight transport, is actually down by 20% in the last 2-3 months. Red flag or opportunity?
What’s Concor’s Problem?
Other than conflict driven dynamics, demand has been great for freight companies, thanks to robust economic activity, a rejig of global supply chains, and multiple domestic initiatives, including the focus on manufacturing and development of freight routes.
However, despite this perfect storm, Concor has actually lost market share in the last year - both in the domestic market to 67% in FY24 from 73% in FY23, and in the export-import market to 55% from 58% over the same period.
The prime culprit in this has been, surprisingly, India’s push for self-reliance and reduced imports from China, resulting in a tightened domestic supply for containers - thereby choking Concor’s ability to grow.
Although the government has rolled out a plan to manufacture 19,000 containers domestically, the ecosystem is still in its infancy, and production isn't ramping up as quickly as needed. This bottleneck has left Concor scrambling for containers to keep up with demand.
Will Concor Be Able to Reclaim Its Position?
While Concor can do little to ramp up domestic container supply on an immediate basis, it has been striding in several other directions can more than offset the impact of constrained supply.
Infrastructure Expansion
Concor has undertaken a bunch of initiatives in order to expand capacity and boost volume growth, including:
Adding 3 new Multi-Modal Logistics Parks (MMLPs) at Jajpur, Kadakola, and Paradip
Commissioning 14 new high-speed, heavy-capacity rakes, boosting its total fleet to 377
Procuring 7,650 new containers, pushing its container count to over 44,000
Earmarking Rs. 600 crore for capex in FY25, with a focus on land procurement, terminal development, IT upgrades, and adding more wagons, containers, and rolling stock
Plans of procuring 700-800 containers monthly and 200 LNG trucks for FY25
Double-Stacked Trains
A new initiative in India is of double-stacking, which allows trains to carry twice as many containers, significantly increasing infrastructure, and reducing transport costs.
Concor saw a robust 33% YoY growth in double-stacked train operations in FY24, with 5,440 trains running. This will be further accelerated by the new Nhava Sheva (Mumbai’s JNPT port, India’s largest container port) to Vadodara route coming online.
Bulk Cement in Tank Containers
Concor is venturing into new territory by launching tank containers for transporting bulk cement. Given that around 25% of the 300 million tonnes of bulk cement transported in India is currently moved by road, Concor sees a big opportunity to shift a portion of this to rail.
With cement stakeholders showing great interest, the company expects to start reaping the benefits of this new product in the second half of FY25, thereby further boosting growth, through a new line altogether.
Dedicated Freight Corridors (DFCs)
The completion of new DFCs is set to be a game-changer for Concor. In April last year, the company ran its first train on the dedicated freight corridor from Dadri (Delhi) to Mundra port, slashing travel time from 60 hours to just 38.
This not only reduces costs but also allows for more double-stacked trains, boosting operational efficiency. With the DFC extending, and with plans for the Nhava Sheva port to start by March 2025, Concor is well-positioned to further drive volume growth.
Will Concor Bounce Back?
The current global container situation has been posing more challenges for Concor than benefits - and that is being reflected in Concor’s stock price. However, this rocky road might just turn out to be an opportunity, given:
Challenges arising out of conflict are usually transient, and tend to normalise over time
Despite India’s self-reliance ambitions, Concor has ramped up procurement of containers
The domestic container infrastructure is likely to expand and mature over time
The government’s focus on freight is likely to improve demand and infrastructure
New opportunities in areas like cement will only add to revenue
With this, Concor is targeting an overall volume growth of 18-20% in FY25 - with the domestic segment projected to see a 25% increase, and export-import segment expected to growth by 15%. These growth rates are a significant step up from the past, like the 8% growth seen in FY24.
With a rebound in sight, and with long-term growth drivers in place, Concor has the ability to row through near-term challenges, and sail towards sustained long-term growth and expansion.
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