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Freight rates drop for Indian shippers, but fresh hikes loom amid schedule disruptions

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MUMBAI : Average container freight rates for trades out of India have significantly tapered off this month, versus the levels maintained by major carriers in May, according to a new market analysis .

On the westbound India-Europe trade, rates West India [Jawaharlal Nehru Port (JNPT)/Nhava Sheva or Mundra Port] to Felixstowe/London Gateway (UK) now stand at around US$6,009/20-foot container and US$7,141/40-foot container, down from US$7,615 and US$8,015, respectively, in May.

For ex-West India-to-Rotterdam (the Netherlands) shipments, average pricing has dropped to about US$6,000 per 20-foot container and US$6,300 per 40-foot container, from US$7,015 and US$7,046, respectively.

Eastbound rates, however, remain at the same levels as they were at the end of last month — at US$1,923/20-foot container and US$2,046/4-foot container for cargo shipped from Felixstowe/Rotterdam to West India.

Contract rates for Indian cargo to the US have also seen double-digit drops from the May trends – averaging at US$8,317 per 20-foot box, from US$10,090, and US$10,500 per 40-foot box, from US$12,693, for bookings to the US East Coast (New York), and at US$10,250, from US$11,725, and US$12,850, from US$14,765, respectively, for the US West Coast (Los Angeles). For the West India-US Gulf Coast trade, rates are hovering at around US$9,150 per 20-foot and US$11,500 per 40-foot container, versus US$10,906 and US$13,713, respectively.

In the return direction, there has been a decrease of about 10%, on average, for bookings from the US East/West/Gulf coasts to West India.

Similarly, average contract rates on intra-Asia trades have cooled between 10 and 25% from the levels reported in May. For shipments from West India to South China (Yantian), rates now stand at around US$450 per 20-footer, down from US$600, and US$700 per 40-footer, down from US$900, respectively, as of the end of May. For the West India-Singapore trade, rates have fallen to US$405 and US$610, from US$450 and US$750 last month.

For South China-West India, 20-foot/40-foot bookings are being made at around US$2,150 and US$4,050, compared with US$2,412 and US$4,481 in May, the analysis shows.

“The pressure on space and equipment during the pandemic had been due to the sudden surge in demand for goods from Asia (including the Indian Sub-Continent) into the US and Europe,” said Sunil Vaswani, Executive Director of the Container Shipping Lines Association (CSLA). “As a result of this, the ports in the US (particularly, Los Angeles and Long Beach that handle 42% of the US volumes) & Europe got congested, leading to extended berthing delays, which delayed the turnaround of ships & equipment, thus disrupting schedules & putting further pressure on space & equipment.

“The shipping lines responded to this aggressively by putting in additional capacity to meet this demand. For instance, during the year 2021, the lines repositioned 1.85 million TEU of empty containers into India and introduced new services which increased the capacity by about 33,000 / 35,000 TEU weekly. Both these efforts continue during 2022 as well. All this has contributed towards the recent stabilisation/softening of the rates.”

Vaswani added, “As far as the peak season is concerned, firming up of the freight rates during this period is not a new phenomenon. This happens every year & could therefore be well expected this year too.

After all, it’s all a question of demand and supply where market forces play their role.”

To that end, some signals are already emerging. Mediterranean Shipping Co. (MSC) has announced hefty rate hikes on its India-North America network. It will start charging a general rate increase (GRI) of US$1,000 per container from 4 July, which will be followed by peak season surcharges of US$1,000 per box from 15 July and US$ 2,000 per box from 1 August.

“In order to maintain the high level of reliability and efficiency of our services to meet the needs of our customers, MSC will apply PSS effective 15 July, 2022 handover and 1 August, 2022 handover, ex-India to US and San Juan, Puerto Rico,” MSC (India) said in a customer advisory.

At the same time, schedule disruptions continue to be a nagging pain point for Indian exporters. The latest blow comes from Hapag-Lloyd’s Indian Ocean Service (IOS) between West India and North Europe. The service will intermittently skip calls to a number of key ports, such as Nhava Sheva (JNPT), Mundra, Rotterdam, London Gateway and Antwerp from July through September, in addition to blanking the port of Hazira throughout this period.

“These changes will be in place for the remaining part of Q2 and Q3 2022 to improve the service’s schedule reliability,” Hapag-Lloyd noted in its advisory.

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