India container freight surges by up to 67% on acute space shortage

New Delhi — Container freight rates for sailings out of India have surged by up to 67% over the past month due to shortages in inventory and available space, market sources said.

For some destinations, particularly short-haul destinations in the Middle East, liners are not offering containers though traders are willing to pay a premium, Harshveer Soni, head of GreenLeaf, which exports rice and cotton, said.

Freight rates for available space on the short haul routes -- such as to the Middle East -- have surged.

"Container freight from west coast India to Kuwait has increased to $600-$650/TEU, for Bahrain it has increased to about $500/TEU and for Qatar it would be $375-$400/TEU. For all these locations, freight has increased by $100-$150/TEU if you compare with the pre-lockdown period," Soni said.

The freight has increased by about 30% for long-haul routes as well.

In the last one month, container freight from west coast India to the US has increased by $600-$800/FEU, a freight forwarder said. "Container rates are currently around $2,600-2,700/FEU for US. They were around $2,000-$2,100 a month ago."

"Carriers are preferring to book cargoes for long haul, as long haul freight is higher," a freight forwarder said.

Since the start of July, the Platts Container Index, a weighted average of the Platts' container rate assessments, has increased about 5% to $1,333.12/FEU on Aug. 6.

Carriers are charging a premium not only because container inventory is low, but also because there is not enough space available on vessels, he said.

A large number of liners had blanked sailings to India during the lockdown. Though demand has started reviving to some extent, the number of vessels docking at Indian ports is still quite low.

Container arrivals tank as imports fall

The pandemic led-lockdowns and trade disruptions have led to container imbalances the world-over. While Europe has started easing out of the container shortage, in India, exporters expect the scarcity to persist.

"There is an imbalance in equipment availability because imports have dropped and exports have picked up," Container Freight Station Association of India Secretary General Umesh Grover said.

Though India's exports fell for the fourth straight month in June, the fall in imports was steeper at 47.6%, and the country reported a trade surplus for the first time in 18 years.

Jawaharlal Nehru Port Trust (JNPT) in Mumbai, India's largest container port, saw exports from the port exceed imports by 41,600 TEU in July.

"After the lockdown got over, there has been a surge in exports from India. There has also been a surge in container requirement for export of sugar, rice, soymeal and other agricultural produce. It is getting tough to get containers, supplies are short," a broker said.

The problem is not as acute as it was till late-July, but finding larger lots of containers is still difficult, Indian Sugar Exim Corp Managing Director Adhir Jha said.

Other exporters too reported similar problems. "If you want to book a lot size of 50 containers a day for exports, you may get only 20-30," Soni said.

Traders said the container shortage on the Indian market will persist until imports from China pick up. Imports from China typically account for more than 50% of container throughput in India.

The pandemic lockdown in India, followed by a recession has led to a sharp drop in import demand. Container traffic from China was hit also as port authorities subjected Chinese imports to stricter checks following the geo-political stand-off between the two countries. This led to a further slowdown in import cargoes even after the lockdown ended, an official at a leading container port said.

Fresh containers on the horizon for India shippers

There may be some relief on the horizon. Traders said some vessels have started bringing in empties from Dubai and other countries to India, hoping to cash in on the surge in freight rates, and that may eventually push rates back down.

"Some shippers have also started stopping at Indian ports again, this too will help [lower freight rates]," the broker said.

An increase in imports into India ahead of Diwali may also increase container availability and help cool off freight, brokers said.

The decline in container rates, however, is likely to be moderate unless there is a sharp pick-up in imports.

"It is costly to bring in empties. You still need to pay the additional cost of bringing in empties to India, transporting them via rail to inland manufacturers. This leads to an additional cost of as much as Rupees 30,000, which is added to the overall freight," the broker said.

Others are hopeful that the container shortage as well as freight rates would ease by the end of August. "After the economy opened up, manufacturers and other traders started placing import orders. Once these import cargoes start flowing in by the end of this month, container availability will improve and that will lower freight," an official with a multinational trading company said.