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French container shipping company CMA CGM S A on Tuesday started levying an Emergency Space Surcharge (ESS) of $200 per twenty-foot equivalent unit (TEU) from South East India ports as the cascading impact of global equipment shortages, port congestion and shipping delays including in India, creates space constraints on ships and force freight rates to soar to record levels.
The emergency space surcharge is being levied for loading from South East India ports to the North Continent, the Mediterranean, North Africa, Red Sea and Latin America as part of “continued effort to provide customers with reliable and efficient service,” CMA CGM said in an advisory to customers.
The South East India ports includes Kolkata, Cochin, Ennore, Haldia, Kattupalli, Krishnapatnam, Chennai, Pipavav, Tuticorin and Visakhapatnam.
The destination covered include North Europe, Scandinavia and Poland, Baltic, East and West Mediterranean, North Africa, Morocco, Red Sea, South America West Coast, Central America East Coast and the Caribbean, Central America West Coast and Mexico West Coast, Leeward, Windward, French Guiana and French West Indies.
The emergency space surcharge will be charged on dry, reefer, out of gauge (OOG) - container size beyond 40 high cube - and paying empties, until further notice.
Soaring rates
Container shipping rates from India have soared over the past few months. From Cochin, the prevailing rates are 100-150 per cent higher than what it was in January. Peak season and other surcharges have contributed to the spurt in rates.
“The situation in India is an offshoot of the ongoing global shipping crisis, where record imports to the US and Europe from Asia have created an equipment imbalance – a container shortage in Asia and idle inventory in the US and Europe,” says Harsh Deo, a supplier relations executive at Cogoport, which helps plan, book and manage shipments.
“That, along with port congestion, shipping delays and weather-related disruptions such as cyclone Nivar in the case of ports in Chennai area – are to blame for runaway freight costs,” Deo said.
Kattupalli port near Chennai will temporarily stop accepting exports from December 18 in a bid to stop containers piling up at its yard.
‘Build connected ecosystem’
While the shipping industry is still dealing with the challenges of Covid-19, Deo says that the “current situation across ports is not a Covid induced issue”.
“This is a systemic failure only brought to surface by Covid. It has resulted in certain stakeholders having an undue advantage in the supply chain. Low adoption of technology and inventory visibility is bound to create such issues in the future. The only way to avoid this scenario is to build a connected ecosystem with real-time visibility of containers. This, along with predictive models, will help foresee such issues in advance and help the stakeholders plan accordingly,” Deo added.
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