Logistics

Shortage of containers to linger

TE Raja Simhan | Updated on January 24, 2021

Boxed up: Freight rates are at least three times higher than pre-Covid-19 rates   -  ISTOCK.COM

Soaring freight costs, demand-supply imbalance and shipment delays hit trade

The Covid-19 pandemic in 2020 derailed every sector, and the shipping industry was no exception. While many industries, including manufacturing, are slowly bouncing back, the shipping sector is still struggling with a severe shortage of containers affecting trade.

The fall in imports after the pandemic led to a huge imbalance in the demand and supply of containers, hitting the availability of containers for exports.

The trade that is mainly dependent on maritime transport is trying to cope with the continuing shortage, which led to the spiralling of freight costs and delays in shipments. In some sectors, freight rates increased by 100-200 per cent. Adding to the woes is the cancellation of scheduled vessels while the rescheduling of regular calls has created a demand for container slot allotments on vessels. This is affecting exports and is also leading to escalating freight cost.

The bleak situation may continue beyond the present financial year, said G Raghu Shankar of the ICSA Group, an integrated logistics service provider.

The freight rate from Chennai to Hamburg has more than tripled to $1,800 per 20-foot equivalent unit (TEU) from $500 in April 2020; to Felixstowe by over four times to $1,800 from $400; and to New York to $4,800 from $2,200. These are fluctuating rates based on demand and supply, Shankar added.

Echoing a similar view, Sanjay Lulla, Managing Partner at SM Lulla Industries Worldwide, a Chennai-based exporter of leather garments, said: “The situation was bad last year and our shipments were delayed. We had to wait for containers for 2-3 weeks. Now it is better, but we need to pay premium rates to get containers almost immediately.”

Empty container shortage is a concern for major exporters as they are facing difficulties in exporting bulk shipments with the shipping lines rationing it, said Ennarasu Karunesan, Founder & CEO, UMK Group, and an expert in ports and logistics.

Sino-Indian Trade is getting stabilised as import cargo from China into India has increased and the container repositioning for exports to China improved considerably.

However, exporters are hit by freight rates that are at least three times higher than their pre-Covid-19 spendings.

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Published on January 24, 2021
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