Container shortage now becomes a big issue for India; threatening nascent export revival

By: |
Updated: December 09, 2020 1:13 PM

Global trade is being roiled by a shortage of containers because dire predictions of a collapse this year that prompted carriers to cancel sailings have proved too pessimistic

The scheme would refund to exporters the embedded central, state and local duties and taxes that were so far not being rebated or refunded.The scheme would refund to exporters the embedded central, state and local duties and taxes that were so far not being rebated or refunded.

A recent revival in Indian exports is under threat because there aren’t enough shipping containers to get the goods across the sea. Shipments of certain goods, especially sales of packaged foods, had surged in recent months as more people eat at home during lockdowns, boosting expectations of a busy Christmas season. But the global impact of the coronavirus on trade and a slump in Indian imports have led to a shortage of incoming shipping containers, boosting freight charges about seven times.

Vimal Agro Products Pvt., which exports goods like canned mangoes and pickles to the Indian diaspora, said orders that were intended to arrive in Australia and New Zealand in time for Diwali reached only after the Hindu festival. While the company can’t share details on Christmas orders due to client confidentiality, there’s concern of a “big impact” if the container shortage persists, according to Chirag Nemani, vice president for marketing and sales. “Empty containers were easily available earlier but now that is a big issue,” Nemani said. “Customers don’t want delay.”

Global trade is being roiled by a shortage of containers because dire predictions of a collapse this year that prompted carriers to cancel sailings have proved too pessimistic. India’s situation is worsened by geopolitical tensions with China that have reined in imports — and subsequently incoming containers — even while exports are recovering.

India’s exports in terms of volumes grew 24% July-October, while imports reduced 28% from the previous year. Due to this, companies which used to ship out empty containers from India had to now bring them into the country and move them inland where factories are located at a huge cost, according to the country’s Container Shipping Lines Association.

Vimal Agro’s freight costs have doubled to $1,800 per container for the U.K. and charges have gone up three times to $1,500 for Australia. Capital Ventures, which sells spices, bakery goods and staples under the Parliament brand, is paying $200 for Singapore where it was earlier $20 and $700 instead of $200 for Dubai.

Organic Tattva, which is reporting a 50% increase in sales of organic foods to retailers including Costco Wholesale Corp. and the UAE-based Lulu Group, said shipments would have been 20% higher if it weren’t for India’s harsh lockdown that hit the availability of manpower and now the container shortages. The U.S. contributes 40% of the company’s revenue.

“The shortage of containers started a few months back and has exacerbated in the last few weeks,” said Manish Sharma, a partner at PwC India. “Unfortunately, this has come even as our exports were picking up, so on top of an economic shock we now have a logistics-induced challenge.”

Key Numbers:
* India’s overall shipments in value fell 5.1% in October, though food and beverage sales rose about 32%
* Imports plunged 11.5%, the eighth straight month of declines
* Sustained drop in imports contributed to a rare current account surplus in the June quarter

Sharad Kumar Saraf, president of the Federation of Indian Organisations, said the industry body has been informed that the government is asking shipping lines to arrange for 100,000 containers per week. “The waiting time for containers is currently two weeks or more, while normally it is 1-2 days,” said Saraf. “This will definitely impact Christmas orders.”

 

Do you know What is Cash Reserve Ratio (CRR), Finance Bill, Fiscal Policy in India, Expenditure Budget, Customs Duty? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1RBI bulletin: ‘Demand shock biggest toll of second Covid wave’
2A shot in arm for India, South Africa: On IPR waiver for Covid jabs, China backs ‘developing world’
3Can digital cash make inflation worse? Fed, other central banks need to be cautious