2020 will be remembered by many as one of the years that has caused maximum upheaval in terms of freight rates, space and equipment capacity in all markets around the world.
While the impact on the Trans-Pacific and Trans-Europe has been the maximum, other trades like the India trade has also been affected quite substantially.
As of the 29th of Jan, the average freight rates from India West Coast to USA East Coast was around USD3,205/20’ and USD4,010/40’.
These never before seen steep increases especially on the exports, has sent the export community in India into a frenzy as shipping lines continue with the increases one after the other.
MSC, CMA CGM, Hapag Lloyd have all announced another round of GRIs
- MSC – USD500/20’ & USD600/40’
- CMA CGM – USD900/20’ & USD1,000/40’
- Hapag Lloyd – USD480/20’ & USD600/40’
These GRIs will be applicable on the trade lanes between India and the USA West Coast and Canada.
The Europe trade has also not been spared with GRIs of USD500/20’ & USD1,000/40’ which has taken the rates from USD950/20’ & USD1,150/40’ last year same period to USD1,962/20’ & USD3,174/40’ if we take Hapag Lloyd as an example.
While lines seem to be using the standard monologues similar to “In a continued effort to provide (customers) with a high level of service and uninterrupted liner services and equipment supply……………….we are announcing a GRI (General Rate Increase) of …………………., on the trade between India and Europe” etc, Indian shippers and forwarders are not buying this argument.
Kuljit Anand, General Manager of Procurement with M+R Logistics India (member of the M+R Spedag Group) relates their plight as “First they came as Shocks, then subsided to Surprises, then went from Reluctance to Acceptance, but now it is Expected / Accepted and Quietly Submitted to“.
An Indian West Coast exporter who didn’t want to be named for fear for backlash from the lines said
“Freight rates in certain sectors have gone up by 5 to 6 times more than the usual rates.
The implementation of GRI at a time when all shipping lines are showing massive profits in 2020 is not just cruel and impractical, but impacts exporter as certain products cannot be exported simply because the freight cost is twice or triple the cost of goods.
We have had goods sitting for 2 months because the freight rates were in the range of USD 5000 to 6000 per FEU and the buyers refused to buy.
Because of these crazy hikes, buyers are looking at other unexplored markets in Europe and in some cases Africa too simply because the freight is cheaper substantially from those origins.
While the shipping lines have every right to introduce surcharges because they have had some bad times, this should not be at the cost of exporters losing business and their markets thus allowing competition from other countries.
The problem is further compounded because despite such high rates bookings aren’t easily available.”
A smaller forwarder who also didn’t want to be named shared their plight “With increasing rates, smaller forwarders are facing tremendous challenges because the already marginal profit margins are shrinking further. With vessels going full, and shipping lines not wanting to negotiate any named account filing, sustaining business is getting difficult.”
Jashma Shetty, Head of Commercial at Freightcrate Technologies attributed the pandemic, the resultant trade imbalance of exports more than imports, repeated blank sailings, and some of the major ports delays in turnaround of containers as some of the reasons for container shortage in India.
“Shipping lines have to specially bring empty containers to India from various parts of the world, thus leading to increase in the freight rates. Shipping lines have increased the freight rate by 100% to USA and Europe as compared to the freight rate in July 20,” said Jashma. She also added, “The Indian Market must be ready for further rate increases due to these ongoing issues for the next 2 to 3 months at least.”
While this unprecedented increase in export volumes which has created this demand is one of the main reasons for the increase in rates as well, the continued increase and pressure on the shippers and forwarders is not something that the Indian export market may be able to sustain as per market experts.
While the world is in the throes of vaccinating its population in an attempt to achieve herd immunity and get over this pandemic as quickly as possible, how far the rates can be stretched remains to be seen.
Will the Indian export market behave like Elastigirl or will it snap?
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Via Moving http://www.rssmix.com/
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