The escalation of war in West Asia after the collapse of ceasefire in early July has come as a shock to India’s export-import trade with shipping rates to key destinations doubling and availability of containers contracting sharply due to disruption in global shipping routes.
The container shipping rates to the US East Coast from Indian ports on the western coast, for instance, are ruling at $ 6,000 for a 40-feet container, up from $ 3,400 in June. For US West Coast freight, charges for a container are now at $ 7,300, up from $ 4,100. While for sending a container to Europe, in July the cost went up to $ 3,800 from $ 1,700 at the start of June.
The recent increase has come on the top of high prices prevailing since the war started in March. Adding to the increase is the general uncertainty as the prices are varying across vessels making planning difficult, Managing Partner of Jyoti Steel Industries and Chairman Engineering Export Promotion Council Pankaj Chadha said.
Equipment Shortages
Other than the container rates, some shipping lines that are supposed to call at Indian ports are avoiding them leading to further complications like choking of supply of containers, Director of Geco Trading Corporation Khalid Khan said.
The blank calls at Indian ports by global shipping lines could also be a tactic to charge higher prices, a head of a global logistics firm said.
The fresh containers are not coming in and those for export are piling at the ports as some ships are bypassing Indian ports altogether. If there is a requirement of five containers only two can be arranged, Chadha said.
Other than longer routes that ships have to travel to avoid trouble spots, China’s move to corner a large chunk of containers available in the market is adding to the shortage, founder and CEO of Lexship Padmanabhan Babu said. China’s move is connected to the start of its export season from July which lasts till December, he added.
In line with ocean shipping, the rates for sending a cargo by air have gone up to Rs 400 a kg from Rs 100, Babu said.
As some ships avoid India, there is a build up of containers at the ports for which exporters have to pay rent and other charges and deal with buyers who complain of delay. As the pattern of higher freight and container shortage repeats at every hint of global trouble, exporters say there is no option but to build a formidable Indian shipping line and container building capacity. For air cargo, high dependence on West Asia-based air freight carriers is leading to the big hikes seen in the last few months.
Khan said the port authorities and the government should also work out relief in terms of waiver of charges for stuck cargo.
Dual Chokepoint Bottlenecks
The first flare-up in West Asia had led to closure of Strait of Hormuz for shipping traffic, The resumption of hostilities after the breakdown of Iran-US talks has widened the theatre of conflict to include Bab al-Mandeb strait and Red Sea through Suez Canal.
Escalated Houthi blockades and targeted attacks on commercial shipping have forced carriers to abandon short routes through the Suez Canal and take long detours, creating a dual-chokepoint bottleneck in West Asia. As the US intensifies attacks on Iran and Tehran and its allies threaten retaliation, the situation is expected to deteriorate in days to come.
