Exporters have raised the issue with the nodal commerce and industry ministry, as imposition of emergency and peak season surcharges by foreign shipping lines — besides detention and demurrage charges — are inflating logistics costs and delaying shipments.
“Vessels are giving blank calls and not touching ports, due to which we are not finding containers,” said Khalid Khan, director at export house Geco Trading Corp. “Moreover, China is picking up more empty containers than before.”
Ocean freight rates from India’s west coast to Argentina, at $3,000-4,000, have more than doubled to $9,000 in the past three months. Rates to Africa have also surged to $7,500, from $3,500, said Khan.
For shipments to the US east coast, freight rates have climbed to $9,500, from $5,500, while to Russia, it has more than doubled to $5,000, from around $2,000 a year ago.
Container shipping rates to conflict-afflicted West Asia have seen the highest surge, to around $3,500, from $400. “Our goods are ready to be shipped but dispatches have been affected due to unavailability of vessels,” said Rajeev Chitalia, chairman, Electrofocus Electricals.
Demurrage & Detention Costs
Electrofocus is a manufacturer and exporter of electrical fittings. “Mother vessels are either not calling at, or skipping, JNPT. Smaller vessels too are infrequent… Severe congestion at the port is mainly due to the West Asia crisis,” said Chitalia.
He said bookings for ports such as Bahrain and Sydney have been paused for more than a month due to the prevailing higher freight costs. Container shipping rates for Bahrain have soared to $5,600, from $550 prior to the start of the Iran war on February 28. Rates to Trinidad & Tobago have jumped to $10,000, from $6,000.
“Plus, we have to pay heavy transportation and detention costs,” said Chitalia. He said the company is saddled with Rs 8 crore worth of inventory due to the supply chain bottlenecks issues.
Ports on India’s west coast are heavily reliant on Gulf shipping routes, which have been disrupted by the conflict. India’s exports to West Asia rose 7.3% on-year to $5 billion in June.
The conflict has affected movement of cargo ships in international waters, particularly through the Strait of Hormuz. After the initial disruption, India moved to using three ports in Oman (Duqm, Sohar and Salalah) to continue shipments.
“Nhava Sheva and Mundra ports are congested, and vessels are unable to berth on time, which is causing delays,” said Khushwant Jain, managing partner at Mumbai-based GS Exports, an exporter of oilseed and spices. “For the last month or two, we can’t get containers to export to Canada due to higher freight rates. Orders are getting cancelled as there is no space in vessels.”
Exporters are also being impacted by a shortage of food grade containers, said Jain, highlighting that China is taking most of the containers.
Ajay Sahai, director general of Federation of Indian Export Organisations, said exporters earlier primarily faced challenges related to the frequency of long-haul services, but current concerns are increasingly centred around elevated freight rates and the imposition of various additional charges, which are adding to exporters’ logistics costs and affecting their competitiveness.
“We ourselves are running short of 50 containers here to fulfil our export commitments,” said Jain of GS. “Due to the war, our containers on the way to Oman are stuck at transshipment ports. We have paid around Rs 25 lakh in detention, compensatory and demurrage charges as the client refused delivery due to delays. The problem is compounded as foreign shipping lines are not registered in India and are present through agents.”
Exporters emphasised that while the government can’t, on its own, control sea freight rates, it can ask Europe to give preference to Indian routes as most shipping lines are based on the continent, and both sides are currently negotiating a trade deal.