Nagpur: Shipping rates have jumped 55% in a fortnight owing ot a peculiar situation arising possibly out of demonetization. Imports have taken a dip but export demand has held up, leading to a shortage of containers at Indian ports. This led to freights going up. Shipping companies have announced two general rate hikes (GRIs), of $200 to $150 depending on the sector in January.
If things were normal shipping liners carry the export consignments in the same containers that bring in imports. Now exports are at their usual level but imports have taken a plunge. With low number of overseas vessels reaching Indian ports with imports, the companies do not have enough containers to fill up commodities to be exported. Shipping companies are having to get empty containers from places like Sri Lanka, Singapore and even Bangladesh.
This has increased the cost necessitating a hike in freight rates. Stakeholders say this could be due to demonetization, though there is no agreement on the cause. Imports are down because of a general slowdown in the industry, which may be due to demonetization, say sources in the business. A large portion of imports includes industrial inputs. Slowdown in manufacturing activity due to note-ban is estimated to have taken a toll on imports of raw materials, say those in the business. The biggest hit is in the metals, auto and high-end consumer goods segments, sources said.
Freights for shipping goods to Europe have gone up to $700 as against $450 per container over a week ago. For South Africa or Colombo, it is $350 now, up from $200 and for West Africa it is $800 from $650, said a representative of R&Y Logistics, a city-based shipping agency.
Vidarbha region mainly exports rice, textiles and steel products that travel through Inland Container Depots (ICDS) to Mumbai. The imports include scrap, timber and industrial inputs, the source said.
Farooq Abkani, a timber merchant and president of Vidarbha Rural Industries Association, said the demand for timber was down 30%. This was because of slump in construction sector that could be due to demonetization.
Kirit Joshi, director of modular furniture maker M/s Spacewood, said the company imported their raw materials. The number are down nearly 20% due to the slump. Things are expected to improve in next 3-4 months but businesses will have to change their strategy, he said. Spacewood is one of the major importers in the region.
"Imports even at our unit have gone down a bit but no crisis is seen in industry in general and it cannot be attributed to note-ban, which only led to a little inconvenience on fronts like payment of wages," said Atul Pandey, president of Vidarbha Industries Association.
Source: timesofindia.indiatimes.com