Indian Exporters Struggle with Freight Rates and Container Shortages
Indian exporters are facing significant challenges as they grapple with steep freight rates, container shortages, and limited shipping space. Foreign container shipping lines have reported these issues, causing concerns for exporters.
Easing Freight Rates Bring Some Relief
While there has been some relief in freight rates, exporters are still encountering hurdles. Rates from India’s east coast to Europe and the U.S. have decreased by 30-40%. Shipping to the U.S. is now between $4,300 and $4,500 per twenty-foot equivalent unit (TEU), down from previous rates of $5,500 – $6,000. Similarly, rates to Europe have dropped to $3,000 – $3,200 per TEU.
These reductions can be attributed, in part, to the conclusion of the Christmas season cargo rush. As large volumes of goods were shipped to meet Western market demands, the cargo flow has slowed, providing some relief in terms of available space on ships. However, concerns persist about a potential longshoremen strike in the U.S. in October that could disrupt supply chains, leading to container shortages and driving freight rates back up. Exporters are anxious about delays and space issues if the strike proceeds.
Container Shortages Persist
Shipping lines acknowledge that although container shortages have been reported, the situation is improving but has not yet been fully resolved. During the pandemic, the global supply chain was severely disrupted, which led to increased demand for containers and shipping space, subsequently driving prices higher. As the pandemic-induced boom has waned, rates began to decline. However, geopolitical tensions, such as the Houthi attacks, have caused shipping lines to reroute through the Cape of Good Hope, temporarily increasing freight rates.
The Future of Shipping
Looking ahead, the introduction of new container ships with a cumulative capacity of 2.4 million TEUs in 2024 may alleviate some of the pressure on freight rates. The increased capacity is expected to exert downward pressure on rates, providing benefits for exporters. However, uncertainties such as U.S. tariffs, global political tensions, and potential strikes will continue to impact global shipping and trade routes.
Exporters in India are closely monitoring the situation, hoping for stability in freight rates and an easing of container shortages and shipping space constraints. As these challenges persist, collaboration between exporters, shipping lines, and relevant authorities will be crucial in ensuring smooth supply chains and sustainable trade growth in the future.
