Informist, Tuesday, Aug 3, 2021
By Dev Kachari and Apoorva Choubey
NEW DELHI/MUMBAI – Container freight rates from major Indian ports—-Nhava Sheva, Mundra and Hazira--on key routes that connect to ports in the US, Europe and the Mediterranean are set to rise further, as disruptions in the shipping supply chain may continue.
Spot container freight rates for movement of cargo from India to its biggest export market, the US, are currently at $9,000-$10,000 per forty-foot equivalent container unit, and they are set to rule even higher, especially on routes that connect to Los Angeles port and Port of Oakland.
The rates on routes from Indian ports to the US East Coast are seen hovering well above the $10,000 per forty-foot equivalent unit mark, as per a senior official of a non-vessel operating common carrier company. Such companies have arrangement with shipping lines and acquire container space for cargo transport.
"What I am hearing with the shipping lines with whom we engage is that the rates are expected to touch $12,000-13,000 per FEU (forty-foot equivalent container unit) in the coming one-two months for container cargo from India ports bound for US West coast," he added.
While Mundra and Hazira ports in Gujarat are gateways for export-import cargo from north, northwest and central India, Nhava Sheva port in Mumbai handles cargo traffic for Maharashtra, Madhya Pradesh, Gujarat, and Karnataka. Cargo handled by these ports include textiles, machinery, chemicals, pharmaceuticals, vegetable oils and aluminium and other non-ferrous metals, among others.
Container freight from India to the European and the Mediterranean market is also set to become costly. Major shipping liner Hapag-Lloyd has increased tariffs on cargo from the Indian subcontinent to Europe and the Mediterranean by $1,000 per forty-foot equivalent unit.
With effect from Aug 15, tariff from Nhava Sheva, Mundra and Hazira ports to Rotterdam port in the Netherlands will increase to $5,724 per forty-foot equivalent unit, while those to Genoa in Italy and Valencia in Spain are set to rise to $5,444 per unit.
Shipping liners are also undertaking General Rate Increase in the range of $500-$1,000, market participants said. General Rate Increase is a temporary levy, which is charged on shippers based on the supply and demand situation and for shipping liners to cover any additional cost.
Hapag-Lloyd is scheduled to undertake a General Rate Increase of $1,000 per forty-foot equivalent unit, with effect from Sep 1, for cargo shipped from the Indian subcontinent to the US and Canada.
Freight charges the world over have spiked out of hand over the last year due to disruption in economic activities caused by the COVID-19 pandemic. The recent jam at the Suez Canal followed by lockdowns in South China ports such as Yantian, and heavy traffic at ports along the east coast of the US due to increased volumes have only exacerbated such issues.
"It (increase in freight rates) depends very much on the value of the goods, on the route and also volume," said Jan Hoffmann, head of the trade logistics branch, division on technology and logistics of United Nations Conference on Trade and Development, at a recent maritime webinar on container shipping crisis. He added that high volume products are more susceptible to the increase in rates.
Several companies across various sectors, ranging from chemicals to pharmaceuticals to consumer goods, have indicated that they were conducting business with the assumption that logistics expenses will remain elevated. On an average, Indian companies are expected to witness a 10-30% increase in logistics costs compared with last year due to higher freight rates, believe analysts.
Some sectors, like chemicals, may have to shell out more than others, given the need for special tankers or containers for storage. Major Indian chemical companies could spend 13-16% of their sales on logistics expenses this financial year, compared with 9-12% earlier, said Likhita Chepa, an analyst at CapitalVia Global Research.
While larger companies, especially those with significant market share in their respective sectors, have been able to operate with higher freight costs, several smaller companies are facing the short of the end of the stick, as high logistics costs may not allow their exports to remain viable, said the head of research at a foreign brokerage house. Companies relying on imports for raw materials are already on the hunt for alternate suppliers within India, he said. End
US$1 = 74.29 rupees
Edited by Mainak Moitra
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