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India's export body calls for indigenous shipping line to tackle container issues

Highlights

Shipping line to help local companies

Industry participants divided on proposal

The Federation of Indian Export Organisations, or FIEO, has called on the government to establish an indigenous shipping line to overcome issues faced by exporters due to the ongoing turmoil in the container industry.

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Freight rates and congestion are major issues that have affected the entire industry, and the immediate concern is that India does not have its very own shipping or carrier company, FIEO President A. Sakthivel said while responding to a question posed by S&P Global Platts.

Sakthivel was speaking at a virtual press conference, organized by FIEO on June 28, his first since assuming office.

The Indian company could offer help in tackling the challenges, ranging from severe congestion at key ports to equipment shortages and sky high freight rates, among others, he said, adding that under the current setup where all carriers operating at Indian ports are foreign, the organization doesn't have the authority to control prices.

"The shipping company need not own their vessels, but just by having a local shipping company we will have the ability to control the prices and further have better availability of equipment."

The suggestion comes against the backdrop of a sharp hike in container rates in the last one year due to an acute shortage of equipment, congestion issues at major ports and firm demand from the US and the UK.

However, such a proposal isn't peculiar to the export body as a few weeks ago, US retailer Home Depot announced it will be chartering its own container ship to deal with the current struggles in the sector.

The announcement sparked a debate among industry participants where some believed that this could be the new disruption for the sector while others said it is not feasible enough to be a popular practice.

"Next two years are going to witness a lot of changes, the supply chain will completely change ... the big forwarders like DSV Panalpina have started sailing their own vessels on the short routes for about 200-500 containers, now they are trying to establish their centralized markets," a freight forwarder working with a Germany-based company said.

"We can see new shipping lines being developed in the coming days, but it will be very challenging too," the source added.

"It's probably not easy to replicate because fundamentally there aren't many vessels that are available to be chartered ... If you look at the charter market, this is the tightest it has been in years with significantly, a very shallow amount of excess capacity," Alex Hersham, CEO of UK-based digital logistics company Zencargo, said.

While chartering vessels can be profitable if there is a regular flow of cargo, factors like regulatory permits, port congestion and legal expertise remain crucial, a logistics sector executive based in Hong Kong said.

"The chartering cost can go as high as $100,000 a day... even if you charter a vessel, where are you going to find containers?"