As economic sentiments inch towards normalcy, an unprecedented increase in freight rates whams exporters and importers. Exports from India hit with a 60% increase in freight to major global ports.
Shortage of Containers Adds to the Freight Increase
Sharad Kumar Saraf, president of FIEO, revealed that sea freight rates for European ports have increased by 60%. Likewise, the freight rates for Latin American ports have increased by 50%. Freight rates for October have drastically risen from $300 to $800 for the Middle East, European, North, and South American ports. Besides, Air freights are also up by 30-40% due to a decrease in overseas flights owing to the pandemic. Further, there is a massive shortage of containers due to the decline in imports from China.
Shipping Lines Accused of Exploiting Exporters
While reduced import from India is causing a shortage of containers, the delayed repositioning of containers returning from the West has exacerbated the problem further. Noting the impact of increased cost, several trade associations have expressed their concerns over monopolistic practices of shipping lines. They complained to the central government and asked it to rein in the uncontrolled rise in freight rates.
Recently, the Engineering Export Promotion Council of India (EEPC) also brought the massive drop in exports to government’s notice. It said that shipping lines are forming cartels and decreasing the competitiveness of India’s exporters in the market. The engineering products dropped by 8.03% in August.
Container Shortage Crisis to Last for another 3 Months
An official from freight forwarding agency, Worldwide Logistics (India) said that the shortage of containers could last for about the next three months. The creeping equipment shortage has piled up empties at ports in the US and Australia. The vessels which remained idle in the lockdown were re-routed to more profitable trades. Lack of containerships calling at Indian ports made the carriers to cut short their container lease positions, which resulted in supply and demand gaps.
Rakesh Pandit, CEO of Conbox Logistics, stated that the situation is getting worse as freight rates are increasing much faster than usual. He added that they have pending bookings for 80 20ft containers for Durban; however, there is no space until November. Apart from this, the problem in Maersk’s booking system is also causing a delay.
Ministry of Commerce and Industry on 21st October met to discuss the high rate of containers, and unfair demurrage charges raised by the shipping line companies. Further, it has asked them to submit requirements for container requirements for the next two months.