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    Container crisis, spiralling freight rates to hit exports

    Synopsis

    Container shortage has further added to the woes of exporters as finding empty containers is also a daunting task, said exporters, alleging that hoarding of containers by China created a shortage and fuelled rates.

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    Freight charges have spiralled for most export destinations, including Europe, Canada, Middle East.
    (This story originally appeared in on Aug 03, 2021)
    AHMEDABAD: At a time when export prospects are looking up with recovery in global trade, container shortage and spiralling container freight rates continue to haunt exporters. This twin blow is feared to hit exports.

    Container freight rates had doubled and trebled in May depending upon the destination of consignments. The situation has worsened as freight charges continue to move upwards unabatedly, said exporters.

    "Freight rates are surging continuously. The charges for containers are increasing between $500 (Rs 37,000 approx) to $800 (Rs 59,000 approx) every fortnight," said Ashwin Nayak, founder chairman, Federation of Indian Spice Stakeholders (FISS).

    For instance, a 40-foot long container for a shipment to New York will currently cost around $8,500 (Rs 6.32 lakh approx) which hovered around $7,000 (Rs 5.21 lakh approx) a month ago. The same rate was $2,500 (Rs 1.86 lakh approx) in pre-pandemic level. Some other destinations in the US and Canada have seen container charges reaching about $12,000 (Rs 8.92 lakh approx).

    For exports to Europe, rates have firmed up to $5,500 (Rs 4 lakh approx) currently from $4,000 (Rs 2.97 lakh approx) last month. The freight ranged from $1,000 (Rs 74,365 approx) to $1,200 (Rs 89,240 approx) before the outbreak of the pandemic, said exporters.

    Freight charges have spiralled for most export destinations, including Europe, Canada, Middle East.

    "Rates for LCL (less-than-container-loan) shipment, where small quantity cargoes are grouped together in one container, have surged 3-4 times," said Bhupendra Patel, chairman (Gujarat) of Basic Chemicals, Cosmetics & Dyes Export Promotion Council (Chemexcil).

    Container shortage has further added to the woes of exporters as finding empty containers is also a daunting task, said exporters, alleging that hoarding of containers by China created a shortage and fuelled rates.

    "Freights have surged substantially. Exporters are not getting containers in time due to shortage. If you manage a container, then availability of vessel is also an issue. Hence, exporters have turned cautious because export cost has also gone up," added Nayak.

    Smaller players have reduced export work and exporters now prefer to book free on board (FOB) orders and try to avoid C&F (cost and freight) orders, said an exporter.

    "Container shortage and high freight have led to delays in shipments, blockage of funds and higher cost of exports," said Dilip Padhya, chairman (regional council) of Gujarat Chamber of Commerce and Industry.

    "We are also losing export business as no containers are available for destinations such as Australia and Latin American countries even if exporters are ready to cough up exorbitant container freight rates," he added. According to KG Kundariya, former president of Morbi Ceramic Association, high freight rates and container shortage have dented ceramic tile exports from Morbi by about 10%. Buyers are ordering consignment that are inevitable and tend to postpone consignments that can be avoided currently.
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