Trade hit by record 60% surge in freight

(This story originally appeared in on Oct 22, 2020)

Mumbai: Trade, both exports and imports, has been badly impacted over the last few weeks after sea freight charges saw one of the highest ever increases of 60% in recent times. The development came after shipping companies hiked rates substantially. To make matters worse, exporters are facing a massive shortage of containers due to lower imports over the last few months.

The cost impact is being felt across industries such as engineering, auto components, chemicals, pharma and devices. There has been an increase in freight costs of 20-30% in October alone. Air freight is also up by 30-40% owing to reduced overseas flights due to the pandemic. For importers, it’s a double whammy — in the wake of the increased freight rates, there is a higher outgo in terms of duties, which will impact companies’ margins in future, industry experts told TOI.

Federation of Indian Export Organisations (FIEO) president Sharad Kumar Saraf told TOI, “Exports are affected more by sea freight, in which there is a 60% increase in rates for main European ports over the last six months. Similarly, freight rates to Latin American ports have increased by 50%, and for the US it is being increased regularly since February. This is an unprecedented increase and a clear indication of a monopolistic and unfair trade practice.’’

Freight rate for October has risen sharply from $300 to $800 (per 40ft full container load), particularly for Middle East, European, North and South American ports. Availability of containers has further worsened even at regular ports like Mundra and Nhava Sheva, while the situation in inland container depots is worse. “There is also a huge hold-up of shipments at ports, resulting in inordinate delays and cost-escalation (for industry). Imports are subjected to thorough checks,” Pharmaceutical Export Promotion Council of India (Pharmexcil) chairman Dinesh Dua said.

The clearance of shipments currently takes 15-20 days as against nearly a week earlier. This is also being attributed to faceless assessment at ports. Raising the issue with the government, the industry has sought a regulatory body for shipping companies operating from domestic ports, according to a letter to the Directorate General Shipping. The letter, a copy of which is with TOI, adds, “Shipping lines are increasing freight (rate) in fortnightly or monthly intervals consistently since July. Besides the increase, the shipments are getting delayed as the vessels are going full. Shipping companies are able to increase the freight by forming cartels.”

Industries across the board are worried. “Both air and sea freight have gone up over the last few months, which may have an impact on companies,” Indian Drug Manufacturers’ Association (IDMA) president Mahesh H Doshi said.

Logistics company Maersk’s MD (South Asia) Steve Felder said, “Freight rates are a function of demand and supply, and they vary based on how these two change. Clearly, Equipment shortages impact supply and we are constantly looking to manage it. In recent months, we have seen a general shortage of equipment in the market due to an imbalance between imports into and exports out of India. However, our goal is to ensure that we can help our customers in enabling their trade. With exports rising from different parts of the country, we need to position empty containers accordingly across India, thus adding up to the overall cost of logistics.”

Trade hit by record 60% surge in freight Trade hit by record 60% surge in freight Reviewed by TechCO on 10/22/2020 Rating: 5

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