Logistics

Surcharges threaten to rock exporters’ boat

TE Raja Simhan Chennai | Updated on June 26, 2021

Shipping lines to levy up to $1,500/TEU

At a time when exports appear to be the only saving grace for the Indian economy, exporters are being forced to shell out more to ship  goods to global destinations.

Shipping lines have announced surcharges due to the continued disruptions in global container trade following congestion at various ports. The proposed increase is between $500 and $1,500 per twenty-foot equivalent unit (TEU), depending on the destination.

Effective  July 7, shipping rates from Nhava Sheva, Mundra, and Hazira ports to Mediterranean will see a rate increase of $500 per TEU, said an Hapag Lloyd advisory. At present, it costs $2,800 per TEU to Barcelona: a $500 surcharge would mean an 18 per cent increase in shipping cost.

The French shipping group CMA CGM will apply a peak season surcharge of $1,250 per TEU for dry cargo to East Coast Central America, the Caribbean and Mexico East Coast from India via Malta. Considering that it costs $5,500 per TEU to Buenos Aires from India, the surcharge adds to the shipping cost by 23 per cent.

The congestion was aggravated after the Suez Canal blockage and the recent suspension of activity at Yantian International Container Terminal (YICT), China.

Suez Canal blockage

Lars Jensen, an industry expert, in a social-media post, said that  YICT  operated at 30 per cent of capacity in the past month. It will take 82 days to clear the backlog there, said Jensen.

“Importers and exporters are facing huge challenges with port congestion and availability of vessels. We are having to pay three times the normal costs. This is a huge burden for exporters like us who have already contracted the prices with the customers,” said Sanjay Lulla, Managing Partner at SM Lulla Industries Worldwide – a leather garment exporter.

An official with  a shipping line said they are increasing freight rates to set off steep increase in vessel costs. There is also a serious equipment imbalance, he added.

Maersk, in a bulletin, said that Covid-19 compromised global plans and, in parallel, consumers began asking for more. The knock-on effects of this are widespread and the global trade lacks the resilience needed to cater to this added strain.

 

Published on June 26, 2021

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