October 21, 2020: With foreign trade pattern changing drastically over the last few months in the wake of global supply disruptions and demand slump among other key factors, lower imports have resulted in fewer containers coming back to India.
Key Highlights:
- With no solution to container shortage in sight, exporters’ body FIEO wants Director General of Shipping to mandate for ship-liners to bring empty containers.
- FIEO claimed ship-liners have raised rates by nearly 60% in the last three months for moving a container to the US. In case of African ports, the rate has more than doubled.
- Logistics start-up Gxpress, which needs 10-15 containers every week for sending shipments to the US, is now paying nearly $3,600 for each container, up 40% in last one month.
An exporter said that prices vary from season to season and also on the kinds of routes taken by the ship-liners.
As acute shortage of containers continues to hurt exporters causing spike in freight rates over key international trade routes, top industry body wants the government to mandate it for shipping lines to ferry empty containers to India.
Federation of Indian Export Organisations (FIEO) estimates suggest shipping lines have raised rates by nearly 60 per cent in the last three months for moving a container to the US. In case of African ports, the rate has more than doubled while freight rate has soared by 50 per cent for Europe.
“Overall, the rates have gone up more than 50 per cent everywhere,” said FIEO president Sharad Kumar Saraf.
While noting that he does not see the situation improving anytime soon, Saraf said that the only way this situation can ease is by Indian maritime authority Director General of Shipping directing shipping companies to bring back empty containers.
“It’s a very serious problem. There are no containers for stuffing export cargo. Because of lack of containers shipping companies have raised rates also. Freight rate to [the] US has gone up by 60 per cent in last three months. For African ports, it is almost 100 per cent. European ports, it is 50 per cent. Overall, it is more than 50 per cent everywhere,” noted the FIEO chief.
Jaipur-based logistics start-up Gxpress which needs 10-15 containers every week for sending shipments to the US is now paying nearly $3,600 for each container. Praveen Vashistha, founder and director of the firm said that rates have gone up 40 per cent in last one month alone.
“We primarily send shipments to [the] US, Canada and the UK. We have seen rates rising sharply in case of all the three countries. For an exporter, it is becoming increasingly difficult to send the shipments. While shipping lines have increased prices they are not providing containers,” said Vashishtha.
He added that before COVID pandemic broke out, he paid $1,700-1,800 for a container to the US.
Elaborating on rate patterns on sea routes, a leading exporter said that prices vary from season to season and also on the kinds of routes. While moving a container from Mumbai to New York by shipping liner Hapag-Lloyd could cost $2,800-3,000, other liner could charge less but would take more time.
“It (Hapag-Lloyd) gives guarantee of anything between 28 to 30 days for moving the container to New York. Others may charge less but would take 60 days to reach there,” he said.
A combination of issues, primary being sharp fall in imports, has resulted in massive shortage of containers in the country.
Historically, there have been more imports than exports so equipment was never a problem in the country. But after COVID break-out, imports have contracted sharply compared to exports.
With foreign trade pattern changing drastically over the last few months in the wake of global supply disruptions and demand slump among other key factors, lower imports have resulted in fewer containers coming back to India.
After contracting for six months, exports from India turned positive in September 2020, recording 5.99 per cent growth to $27.58 billion over the same month last year. Imports, however, during this period contracted 19.6 per cent Y-o-Y to $30.31 billion.
As per official data, exports declined 16.66 per cent to $221.86 billion during April-September 2020 period while imports shrunk a whopping 35.43 per cent to $204.12 billion over the same period last year. Indian government’s move to reduce imports from China has added to contraction in imports.
Industry watchers do not expect the container crisis to get over anytime soon.
“It is not going to ease now. There is problem in Punjab. Because of farmer protests, rail is not moving containers. Exports goods are also held up. Second, because of container shortage, shipping lines are charging a minimum of $50-100 more for every container,” said Ajay K Kadakia, Chairman of Basic Chemicals, Cosmetics & Dyes Export Promotion Council popularly known as Chemexcil.
Karunakar S Shetty, president, Brihanmumbai Custom Brokers Association, emphasised that the issue of container shortage has failed to improve in last one month and delay in custom clearance despite introduction of faceless assessment has added to the problem.
“There are multiple issues. Exports are growing and imports are down. It is reverse of the earlier situation. Even though faceless assessment has started, clearances are held up in case of import consignments,” Shetty said.
Source: Business Today
