Container rate cuts provide reprieve to Indian rice exports: sources

Indian rice export is likely to find relief in the coming days as major shipping lines are cutting down their container freights to West Africa, sources said Aug. 7.

Reduced container rates are likely to boost container activities, attract greater international demand from West African buyers, and provide support to Micro, Small, and Medium Enterprises (MSME) that mostly depend on container trade.

Container rates surged 150%-200% from mid-May to July 2024, when shipping lines increased their container rates to $4,000-$5,000/TEU for Vizag to Cotonou delivery, an increase of $2,800/TEU from rates offered in Dec. 2023, sources said.

The shortage of containers resulting from ships rerouting due to the Red Sea crisis and leading to congestion at major ports, combined with other factors such as China loading more containers in advance due to US import tariffs on Chinese goods, caused an unprecedented increase in container rates. Shipping lines also stopped their dedicated service from India to West Africa in the last two months, market participants said.

According to a Chhattisgarh-based exporter, rising freight rates had led to 90% decrease in container-based trade from India for non-basmati rice.

Members of an Indian rice export association convened with the Ministry of Commerce and Industry on Aug. 2 to discuss increasing freight rates. The meeting, led by Additional Secretary Shri Anant Swarup, focused on the issue of rising ocean freight rates imposed by shipping lines and the measures to regulate these rates to ensure fairness and affordability for the MSME rice exporters.

Market participants suggested shipping lines to bring the freight down to $1,600/TEU for Cotonou delivery.

The shipping lines confirmed in the meeting that, in the coming days, container rates to West Africa will come down to $2,000/TEU levels, participants said.

One shipping line container rates have already come down to $2,578/TEU for Aug. 21 delivery to Cotonou from Vizag, lowering their quotes by $400-$500/TEU from rates offered for deliveries until Aug. 7.

"Current container rates are at $3,200-$3,300/TEU to West Africa, but the shipping line will revise the freight to $2,600-$2,800/mt in coming days," said a Karnataka-based exporter.

Currently, exporters are charged $100/mt to ship non-basmati rice from Vizag to Cotonou. One source said that if container rates come down to $2,000/TEU levels, then they will have to pay on average $76/mt.

Although the container freight will remain above the current breakbulk rate of $60-$62/mt, it will still benefit the exports, as some buyers usually offer to pay premium for container shipments.

"Many importers and exporters who are container-friendly will come into the picture with this move," said an exporter from Uttarakhand.

A freight forwarder based in the east coast explained that the choice to decrease container rates was also influenced by shipping lines expecting the congestion at transshipment ports like Colombo to stabilize soon and to offset the delays caused by slow-moving breakbulk ships at various ports.

According to The Agricultural and Processed Food Products Export Development Authority's latest data, India exported 2,900,173 mt of rice in the first two months of the fiscal year 2024-25 (April-March), dropping 21% year on year.

Amid the ongoing container crisis, the Indian Parboiled rice price has been under pressure in July 2024.

Platt, part of S&P Global Commodity Insights, assessed Indian Parboiled 5% at $534/mt FOB on Aug. 7, dropping $4 from the month prior, on low demand from international markets.

India is the world's largest rice exporter and is forecast to ship out 21.47 million mt in the calendar year 2024, up 21% on the year, Commodity Insights data showed, which, if realized, will be one of the highest shipment volumes ever by the country.