Mumbai: Trade, both export and import, has been severely impacted, with sea freight costs from China shooting up 200% from pre-pandemic levels.
The sky-rocketing sea freight cost (from the US, Europe and China), along with shortage of containers, is hurting the profits of companies in sectors such as engineering, auto components, pharma and medical devices. To make matters worse, the cost of air freight from the US and China has also increase 50-200%.
Industry experts attribute the container shortage to China, which has a dominant share in global trade, as well as a stronghold in container-manufacturing. Further, there is congestion at ports with uncleared containers, while some are lying at warehouses. Due to these bottlenecks, there are delays of 10-15 days, while price volatility is affecting orders.
“To overcome the demand-supply mismatch of containers, there is a suggestion of a digital platform to display the freight rates as well as container vessel status, on a real-time basis. Increased digitisation of shipping services and improved communication between supply chain partners will also help”, Sanjay Budhia MD, Patton group & co-chair CII national committee on exports, told TOI.
Shipping companies have jacked up rates over the last year by adding peak season surcharge and other increases, which vary with shipping lines and container sizes.
“Over the last six months, freight rates for US vessels have doubled to $6,000. We suspect there is cartelisation, and hence have been asking for government intervention in regulating rates,” said Sharad Saraf, former president, Federation of Indian Export Organisations, and owner of export house, Technocraft.
Exports during the April-June quarter jumped to $95 billion on account of healthy growth in sectors including engineering, rice and pharmaceuticals.
Pharma exports, valued around $25 billion for FY21, have been growing around 14% year-on-year, but the first quarter has been slow due to logistics’ bottlenecks. “Exports have shown tremendous growth in the last four months despite constraints like container shortage and vessel unavailability, leading to huge upsurge in freight rates. With MEIS (Merchandise Exports from India Scheme) unresolved issues for the last six months and RODTEP rates (Remission of Duties and Taxes on Export Products) not being announced for the last four months, there is anxiety amongst all exporters regarding the bottom line. The government must ensure clarity as slowdown of Chinese exports-based economy presents a wonderful opportunity for optimising Indian exports sizeably,” Dinesh Dua, chairman, Pharmexcil, said.
“Cost of freight has witnessed a substantial upsurge. In markets, where we sell generics, these increases (in freight) are making it unviable to continue selling our products at current market prices. Our margins are impacted,” an executive with a Mumbai-based pharma company, said.
There is a need for a national shipping regulatory body to be formed to determine freight rates, experts added.
Source:thetimesofindia.com