Dropping freight rates to US may hurt SCI-led consortium

Kailash Rajwadkar

Mumbai, Jan 4: The new service to the US, introduced by Maersk Sealand, is likely to soften freight rates to $1,200-1,300 per 20 ft container from the existing $1,600. Though this would be a boon for the trade which has already seen the freight rates dip from a high of $2,300, existing service to the US by SCI led consortium — IndAmEx — may find it difficult to sustain.

IndAnEx vessel has a capacity to carry 1,400 TEUs (twenty equivalent units), while the service introduced by Maersk Sealand has a capacity to carry 4,000 TEUs. “We are exploring options on how to meet this competition,” a top SCI official said.

The impact of the new service by Maersk Sealand is yet to reflect on the trade which may take another two to three voyages in the next 2-3 weeks.

SCI caters 80 per cent of the India’s international trade, while only 10 per cent of its cargo is through cross trade unlike other maritime countries like Norway which caters more to international trade. Industry sources said that globally container services are cross subsidised with thin margins and reasonable profits.

Cross trade however needs international marketing set-up, extensive networking, besides heavy investments which SCI does not have.
These recommendations were however a part of the PriceWaterhouseCoopers report for SCI which is currently being implemented at a rather slow pace, sources said.

The softening of the rates on the US sector is a setback for the SCI which was trying to gain by the merger of two consortium lines on the European sector in order to sustain freight rates. SCI’s container and bulk carriers division was able to post a negligible profit last year after a gap of five years and the current drop in the freight rates is unlikely to display a black bottomline.

Meanwhile, the merger of IES and IEX consortium on the European sector will be effective January 6, 2002. The merger would result in plying of seven ships of 2,600 TEUs instead of 14 ships. The merger would also reduce the transit time between JNPT and Europe by three days, sources said.