Containers pile up, freight rates soar as shipping lines cut down sailings

MUMBAI: Shipping lines are cutting down on the number of sailings amid the Covid-19 scare, resulting in the piling of containers at ports and increased freight rates, despite a sharp fall in crude oil prices.

Shipping lines are skipping calls at several ports to avoid partial filling of ships. Partially filled ships result in lower margins or even a loss, so operators would skip a scheduled call. This leads to cargo getting accumulated at ports, and ships getting filled to a greater capacity during the subsequent call.

Ship calls at Jawaharlal Nehru Port in Mumbai were down 15% at 141 in February over the previous month, according to data provided by Shipsy, a supply-chain technology platform.

As per the current Covid-19 protocol, crew and cargo coming from high-risk countries must be screened, pushing up the turnaround time for cargo.

"We have to follow the guidelines laid by the health ministry. If there are ships coming in from the countries enumerated in the guidelines, the crew has to be quarantined and the cargo laid up in anchorage," Jawaharlal Nehru Port Trust chairman Sanjay Sethi said.

The average turnaround time for a container at various global ports has gone up sharply. At India’s ports, this time has gone up to 12.2 days from about three days usually, according to Shipsy data.

As containers pile up at ports, even freight rates from India have soared between 15% and 100% depending upon the destination, hurting exporters. The rate per container from Mumbai to New York, for example, is up to about $2,400 (Rs 1.8 lakh) from the usual $1,800, as per industry quotations.

The increased turnaround time of containers has also resulted in a shortage of empty containers, prompting many shipping lines to charge extraordinary “equipment handling charges” of up to $300.

“Empty container is a very important and limited commodity,” said Soham Choksi, the chief executive at Shipsy. His company handles about 70,000 containers a month usually, but the volume has now come down by 25%, he added.

(With inputs from Anirban Chowdhury)