Business imbalance causes container scarcity; freight rates hit the roof

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Container scarcity in India because of the uneven import-export scenario is taking costs through the roof for both, shipping lines in addition to the importers and exporters.


“Freights have jumped on all routes in the range of 20-100 percent depending on the sector. Exporters are operating on losses at times as customer isn’t in a position to take in the hike,” Mark S. Fernandes, director, IMC Chamber of Business and Industry, told Commerce Standard.



Imports to India plummeted 22-24 percent in the April-November period, while exports have risen to 29 percent in the same period creating equipment (container) imbalance in the domestic market, informed industry officials.


“China used to be a strong importing partner for India. After Chinese imports came under scanner and bans were placed on Chinese goods, the imports to the country have gone for a toss, resulting in this equipment imbalance for India,” said Umesh Grover, secretary general at Container Freight Station Organization of India (CFSAI).


Increased freight cost has impacted the margins of exporters across the sectors. “We are in a helpless situation. Customer isn’t in a position to pick out up goods at increased prices, while shipping lines have raised freight. So we need to bear the cost since fabric is already produced and must be delivered. For my company, freights have jumped between 3-5 times in the final four months. The shipping lines have been ruthless in increasing costs. There is total insanity available in the market and shipping line have formed a cartel to make up for the losses it incurred all over worldwide lockdown (early this year),” said an exporter on condition of anonymity. The exporter in large part sends consignments to China and the Far East.


Though freights have gone up for the container segment, the issue of availability of containers eases to a point whether bookings are done in advance. “Now the exporters are planning with shipping lines approximately 1-2 months in advance and making certain cargo moves on time. There is not any major delay in getting containers whether it is deliberate better,” said Fernandes.


A 40-foot standard container can carry 22-23 tonne of cargo and is meant for lighter and voluminous fabric, while a 20-foot standard container is used for carrying heavier fabric and can hold 28 tonne cargo.


“There’s a waiting list for even booking in advance. It isn’t all that easy to book but once a container is booked, availability is assured. Getting a slot is a struggle again,” said an industry expert on condition of anonymity.


Balmer Lawrie, Hyundai and Nathani among others were one of the most container manufacturers in India who went into bankruptcy after China started producing the equipment at a much competitive price of $1000 a container as against $1800-$2000 a container manufactured in India.


“Shipping line could order for making more containers but once commerce situation comes to normal, which is expected by February. Those newly ordered containers are going to be an stock. So shipping lines aren’t eager to invest in new containers at present,” said Grover.


Today, India has no container manufacturers. The biggest container manufacturer on the planet is China. At present, a 40-foot standard container is manufactured at approximately $5000, which is a hop from near to $3,500 per container.


“It isn’t easy for shipping lines to live on as mannered. Their operating costs have gone up. Business overall is hit, so there are less ships on water and have to transport a large number of empties, fuel costs have jumped. Because of the pandemic, crew cannot be relieved without conducting sure procedures, which takes time and may be an extra cost. There is cost burden across the chain, not just for exporters,” said Grover.


Meantime, container ports such as JNPT and Chennai are trying to retain operational efficiency in an effort to check costs for both — the shipping lines in addition to for importers/exporters — from the port end.


“There is cargo growth at the port and we are in a recovery mode. We are ensuring there’s no congestion at the port in order that no extra cost burden is incurred by any of the stakeholders,” said a senior traffic official with JNPT.

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